Environments of Compensation and Benefits Administration

Labor Supply

The quantity of the labor supply is termed the labor force. A person is included in the US labor force if they are:

• 16 years of age or older (although it is possible to work at 14, with permission, for certain jobs, these workers are not part of the formal count)
• able to work
• either working or looking for work

The size of the labor force is determined by two factors:

1. the population
2. the number of workers in the labor force, also known as the labor force participation rate

Population growth increases the potential labor force. At the end of 2025, the United States civilian labor force stood at 170,000,000. According to PEW Research, more than 1 in 3 workers are now Millennials (those born in the years 1981 to 1997) and constitute the largest generation in the workforce supplanting the Baby Boomers (born in the years 1946 to1964). In 2015, they surpassed Generation X (born in the years 1965 to 1980) in the labor force. Generation Z is beginning to be a presence in the labor force. Immigration to the U.S. has historically increased the population base, and thus the labor force, considerably.

The prime age participation rate for civilians (ages 25 to 54) is 83.9% and the participation rate for all civilian workers is 62.4%.

Labor Supply in the Future

What will the future labor supply be?

Some of the changes predicted from 2024 to 2034 by the Bureau of Labor Statistics include:

• participation for youth continues to decrease as does the overall participation rate but participation by older workers will increase
• labor force growth will be slower (0.3 percent annually)
• employment gains will be mostly in the service sector with the strongest growth in healthcare and social assistance services
• the labor force continues to age

Other Factors Influencing Labor Supply

How does unemployment affect the labor supply?

Unemployment influences labor-force participation in two opposite ways:

1. Additional family members look for work when the major breadwinner is unemployed.
2. Discouraged workers leave the labor force believing that no jobs exist for them. This latter consequence has a greater impact.

How many hours do employees work?

The quantity of the labor supply is also determined by the number of hours labor force members want to work. Much variation exists among the hours people want to work. Factors such as how much workers earn an hour and whether their family has more than one breadwinner impact this decision.

While the official length of the workweek has remained stable for almost 70 years, this is changing. Until recently, Americans were working shorter work years because of longer vacations, more holidays, and more part-time employment. Yet in the last few years, the number of hours worked by American workers has increased significantly.

Americans work more hours per year than do the citizens of almost all other countries with advanced economies.

What is the quality of the labor supply?

Formal education, on-the-job training and experience of the labor force together determine labor force quality. This quality, termed human capital, has been increasing in the United States.