Men without Education and Work: A Crisis Unfolding

A salient feature of the labor markets of developed economies is that low-educated prime-age men are much less likely to be employed than high-skilled prime-age men. The gap emerged several decades ago and has been growing ever since. The goal of our project is to understand why low-educated men work so little, and how policy may help improve their labor market prospects. Using data from Norway and the United States, we will carry out two separate but related projects. The goal of the first project is to investigate the roles of changes in skills, labor demand, and wage-setting institutions. We first provide an empirical characterization of the skills of low-educated men, and investigate whether a reduction in the average quality of skills or an increased mismatch between the supply of skills and the skills that firms demand can help explain their declining employment rates. We then study the effects of different exposures and responses to labor demand shocks and the effects of providing wage subsidies to employers targeted towards marginalized individuals. Finally, we examine social exclusion in the Norwegian labor market by developing and estimating a structural model of the wage-setting institutions. In the second project, we examine the roles of changes in labor supply factors and work incentives. We first consider the role of technological progress in leisure activities and the corresponding changes in the value of leisure. We then turn to the social safety net, and investigate how differences in disability insurance (DI) beneficiary rolls over time and between Norway and the US in may be driven by differences in the labor market, characteristics of the eligible population, or the DI system itself, respectively. Finally, we study the role of self-insurance and how it interacts with features of the DI program, and whether expanding unemployment benefit duration can increase the labor force participation of young and marginal workers.

The goal of this project is to provide novel empirical evidence on the causes and consequences of declining labor market participation among the low-educated, with a particular focus on young men. Using data from Norway and the United States, we will carry out two separate but related projects, each of which includes several specific paper proposals that are descripted in the application. The goal of the first project is to investigate the roles of changes in skills, labor demand, and wage-setting institutions. We first provide an empirical characterization of the skills of low-educated men, and investigate whether a reduction in the average quality of skills or an increased mismatch between the supply of skills and the skills that firms demand can help explain their declining employment rates. We then study the effects of different exposures and responses to labor demand shocks and the effects of providing wage subsidies to employers targeted towards marginalized individuals. Finally, we examine social exclusion in the Norwegian labor market by developing and estimating a structural model of the wage-setting institutions. In the second project, we examine the roles of changes in labor supply factors and work incentives. We first consider the role of technological progress in leisure activities and the corresponding changes in the value of leisure. We then turn to the social safety net, and investigate how differences in disability insurance (DI) beneficiary rolls over time and between Norway and the US in may be driven by differences in the labor market, characteristics of the eligible population, or the DI system itself, respectively. Finally, we study the role of self-insurance and how it interacts with features of the DI program, and whether expanding unemployment benefit duration can increase the labor force participation of young and marginal workers.