How much of the change in the participation rate is cyclical and how much is structural?

The participation rate is the percentage of the working-age population that is in the labour market. Some changes in the participation rate are cyclical. After a recession, workers have lost their jobs and are reluctant to return to the labour market; in a period of strong growth, companies are willing to hire low-skilled workers who were previously out of work. But other changes in the participation rate are structural, linked to the population’s level of education, the matching of skills with companies’ needs, the attractiveness of low-paid jobs, especially if they are arduous, and pension system rules. We attempt to separate statistically the cyclical and structural components of changes in the participation rate in the United States, the euro zone and France. We then find that the structural component of the participation rate has been: Declining since 2010 in the United States, due to low wages at the bottom and low skills; Rising since the late 1990s in the euro zone and since 2012 in France, due to skills improvement (euro zone) and increases in the retirement age.