Accounting for Racial and Ethnic Disparities in Labour Force Projections for the USA Based on a Dynamic Microsimulation

We develop a dynamic microsimulation model to project the labour force and economic dependency ratios in the USA from 2022 to 2060 taking population projections and the large inequalities between population groups of different race or ethnicity and gender into account. We contrast policy scenarios and show the potential impact that closing the gaps in education, health and participation rates between population sub groups can have on increasing labour force in the USA. Our baseline projections indicate an increase of the labour force of about 27 million persons by 2060 which is mainly caused by population growth. The downstream effects of removing disparities in population health and education al attainment on labour force participation can add about 10 percent (+2.6 million persons) to our baseline projections. The potential effects of closing gaps between genders and between minority groups and the n on Hispanic White population, however, are much larger if we assume the equalisation of participation rates for individuals with similar characteristics. Closing gender gaps within ethno-racial groups, for instance, can add 9.9 to 14.3 million persons to the labour force depending on the assumptions. Overall, reducing disparities in labour force participation rates has the potential to more than compensate the effects of demographic aging on the economic dependency ratio.