Working Paper: NBER ID: w24333
Authors: Katharine G. Abraham; Melissa S. Kearney
Abstract: This paper first documents trends in employment rates and then reviews what is known about the various factors that have been proposed to explain the decline in the overall employment-to-population ratio between 1999 and 2018. Population aging has had a large effect on the overall employment rate over this period, but within-age-group declines in employment among young and prime age adults also have played a central role. Among the factors whose effects the evidence allows us to quantify, labor demand factors, in particular increased import competition from China and the penetration of robots into the labor market, are the most important drivers of observed within-group declines in employment. Labor supply factors, most notably increased participation in disability insurance programs, have played a less important but not inconsequential role. Increases in the real value of state minimum wages and in the share of individuals with prison records also have contributed modestly to the decline in the aggregate employment rate. In addition to the factors whose effects we roughly quantify, we identify a set of potentially important factors about which the evidence does not yet allow us to draw clear conclusions. These include the challenges associated with arranging child care, improvements in leisure technology, changing social norms, increased use of opioids, the growth in occupational licensing, and declining labor market fluidity. Our evidence-driven ranking of factors should be useful for guiding future discussions about the sources of decline in the aggregate employment-to-population ratio and consequently the likely efficacy of alternative policy approaches to increasing employment rates.
Keywords: employment; labor market; disability insurance; import competition; technology
JEL Codes: J01; J21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| population aging (J11) | decline in US employment-to-population ratio (J69) |
| within-group declines in employment rates among young and prime-age adults (J63) | decline in US employment-to-population ratio (J69) |
| introduction of robots into the labor market (F66) | decline in employment rates among less-educated workers (F66) |
| increase in disability insurance participation (J65) | decline in US employment-to-population ratio (J69) |
| increased import competition from China (F69) | decline in employment rates among less-educated workers (F66) |