Sunday, August 7, 2011

Labor Force Participation Rates


Dr. Maya Choshen


Labor force participation rates are calculated as the number of individuals actively involved in the Labor force as a percentage of the entire working-aged population.  The category of Labor force participants includes those who are employed or are actively seeking employment.  While there are a number of different ways to define the Labor force, this column follows the definition of those between the ages of 20 and 65.

The economic effects of Labor force participation rates play out on the individual, family, city and national levels.  Studies performed by the Bank of Israel have found that low Labor force participation rates characterize those who have less education, ultra-orthodox males with an extensive religious education, and Arab women, particularly with less education.  Low participation rates prevent the maximization of the country’s productiveness, lower quality of living, and increase the scope of poverty as well as government spending on welfare entitlements.

A comparison of Labor force participation rates for 2009 (for those aged 20 to 65) in Jerusalem and Israel as a whole reveal significantly lower rates for Jerusalem (58% compared with 71%).  Jerusalemites’ Labor force participation rates lagged far behind national averages for both the Jewish population (includes non-Arab Christians, and persons without religious classification) and Arab population. The average participation rate for Jerusalem among the former group was 64% compared with a national average of 75%; among the latter group it was 47% compared with a national rate of 50%.  It is noteworthy that the disparity between participation rates in Jerusalem and Israel as a whole is greater for the Jewish rather than the Arab population.  This finding might be explained by the distinct character of Jerusalem’s Jewish population which is greatly ultra-orthodox, a group with strikingly low employment rates among its male population. This reality impacts Jerusalem’s economy as well as the pervasiveness of poverty among the ultra-orthodox population.  On the upside, the current situation offers tremendous potential for economic growth, and there are many national and municipal programs aiming to incorporate more ultra-orthodox men in institutions of higher education for the purpose of helping them incorporate in the Labor force.  The upcoming column will deal with Labor force participation rates among the Arab population and gender differences.