Julie L. Hotchkiss, M. Melinda Pitts, and Fernando Rios-Avila
Working Paper 2012-10
August 2012
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This paper uses matched individual-level data from the Current Population Survey to determine that around the 2008 recession, there was a significant upward shift in trend of the share of labor force leavers giving "Schooling" and "Other" as the reason for absence from the labor market. This trend shift is observed primarily among workers between the ages of 25 and 54 and is widespread across all educational groups with at least a high school degree. In addition, the upward shift in the trend of the schooling reason share occurred among workers previously employed in occupations and industries with varying degrees of job losses during the recession. This shift suggests it was a widespread phenomenon and not isolated among sectors or occupations that suffered the most during the recession. The implication is that the upward shift in the schooling reason share has more likely been a response to lower opportunity costs of schooling during economic downturns rather than the result of workers trying to overcome skill mismatch in the labor market. In addition, since transition rates to the labor force are highest among those giving "Schooling" and "Other" as reasons for absence, the decline in labor force participation since 2008 is likely more transitory than permanent.
JEL classification: J21, J22
Key words: nonparticipation, labor force participation, labor market transition, great recession
The authors thank John C. Robertson and participants at the Federal Reserve System Applied Microeconomics Conference for helpful comments. The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.
Please address questions regarding content to Julie L. Hotchkiss (contact author), Research Department, Federal Reserve Bank of Atlanta and Georgia State University, 1000 Peachtree Street N.E., Atlanta, GA 30309-4470, 404-498-8198, julie.l.hotchkiss@atl.frb.org; M. Melinda Pitts, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street N.E., Atlanta, GA 30309-4470, 404-498-7009, melinda.pitts@atl.frb.org; or Fernando Rios-Avila, Research Department, Federal Reserve Bank of Atlanta and Georgia State University, 1000 Peachtree Street N.E., Atlanta, GA 30309-4470, 404-498-8198, fernando.rios@atl.frb.org.
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