Not Working: Demographic Changes, Policy Changes, and the Distribution of Weeks (Not) Worked

Abstract

From 1978 to 2000 the fraction of adult men in full-year non-employment increased from 17.1 to 21.6 percent. Previous research focused on the role of disability insurance policy and wage structure changes to explain this increase. Using Current Population Surveys from 1979 to 2003 we assess how much of the changes in full-year non-employment can be explained by demographic changes, possibly linked to health. Our empirical strategy allows us to examine how 1978 to 2000 changes in demographic characteristics would have changed the distribution of weeks worked if policies and macroeconomic conditions remained as they were in 1978. For prime-aged men, we find changes in age, race, and ethnicity can "explain" 14 to 33 percent of the increase in fullyear non-employment, without any change in policy or wage structure. For prime-aged women, changes in demographics also would have predicted increases in full-year nonemployment, when in fact we saw dramatic decreases.

Keywords: Disability, unemployment, health, labor force participation

JEL Classification: I12, J11, J64