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The High-Pressure U.S. Labor Market of the 1990s

  • Lawrence F. Katz

    (Harvard University)

  • Alan B. Krueger

    (Princeton University)

This paper examines the impact of selected labor market changes on the decline in the unemployment rate in the 1990s. The first section provides an overview of aggregate unemployment trends, inflation, and price and wage Phillips curves. The second section examines the effect of demographic changes on the unemployment rate. The third section examines the impact of the 150 percent increase in the number of men in jail or prison since 1985 on the unemployment rate. The fourth section examines the impact of evolving labor market intermediaries (namely worker profiling by the Unemployment Insurance system and the growth of the temporary help industry) on the unemployment rate. The fifth section explores whether worker bargaining power has become weaker, allowing for low unemployment and only modest wage pressure, because of worker job anxiety, the decline in union membership, or increased competitive pressures. The final section examines the impact of the tightest labor market in a generation on poverty. Our main findings are that changes in the age structure of the labor force, the growth of the male prison population, and, more speculatively, the rise of the temporary help sector, are the main labor market forces behind the low unemployment rate in the late 1990s.

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File URL: http://www.brookings.edu/~/media/Files/Programs/ES/BPEA/1999_1_bpea_papers/1999a_bpea_katz.pdf
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Article provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.

Volume (Year): 30 (1999)
Issue (Month): 1 ()
Pages: 1-88

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Handle: RePEc:bin:bpeajo:v:30:y:1999:i:1999-1:p:1-88
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  1. Lawrence H. Summers, 1986. "Why is the Unemployment Rate So Very High near Full Employment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(2), pages 339-396.
  2. John A. Abowd & Thomas Lemieux, 1993. "The Effects of Product Market Competition on Collective Bargaining Agreements: The Case of Foreign Competition in Canada," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 983-1014.
  3. Orley Ashenfelter & David Ashmore & Olivier Deschenes, 1999. "Do Unemployment Insurance Recipients Actively Seek Work? Randomized Trials in Four U.S. States," NBER Working Papers 6982, National Bureau of Economic Research, Inc.
  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 1333-1381, September.
  5. Bruce Weinberg & Eric Gould & David Mustard, 1998. "Crime Rates and Local Labor Market Opportunities in the United States: 1979-1995," Working Papers 98-11, Ohio State University, Department of Economics.
  6. Richard B. Freeman & William M. Rodgers III, 1999. "Area Economic Conditions and the Labor Market Outcomes of Young Men in the 1990s Expansion," NBER Working Papers 7073, National Bureau of Economic Research, Inc.
  7. Richard B. Freeman, 1979. "The Effect of Demographic Factors on Age-Earnings Profiles," Journal of Human Resources, University of Wisconsin Press, vol. 14(3), pages 289-318.
  8. William T. Dickens, 1986. "Wages, Employment and the Threat of Collective Action by Workers," NBER Working Papers 1856, National Bureau of Economic Research, Inc.
  9. Rose, Nancy L, 1987. "Labor Rent Sharing and Regulation: Evidence from the Trucking Industry," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1146-1178, December.
  10. Bruce D. Meyer, 1995. "Lessons from the U.S. Unemployment Insurance Experiments," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 91-131, March.
  11. repec:fth:prinin:382 is not listed on IDEAS
  12. Chinhui Juhn & Kevin M. Murphy & Robert H. Topel, 1991. "Why Has the Natural Rate of Unemployment Increased over Time?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 75-142.
  13. Ana L. Revenga, 1992. "Exporting Jobs?The Impact of Import Competition on Employment and Wages in U. S. Manufacturing," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 255-284.
  14. Welch, Finis, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S65-97, October.
  15. Henry S. Farber, 1997. "The Changing Face of Job Loss in the United States, 1981-1995," Working Papers 761, Princeton University, Department of Economics, Industrial Relations Section..
  16. Katharine G. Abraham, 1987. "Help-Wanted Advertising, Job Vacancies, and Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1), pages 207-248.
  17. Robert J. Blendon, 1997. "Bridging the Gap between the Public's and Economists' Views of the Economy," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 105-118, Summer.
  18. Henry S. Farber, 1997. "The Changing face of Job Loss in the United States, 1981-1995," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 55-142.
  19. Arthur M. Okun, 1973. "Upward Mobility in a High-Pressure Economy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1), pages 207-262.
  20. repec:pri:indrel:dsp01br86b358x is not listed on IDEAS
  21. Finis Welch, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," UCLA Economics Working Papers 146, UCLA Department of Economics.
  22. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
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