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Explaining the Decline in the U.S. Employment-to-Population Ratio: A Review of the Evidence

Katharine Abraham () and Melissa S. Kearney

No 24333, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper first documents trends in employment rates and then reviews what is known about the various factors that have been proposed to explain the decline in the overall employment-to-population ratio between 1999 and 2016. Population aging has had a notable effect on the overall employment rate over this period, but within-age-group declines in employment among young and prime age adults have been at least as important. Our review of the evidence leads us to conclude that labor demand factors, in particular trade and the penetration of robots into the labor market, are the most important drivers of observed within-group declines in employment. Labor supply factors, most notably increased participation in disability insurance programs, have played a less important but not inconsequential role. Increases in the real value of the minimum wage and in the share of individuals with prison records also have contributed modestly to the decline in the aggregate employment rate. In addition to these factors, whose effects we roughly quantify, we also identify a set of potentially important factors about which the evidence is too preliminary to draw any clear conclusion. These include improvements in leisure technology, changing social norms, increased drug use, growth in occupational licensing, and the costs and challenges associated with child care. Our evidence-driven ranking of factors should be useful for guiding future discussions about the sources of decline in the aggregate employment-to-population ratio and consequently the likely efficacy of alternative policy approaches to increasing employment rates.

JEL-codes: J01 J21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dem, nep-ias and nep-lma
Date: 2018-02
Note: LS
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