Labour force participation
Labour force participation rates in 2019 were on average somewhat lower in OECD countries (61.4%) than in Asia/Pacific countries (63.2%), (see Figure 3.1). In 2019, the highest labour force participation rates were recorded for Nepal, Cambodia and Korea DPR at over 80%, while these were below 50% in India, Papua New Guinea, Tonga, Samoa and Tajikistan.
There is a gender gap in labour force participation rates. On average across the region labour force participation rates were 74% for men and 53% for women in 2019. In that year, gender labour force participation rate gaps exceeded 40 percentage points in Bangladesh, India, the Maldives and Sri Lanka, and at 60 percentage points was largest in Pakistan. The smallest gender gaps in favour of men (1 to 2 percentage points) were recorded for Papua New Guinea – where labour force partition rates were 47% and Nepal, which with 82.5% recorded the highest labour force participation rate of the region.
Looking ahead, OECD projections (Figure 3.2) show that – if male and female labour participation rates by five-year age groups follow the “baseline” scenario – the labour force will decrease substantially in Japan (from peak of 67 million in 2019), China (from peak of 805 million in 2020) and Korea (from peak of 28.3 million in 2025). In contrast, Australia, India and Indonesia are projected to experience an increase in the size of the labour force over the next few decades. G20 countries have committed to reduce the gender gap in labour force participation rates. This scenario would have a significant effect on the size of the labour force in several countries, especially in India, where female labour force participation rates are currently low, the labour force could potentially double by 2060.
The labour force participation rate is a measure of the proportion of a country’s working-age population (15 and more) that engages actively in the labour market, either by working or looking for work for at least one hour in the reference week. It provides the relative size of the supply of labour available to engage in the production of goods and services. Data was taken from the ILO’s Key Indicators of the Labour Market (KILM) database for non-OECD countries.
The labour force projections presented here are based on population projections for persons aged 15-74 years and current rates of labour market entry and exit. The model is a dynamic age-cohort model that projects future labour participation by gender and five-year age group. Three scenarios are considered, and based on OECD population data and the OECD Employment Database.
1. Baseline: In many countries, there has been an increase trend in the participation of women which has offset a decline in participation rates for men, and there have been different trends by age. Rather than assuming fixed participation rates, the baseline scenario uses current (2011-20) rates of labour market entry and exit to project participation rates by gender and five-year age group over the period to 2060.
2. Gender gap reduced by 25% by 2040, and halved by 2060: Male participation rates are held at the baseline, with female participation rates projected such that the gender participation gap in 2025 is 25% smaller than the gap in 2020, and the gap in 2040 50% smaller than in 2020.
3. Gender gap halved by 2040, and closed by 2060: Male participation rates are held at the baseline, with female participation rates projected such that the gender participation gap in 2040 is 50% smaller than the gap observed in 2020, and is closed completely by 2060.
Source: International Labour Organization (2020), ILOSTAT Labour force participation rate (%) by sex and age, November 2020.
Note: The labour force projections are based on population projections for persons aged 15-74 years, by five-year age groups, and labour force participation data from the OECD.
Source: OECD Secretariat calculations based on OECD population data and the OECD Employment Database.