2014 LaborForceParticipationRecentDe

(Aaronson et al., 2014) ⇒ Stephanie Aaronson, Tomaz Cajner, Bruce Fallick, Felix Galbis-Reig, Christopher L Smith, and William Wascher. (2014). “Labor Force Participation: Recent Developments and Future Prospects." FRB of Cleveland Working Paper.

Subject Headings: U.S. Labor Force Participation Rate.

Notes

It suggests that Structural Unemployment can influence Labor Participation Rate.

Cited By

http://scholar.google.com/scholar?q=%222014%22+Labor+Force+Participation%3A+Recent+Developments+and+Future+Prospects

Quotes

Author Keywords

Labor force participation; retirement behavior; disability insurance; implications of an aging population; youth employment; labor market slack; labor market fluctuations and the business cycle

Abstract

Since 2007, the labor force participation rate has fallen from about 66 percent to about 63 percent. The sources of this decline have been widely debated among academics and policymakers, with some arguing that the participation rate is depressed due to weak labor demand while others argue that the decline was inevitable due to structural forces such as the aging of the population. In this paper, we use a variety of approaches to assess reasons for the decline in participation. Although these approaches yield somewhat different estimates of the extent to which the recent decline in participation reflects cyclical weakness rather than structural factors, our overall assessment is that much - but not all - of the decline in the labor force participation rate since 2007 is structural unemployment|structural in nature. As a result, while we see some of the current low level of the participation rate as indicative of labor market slack, we do not expect the participation rate to show a substantial increase from current levels as labor market conditions continue to improve.

Introduction

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Indeed, as we show in the final section of the paper, projections from our model point to further declines in the trend participation rate over the next decade or so.

V. Additional explanations for the decline in participation

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Polarization in labor demand, driven by exogenous technological changes and globalization, seems at least a plausible candidate explanation for some of the secular decline in participation among less-educated individuals. The idea is that polarization, while increasing demand for better-educated workers, displaces some less-educated (non-college) workers who were employed in middle-type jobs. Of these, some are able to transition to high-type jobs, some transition into the lower-paying service sector (perhaps displacing lower-skilled workers), and some may temporarily or permanently drop out of the labor force, as the decline in demand for their labor pushes their offer wages below their reservation level.^[1] Labor force withdrawal is likely to be most acute for less-educated adults, since they are most likely to have been employed in middle-type or lower-type jobs.^[2]

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VIII. Conclusions

The evidence we present in this paper suggests that much of the steep decline in the labor force participation rate since 2007 owes to ongoing structural influences that are pushing down the participation rate rather than a pronounced cyclical weakness related to potential jobseekers’ discouragement about the weak state of the labor market …

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By our calculations, over the next decade somewhere between 50,000 and 75,000 jobs per month will be needed to maintain an unchanged unemployment rate, wellthe amount needed in the 1990s).

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Footnotes

↑ Displacement out of the labor force from middle-type jobs due to these forces may also have been exacerbated by the concurrent liberalization of disability insurance (DI), which lowered the costs of dropping out of the labor force by raising the likelihood of DI benefit receipt and providing more generous benefits to those on disability rolls (Autor and Duggan, 2006; Duggan and Imberman, 2009).
↑ In 1985, of those without a four-year college degree, 21 percent of prime-age males and 45 percent of prime-age females were employed in middle-type jobs. Of those with a four year college degree or more, only 11 percent of males and 28 percent of females were employed in middle-type jobs.

References

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	Author	volume	Date Value	title	type	journal	titleUrl	doi	note	year
2014 LaborForceParticipationRecentDe	Stephanie Aaronson Tomaz Cajner Bruce Fallick Felix Galbis-Reig Christopher L Smith William Wascher			Labor Force Participation: Recent Developments and Future Prospects

[1] Displacement out of the labor force from middle-type jobs due to these forces may also have been exacerbated by the concurrent liberalization of disability insurance (DI), which lowered the costs of dropping out of the labor force by raising the likelihood of DI benefit receipt and providing more generous benefits to those on disability rolls (Autor and Duggan, 2006; Duggan and Imberman, 2009).

[2] In 1985, of those without a four-year college degree, 21 percent of prime-age males and 45 percent of prime-age females were employed in middle-type jobs. Of those with a four year college degree or more, only 11 percent of males and 28 percent of females were employed in middle-type jobs.

[1]

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