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Labor Force: Definition & Concept

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  • 0:01 What Is the Labor Force?
  • 0:23 Measuring the Labor Force
  • 1:55 Labor Force Participation Rate
  • 3:31 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
The labor force is a fundamental component of every modern economy. In this lesson, you'll learn what the labor force is and some of its important concepts.

What Is the Labor Force?

In the United States, the labor force includes all persons aged 16 years or over that are economically active within the period of time being reported. People are economically active if they are employed, self-employed, serving in the military, or are unemployed but are looking for work.

Measuring the Labor Force

The labor force can be derived from the sum of the employed population and the unemployed population or:

LF = E + U

Where

LF = Labor force

E = Employed population

U =Unemployed population

Remember that you are only unemployed, for the purposes of the labor force, if you are actively looking for work. If you are not looking for work, you do not fall under the label of unemployed, even if you don't have a job.

Let's illustrate the concept with an example. Imagine that you work for the department of labor statistics for a country and you have to report on your country's labor force for the previous month. Last month your country had an employed population of 100,000,000 people and an unemployed population of 7,000,000. What was the labor force for that month?

LF = E + U

LF = 100,000,000 + 7,000,000

LF = 107,000,000

You can determine the unemployment rate (UR) by dividing the number of unemployed people by the labor force and then multiply by 100. Mathematically, the equation looks like this:

UR = U/LF x 100

Let's apply this formula to the numbers we used in the previous example.

UR = U/LF x 100

UR = 7,000,000/107,000,000 x 100

UR = 0.065 x 100

UR = 6.5%

Labor Force Participation Rate

The labor force participation rate (LFPR) measures the proportion of a particular population that is economically active. In other words, it's the proportion of people in a particular population that participates in the labor market by working or seeking work out of an entire population, which is usually defined as all people of working age. The labor force participation rate is calculated by the following formula:

LFPR = LF/P x 100

Where

P = total population - both the economically inactive and active populations

LF = labor force

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