The Employment, Earnings, and Income of Less Skilled Workers Over the Business Cycle

Abstract

comes from the NICHD and the Sloan Foundation. Computing support was provided by the Econometrics Laboratory at U.C. Berkeley. In this paper, I examine the effect of business cycles on the employment, earnings, and income of persons in different demographic groups. I classify individuals by sex, education, and race. The analysis uses data from the Current Population Survey's Outgoing Rotation Group file, covering the period 1979-1992, and March Aimual Demographic files (ADF) covering the period 1975-1997. Many different individual and family outcome measures are considered including: employment to population ratios, weekly earnings, hourly earnings, aimual hours, aimual earnings, family earnings, family transfer income, and total family income. The regression model is specified such that the key parameters measure how the labor market outcomes of less skilled workers vary with the business cycle relative to the variability for high skill groups. The analysis uses variation across MSAs in the timing and severity of shocks. The results consistently show that individuals with lower education levels, nonwhites, and low skill women experience greater cyclical fluctuation than high skill men. These results are the most striking when examining comprehensive measures of labor force activity such as the likelihood of full-time year around