Who's Not Working and Why Employment, Cognitive Skills, Wages, and the Changing U.S. Labor Market

Over the Last Quarter-Century, the U.S. labor market has experienced some disturbing trends. Despite apparent economic prosperity, joblessness among less-educated prime-age males is rising and, in addition, an increasing number of university graduates are taking "high-school jobs." Moreover, except for a thin layer of university-educated workers, most in the labor force are experiencing stagnating or falling real wages. Simultaneously, the inequality of wages is increasing within most groups. Using an entirely new approach that takes account of the cognitive skills of U.S. workers and the detailed occupational structure of the labor force, Frederic L. Pryor and David L. Schaffer explore the underlying causes of these trends. To explain both employment and wages, they demonstrate that what a worker knows is becoming increasingly more important than a worker's formal education. They also present evidence that because of differences in wages between men and women, women are replacing men in many occupations. Finally, they synthesize these and other labor market characteristics to explain the increasing inequality of wages. The authors have written this empirical study in non-technical language for those concerned with labor market problems and policies. For specialists they analyze a variety of technical issues in the appendices.