Changing Poverty, Changing Policies

Chapter 3. Economic Change and the Structure of Opportunity for Less-Skilled Workers

Chapter 3 Economic Change and the Structure of Opportunity for Less-Skilled Workers Rebecca M. Blank T he primary source of support for most non-elderly adults comes from their employment and earnings. Hence, understanding the jobs and wages available to less-educated workers is key to understanding changes in the well-being of low-income populations. Expansions and contractions in the macroeconomy influence unemployment rates, wages, and overall economic growth, all of which are important determinants of the economic circumstances facing low-income families. This chapter focuses on the trends in labor market and macroeconomic circumstances that particularly affect less-educated and low-wage workers. The first section looks at changes in work behavior among individuals by skill level, the second at unemployment and job availability. The third section investigates trends in earnings and discusses the reasons behind substantial earnings shifts among less-educated men and women since 1980. The fourth section looks at the most disadvantaged families and investigates the relationship between macroeconomic and labor market factors and poverty rates. The final section discusses policy implications. A primary finding is that low-income families are more reliant on jobs and earnings in the 2000s than they were in past decades. This is particularly true for lessskilled single mothers, who greatly increased their earnings following welfare reform in the mid-1990s. Maintaining a high-employment economy, with stable or growing wages and jobs that are readily available to less-educated workers, continues to be the most important antipoverty policy for this country. The deep recession that began in 2007 and has already brought unemployment rates to their highest levels in twenty-five years is likely to cause significant increases in poverty. WORK BEHAVIOR AMONG LESS-EDUCATED PERSONS The economy primarily affects individuals who are working or actively looking for work. Because trends in labor force participation since 1980 have differed between less-educated men and women, I discuss the factors influencing work behavior among men first. / 63 Changes in Work Among Less-Educated Men Employment declined markedly among less-educated men between 1979 and 2007, although more of this decline occurred between 1979 and 1995 than in the more recent decade. Figure 3.1 shows the trends over this time period in the share of men between the ages of eighteen and fifty-four who reported themselves as either working or looking for work.1 The solid line shows labor force participation among men who did not hold a high school diploma. The dashed line shows labor force participation among men who held only a high school diploma, while the dotted line represents men who had at least some schooling beyond high school. Men with more than a high school diploma have always been highly likely to work, with about a 90 percent labor force participation rate throughout this time period. (The slight decline is due to growing years of school and earlier years of retirement within this group.) In contrast, men with only a high school diploma or less have seen substantial declines in labor market involvement. The participation rate among non-elderly men without a high school diploma fell from 79 percent to 73 percent between 1979 and 2007; among those with exactly a high school diploma it fell from 92 percent to 83 percent. These declines are particularly steep among African American men (data not shown). Changing Poverty, Changing Policies 64 / 0 40 50 60 70 80 90 100 Percentage in the Labor Force Year 1979 1981 1985 1983 1987 1989 1991 1993 1995 1997 1999 2001 2005 2007 2003 Less Than High School More Than High School Exactly High School Source: Author’s compilation based on Current Population Survey Outgoing Rotation Group data (U.S. Bureau of the Census, various years). Note: Based on all non-institutionalized civilian adults age eighteen to sixty-five. FIGURE 3.1 / Male Labor Force Participation by Skill Level, 1979 to 2007 Later I discuss wage declines for these men, particularly over the 1980s. Chinhui Juhn (1992) indicates that virtually all of the decline in less-skilled men’s labor force participation over the 1980s can be explained by declining wages. More recent declines are less easily understood. While labor force participation has risen slightly among the least-educated, it continues to decline among those with just a high school education. This is true even though unemployment rates remained relatively low throughout the 1990s and early 2000s. Harry...