IDEAS home Printed from https://ideas.repec.org/p/cdl/indrel/qt0gn7w7hn.html
   My bibliography  Save this paper

The Great Recession and its Aftermath: What Role for Structural Changes?

Author

Listed:
  • Rothstein, Jesse

Abstract

The last eight years have been disastrous for many workers, and particularly so for those with low human capital or other forms of disadvantage. Although the Great Recession officially ended in 2009, the labor market has been very slow to recover. One explanation attributes the ongoing poor labor market outcomes of young and non - college workers to the combination of deficient aggregate labor demand and greater sensitivity of marginal workers to cyclical conditions. A second attributes the recent outcomes to structural changes in the labor market. These have importantly different policy implications: Cyclical explanations imply that the main challenge is to raise aggregate labor demand and that if this is done many of the patterns seen in the last several years will revert to their prior trends. Structural explanations, by contrast, suggest the recent experience is the “new normal,” absent policy responses to encourage more (or different) labor supply. This paper reviews recent data for evidence on the two explanations, focusing on wage trends as an indicator of the relative importance of labor supply and demand. I find little evidence of wage pressure in any quantitatively important labor markets before 2015. The most recent data is more mixed, but still suggests substantial ongoing slack.

Suggested Citation

  • Rothstein, Jesse, 2015. "The Great Recession and its Aftermath: What Role for Structural Changes?," Institute for Research on Labor and Employment, Working Paper Series qt0gn7w7hn, Institute of Industrial Relations, UC Berkeley.
    • Handle: RePEc:cdl:indrel:qt0gn7w7hn
    as

    Download full text from publisher

    File URL: https://www.escholarship.org/uc/item/0gn7w7hn.pdf;origin=repeccitec
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
    2. Kory Kroft & Fabian Lange & Matthew J. Notowidigdo, 2013. "Duration Dependence and Labor Market Conditions: Evidence from a Field Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(3), pages 1123-1167.
    3. Peter Diamond, 2011. "Unemployment, Vacancies, Wages," American Economic Review, American Economic Association, vol. 101(4), pages 1045-1072, June.
    4. Richard B. Freeman & David A. Wise, 1982. "The Youth Labor Market Problem: Its Nature Causes and Consequences," NBER Chapters, in: The Youth Labor Market Problem: Its Nature, Causes, and Consequences, pages 1-16, National Bureau of Economic Research, Inc.
    5. Henry S. Farber, 2012. "Unemployment in the Great Recession: Did the Housing Market Crisis Prevent the Unemployed from Moving to Take Jobs?," American Economic Review, American Economic Association, vol. 102(3), pages 520-525, May.
    6. Stevens, Ann Huff & Schaller, Jessamyn, 2011. "Short-run effects of parental job loss on children's academic achievement," Economics of Education Review, Elsevier, vol. 30(2), pages 289-299, April.
    7. Kahn, Lisa B., 2010. "The long-term labor market consequences of graduating from college in a bad economy," Labour Economics, Elsevier, vol. 17(2), pages 303-316, April.
    8. Kim B. Clark & Lawrence H. Summers, 1982. "The Dynamics of Youth Unemployment," NBER Chapters, in: The Youth Labor Market Problem: Its Nature, Causes, and Consequences, pages 199-234, National Bureau of Economic Research, Inc.
    9. William T. Dickens & Rand Ghayad, 2012. "What can we learn by disaggregating the unemployment-vacancy relationship?," Public Policy Brief, Federal Reserve Bank of Boston.
    10. Edward P. Lazear & James R. Spletzer, 2012. "The United States labor market: status quo or a new normal?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 405-451.
    11. Alan B. Krueger & Judd Cramer & David Cho, 2014. "Are the Long-Term Unemployed on the Margins of the Labor Market?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 45(1 (Spring), pages 229-299.
    12. Poterba, James M & Summers, Lawrence H, 1986. "Reporting Errors and Labor Market Dynamics," Econometrica, Econometric Society, vol. 54(6), pages 1319-1338, November.
    13. Jesse Rothstein, 2012. "The Labor Market Four Years into the Crisis: Assessing Structural Explanations," ILR Review, Cornell University, ILR School, vol. 65(3), pages 467-500, July.
    14. Alan B. Krueger & Judd Cramer & David Cho, 2014. "Are the Long-Term Unemployed on the Margins of the Labor Market?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(1 (Spring), pages 229-299.
    15. Philip Oreopoulos & Till von Wachter & Andrew Heisz, 2012. "The Short- and Long-Term Career Effects of Graduating in a Recession," American Economic Journal: Applied Economics, American Economic Association, vol. 4(1), pages 1-29, January.
    16. Steven J. Davis & R. Jason Faberman & John C. Haltiwanger, 2013. "The Establishment-Level Behavior of Vacancies and Hiring," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(2), pages 581-622.
    17. John Schmitt & Kris Warner, 2011. "Deconstructing Structural Unemployment," CEPR Reports and Issue Briefs 2011-06, Center for Economic and Policy Research (CEPR).
    18. Congressional Budget Office, 2012. "Understanding and Responding to Persistently High Unemployment," Reports 42989, Congressional Budget Office.
    19. Greg Kaplan & Sam Schulhofer-Wohl, 2015. "Understanding the Long-Run Decline in Interstate Migration: Online Appendix," Working Papers 725, Federal Reserve Bank of Minneapolis.
    20. Congressional Budget Office, 2012. "Understanding and Responding to Persistently High Unemployment," Reports 42989, Congressional Budget Office.
    21. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
    22. Daniel Sullivan & Till von Wachter, 2009. "Job Displacement and Mortality: An Analysis Using Administrative Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(3), pages 1265-1306.
    23. Freeman, Richard B. & Wise, David A. (ed.), 1982. "The Youth Labor Market Problem," National Bureau of Economic Research Books, University of Chicago Press, number 9780226261614, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jesse Rothstein, 2012. "The Labor Market Four Years into the Crisis: Assessing Structural Explanations," ILR Review, Cornell University, ILR School, vol. 65(3), pages 467-500, July.
    2. Kory Kroft & Fabian Lange & Matthew J. Notowidigdo & Lawrence F. Katz, 2016. "Long-Term Unemployment and the Great Recession: The Role of Composition, Duration Dependence, and Nonparticipation," Journal of Labor Economics, University of Chicago Press, vol. 34(S1), pages 7-54.
    3. Richard B. Freeman, 2013. "Failing the Test? The Flexible U.S. Job Market in the Great Recession," The ANNALS of the American Academy of Political and Social Science, , vol. 650(1), pages 78-97, November.
    4. Modestino, Alicia Sasser & Shoag, Daniel & Ballance, Joshua, 2016. "Downskilling: changes in employer skill requirements over the business cycle," Labour Economics, Elsevier, vol. 41(C), pages 333-347.
    5. Lindgren, Petter Y. & Presterud, Ane Ofstad, 2021. "Expanding the Norwegian Armed Forces in the Time of Corona: Benefit-Cost Analysis in the Context of High Unemployment Rate," MPRA Paper 106405, University Library of Munich, Germany.
    6. Robert E. Hall & Sam Schulhofer-Wohl, 2018. "Measuring Job-Finding Rates and Matching Efficiency with Heterogeneous Job-Seekers," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(1), pages 1-32, January.
    7. Michael W. L. Elsby & Bart Hobijn & Aysegul Sahin, 2010. "The Labor Market in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 41(1 (Spring), pages 1-69.
    8. Brian Clark & Clément Joubert & Arnaud Maurel, 2017. "The career prospects of overeducated Americans," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 6(1), pages 1-29, December.
    9. Kory Kroft & Fabian Lange & Matthew J. Notowidigdo & Matthew Tudball, 2019. "Long Time Out: Unemployment and Joblessness in Canada and the United States," Journal of Labor Economics, University of Chicago Press, vol. 37(S2), pages 355-397.
    10. Liu, Kai & Salvanes, Kjell G. & Sørensen, Erik Ø., 2016. "Good skills in bad times: Cyclical skill mismatch and the long-term effects of graduating in a recession," European Economic Review, Elsevier, vol. 84(C), pages 3-17.
    11. Brian Bell & Anna Bindler & Stephen Machin, 2018. "Crime Scars: Recessions and the Making of Career Criminals," The Review of Economics and Statistics, MIT Press, vol. 100(3), pages 392-404, July.
    12. Steven J. Davis & Till Von Wachter, 2011. "Recessions and the Costs of Job Loss," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 1-72.
    13. Katharine G. Abraham & John Haltiwanger & Kristin Sandusky & James R. Spletzer, 2019. "The Consequences of Long-Term Unemployment: Evidence from Linked Survey and Administrative Data," ILR Review, Cornell University, ILR School, vol. 72(2), pages 266-299, March.
    14. Kevin Donovan & Jianyu Lu & Todd Schoellman, 2018. "Labor Market Flows and Development," 2018 Meeting Papers 976, Society for Economic Dynamics.
    15. Gianni De Fraja & Sara Lemos & James Rockey, 2021. "The Wounds That Do Not Heal: The Lifetime Scar of Youth Unemployment," Economica, London School of Economics and Political Science, vol. 88(352), pages 896-941, October.
    16. Schmidpeter, Bernhard & Winter-Ebmer, Rudolf, 2021. "Automation, unemployment, and the role of labor market training," European Economic Review, Elsevier, vol. 137(C).
    17. Corinna.Ghirelli, 2014. "The scarring effect of early non-employment," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 14/895, Ghent University, Faculty of Economics and Business Administration.
    18. Steven J. Davis & Till Von Wachter, 2011. "Recessions and the Costs of Job Loss," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 1-72.
    19. Mueller, Andreas I. & Spinnewijn, Johannes, 2023. "The Nature of Long-Term Unemployment: Predictability, Heterogeneity and Selection," IZA Discussion Papers 15955, Institute of Labor Economics (IZA).
    20. Matthias Umkehrer, 2019. "The impact of declining youth employment stability on future wages," Empirical Economics, Springer, vol. 56(2), pages 619-650, February.

    More about this item

    Keywords

    Social and Behavioral Sciences;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdl:indrel:qt0gn7w7hn. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lisa Schiff (email available below). General contact details of provider: https://edirc.repec.org/data/irucbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.