The US labor market witnessed two apparently unrelated secular movements in the
last 30 years: a decline in unemployment between the early 1980s and the early 2000s,
and a decline in participation since the early 2000s. Using CPS micro data and a stock-
flow accounting framework, we show that a substantial, and hitherto unnoticed, factor
behind both trends is a decline in the share of nonparticipants who are at the margin of
participation. A lower share of marginal nonparticipants implies a lower ...
The US labor market witnessed two apparently unrelated secular movements in the
last 30 years: a decline in unemployment between the early 1980s and the early 2000s,
and a decline in participation since the early 2000s. Using CPS micro data and a stock-
flow accounting framework, we show that a substantial, and hitherto unnoticed, factor
behind both trends is a decline in the share of nonparticipants who are at the margin of
participation. A lower share of marginal nonparticipants implies a lower unemployment
rate, because marginal nonparticipants enter the labor force mostly through unemployment,
while other nonparticipants enter the labor force mostly through employment.
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