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The Employment, Earnings, and Income of Less-Skilled Workers over the Business Cycle

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Abstract

In this paper, I examine the effect of business cycles on the employment, earnings, and income of persons in different demographic groups. I classify individuals by sex, education, and race. The analysis uses data from the Current Population Survey’s Outgoing Rotation Group data, covering the period 1979–1992, and March Annual Demographic File data, covering the period 1975–1997. Many different individual and family outcome measures are considered, including employment to population ratios, weekly earnings, hourly earnings, annual hours, annual earnings, family earnings, family transfer income, and total family income. The regression model is specified such that the key parameters measure how the labor market outcomes of less-skilled workers vary with the business cycle relative to the variability for high-skill groups. The analysis uses variation across MSAs in the timing and severity of shocks. The results consistently show that individuals with lower educational levels, nonwhites, and low-skill women experience greater cyclical fluctuation than high-skill men. These results are the most striking when examining comprehensive measures of labor force activity such as the likelihood of full-time, full-year work. Government transfers and the earnings of other family members decrease the differences between groups, resulting in more skill-group-neutral effects of business cycles on family income than on individual earnings. The paper examines the stability of these results by comparing evidence across the 1982 and 1992 recessions. The evidence suggests that the 1992 recession led to more uniform effects across skill groups than did earlier cycles.

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Paper provided by University of Wisconsin Institute for Research on Poverty in its series Institute for Research on Poverty Discussion Papers with number 1199-99.

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Handle: RePEc:wop:wispod:1199-99

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  1. Rebecca Blank, 1985. "Disaggregating the Effect of the Business Cycle on the Distribution of Income," Working Papers 569, Princeton University, Department of Economics, Industrial Relations Section..
  2. Timothy J. Bartik, 1993. "The Effects of Local Labor Demand on Individual Labor Market Outcomes for Diffrerent Demographic Groups and the Poor," Upjohn Working Papers and Journal Articles 93-23, W.E. Upjohn Institute for Employment Research.
  3. Keane, Michael & Moffitt, Robert & Runkle, David, 1988. "Real Wages over the Business Cycle: Estimating the Impact of Heterogeneity with Micro Data," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1232-66, December.
  4. Holzer, Harry J, 1991. "Employment, Unemployment and Demand Shifts in Local Labor Markets," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 25-32, February.
  5. repec:fth:prinin:343 is not listed on IDEAS
  6. Richard B. Freeman, 1982. "Economic Determinants of Geographic and Individual Variation in the Labor Market Position of Young Persons," NBER Chapters, in: The Youth Labor Market Problem: Its Nature, Causes, and Consequences, pages 115-154 National Bureau of Economic Research, Inc.
  7. Bartik, Timothy J., 1996. "The Distributional Effects of Local Labor Demand and Industrial Mix: Estimates Using Individual Panel Data," Journal of Urban Economics, Elsevier, vol. 40(2), pages 150-178, September.
  8. Bound, John & Freeman, Richard B, 1992. "What Went Wrong? The Erosion of Relative Earnings and Employment among Young Black Men in the 1980s," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 201-32, February.
  9. Timothy J. Bartik, . "The Effects of Metropolitan Job Growth on the Size Distribution of Family Income," Upjohn Working Papers and Journal Articles tjb1994jrs, W.E. Upjohn Institute for Employment Research.
  10. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  11. Timothy J. Bartik, 2003. "Local Economic Development Policies," Upjohn Working Papers and Journal Articles 03-91, W.E. Upjohn Institute for Employment Research.
  12. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle.
  13. Rebecca M. Blank & David Card & Philip K. Robins, 1999. "Financial Incentives for Increasing Work and Income Among Low- Income Families," HEW 9902002, EconWPA.
  14. John Bound & Harry J. Holzer, 1991. "Industrial Shifts, Skills Levels, and the Labor Market for White and Black Males," NBER Working Papers 3715, National Bureau of Economic Research, Inc.
  15. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-89, August.
  16. Solon, Gary & Barsky, Robert & Parker, Jonathan A, 1994. "Measuring the Cyclicality of Real Wages: How Important Is Composition Bias?," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 1-25, February.
  17. Cain, Glen G & Finnie, Ross E, 1990. "The Black-White Difference in Youth Employment: Evidence for Demand-Side Factors," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages S364-95, January.
  18. David M. Cutler & Lawrence F. Katz, 1991. "Macroeconomic Performance and the Disadvantaged," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 1-74.
  19. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
  20. Rebecca M. Blank & Alan S. Blinder, 1985. "Macroeconomics, Income Distribution, and Poverty," NBER Working Papers 1567, National Bureau of Economic Research, Inc.
  21. Rebecca M. Blank & David Card, 1993. "Poverty, Income Distribution, and Growth: Are They Still Connected," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 285-340.
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