The Story of the US Labor Market: Increasing Disconnection/Decreasing Coverage

Abstract

M.P.P.

For the past four decades, the US labor market has witnessed major changes. Demographic changes, technology, globalization, industrial restructuring, and long-lasting effects of recessions have dramatically affected its size and composition.

In this study, I examine the structure of the US labor market from the perspective of a wide range of labor market outcomes. My findings show that, unemployment rates for subgroups of the population have been very sensitive to general demand conditions, and they change over the cycles. This cyclical pattern shows no significant change over time. However, structural changes in the market have been substantial. Labor force participation rates for prime-age men have been on a declining secular trend for half a century and, today roughly 11 percent of prime-age men (7 million) are neither working nor looking for work. My analysis indicates that structural factors have played the major role in this decline by reducing demand for less-skilled male workers.