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The Utilization of Human Capital in the U.S., 1975-1992: Patterns of Work and Earnings Among Working Age Males

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  • Robert Haveman

    (The Jerome Levy Economics Institute)

  • Lawrence Buron

    (The Jerome Levy Economics Institute)

  • Andrew Bershadker

    (The Jerome Levy Economics Institute)

Abstract

Fundamental changes in labor market patterns among U.S. prime-age men over the past two decades have been the focus of numerous recent research studies and media accounts. Increases in wage inequality and in male joblessness are the most important of these changes; assertions of an increase in part-time and "contingent" work have also been made. In addition, there is evidence of a more general decline in the total annual hours of market work of the typical working-age male. In this paper, we focus on civilian non-student 18-64 year-old males, and present a new statistical indicator of the extent to which the human capital of this group (and subgroups within it) is underutilized. We call our indicator the Capacity Utilization Rate (CUR), as it measures the extent to which the use of capital falls short of a full utilization norm. We view the human capital embodies in an individual (or a group) to be the package of characteristics possessed by the person or group that yield value to the economy if used in productive activities. These characteristics include such things as basic ability, schooling skills, work experience, and health status. Each individual's (estimated) wage rate is a function of his endowment of these characteristics. The wage rate is, in turn, an estimate of the market valuation of the hourly rental value of an individual's productive activities is reflected in the market-determined "use-value" of these characteristics. Hence, the annual value of the human capital of an individual (or group) is the amount that could be earned were the productive characteristics of the individual fully utilized. We consider an individual's human capital to be fully utilized if he works full time-full year, that is 52 weeks per year and 40 hours per week. We use the CUR indicator to examine trends in human capital utilization for the population of working-age males, and for various population subgroups, over the 1975-1992 period. We also examine trends in the reasons given for the failure to fully utilize human capital, and categorize them into two sets-those reasons reflecting exogenous constraints on work (e.g., inability to find work) and those that reflect individual response to labor market and other incentives (e.g., retirement before age 65).

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 9803002.

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Length: 50 pages
Date of creation: 03 Mar 1998
Date of revision:
Handle: RePEc:wpa:wuwpma:9803002

Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 50; figures: included
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Web page: http://128.118.178.162

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  1. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
  2. Richard B. Freeman, 1994. "Working Under Different Rules," NBER Books, National Bureau of Economic Research, Inc, number free94-1, May.
  3. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  4. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
  5. Max Dupuy & Mark E. Schweitzer, 1995. "Another look at part-time employment," Economic Commentary, Federal Reserve Bank of Cleveland, issue Feb.
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