California faces significant long-term labor market headwinds, with a shrinking workforce relative to the population. Labor force participation has dropped from 67 percent in 2000 to 62 percent now—mainly due to an aging population. In addition, we find

Significant gaps exist by race, gender, and nativity. Among prime-age workers (25–54), women are 13 percentage points less likely to work than men. Across race/ethnicity and gender, Black men (83%) and Latina women (74%) have the lowest rates. Foreign-born noncitizen adults have slightly lower participation than native-born and naturalized citizens.
Educational differences largely drive race/ethnic gaps. For college graduates, participation is near 90 percent, with only small differences across race/ethnic groups. For those lacking a high school diploma, rates are much lower, ranging from 74% (Latino) to 48% (Black).
Gender gaps are largest for women with young children and a partner. For single adults with no children, participation gaps between men and women are small—especially among those with at least some college education.
People with disabilities have low participation. Although participation is low among adults with a disability—especially for those with lower levels of education—prime-age participation has increased substantially since the pandemic, even as rates of disability have risen.

California’s long-term downward trend is almost entirely due to an aging population

Percent in labor force

SOURCES: Current Population Survey; Authors’ calculations.

NOTES: Annual averages computed over all months in year, except for 2023 (through November). Dotted lines show hypothetical labor force participation rate removing the given demographic and participation changes since 2001. See report text for full detail.

What economic challenges does shrinking labor force participation pose?

The challenge California faces is twofold: aggregate needs for a strong and sizable statewide labor force, and longstanding gaps in labor force participation by race, gender, nativity, and disability status. Addressing these longstanding gaps is critical at this juncture.

In the short run—especially in critical sectors projected to grow, like health, elder, and dependent care; climate; and infrastructure—declining labor supply may constrain growing workforce needs.

In the longer run, declining participation may fundamentally shift what the economy can produce and how individuals fare economically. This could require adjustments to health, safety net, and education policies.

High potential for labor force growth exists among large prime-age, low-participation groups

Eliminating gaps and increasing participation among large low-participation demographic groups could help address labor supply declines due to aging and population loss. Among the ten lowest-participating, large prime-age groups, three general themes emerge, as follows.

Low educational attainment is common. Unemployment rates are high for these workers. Low wages and poor job benefits make workforce participation less attractive.
Most low-participation groups are women. Those with low levels of education tend to face worse job prospects. Moreover, women are more likely to be the primary caregiver for children. Nearly 200,000 foreign-born, married Latina women without a high school diploma are not working.
Black and white, US-born, never-married men with less than a high school education have very low participation rates. In addition to less education, the rates for these groups also reflect poor job prospects and/or discrimination, made worse for some by prior criminal records.

What policy approaches could help boost participation?

To counteract current and projected labor force declines, multiple and varying efforts will be required. Policy efforts to remove labor market barriers—such as childcare, education, skills, and language—could reduce gaps, improve economic outcomes, and, in some cases, help counteract downward trends in statewide labor supply. Here we highlight key areas where California could boost labor supply.

For the aging workforce (ages 55–74). Participation among older workers is low but has been growing gradually for decades. Encouraging more older adults to work could go a long way to offset declines in participation—but would require attentiveness to their preferences. Remote work and flexible work schedules (fewer hours per week, for example) may help.

For the lowest-participation groups. Addressing barriers for the lowest-participation groups would increase labor supply and improve outcomes. Closing education gaps could increase participation among Black and Latino adults—and could add hundreds of thousands of new workers. In the short term, retraining programs, improving prospects for skilled workers with less formal education, and easing pathways to entrepreneurship could all have sizable impacts.

For women. Participation is lowest among women with young children, especially Latinas and those with low education levels. Difficulties with childcare may inhibit working; improving upon current supports for working parents, like paid family leave, tax credits for low-income workers with children, and child care subsidies could have a positive impact.

For those with disabilities. Over 1.1 million prime-age Californians report a disability. Increased participation among these workers post-pandemic may suggest that greater workplace flexibility created new opportunities. Efforts to understand these trends and expand upon what works could be fruitful.

Source

About the Authors

Julien Lafortune is a research fellow at the Public Policy Institute of California, where he specializes in education and economics. He is also a member of the PPIC Economic Policy Center. His primary areas of focus include K–12 education finance, school infrastructure, human capital, and labor market policy. He has authored policy reports, briefs, presentations, and blogs on a variety of policy topics, including K–12 education, labor market issues, demographics, and housing markets. He has academic published research papers on school finance reforms and school capital investments in the American Economic Journal: Applied Economics and the American Economic Review: Papers and Proceedings. He holds a PhD in economics from the University of California, Berkeley.

Sarah Bohn is vice president and director of the PPIC Economic Policy Center and senior fellow at the Public Policy Institute of California, where she holds the John and Louise Bryson chair in policy research. She is also a member of the PPIC Higher Education Center. As the founding director of the PPIC Economic Policy Center, she leads research and engagement to inform California policymaking to support greater opportunity and upward mobility for workers, families, and businesses statewide. A labor economist, her research focuses on the job market, workforce skills, and the role of education and government programs in upward mobility. Her other areas of expertise include immigration policy, poverty measurement, income inequality, and career technical education. Her work has been published in major academic journals, including the American Economic Review, Demography, American Economic Journal: Economic Policy, and The Review of Economics and Statistics. Previously she served as vice president of research at PPIC. She holds a PhD in economics from the University of Maryland, College Park.

Marisol Cuellar Mejia is a research fellow at the PPIC Higher Education Center. Her research focuses on community college students and their path towards a four-year degree. Her recent projects have focused on examining statewide reforms to developmental education, recent trends and barriers to transfer from community colleges to four-year colleges, and the economic returns to a college degree. She is also a member of the PPIC Economic Policy Center, where she studies labor market trends. Her other areas of expertise include housing in California, and demographic trends. Before joining PPIC, she worked at Colombia’s National Association of Financial Institutions as an economic analyst, concentrating on issues related to the manufacturing sector and small business. She has also conducted agricultural and commodity market research for the Colombian National Federation of Coffee Growers and the National Federation of Palm Oil Growers of Colombia. She holds a master’s degree in economics from Universidad del Rosario and a master’s degree in agricultural and resource economics from the University of California, Davis.

Jenny Duan is a research associate at the Public Policy Institute of California, where she studies the labor market, job and employment policies, and systemic barriers to economic opportunity. She is also a member of the PPIC Economic Policy Center. Before joining PPIC, she worked as an economist at TD Bank Group, where she researched macroeconomic trends in the economy, specializing in commodity price movements and macroeconomic growth for commodity-exporting Canadian provinces. Prior to that, she worked as a research assistant in the economic and financial research department at the Bank of Canada. There, she worked primarily on fiscal policy research and labor market changes during the COVID-19 pandemic. She holds a MA in economics from the University of Toronto and a BA in economics from the University of British Columbia.

Hans Johnson is a senior fellow at the PPIC Higher Education Center and a member of the PPIC Economic Policy Center. His research focuses on improving college access and completion. He frequently presents his work to policymakers and higher education officials, and he serves as a technical advisor to many organizations seeking to improve college graduation rates, address workforce needs, and engage in long-term capacity planning. His other areas of expertise include international and domestic migration, housing in California, and population projections. Previously, he served as research director at PPIC. Before joining PPIC, he worked as a demographer at the California Research Bureau and at the California Department of Finance. He holds a PhD in demography and a master’s degree in biostatistics from the University of California, Berkeley.

Shannon McConville is a research fellow at the Public Policy Institute of California and a member of the PPIC Economic Policy Center. Her research interests include health care access, utilization, and outcomes among vulnerable populations and the impact of vocational training programs on economic mobility. Her current work focuses on examining safety net programs, assessing the effects of Medicaid coverage expansions on individuals involved with the criminal justice system, and analyzing the employment outcomes and economic returns of career technical education. Before joining PPIC, she was a research training fellow in the Health Services and Policy Analysis doctoral program at the University of California, Berkeley; a senior research associate at the Department of Health Research and Policy at Stanford University; and a project manager at the Lewis Center for Regional Policy Studies at the University of California, Los Angeles. She holds a master’s in public policy from the University of California, Los Angeles.

Chansonette Buck is the owner and executive editor of Appaloosa WordCraft, which provides research, writing, and editing for a wide range of organizational clients—including public policy think tanks and nonprofits. She is also an award-winning poet. She holds a PhD in English from the University of California, Berkeley.