IDEAS home Printed from https://ideas.repec.org/p/fip/fedcwq/180101.html
   My bibliography  Save this paper

Excess Persistence in Employment of Disadvantaged Workers

Author

Listed:
  • Bruce Fallick
  • Pawel Krolikowski

Abstract

We examine persistence in employment-to-population ratios in excess of that implied by persistence in aggregate labor market conditions, among less-educated individuals using state-level data for the United States. Dynamic panel regressions and local projections indicate a moderate degree of excess persistence, which dissipates within three years. We find no significant asymmetry between the excess persistence of high vs. low employment rates. The cumulative effect of excess persistence in the business cycle surrounding the 2001 recession was mildly positive, while the effect in the cycle surrounding the 2008-09 recession was decidedly negative. Simulations suggest that the lasting employment benefits of temporarily running a ?high-pressure? economy are small.

Suggested Citation

  • Bruce Fallick & Pawel Krolikowski, 2019. "Excess Persistence in Employment of Disadvantaged Workers," Working Papers 18-01R, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwq:180101
    DOI: 10.26509/frbc-wp-201801r
    Note: This is a revision of working paper 18-01 titled “Hysteresis in Employment among Disadvantaged Workers.”
    as

    Download full text from publisher

    File URL: https://doi.org/10.26509/frbc-wp-201801r
    File Function: Full text
    Download Restriction: no
    File URL: https://libkey.io/10.26509/frbc-wp-201801r?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. Elsby, Michael W.L. & Hobijn, Bart & Şahin, Ayşegül, 2015. "On the importance of the participation margin for labor market fluctuations," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 64-82.
    3. Daniel Schiffman & Warren Young & Yaron Zelekha, 2017. "The Role of Economic Advisers in Israel's Economic Policy," Springer Books, Springer, number 978-3-319-60682-8, June.
    4. Olivier Blanchard & Jordi Galí, 2010. "Labor Markets and Monetary Policy: A New Keynesian Model with Unemployment," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 1-30, April.
    5. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
    6. Greg Kaplan & Sam Schulhofer-Wohl, 2012. "Interstate Migration Has Fallen Less Than You Think: Consequences of Hot Deck Imputation in the Current Population Survey," Demography, Springer;Population Association of America (PAA), vol. 49(3), pages 1061-1074, August.
    7. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
    8. Richard K. Crump & Stefano Eusepi & Marc Giannoni & Aysegul Sahin, 2019. "A Unified Approach to Measuring u," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 50(1 (Spring), pages 143-238.
    9. Italo A. Gutierrez & Jennie W. Wenger, 2017. "Long-Term Effects of Leaving Military Service in a Weak Economy," Working Papers wp369, University of Michigan, Michigan Retirement Research Center.
    10. Hannes Schwandt & Till von Wachter, 2019. "Unlucky Cohorts: Estimating the Long-Term Effects of Entering the Labor Market in a Recession in Large Cross-Sectional Data Sets," Journal of Labor Economics, University of Chicago Press, vol. 37(S1), pages 161-198.
    11. Paul Beaudry & Dana Galizia & Franck Portier, 2020. "Putting the Cycle Back into Business Cycle Analysis," American Economic Review, American Economic Association, vol. 110(1), pages 1-47, January.
    12. Richard B. Freeman & David A. Wise, 1982. "The Youth Labor Market Problem: Its Nature, Causes, and Consequences," NBER Books, National Bureau of Economic Research, Inc, number free82-1.
    13. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    14. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    15. David T. Ellwood, 1982. "Teenage Unemployment: Permanent Scars or Temporary Blemishes?," NBER Chapters, in: The Youth Labor Market Problem: Its Nature, Causes, and Consequences, pages 349-390, National Bureau of Economic Research, Inc.
    16. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
    17. Theodore M. Crone, 2005. "An Alternative Definition of Economic Regions in the United States Based on Similarities in State Business Cycles," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 617-626, November.
    18. Galí, Jordi, 2010. "Monetary Policy and Unemployment," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 10, pages 487-546, Elsevier.
    19. Chinhui Juhn, 1992. "Decline of Male Labor Market Participation: The Role of Declining Market Opportunities," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(1), pages 79-121.
    20. Murat Tasci, 2012. "The Ins and Outs of Unemployment in the Long Run: Unemployment Flows and the Natural Rate," Koç University-TUSIAD Economic Research Forum Working Papers 1233, Koc University-TUSIAD Economic Research Forum.
    21. Almlund, Mathilde & Duckworth, Angela Lee & Heckman, James & Kautz, Tim, 2011. "Personality Psychology and Economics," Handbook of the Economics of Education, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 4, chapter 0, pages 1-181, Elsevier.
    22. Gary Solon & Steven J. Haider & Jeffrey M. Wooldridge, 2015. "What Are We Weighting For?," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 301-316.
    23. Rosella Gardecki & David Neumark, 1998. "Order from Chaos? The Effects of Early Labor Market Experiences on Adult Labor Market Outcomes," ILR Review, Cornell University, ILR School, vol. 51(2), pages 299-322, January.
    24. Lori G. Kletzer & Robert W. Fairlie, 2003. "The Long-Term Costs of Job Displacement for Young Adult Workers," ILR Review, Cornell University, ILR School, vol. 56(4), pages 682-698, July.
    25. Regis Barnichon & Christopher J. Nekarda, 2012. "The Ins and Outs of Forecasting Unemployment: Using Labor Force Flows to Forecast the Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 83-131.
    26. Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Hysteresis in unemployment," European Economic Review, Elsevier, vol. 31(1-2), pages 288-295.
    27. James D. Hamilton, 2018. "Why You Should Never Use the Hodrick-Prescott Filter," The Review of Economics and Statistics, MIT Press, vol. 100(5), pages 831-843, December.
    28. Dave Reifschneider & William Wascher & David Wilcox, 2015. "Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(1), pages 71-109, May.
    29. Beaudry, Paul & DiNardo, John, 1991. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 665-688, August.
    30. Regis Barnichon & Geert Mesters, 2018. "On the Demographic Adjustment of Unemployment," The Review of Economics and Statistics, MIT Press, vol. 100(2), pages 219-231, May.
    31. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    32. Andrew Foote & Michel Grosz & Ann Stevens, 2019. "Locate Your Nearest Exit: Mass Layoffs and Local Labor Market Response," ILR Review, Cornell University, ILR School, vol. 72(1), pages 101-126, January.
    33. Portier, Franck & Beaudry, Paul & Galizia, Dana, 2015. "Reviving the Limit Cycle View of Macroeconomic Fluctuations," CEPR Discussion Papers 10645, C.E.P.R. Discussion Papers.
    34. Berge, Wiljan van den, 2018. "Bad start, bad match? The early career effects of graduating in a recession for vocational and academic graduates," Labour Economics, Elsevier, vol. 53(C), pages 75-96.
    35. Johannes F. Schmieder & Till von Wachter, 2010. "Does Wage Persistence Matter for Employment Fluctuations? Evidence from Displaced Workers," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 1-21, July.
    36. Andrews,Donald W. K. & Stock,James H. (ed.), 2005. "Identification and Inference for Econometric Models," Cambridge Books, Cambridge University Press, number 9780521844413, September.
    37. Brent Meyer & Murat Tasci, 2015. "Lessons for Forecasting Unemployment in the U.S.: Use Flow Rates, Mind the Trend," Working Papers (Old Series) 1502, Federal Reserve Bank of Cleveland.
    38. Hilary Hoynes & Douglas L. Miller & Jessamyn Schaller, 2012. "Who Suffers during Recessions?," Journal of Economic Perspectives, American Economic Association, vol. 26(3), pages 27-48, Summer.
    39. Darby, Michael R & Haltiwanger, John C & Plant, Mark W, 1985. "Unemployment Rate Dynamics and Persistent Unemployment under Rational Expectations," American Economic Review, American Economic Association, vol. 75(4), pages 614-637, September.
    40. 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, April.
    41. Arellano, Manuel, 2003. "Panel Data Econometrics," OUP Catalogue, Oxford University Press, number 9780199245291.
    42. Julie L. Hotchkiss & Robert E. Moore, 2022. "Some Like it Hot: Assessing Longer-Term Labor Market Benefits from a High-Pressure Economy," International Journal of Central Banking, International Journal of Central Banking, vol. 18(2), pages 193-243, June.
    43. Harry J. Holzer & Steven Raphael & Michael A. Stoll, 2006. "Employers in the Boom: How Did the Hiring of Less-Skilled Workers Change during the 1990s?," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 283-299, May.
    44. Bound, John & Holzer, Harry J, 2000. "Demand Shifts, Population Adjustments, and Labor Market Outcomes during the 1980s," Journal of Labor Economics, University of Chicago Press, vol. 18(1), pages 20-54, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tomaz Cajner & John Coglianese & Joshua Montes, 2021. "The Long-Lived Cyclicality of the Labor Force Participation Rate," Finance and Economics Discussion Series 2021-047, Board of Governors of the Federal Reserve System (U.S.).
    2. Mohammed Ait Lahcen & Garth Baughman & Hugo van Buggenum, 2023. "Racial Unemployment Gaps and the Disparate Impact of the Inflation Tax," Opportunity and Inclusive Growth Institute Working Papers 073, Federal Reserve Bank of Minneapolis.

    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. Till von Wachter, 2020. "The Persistent Effects of Initial Labor Market Conditions for Young Adults and Their Sources," Journal of Economic Perspectives, American Economic Association, vol. 34(4), pages 168-194, Fall.
    2. Paul Ryan, 2001. "The School-to-Work Transition: A Cross-National Perspective," Journal of Economic Literature, American Economic Association, vol. 39(1), pages 34-92, March.
    3. 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.
    4. Bart Hobijn & Ayşegül Şahin, 2021. "Maximum Employment and the Participation Cycle," NBER Working Papers 29222, National Bureau of Economic Research, Inc.
    5. Rune V. Lesner & Anna Piil Damm & Preben Bertelsen & Mads Uffe Pedersen, 2018. "Life Skills Development of Teenagers through Spare-Time Jobs," Economics Working Papers 2018-09, Department of Economics and Business Economics, Aarhus University.
    6. Corinna Ghirelli, 2015. "Scars of early non-employment for low educated youth: evidence and policy lessons from Belgium," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-34, December.
    7. Brzinsky-Fay, Christian, 2017. "The interplay of educational and labour market institutions and links to relative youth unemployment," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 27(4), pages 346-359.
    8. Charles L. Baum & Christopher J. Ruhm, 2016. "The Changing Benefits of Early Work Experience," Southern Economic Journal, John Wiley & Sons, vol. 83(2), pages 343-363, October.
    9. Brand, Claus & Obstbaum, Meri & Coenen, Günter & Sondermann, David & Lydon, Reamonn & Ajevskis, Viktors & Hammermann, Felix & Angino, Siria & Hernborg, Nils & Basso, Henrique & Hertweck, Matthias & Bi, 2021. "Employment and the conduct of monetary policy in the euro area," Occasional Paper Series 275, European Central Bank.
    10. Stimpfle, Alexander & Stadelmann, David, 2015. "The Impact of Fundamental Development Factors on Different Income Groups: International Evidence," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113128, Verein für Socialpolitik / German Economic Association.
    11. Christian S. Otchia, 2021. "Returns to Educational Attainment in Urban Ghana: The Role of Job-to-Job Transition," Progress in Development Studies, , vol. 21(1), pages 51-67, January.
    12. Falck, Oliver & Heimisch-Roecker, Alexandra & Wiederhold, Simon, 2021. "Returns to ICT skills," Research Policy, Elsevier, vol. 50(7).
    13. Stephanie R. Aaronson & Mary C. Daly & William L. Wascher & David W. Wilcox, 2019. "Okun Revisited: Who Benefits Most from a Strong Economy?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 50(1 (Spring), pages 333-404.
    14. Thomas Bolli & Katherine Caves & Maria Esther Oswald-Egg, 2021. "Valuable Experience: How University Internships Affect Graduates’ Income," Research in Higher Education, Springer;Association for Institutional Research, vol. 62(8), pages 1198-1247, December.
    15. Robert Gibbons & Michael Waldman, 2006. "Enriching a Theory of Wage and Promotion Dynamics inside Firms," Journal of Labor Economics, University of Chicago Press, vol. 24(1), pages 59-108, January.
    16. Mattia Filomena, 2021. "Unemployment Scarring Effects: A Symposium On Empirical Literature," Working Papers 453, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    17. Abigail Wozniak, 2010. "Are College Graduates More Responsive to Distant Labor Market Opportunities?," Journal of Human Resources, University of Wisconsin Press, vol. 45(4), pages 944-970.
    18. 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.
    19. 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.
    20. Gábor Pintér, 2019. "House Prices and Job Losses," The Economic Journal, Royal Economic Society, vol. 129(618), pages 991-1013.

    More about this item

    Keywords

    persistence; unemployment; labor market tightness; employment;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

    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:fip:fedcwq:180101. 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: 4D Library (email available below). General contact details of provider: https://edirc.repec.org/data/frbclus.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.