Excess Persistence in Employment of Disadvantaged Workers

50 Pages Posted: 7 Feb 2018 Last revised: 2 Sep 2019

See all articles by Bruce Fallick

Bruce Fallick

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Pawel Michal Krolikowski

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Date Written: August 30, 2019

Abstract

We examine persistence in employment-to-population ratios in excess of that implied by persistence in aggregate labor market conditions, among less-educated individuals using state-level data for the United States. Dynamic panel regressions and local projections indicate a moderate degree of excess persistence, which dissipates within three years. We find no significant asymmetry between the excess persistence of high vs. low employment rates. The cumulative effect of excess persistence in the business cycle surrounding the 2001 recession was mildly positive, while the effect in the cycle surrounding the 2008-09 recession was decidedly negative. Simulations suggest that the lasting employment benefits of temporarily running a “high-pressure” economy are small.

Note: Previous version of paper was titled "Hysteresis in Employment Among Disadvantaged Workers".

Keywords: persistence, labor market tightness, unemployment, employment

JEL Classification: E24, J21, J24

Suggested Citation

Fallick, Bruce and Krolikowski, Pawel Michal, Excess Persistence in Employment of Disadvantaged Workers (August 30, 2019). FRB of Cleveland Working Paper No. 18-01R, Available at SSRN: https://ssrn.com/abstract=3119117

Bruce Fallick (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Pawel Michal Krolikowski

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

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