Graphical/Tabular Report | U.S. Labor Market Trends |

Ngoc Hoang
Econ 4800
Prof. Ethan DoetschApril 21, 2014 |

The labor force participation rate of men has been decreasing over the past 60 years while the trend for women has been increasing rapidly. However, after 2008 the labor force participation rate of women has slightly declined, from 61.2% to 58.5% in 2013. There are various factors accounting for the decline in men’s participation rate in labor force, including changes in laws and government regulations. Social security retirements for the elderly population have affected labor force participation rates. Besides, Social Security Act, which was amended in 1960, has allowed individuals under age 50 eligible to receive disability payments. By providing people with non-labor income, it reduces the incentive to work which leads to people dropping out of the labor force. In contrary, remarkable changes in labor force participation rates of women reflected their significant role in the world of work over the past 60 years. Access to higher education and training used to be a significant barrier to women’s participation in the workforce. However, since the 1950s, the ability to pursue higher education, occupational structure of the economy and medical advances have allowed women to choose between household labor and work in the labor market in order to maximize their utility. Labor-saving technology and home-care products such as washers and dryers, dishwashers, etc. have helped to reduce the amount of time spending on household tasks. Birth control has also provided women with more choices in child bearing decision. Hence, they have had more opportunities to participate in the workforce.

Recession is a significant decline in activity across the economy which lasts for two consecutive quarters. One of its characteristics is a rise in unemployment rate. As a recession takes hold, unemployment rates continue to rise. Specifically, unemployment rate skyrocketed from 1980 to 1982, in which recession occurred. Unemployment rate of African American men significantly increased from 11.8% to 20.6% during those years while unemployment rate of White men also rose rapidly from 5.3% to 9%. Again, in the most recent recession, the Great Recession of 2009, which started in 2007 the unemployment rates escalated. Between 2007 and 2009, the unemployment rates of African American men and White men shot up from 8.4% to 16.7% and from 4.1% to 9.6%, respectively. The overall unemployment rate of African American men is higher than that of White men, even if the business cycle is at its peak. It persisted over the past 40 years and tend to continue later in future. African Americans tend to be employed in sectors that are very business-cycle sensitive. So when the economy is doing badly, and that sector gets worse, it’s worse for this particular population, which leads to skyrocketed unemployment rate. The widest gaps, when black’s unemployment was as much as 2.3 times that of white’s unemployment, came in the late 1980s. During the Great Recession in 2009, this gap shrunk when the unemployment rate of African American is about 1.7 times higher than that of White. There are many factors that could explain this phenomena including segregation, racial discrimination, and expressions of white supremacy. With little or no chance of obtaining higher education, being segregated in neighborhoods that getting a college degree is not an option, or having financial burden, African Americans is at a disadvantage when competing against White workers for jobs, especially during the recession.

The median weekly earnings in the U.S over the past 30 years have been increasing and decreasing depending on where the country was in its business cycle. Workers earn less during the recession due to firms reducing its costs by cutting back on working hours. However, as the economy recovers, earnings of workers are increasing. Therefore, we might be able to guess whether the country is in recession or at its peak by looking at the median weekly earnings. In the late 1970s and early 1980s, the U.S experienced recession and then a recovery. Between 1997 and early 2000s, there was an increase in median weekly earnings. This could be correlated to periods when the economy as a whole was growing. The overall trend for median weekly earnings of workers in the U.S is increasing even when the economy is in recession. However, it could be problematic if looking at only median weekly earnings to see where the country is in its business cycle. The most recent recession started in 2007 and lasted until 2009. During this period, the median weekly earnings was expected to be deceasing. However, it instead increased from $334 to $346. Besides, by only looking at median weekly earnings, there are some other important variables that are excluded such as unemployment rate, inflation, etc. These variables could help to get a more accurate idea of how strong the economy is.

Table 1: 2013 Fourth Quarter, Median Weekly Earnings of Full-Time Wage and Salary Workers by Gender, Race, and Ethnicity, 16+ years old, in current dollars Race | Men | Women | | | | White | 896 | 728 | Black | 646 | 621 | Asian | 1019 | 792 | Hispanic | 594 | 531 | | | |

Regardless of races, women’s weekly earnings are lower than men’s. For example, the median weekly earnings of White women in 2013 fourth quarter was $728 whereas White men earned $896. Even for Black workers, men’s median weekly earnings was $646, $25 more than women’s earnings, which was $621. Child bearing is one of the main factors that drive these differences. Women have to drop out of labor force periodically due to child bearing. As a result, women have less working experiences than men, hence, they have less marketable skills. They tend not to choose occupations that require high skill level, and prefer those that allow them to take time off raising children and later they can get back to the workplace. These occupations mostly pay lower wage rates than others.
Within gender, there are wage differences between races. Median weekly earnings of Asian male workers was $1019 while it was $896 for White male, $646 for Black male, and $594 for Hispanic male workers. For women workers, median weekly earnings of Asian, White, Black, and Hispanic workers were $792, $728, $621, and $531 respectively. There are many factors that could explain the wage differences between races. Culture and upbringing play important roles in explaining high median weekly wages of Asian workers. Most Asian parents tend to choose career path for their children. They want their children to be either doctors, engineers, or lawyers, or those occupations that have high social status. These occupations require expensive and longer education and training. Therefore, wage rates will be higher for these occupations. Lower earnings of Black workers comparing to White and Asian workers can be explained by residential segregation. Black community is segregated in neighborhoods where there is high crime rate, poverty, and low education quality. These barriers prevent them from getting higher education and obtaining high skills. The same goes for Hispanic workers. They, along with Black workers, are disproportionately represented in many service jobs that require lower skills.

Table 2: 2013 fourth quarter Median weekly earnings of Full-time Wage and Salary Workers by Gender and Educational attainment, 25+ years old, in current dollars Education Level | Men | Women | | | | Less than high school | 499 | 390 | High school grads no college | 732 | 564 | Bachelor’s degree only | 1313 | 977 | Advanced degree | 1648 | 1170 | | | |

Regardless of educational levels, median weekly earnings of men is higher than women’s. Having an advanced degree, men’s median weekly earnings in 2013 fourth quarter was $1648 while it was $1170 for women. Even for high school dropout, median weekly earnings of men was $499, $109 more than that of women, which was $390. Women are more likely to leave the workforce to provide unpaid care to family members. Hence, they have less experiences than men. They are more likely to work in low-wage, “pink-collar” jobs such as teaching, child care, nursing, cleaning, and waitressing. Within genders, the higher educational attainment an individual has, the higher earnings he receives. Median weekly earnings of men with less than high school degree was $499 while it was $1648 for those that have advanced degrees. The same goes for women. Those with advanced degrees had median weekly earnings of $1170 while it was $390 for those with less than high school degrees. Education serves as a signal to employers of the likely innate ability of an individual. Higher education signals higher ability. Employers pay educated workers more than uneducated ones because they are likely to be of higher ability, and hence, more productive than other workers.

Table 3: 2013 Union Representation of Wage and Salary Workers by Gender, Race, and Ethnicity, 16+ years old, in current dollars Race | Men | Women | | | | White | 12.8 | 11.5 | Black | 16.2 | 14.0 | Hispanic | 10.2 | 10.5 | | | |

Within races, union representation of men is higher than that of women. Specifically, union representation of White male workers was 12.8% while union representation of White female workers was 11.5% in 2013. The same goes for Black workers. However, union representation of Hispanic female workers was 10.5%, slightly higher than that of Hispanic male workers, which was 10.2%. Preferences can explain these differences. Women tend not to join union. In spite of women's involvement in labor force, deeply ingrained prejudices against women in the workplace were often reinforced by labor unions. Women were seen as threats to men’s jobs. Hence, male workers have often used unions to exclude women.
Within genders, Black male workers have the highest union representation rate which was 16.2% while that of White male and Hispanic male were 12.8% and 10.2% respectively in 2013. Black workers are disproportionately union members. They struggle for freedom and equality, and face many challenges in the workplace. Hence, they have always seen unions as a fundamental instrument for achieving their goals.

Table 4: 2013 Median Weekly Union Earnings vs. non-Union Earnings by Race and Ethnicity, 16+ years old, in current dollars Race | Represented by Unions | Non-Union | | | | White | 970 | 769 | Black | 794 | 606 | Hispanic | 832 | 547 | | | |

Unions are representatives of workers in the U.S. Their activities center on collective bargaining over wages, benefits, and working conditions for their members, and on representing their members in disputes with management over violations of contract provisions. Hence, they negotiate with employers for higher wage rates, which leads to higher earnings, for their member. Median weekly earnings are higher for those who are represented by unions. In 2013, among full-time wage and salary workers, White union members had median weekly earnings of $970, while those who were not union members had median weekly earnings of $769. Black union members’ median weekly earnings was $794, which was $188 more than non-union members’ earnings. And Hispanic has median weekly earnings of $832, while non-union members’ median weekly earnings was $547. Black workers have the lowest earnings even being represented by union. The gap between union members’ earnings and non-union members’ earnings of Black worker is the smallest. One factor could explain this difference is discrimination by firms. Firms have their own prejudice and stereotype against Black workers. These workers are believed to be less productive than others. There are also premarket discrimination against this population. It can take in account factors such as family background, school quality, etc. Hence, their earnings are still low even though they are represented by unions.