OKPOLICY.ORG
To protect the long-term health of our economy, Oklahoma’s lawmakers should enact policies that will strengthen Oklahoma’s labor force participation, which has been declining for more than a decade. Policies that invest in our workforce — such as guaranteeing paid family and medical leave, increasing access to child care, investing in mental health care/substance abuse treatment, and bolstering the state Earned Income Tax Credit — will provide Oklahomans the support they need to reenter the workforce, creating a healthier, more prosperous economy for everyone.
Labor force participation is the backbone of our economy
Our labor force is the people within our economy who are trying to engage in paid labor to support themselves, their families, and our entire society. While there are many important ways outside of the formal economy through which people can support those around them, people engaged in the labor force earn the income that all of us need to survive.
In technical terms, the labor force participation rate is the share of the civilian (non-military), noninstitutionalized, working age (15-64) population that is either currently working or actively searching for work. Essentially, it measures the percentage of people who want to be working out of all of the people who are hypothetically able to work. This metric is in contrast to the unemployment rate, which measures the proportion of people who don’t have a job out of all the people who want to be working (including those already working). Labor force participation and unemployment are related; when people drop out of the labor force, for instance, they are no longer counted in unemployment statistics. However, the two measures are distinct metrics of an economy’s health. For example, the unemployment rate is a good indicator of whether or not an economy is in a recession, whereas the labor force participation rate is an indicator of whether there are structural forces keeping people from looking for work entirely.
Maintaining a healthy labor force participation rate is important because our labor force financially supports our non-working population (such as children, people with disabilities, and the elderly). More people in the labor force means more people providing for their families and supporting the state services upon which we all rely through tax revenue. Conversely, fewer people in the labor force means the burden of supporting social services is placed on a smaller number of taxpayers. If we want to maintain state economic output and our families’ current quality of life, then we need to convince more people to join the workforce, remove barriers to employment for those who wish to be employed, or increase the productivity of those who remain employed.
Oklahoma’s labor force participation rate is declining, but this decline isn’t entirely inevitable
Labor force participation is declining in Oklahoma and across the country for a variety of reasons, including some that could be managed by forward-planning public policy. The most prominent reason for the decline is our aging population. As the average age of our population increases, the proportion of our labor force that is retired does as well.
Health-related factors are also keeping Americans out of the labor force. A 2020 study found that two in five prime-age (25-54) men who hadn’t worked in the previous year were not working due to health conditions, which could include a variety of conditions such as back injuries, disability due to mental health, or other chronic conditions. Americans generally have poorer health outcomes than citizens in other developed countries, and Oklahoma ranks lower in public health relative to most other states in the country. Substance abuse issues have also inhibited people’s ability to work. The opioid crisis caused potentially up to half of the decline in labor force participation since 2000, and pandemic-related increases in substance abuse may have caused between 9 and 26 percent of the decline since February 2020. An additional pandemic-related health cause behind the labor force decline is symptoms related to “long COVID,” which may account for one in seven unfilled jobs nationally.
Finally, Oklahoma’s affordable child care crisis is likely preventing Oklahomans — especially single mothers — from getting back to work. Access to child care in Oklahoma is declining while child care becomes more expensive than college and may cost workers with children more than they would earn at their job, removing much of the incentive for parents to return to the workforce. One Federal Reserve analysis estimates that by the end of 2021, 15 percent of the working-age people in the U.S. outside the labor force remained out due to home or family responsibilities.
Investing in our workforce will help to reverse the decline in labor force participation
Oklahoma’s business leaders have identified workforce development as the biggest challenge facing Oklahoma’s economy. Fortunately, our policymakers don’t need to reinvent the wheel to figure out which targeted investments will be the most effective in bolstering our state’s workforce and economy. Using evidence from other states, we can identify multiple policies that will increase labor force participation in Oklahoma:
- Creating a state paid family and medical leave program would give people with health conditions or family responsibilities the flexibility they need to return to the workforce. Therefore, it is no surprise that increasing access to family and medical leave increases labor force participation, especially among women.
- Increasing access to child care has been proven to increase labor force participation, among other economic benefits. Increasing subsidies to families and reimbursing providers based on enrollment would help to get parents back into the workforce.
- Investing in mental health care would help to reduce the negative economic (and health) impacts of substance abuse disorder in Oklahoma. There are multiple strategies our policymakers can pursue to undo the damage caused by our long history of disinvestment in access to care.
- Tying Oklahoma’s Earned Income Tax Credit to 10 percent of the federal EITC would increase the value of low-wage jobs. This helps to pull into the labor force workers who would otherwise be discouraged by a lack of good-paying jobs. This is particularly important, given Oklahoma employers’ disproportionate reliance on low-wage employment.
Our declining labor force participation rate is a longstanding issue, but with prudent public policy, it can be addressed. Investing in Oklahoma’s workforce will not only provide relief to our families — it will safeguard the future of our economy.
