California faces significant long-term labor market headwinds. Labor force participation has dropped from 67% in 2000 to 62% now—mainly due to an aging population. The challenge is twofold: aggregate needs for a strong and sizable statewide labor force and longstanding gaps in participation by race, gender, nativity, and disability status. In a virtual event last week, PPIC researchers Julien Lafortune, Hans Johnson, and Marisol Cuellar Mejia discussed their new report on the topic.

Julien Lafortune first went over key findings about California’s aging workforce and how participation among prime-age workers varies depending on their gender, race, family structure, and other factors. Illustrating how racial differences in participation are greater among demographic groups with lower education levels, he noted that addressing barriers experienced by the largest low participation groups—including less-educated partnered Latina women and single men—could yield significant workforce growth while also improving individual outcomes. Expanding on recent increases among workers 55 to 74 and closing education gaps also stand out as promising policy avenues. Ultimately, Lafortune stressed the complex intersectional nature of these factors, and the necessity for multi-faceted policy solutions.

Clearly, California has a challenging road ahead. Even so, panel members were quick to identify bright spots. Lafortune pointed to California’s rapid rebound from the pandemic recession. “We’re four years out; we’re basically recovered,” he said. “With the Great Recession, four years out participation was still declining and would decline for years to come.”

For Hans Johnson, it was the increasing participation rates among pre-retirement workers (ages 55 to 64), especially among those without a college degree: “Historically they have a substantially lower rate than college graduates.” He noted that now we’re seeing a “catch-up effect,” a trend he identified as especially positive because those are the key earning years for retirement.

For Marisol Cuellar Mejia, “another bright spot was the upward trajectory of prime-age women,” which helped narrow the gender gap. Women—particularly those with young children—have contributed most to the overall post-pandemic labor force rebound. In her view, increases in educational attainment, the flexibility of remote work, and more women entering the labor force through self-employment have likely played a role.

All three affirmed that focusing on education would have a positive impact across demographic groups. For Cuellar Mejia, policies that help women to formalize or start a microbusiness—with access to credit coupled with financial literacy training, and mentorship—could lead to higher female labor force participation, particularly among those with lower levels of educational attainment. Lafortune agreed. “We’re unlikely to see an increase in the overall size of our workforce the way we did over the past couple decades,” he said, pointing out how much pressure that will put on businesses and on state goals. “The imperative is perhaps even greater now for the state…to increase training and skills and entrepreneurship opportunities.”

Johnson pointed out that California’s currently under-enrolled community college system is a huge resource for those needing career training, “There are a lot of ways we can be very forceful and deliberate in leveraging our educational infrastructure in California,” he said, “to make sure that workers are able to fully participate in the labor market and find jobs that are in demand.”