1. Labour supply and demand
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What happened to the ‘Great American Jobs Machine’?

  1. Matteo Richiardi  Is a corresponding author
  2. Brian Nolan
  3. Lane Kenworthy
  1. Centre for Microsimulation and Policy Analysis, University of Essex, UK
  2. Institute for New Economic Thinking at the Oxford Martin School, UK
  3. Collegio Carlo Alberto, Italy
  4. University of Oxford, UK
  5. University of California-San Diego, USA
Research article
Cite this article as: M. Richiardi, B. Nolan, L. Kenworthy; 2020; What happened to the ‘Great American Jobs Machine’?; International Journal of Microsimulation; 13(1); 19-51. doi: 10.34196/ijm.00211
12 figures and 11 tables

Figures

Labour force participation rates. Population aged 15–64.

Data source: OECD.

Employment rates. Population aged 15–64.

Data source: OECD.

Male labour force participation rate by age group.

Data source: OECD.

Female labour force participation rate by age group.

Data source: OECD.

Observed vs. fitted participation rates, (a) US males, (b) UK males, (c) US females, (d) UK females. Coefficients as in Table 2.
Estimated age effects: Participation probability at average values of other variables.
Estimated cohort effects: Participation probability at average values of other variables.
(a) Labour force participation rate, age 25–54, men, (b) Labour force participation rate, age 25–54, women The line for the United States is in bold.

Data source: OECD.

(a) Less than upper secondary education, age 25–64, (b) Bachelor’s degree or more, age 25–34. The line for the United States is in bold.

Data source: OECD.

Goodness of fit, alternative models. Note: Each panel reports the log likelihood (ll) of the models and the Akaike Information Criterion (AIC), normalised by the values achieved by the best fit (m3). Higher is better for ll, while lower is better for AIC. Models as in table B1. (a) US males, (b) UK males, (c) US females, (d) UK females.
(a) Oaxaca-Blinder decomposition of the estimated US participation gap by age group and sub-periods, males.
(b) Oaxaca-Blinder decomposition of the estimated US participation gap by age group and sub-periods, females.

Tables

Table 1
Average values
US UK
1996 2017 1996 2017
Active 0.775 0.743 0.778 0.798
Student 0.106 0.150 0.070 0.088
NEET (15-24) (a) 0.232 0.220 0.241 0.175
Age 37.0 38.5 38.1 40.1
Year of birth 1959.0 1978.5 1957.9 1976.9
Race black 0.099 0.123 0.015 0.030
Race other 0.049 0.108 0.040 0.103
Hispanic 0.152 0.204
Foreign born 0.150 0.192 0.078 0.177
Foreign national 0.094 0.102 0.047 0.142
Education low 0.202 0.156 0.359 0.164
Education medium 0.581 0.545 0.442 0.447
Education high 0.218 0.299 0.199 0.388
Household single alone 0.272 0.312 0.260 0.283
Household single cohabiting 0.020 0.043 0.054 0.121
Household married alone 0.009 0.013 0.016 0.003
Household married cohabiting 0.565 0.510 0.557 0.487
Household separated alone 0.025 0.019 0.024 0.023
Household separated cohabiting 0.002 0.003 0.004 0.003
Household divorced alone 0.082 0.070 0.052 0.048
Household divorced cohabiting 0.012 0.018 0.019 0.023
Household widowed alone 0.012 0.011 0.013 0.009
Household widowed cohabiting 0.001 0.002 0.001 0.001
Number of children 0.953 0.950
Household child under 2 (b) 0.080 0.065 0.078 0.074
Household child 2–4 (c) 0.090 0.084 0.114 0.116
Household child 5–9 (d) 0.105 0.104 0.173 0.182
Household child 10–15 (e) 0.105 0.111 0.210 0.206
Health bad 0.092 0.097 0.152 0.139
Home owned 0.664 0.645 0.729 0.646
Home owned outright 0.154 0.199
Home owned mortgage 0.576 0.447
Rural 0.220 0.172
Unemployment rate (regional or state level) 0.061 0.048 0.084 0.045
GDP per capita (national currency) 29,615 58,081 (2016) 15,526 30,850
Minimum wage (% of GDP per capita) (f) 0.154 0.147 (2016) 0.000 0.233
Social expenditure family (% of GDP) (g) 0.5 0.7 (2016) 2.2 3.8
Social expenditure total (% of GDP) (h) 14.8 19.3 (2016) 18.1 21.5
Maternity total protected (weeks) (i) 12 12 (2016) 40 70
Maternity total paid (weeks) (j) 0 0 (2016) 18 39
Paternity total specific (weeks) (k) 12 12 (2016) 0 20
Paternity total specific paid (weeks) (l) 0 0 (2016) 0 2
AFDC/TANF/SNAP (m) 29.3 21.2 (2016)
SSI federal (n) 16.4 13.4 (2016)
EITC2max (o) 124.0 102.0 (2016)
EITC state (p) 0.027 0.160 (2016)
  1. a

    Not in employment, education or training.

  2. b

    UK: presence of children below 2. US: youngest child below 2.

  3. c

    UK: presence of children aged between 2 and 4. US: youngest child aged between 2 and 4.

  4. d

    UK: presence of children aged between 5 and 9. US: youngest child aged between 5 and 9.

  5. e

    UK: presence of children aged between 10 and 15. US: youngest child aged between 10 and 15.

  6. f

    UK: national minimum wage. US: state minimum wage. Normalised by GDP per capita (000).

  7. g

    Social expenditures on family policies (% of GDP).

  8. h

    Social expenditures, total (% of GDP).

  9. i

    Maximum weeks of job-protected maternity, parental and home care leave available to mothers, regardless of income support.

  10. j

    Total weeks of paid maternity, parental and home care payments available to mothers.

  11. k

    Total weeks of leave reserved for exclusive use by the father.

  12. l

    Total weeks of paid leave reserved for exclusive use by the father.

  13. m

    Combined monthly maximum AFDC/TANF and Food Stamps benefits for a 4-person family. Normalised by GDP per capita and multiplied by 1,000.

  14. n

    EITC maximum credit for two dependents. Normalised by GDP per capita (000).

  15. o

    Monthly maximum federal SSI benefits for individuals living independently. Normalised by GDP per capita (000).

  16. p

    State EITC rate as percentage of Federal credit.

Table 2
Logit estimates of the probability of being in the labour force
(1) (2) (3) (4)
US UK US UK
Male Male Female Female
Variables 16–64 16–64 16–59 16–59
Age 0.123 *** 0.178 *** 0.076 *** 0.156 ***
Age squared −0.002 *** −0.003 *** −0.001 *** −0.002 ***
Year of birth 0.029 *** 0.047 *** 0.034 *** 0.056 ***
Year of birth squared 0.000 *** 0.000 *** 0.000 *** 0.000 ***
Race black −0.479 *** −0.315 *** 0.174 *** 0.231 ***
Race other −0.367 *** −0.447 *** −0.109 *** −0.712 ***
Foreign born 0.311 *** 0.222 *** 0.003 −0.063 ***
Foreign national 0.112 *** −0.082 *** −0.519 *** −0.043 ***
Hispanic 0.111 *** 0.105 ***
Education high −31.25 *** −4.44 −24.42 *** 10.35 ***
Education low 3.050 5.772 * −13.140 *** 25.070 ***
Health bad −8.532 ** −47.640 *** 29.210 *** 0.993
Year x health 0.003 * 0.023 *** −0.015 *** −0.001
Year x education high 0.016 *** 0.002 0.012 *** −0.005 ***
Year x education low −0.002 −0.003 * 0.006 *** −0.013 ***
Household single cohab 0.735 *** 0.617 *** 0.191 *** 0.212 ***
Household married alone 0.639 *** 0.804 *** −0.050 * −0.167 ***
Household married cohab 0.899 *** 0.730 *** −0.384 *** −0.141 ***
Household separated alone 0.443 *** 0.361 *** 0.200 *** 0.037 *
Household separated cohab 0.548 *** 1.030 *** 0.063 0.399 ***
Household divorced alone 0.486 *** 0.307 *** 0.315 *** 0.206 ***
Household divorced cohab 0.793 *** 0.689 *** 0.197 *** 0.300 ***
Household widowed alone 0.133 *** 0.238 *** −0.431 *** −0.084 ***
Household widowed cohab 0.351 *** 0.544 *** −0.248 *** 0.059
Household child under 2 0.041 −0.114 *** −0.967 *** −1.479 ***
Household child 2–4 0.013 −0.205 *** −0.645 *** −1.283 ***
Household child 5–9 0.067 *** −0.225 *** −0.285 *** −0.759 ***
Household child 10–15 0.169 *** −0.145 *** 0.071 *** −0.429 ***
Number of children 0.139 *** −0.094 ***
Home owned 0.068 *** 0.182 ***
Unemployment rate −1.215 *** −0.023 0.615 ** −0.038
Post-crisis 0.116 *** 0.089 ** 0.083 *** 0.043
Minimum wage −0.546 −0.243 * 0.910 *** −0.010
Social expenditure family −0.104 ** −0.031 0.091 ** 0.005
Social expenditure total −0.008 −0.010 −0.021 ** −0.008
AFDC/TANF/SNAP −0.014 *** −0.018 ***
SSI federal 0.003 0.022
EITC2max 0.000 0.000
EITC state −0.022 0.019
Rural −0.137 *** 0.007
Home owned outright 0.240 *** 0.320 ***
Home owned mortgage 1.232 *** 1.056 ***
Maternity total protected −0.007 *** −0.008 ***
Maternity total paid 0.006 *** 0.000
Paternity total specific 0.007 * 0.007 ***
Constant 1.127 *** −0.792 0.461 ** −3.431 ***
Observations 1,063,351 718,417 1053301 704,235
chi2 97,216 120,525 79,867 120,176
P 0.000 0.000 0.000 0.000
r2_p 0.239 0.364 0.118 0.246
  1. Notes: Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1.

  2. Students excluded. The baseline is a medium education white individual, single and not cohabiting, living in urban California (US) or central London (UK), and renting. Cohort is measured subtracting 1,900 from year of birth. State (US) and NUTS1 (UK) regional dummies included.

Table 3
Effects of education and health over time
Males Females
US UK US UK
Case Reference category 1996 2017 1996 2017 1996 2017 1996 2017
Education High Education Medium 0.29 0.62 0.04 0.08 0.33 0.59 0.57 0.47
Education Low Education Medium −0.58 −0.62 −0.40 −0.46 −0.80 −0.67 −0.48 −0.75
Health Bad Health Good −2.16 −2.10 −2.73 −2.26 −1.33 −1.65 −1.90 −1.93
  1. Notes: The table reports the contribution to the logit score from Table 2. The non-linearity of the logit function means that the same increase in the logit score has a different impact on the estimated probability depending on the starting value of the score.

Table B1
Alternative specifications
Model name Treatment of period effect Linear age and cohort effects identifiable Policy effects identifiable
m0 No period effects Yes No
m1 Period effects captured by macroeconomic variables Yes Yes
m2 Time dummies No only policy differentials in the US
m3 Time*region dummies No No
Table C1a
Oaxaca-Blinder decomposition of the estimated US participation gap, males
Males, 16–64 1996–2007 2008–2017
UK mean 87.2% 87.8%
US mean 87.1% 84.7%
difference UK-US (pp) 0.14 3.12
of which:
endowments (pp) −1.75 −0.04
coefficients (pp) 1.83 3.86
interaction (pp) 0.06 −0.70
endowments coefficients Endowments Coefficients
Overall (pp) −1.75 1.83 −0.04 3.86
Contribution of each covariate (pp):
APC −0.77 −1.04 −0.01 −0.25
Race black 0.78 0.46 −0.05 0.44
Race other 0.03 −0.06 0.00 −0.08
Foreign born −0.34 0.08 0.02 0.19
Foreign national −0.08 −0.23 −0.01 −0.26
Education high −0.12 −0.63 −0.04 −1.34
Education low −1.50 0.27 0.07 0.16
Household single cohab 0.61 0.01 −0.06 0.07
Household married alone −0.14 0.05 0.01 0.06
Household married cohab −0.29 −1.08 0.03 0.69
Household separated alone −0.00 −0.02 −0.00 0.09
Household separated cohab 0.02 0.01 −0.00 0.03
Household divorced alone −0.27 −0.13 0.01 0.11
Household divorced cohab 0.11 0.00 −0.00 0.08
Household widowed alone 0.00 0.00 0.00 0.02
Household widowed cohab 0.00 0.00 −0.00 0.00
Household child under 2 −0.00 −0.27 −0.01 −0.25
Household child 2–4 −0.01 −0.36 −0.00 −0.28
Household child 5–9 −0.00 −0.35 −0.00 −0.38
Household child 10–15 0.07 −0.28 −0.00 −0.29
Home owned 0.16 5.41 −0.00 5.07
Unemployment rate difference −0.02 −0.00 0.00 −0.00
  1. Note: Cells with a positive (negative) contribution to the US participation gap of more (less) than one pp are highlighted in red (green).

Table C1b
Oaxaca-Blinder decomposition of the estimated US participation gap, females
Females, 16–60 1996–2007 2008–2017
UK mean 75.1% 78.6%
US mean 74.9% 74.0%
difference UK-US (pp) 0.17 4.54
of which:
endowments (pp) −4.05 −1.17
coefficients (pp) 3.26 6.61
interaction (pp) 0.95 −0.91
endowments coefficients endowments Coefficients
Overall (pp) −4.05 3.26 −1.17 6.61
Contribution of each covariate (pp):
APC −0.14 −2.55 0.54 1.14
Race black −0.15 0.35 −0.11 0.34
Race other 0.01 −0.36 −0.02 −0.69
Foreign born −0.01 −0.02 −0.05 0.08
Foreign national 0.13 0.36 −0.50 0.64
Education high −0.23 0.31 1.09 −0.32
Education low −4.32 0.27 −2.47 −0.03
Household single cohab 0.30 0.06 0.56 0.10
Household married alone 0.02 0.02 0.01 0.00
Household married cohab 0.29 2.54 0.67 2.39
Household separated alone 0.01 −0.01 0.01 0.03
Household separated cohab 0.00 0.01 −0.00 0.02
Household divorced alone −0.25 −0.11 −0.15 0.12
Household divorced cohab 0.05 0.05 0.02 0.08
Household widowed alone 0.03 0.07 0.13 0.13
Household widowed cohab −0.00 0.01 0.01 0.02
Household child under 2 −0.02 −0.95 −0.51 −0.87
Household child 2–4 0.01 −1.04 −0.28 −1.08
Household child 5–9 0.02 −0.76 −0.03 −0.69
Household child 10–15 −0.00 −0.51 −0.00 −0.48
Home owned 0.23 5.51 −0.06 5.68
Unemployment rate difference −0.04 0.00 −0.01 −0.00
  1. Note: Cells with a positive (negative) contribution to the US participation gap of more (less) than one pp are highlighted in red (green).

Table C2
Trends in educational attainment by gender (sample frequencies)
Male Female
US UK US UK
1996 2017 1996 2017 1996 2017 1996 2017
Education Low 0.210 0.167 0.320 0.182 0.194 0.145 0.399 0.146
Education High 0.229 0.279 0.210 0.366 0.206 0.319 0.189 0.411
Table C3a
Oaxaca-Blinder decomposition of the estimated US participation gap by age group and sub-periods, males
Gender Male Male Male
age group 16–19 20–29 30–39
Period 1996–2007 2008–2016 1996–2007 2008–2016 1996–2007 2008–2016
overall (pp) 10.6 12.9 3.0 4.7 1.3 2.7
endowments −0.7 3.5 0.1 1.0 −0.3 0.9
Coefficients 9.3 7.3 2.4 4.7 1.6 2.3
Interaction 2.1 2.1 0.5 −1.1 0.0 −0.5
age group 40–49 50–59 60–64
Period 1996–2007 2008–2016 1996–2007 2008–2016 1996–2007 2008–2016
overall (pp) 1.0 3.2 –0.7 3.5 –4.1 –2.1
endowments −0.6 −0.2 −2.7 −0.9 −3.1 −3.9
Coefficients 1.6 4.2 1.5 4.9 −1.6 0.0
Interaction 0.0 −0.8 0.6 −0.5 0.6 1.9
Table C3b
Oaxaca-Blinder decomposition of the estimated US participation gap by age group and sub-periods, females
Gender Female Female Female
age group 16–19 20–29 30–39
Period 1996–2007 2008–2016 1996–2007 2008–2016 1996–2007 2008–2016
overall (pp) 13.3 13.9 1.1 3.4 –0.1 3.8
endowments 2.9 4.8 1.1 0.7 −3.0 −1.2
Coefficients 6.6 7.4 0.0 3.8 3.2 6.4
Interaction 3.9 1.7 −0.1 −1.0 −0.3 −1.4
age group 40–49 50–59
Period 1996–2007 2008–2016 1996–2007 2008–2016
overall (pp) 1.4 5.5 –2.5 4.2
endowments −5.3 −1.7 −9.4 −3.2
Coefficients 5.1 7.8 2.5 7.1
Interaction 1.7 −0.6 4.4 0.3
Table D1
Logit estimates of the probability of being in the labour force, common specification, males. Students excluded
(1) (2) (3) (4)
US UK US UK
M 16–64 M 16–64 M 16–64 M 16–64
VARIABLES 1996–2007 1996–2007 2008–2017 2008–2017
Age 0.094 *** 0.066 *** 0.123 *** 0.154 ***
Age squared −0.002 *** −0.002 *** −0.002 *** −0.003 ***
Year of birth 0.038 *** 0.087 *** 0.007 0.022 **
Year of birth squared 0.000 *** −0.001 *** 0.000 0.000 ***
Race black −0.583 *** −0.072 −0.480 *** −0.058
Race other −0.492 *** −0.619 *** −0.376 *** −0.489 ***
Foreign born 0.347 *** 0.408 *** 0.442 *** 0.556 ***
Foreign national 0.189 *** −0.099 *** 0.352 *** 0.067 **
Education high −13.91 6.15 −34.72 *** 22.41 *
Education low −25.92 *** 13.19 ** −2.11 35.67 ***
Year x education high 0.007 * −0.003 0.018 *** −0.011 *
Year x education low 0.013 *** −0.007 ** 0.001 −0.018 ***
Household single cohab 0.764 *** 0.817 *** 0.758 *** 0.934 ***
Household married alone 0.766 *** 1.150 *** 0.772 *** 1.253 ***
Household married cohab 1.115 *** 0.884 *** 0.941 *** 1.085 ***
Household separated alone 0.529 *** 0.387 *** 0.263 *** 0.758 ***
Household separated cohab 0.670 *** 1.358 *** 0.454 *** 1.513 ***
Household divorced alone 0.512 *** 0.310 *** 0.387 *** 0.547 ***
Household divorced cohab 0.953 *** 0.965 *** 0.694 *** 1.152 ***
Household widowed alone 0.267 *** 0.289 *** 0.072 0.359 ***
Household widowed cohab 0.455 *** 0.775 *** 0.323 ** 0.925 ***
Household child2 0.252 *** −0.235 *** 0.351 *** −0.120 ***
Household child4 0.290 *** −0.298 *** 0.288 *** −0.178 ***
Household child9 0.270 *** −0.206 *** 0.388 *** −0.126 ***
Household child15 0.349 *** −0.024 0.416 *** 0.038
Home owned 0.195 *** 1.176 *** 0.158 *** 1.026 ***
Unemployment rate diff −6.934 *** −7.906 *** −3.925 *** −4.687 ***
1996 0.034 −0.105 ***
1997 0.070 ** −0.131 ***
1998 0.063 ** −0.186 ***
1999 0.027 −0.166 ***
2000 0.044 −0.165 ***
2001 0.022 −0.198 ***
2002 0.012 −0.192 ***
2003 −0.045 * −0.122 ***
2004 −0.078 *** −0.148 ***
2005 −0.060 ** −0.139 ***
2006 −0.018 −0.063 **
2007
2008 0.025 −0.251 ***
2009 −0.032 −0.231 ***
2010 −0.017 −0.241 ***
2011 −0.081 *** −0.184 ***
2012 −0.078 *** −0.139 ***
2013 −0.017 −0.106 ***
2014 −0.007 −0.057 *
2015 −0.015 −0.050
2016 0.006 −0.017
Observations 580,515 444,333 530,802 274,084
chi2 144,667 159,295 118,940 95,339
P 0.00 0.00 0.00 0.00
  1. Notes: Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1

  2. The baseline is a medium education white individual, single and not cohabiting, who is renting. Cohort is measured subtracting 1,900 from year of birth.

Table D2
Logit estimates of the probability of being in the labour force, common specification, females. Students excluded
(1) (2) (3) (4)
US UK US UK
F 16–59 F 16–59 F 16–59 F 16–59
VARIABLES 1996–2007 1996–2007 2008–2017 2008–2017
Active
Age 0.042 *** 0.063 *** 0.110 *** 0.135 ***
Age squared −0.001 *** −0.002 *** −0.002 *** −0.002 ***
Year of birth 0.050 *** 0.059 *** −0.024 *** −0.005
Year of birth squared 0.000 *** −0.001 *** 0.000 *** 0.000
Race black 0.060 *** 0.325 *** 0.033 ** 0.223 ***
Race other −0.154 *** −0.738 *** −0.177 *** −0.771 ***
Foreign born 0.009 −0.003 0.077 *** 0.109 ***
Foreign national −0.432 *** −0.025 −0.435 *** 0.067 ***
Education high 8.42 −2.257 −53.80 *** −0.227
Education low −37.16 *** 44.29 *** −20.75 ** 0.278
Year x education high −0.004 0.001 0.027 *** 0.000
Year x education low 0.018 *** −0.023 *** 0.010 ** −0.001
Household single cohab 0.226 *** 0.433 *** 0.223 *** 0.400 ***
Household married alone −0.084 ** 0.049 −0.037 −0.031
Household married cohab −0.317 *** 0.113 *** −0.336 *** 0.000
Household separated alone 0.093 *** 0.061 *** 0.063 ** 0.157 ***
Household separated cohab 0.037 0.616 *** −0.015 0.574 ***
Household divorced alone 0.288 *** 0.186 *** 0.152 *** 0.251 ***
Household divorced cohab 0.238 *** 0.529 *** 0.132 *** 0.421 ***
Household widowed alone −0.449 *** −0.108 *** −0.613 *** −0.084 *
Household widowed cohab −0.386 *** 0.134 −0.234 *** 0.249 *
Household child under 2 −1.158 *** −2.259 *** −0.935 *** −1.800 ***
Household child 2–4 −0.818 *** −1.871 *** −0.638 *** −1.549 ***
Household child 5–9 −0.396 *** −1.010 *** −0.337 *** −0.803 ***
Household child 10–15 −0.018 −0.425 *** −0.002 −0.319 ***
Home owned 0.267 *** 1.082 *** 0.255 *** 0.947 ***
Unemployment rate diff −4.673 *** −3.742 *** −1.904 *** −2.786 ***
1996 −0.011 −0.281 ***
1997 0.042 * −0.263 ***
1998 0.050 ** −0.242 ***
1999 0.040 * −0.199 ***
2000 0.074 *** −0.176 ***
2001 0.045 ** −0.161 ***
2002 0.017 −0.146 ***
2003 0.009 −0.147 ***
2004 −0.033 * −0.123 ***
2005 −0.049 *** −0.080 ***
2006 −0.036 ** −0.015
2007
2008 0.172 *** −0.138 ***
2009 0.171 *** −0.123 ***
2010 0.133 *** −0.123 ***
2011 0.071 *** −0.118 ***
2012 0.044 ** −0.101 ***
2013 0.051 ** −0.040
2014 0.021 −0.046 *
2015 −0.030 −0.036
2016 −0.013 −0.032
Observations 583,535 436,474 515,633 267,761
chi2 109,824 116,367 87,444 76,039
P 0.00 0.00 0.00 0.00
  1. Notes: Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1

  2. The baseline is a medium education white individual, single and not cohabiting, who is renting. Cohort is measured subtracting 1,900 from year of birth.

Data and code availability

All data is publicly available for research.

The Stata do files used for data preparation and analysis are available from the authors upon request.

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