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Working Paper
Capital-Task Complementarity and the Decline of the U.S. Labor Share of Income
This paper provides evidence that shifts in the occupational composition of the U.S. workforce are the most important factor explaining the trend decline in the labor share over the past four decades. Estimates suggest that while there is unitary elasticity between equipment capital and non-routine tasks, equipment capital and routine tasks are highly substitutable. Through the lenses of a general equilibrium model with occupational choice and the estimated production technology, I document that the fall in relative price of equipment capital alone can explain 72 percent of the observed ...
Report
The Long-Term Rise of Labor Market Detachment: Evidence from Local Labor Markets
We develop a measure of chronic joblessness among prime-age men and women in the United States—termed the detachment rate— that identifies those who have been out of the labor force for more than a year. We show that the detachment rate more than doubled for men since the early 1980s and rose by a quarter for women since 2000, though it is consistently considerably higher for women than men. We then explore the economic geography of labor market detachment to help explain its rise. Results show that the detachment rate increased more in places with weak local economies, particularly those ...
Working Paper
Job Polarization and the Natural Rate of Unemployment in the United States
I present a new estimate of the natural rate of unemployment in the United States that accounts for changes in the age, sex, and skill composition of the labor force. Using micro-level data from the Current Population Survey for the period 1994-2017, I find that the natural rate of unemployment declined by 0.5 percentage point since 1994 and currently stands at 4.5 percent. My projections show that ongoing demographic and technological changes could lower the trend rate further to 4.4 percent by the end of 2022.
Working Paper
IT and Urban Polarization
We show that differential IT investment across cities has been a key driver of job and wage polarization since the 1980s. Using a novel data set, we establish two stylized facts: IT investment is highest in firms in large and expensive cities, and the decline in routine cognitive occupations is most prevalent in large and expensive cities. To explain these facts, we propose a model mechanism where the substitution of routine workers by IT leads to higher IT adoption in large cities due to a higher cost of living and higher wages. We estimate the spatial equilibrium model to trace out the ...
Journal Article
Why Are Prime-Age Men Vanishing from the Labor Force?
The labor force participation rate for prime-age men (age 25 to 54) has declined dramatically in the United States since the 1960s, but the decline accelerated more recently. In 1996, 4.6 million prime-age men did not participate in the labor force. By 2016, this number had risen to 7.1 million. Better understanding these men and the personal situations preventing them from working may be crucial in evaluating whether they are likely to return to the labor force. Didem Tuzemen documents changes in the nonparticipation rates of prime-age men with different demographic characteristics as well ...
Working Paper
Disappearing Routine Occupations and Declining Prime-Age Labor Force Participation
I study the effect of disappearing routine occupations on the decline in the labor force participation rate of prime-age individuals since the 1990s. I use multiple data sources and empirical models to study this relationship. First, I exploit state-level variation and show that the long-term trends of declining routine employment and prime-age labor force participation are highly correlated. Second, I narrow the geographic unit to local labor markets and quantify the causal effect of declining routine employment on the labor market outcomes of prime-age individuals. My results imply that the ...
Discussion Paper
Job Polarization in the United States: A Widening Gap and Shrinking Middle
Over recent decades, the U.S. workforce has undergone a dramatic restructuring in response to changes in technology, trade, and consumption patterns. Some sectors, such as health care, have expanded, while others, such as manufacturing, have contracted. These changes have altered the composition of the workforce, leading to a phenomenon often referred to as “job polarization,” an important factor contributing to economic inequality in the nation. In this post, we show that the wage gap between high- and low-paid occupations has widened over the past three decades. Further, we show that ...