Men in their prime working age, defined as men between the ages of 25 and 64, constitute 33 percent of the civilian non-institutionalized population in the United States. At the trough of the 1969-1970 recession, 6.5 percent of this group (henceforth, “population”) were out of the labor force (OLF), 90.8 percent were employed, and 2.7 percent were unemployed. Since then, the employment-to-population ratio has trended persistently downward, while the OLF-to-population ratio has increased substantially.
In 2010, the aftermath of the 2007-2009 recession, the employment-to-population ratio of this same group declined to an all-time low of 76.3 percent, while the OLF-to-population ratio increased to an all-time high of 14.7 percent.
In this article, we investigate the extent to which the change in the sociodemographic composition of the population (by age, educational attainment, marital status, and race) has contributed to the changes in the aggregate labor market outcomes. Our emphasis on the compositional changes in the sociodemographic characteristics of the population is motivated by a literature rife with correlations between sociodemographic factors and labor market outcomes. In particular, older workers typically experience lower rates of labor force participation and, conditional on participating, older workers are less likely to be unemployed than younger workers (see, for example, Shimer 1999). The literature also finds that (i) more highly educated workers have a higher opportunity cost of not working; (ii) married men are more likely to participate in the labor force and, conditional on participation, more likely to be employed; and (iii) non-white persons are usually underrepresented in the labor force and employment. Thus, one expects a strong association between labor market outcomes and the demographic composition of the labor force, which serves as a reduced-form representation of underlying structural relationships.