What Happened to the U.S. Employment Miracle?

Transcription

1 What Happened to the U.S. Employment Miracle? Steven J. Davis University of Chicago & NBER Slides Prepared for an AEA Panel Discussion ASSA Chicago 8 January 2012

2 Three What went right? What went wrong? Worries? Many. Remarks on three: U.S. and training system Job displacement and long- term joblessness reversal of 2

3 Some Facts What Went Right? Impressive expansion of U.S. employment and market work hours through roughly 2000 U.S. experience stronger in this regard than other rich countries, much stronger than most Expansion of market work hours accompanied by rising (Aguiar and Hurst, 2007) 3

4 Employment- to- by Age in 2000 (Total) US UK Age Band Reproduced from Fed briefing by Grisse, Klitgaard and Sahin (2011). Employment Population Ratio EU15 France Greece Italy Portugal Spain Sweden Germany 4

5 Reproduced from Rogerson (2006). 5

6 High U.S. market work hours relative to other developed economies arose after the 1960s and 1970s. See Rogerson (2006) for more countries. Reproduced from Davis and Henrekson (2010). 6

7 Reproduced from Ngai and Pissarides 7 (2009).

8 What Went Right? Some Underlying Forces Moderate taxes on labor income and expenditures compared to other rich countries Less extensive, less generous social insurance programs (Krueger and Meyer, 2002) Sensible at least compared to many other rich countries (Gruber and Wise, 1999, 2004) Flexible labor markets again, compared to most to other rich countries 8

9 Taxes, and Time High tax rates on labor income and expenditures shi` work from market provision to home or underground economy. Major factor behind US- European differences in market work and industry mix of market See literature that arose a`er Prescob (2004), e.g, Ohanian et al. (2008), for evidence on total work hours & employment rates. and industry mix effects, see Davis and Henrekson (2005, 2010), Olovsson (2009), Rogerson (2007, 2008), Ragan (2010), McDaniel (2011), *Ngai and Pissarides (2011). Likely roles for labor market programs and product market as well. 9

10 Reproduced from Davis and Henrekson 10 (2005).

11 Reproduced from Davis and Henrekson (2010). 11

12 12

13 See Freeman & Schettkatt and Burda et al. (2008) for other country comparisons. 13

14 What Went Wrong? 1. Longstanding weaknesses in U.S. and training system Many students fail to complete secondary Many who complete secondary are neither prepared for a demanding college educa@on nor equipped with marketable skills 2. Ongoing decline in good job opportuni@es for less educated/less skilled (especially men) Labor- saving technological change Falling trade barriers and skill upgrading abroad Structural shi`s from goods to services 14

15 What Went Wrong? 3. The housing boom muted and partly disguised the secular decline in good job for less educated men 4. The housing bust brought a collapse in good job opportuni@es for less educated men and exposed the severity of the longer term problem. Current situa@on worse than if we d never had a housing boom. 5. Severe recession in and anemic recovery a`erwards. 15

16 US Employment- to- by Age in 2000 & 2009 (Male) US (2000) US (2009) Age Band Reproduced from Fed briefing by Grisse, Klitgaard and Sahin (2011). Employment Population Ratio 16

17 Total Employment- to- (15-64) US EU Reproduced from Fed briefing by Grisse, Klitgaard and Sahin (2011). 17

18 Reproduced from Autor (2011). 18

19 Reproduced from Autor (2011) 19

20 Reproduced from Autor (2011) 20

21 21

22 30.0 Unemployment Rate by Industry: Construction, Manufacturing, Leisure and Hospitality, Financial Activities, , Percent, NSA /1/00 5/1/00 9/1/00 1/1/01 5/1/01 9/1/01 1/1/02 5/1/02 9/1/02 1/1/03 5/1/03 9/1/03 1/1/04 5/1/04 9/1/04 1/1/05 5/1/05 9/1/05 1/1/06 5/1/06 9/1/06 1/1/07 5/1/07 9/1/07 1/1/08 5/1/08 9/1/08 1/1/09 5/1/09 9/1/09 1/1/10 5/1/10 9/1/10 1/1/11 5/1/11 9/1/11 Recession Construction Manufacturing Leisure and Hospitality Financial Activities 22 Source: Current Population Survey, downloaded 2 Jan. 2012

23 Worries Slow/inadequate reform of U.S. and training system for a reversal of marke@za@on Job displacements and long- term joblessness 23

24 On Job Displacement 1. Job displacement brings large PV earnings losses Unemployment Rate in Displacement Year Less than 6% More than 8% Full Sample, Mean PV Losses as of Pre- Displacement Earnings (Men) 1.4 Years 2.8 Years 1.7 Years Based on Davis & von Wachter (2011) 2. Incidence of job loss & displacement rises in recessions and slumps, especially severe ones 3. Job displacement leads to many other consequences for workers and their families

25 Fig. 7. PV Earnings Losses over 20 Years from Displacement, Men 50 or Younger with 3+ Years of Prior Job Tenure PV Earnings Loss As a Multiple of Pre- Displacement Annual Earnings Reproduced from Davis and von Wachter (2011) Unemployment Rate in Displacement Year

26 45 Mean Unemployment Spell Duration, Monthly, Seasonally Adjusted, Source: Current Population Survey, downloaded 2 Jan /1/67 2/1/68 3/1/69 4/1/70 5/1/71 6/1/72 7/1/73 8/1/74 9/1/75 10/1/76 11/1/77 12/1/78 1/1/80 2/1/81 3/1/82 4/1/83 5/1/84 6/1/85 7/1/86 8/1/87 9/1/88 10/1/89 11/1/90 12/1/91 1/1/93 2/1/94 3/1/95 4/1/96 5/1/97 6/1/98 7/1/99 8/1/00 9/1/01 10/1/02 11/1/03 12/1/04 1/1/06 2/1/07 3/1/08 4/1/09 5/1/10 6/1/11 Recession Mean Weeks Unemployed, 16 years and older 26

27 References Aguiar and Hurst (2007) Measuring Trends in Leisure: The of Time over Five Deades, Quarterly ornal of Economics, 122, no. 3, Autor (2011) Impending Labor Market Challenges: Males between the Blades of the Marshallian Scissors> Burda, Hamermesh and Weil (2008) The of Total Work in the EU and USA, in Boeri, Burda and Kramarz, editors, Working Hours and Job Sharing in the EU and USA. Davis and Henrekson (2005) Tax Effects on Work Industry Mix and Shadow Economy Size: Evidence from Rich- Country Comparisons. In Ramón Gómez- Salvador et al., eds., Labour Supply and the IncenBves to Work in Europe. Available as NBER Working Paper No at hbp:// Davis and Henrekson (2010) Economic Performance and Work in Sweden a`er the Crisis of the Early 1990s. Reforming the Welfare State, Richard B. Freeman, Birgiba Swedenborg, and Robert H. Topel, editors, University of Chicago Press. Available at hbp://faculty.chicagobooth.edu/steven.davis/research/. Davis and von Wachter (2011) Recessions and the Cost of Job Loss, Brookings Papers on Economic AcBvity, forthcoming. Freeman and Schebkab (2005) of Household and the EU- US Gap In Work, Economic Policy, 1: Heckman and LaFontaine (2007) The American High School Grduate Rate: Trends and Levels, NBER Working Paper Gruber and Wise (1999) Social Security and ReBrement Around the World, editors. Gruber and Wise (2004) Social Security Programs and ReBrement Around the World: Micro EsBmaBon, editors. Krueger and Meyer (2002) Labor Supply Effects of Social Insurance in Handbook of Public Economics, 4, Auerbach and Feldstein, editors. McDaniel (2011) Forces Shaping Hours Worked in the OECD: , American Economic Journal: Macroeconomics. 27

28 References Ngai and Pissarides (2009) Welfare Policy and the Sectoral of Employment, London School of Economics, 21 May. Ngai and Pissarides (2011) Taxes, Social Subsidies and the of Work Time, American Economic Journal: Macroeconomics, 3, no (4), Ohanian, Raffo and Rogerson (2008) Long- Term Changes in Labor Supply and Taxes: Evidence from OECD Countries, , Journal of Monetary Economics. Olovsson (2009) Why Do Europeans Work so Lible? InternaBonal Economic Reivew, 50, no. 1, Prescob (2004) Why Do Americans Work So Much More than Europeans? Quarterly Review of the Federal Reserve Bank of Minneapolis, July, Ragan (2010) Taxes, Transfers, and Time Use: Fiscal Policy in a Model with Household Produc@on, Stockholm School of Economics. Rogerson, Richard (2006) Understanding Differences in Hours Worked, Review of Economic Dynamics 9(3), Rogerson (2007) Taxa@on and Market Work: Is Scandinavia an Outlier? Economic Theory, 32, Rogerson (2008) Structural Transforma@on and the Deteriora@on of European Labor Market Outcomes, Journal of PoliBcal Economy, 116, no. 2,