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A closer look at nonparticipants during and after the Great Recession

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  • Julie L. Hotchkiss
  • M. Melinda Pitts
  • Fernando Rios-Avila

Abstract

This paper uses matched individual-level data from the Current Population Survey to determine that around the 2008 recession, there was a significant upward shift in trend of the share of labor force leavers giving "Schooling" and "Other" as the reason for absence from the labor market. This trend shift is observed primarily among workers between the ages of 25 and 54 and is widespread across all educational groups with at least a high school degree. In addition, the upward shift in the trend of the schooling reason share occurred among workers previously employed in occupations and industries with varying degrees of job losses during the recession. This shift suggests it was a widespread phenomenon and not isolated among sectors or occupations that suffered the most during the recession. The implication is that the upward shift in the schooling reason share has more likely been a response to lower opportunity costs of schooling during economic downturns rather than the result of workers trying to overcome skill mismatch in the labor market. In addition, since transition rates to the labor force are highest among those giving "Schooling" and "Other" as reasons for absence, the decline in labor force participation since 2008 is likely more transitory than permanent.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2012-10.

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Date of creation: 2012
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Handle: RePEc:fip:fedawp:2012-10

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References

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  1. Maria E. Canon & Mingyu Chen, 2011. "The mismatch between job openings and job seekers," The Regional Economist, Federal Reserve Bank of St. Louis, issue July, pages 10-11.
  2. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July.
  3. Daniel Aaronson & Jonathan Davis & Luojia Hu, 2012. "Explaining the decline in the U.S. labor force participation rate," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Mar.
  4. Courtney C. Coile & Phillip B. Levine, 2007. "Labor market shocks and retirement: Do government programs matter?," NBER Chapters, in: Trans-Atlantic Public Economics Seminar (TAPES), Public Policy and Retirement, pages 1902-1919 National Bureau of Economic Research, Inc.
  5. Dave E. Marcotte, 2000. "Continuing education, job training, and the growth of earnings inequality," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 53(4), pages 602-623, July.
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  7. Murat Tasci & Saeed Zaman, 2010. "Unemployment after the recession: a new natural rate?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Sep.
  8. Arjun Jayadev & Michael Konczal, 2011. "The stagnant labor market: some aspects of the bleak picture," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 33(3), pages 435-450, April.
  9. Robert Shimer, 2012. "Reassessing the Ins and Outs of Unemployment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 127-148, April.
  10. Julie L. Hotchkiss, 2006. "Changes in behavioral and characteristic determination of female labor force participation, 1975-2005," Economic Review, Federal Reserve Bank of Atlanta, issue Q 2, pages 1-20.
  11. Marianna Kudlyak & Felipe Schwartzman, 2012. "Accounting for unemployment in the Great Recession : nonparticipation matters," Working Paper 12-04, Federal Reserve Bank of Richmond.
  12. Peracchi, Franco & Welch, Finis, 1995. "How representative are matched cross-sections? Evidence from the Current Population Survey," Journal of Econometrics, Elsevier, vol. 68(1), pages 153-179, July.
  13. Bart Hobijn & Colin Gardiner & Theodore Wiles, 2011. "Recent college graduates and the labor market," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue mar21.
  14. Rob Valletta & Katherine Kuang, 2010. "Is structural unemployment on the rise?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue nov8.
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Cited by:
  1. Robert E. Hall, 2014. "Quantifying the Lasting Harm to the U.S. Economy from the Financial Crisis," NBER Working Papers 20183, National Bureau of Economic Research, Inc.
  2. Robert E. Hall, 2014. "Quantifying the Lasting Harm to the U.S. Economy from the Financial Crisis," NBER Chapters, in: NBER Macroeconomics Annual 2014, Volume 29 National Bureau of Economic Research, Inc.
  3. RĂ©gis Barnichon & Andrew Figura, 2013. "Declining labor force attachment and downward trends in unemployment and participation," Economics Working Papers 1397, Department of Economics and Business, Universitat Pompeu Fabra.
  4. Barnichon, Regis & Figura, Andrew, 2013. "Declining Labor Force Attachment and Downward Trends in Unemployment and Participation," Finance and Economics Discussion Series 2013-88, Board of Governors of the Federal Reserve System (U.S.).

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