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The Effects of Education on the Natural Rate of Unemployment

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  • Albert E DePrince
  • Pamela D Morris

Abstract

This study develops a natural unemployment rate based upon education attainment. Behind this natural rate are labor force participation rates that vary positively with education attainment; observed unemployment rates that are inversely related to education attainment; and deviations of the observed unemployment rate from this hypothesized natural rate that are related to several expectation-based variables. With a lower natural unemployment rate today compared with years past, results point to a number of education-based challenges that employers will face. Matching employer needs with education will become more complicated as both education and needs become more specialized. Global labor markets will play an increasing role both in terms of skills and cost considerations. Next, the retirement of the baby boom generation will pose a unique challenge. Aside from the challenge of finding replacements from a pool of new workers smaller than the pool of retiring workers, retirements will not be easily predictable, thanks to the elimination of the earnings penalty for social security benefits. Finally, as college degrees become more prevalent, postgraduate studies will likely rise in importance as a distinguishing feature among skills.Business Economics (2008) 43, 45–54; doi:10.2145/20080205

Suggested Citation

  • Albert E DePrince & Pamela D Morris, 2008. "The Effects of Education on the Natural Rate of Unemployment," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 43(2), pages 45-54, April.
    • Handle: RePEc:pal:buseco:v:43:y:2008:i:2:p:45-54
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    Cited by:

    1. Heitor, Manuel & Horta, Hugo & Leocádio, Miguel, 2016. "Enlarging the social basis of higher education: Lessons learned from extending a social support system with a risk-sharing loan scheme in Portugal," Technological Forecasting and Social Change, Elsevier, vol. 113(PB), pages 319-327.
    2. Stanka Zhekova & Dobrina Dimova, 2017. "The Relation between the Education of Economically Active Individuals in Republic of Bulgaria and Their Positions on the Labour Market under Conditions of Economic Instability," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 178-198.
    3. Navarro, Andres & Tapiador, Francisco J., 2019. "RUSEM: A numerical model for policymaking and climate applications," Ecological Economics, Elsevier, vol. 165(C), pages 1-1.

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