Wage Inequality and the Rise in Labor Force Exit: The Case of US Prime-Age Men

Pinghui Wu

No 22-16, Working Papers from Federal Reserve Bank of Boston

Abstract: This article offers the first empirical evidence that labor force exit rates rise when workers’ relative earnings fall. The model takes into account that a job not only provides economic security but also affirms a worker’s social status, which is tied to their relative position in the labor market. Based on the results, the decline in relative earnings for non-college prime-age men over the last four decades is estimated to have raised their labor force exit propensity by 0.49 percentage point, accounting for 44 percent of the total growth in their labor force exit rate during this period.

Keywords: labor force exit rates; prime-age male labor force participation; relative earnings; wage inequality (search for similar items in EconPapers)
JEL-codes: J21 J24 J31 (search for similar items in EconPapers)
Pages: 45
Date: 2022-09-01
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DOI: 10.29412/res.wp.2022.16

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