Technology and Employment Innovation and Growth in the U.S. Economy (1987) / Chapter Skim
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3: Labor Supply and Demand Within the U.S. Economy
3: Labor Supply and Demand Within the U.S. Economy
Pages 51-85
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From page 51... ...
Process innovations that increase labor productivity reduce the amount of labor (and potentially the amount of other inputs) required per unit of output.
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From page 52... ...
Unemployment levels throughout the 1970s and 1980s have remained well above those of the 1960s (Podgursky, 19841.3 The average annual rate of growth in real average hourly earnings during 1970-1986 was -0.4 percent, following average annual growth rates of 2.7 and 1.7 percent, respectively, during the 1950s and 1960s (President's Council of Economic Advisers, 1987, Table B-411. Finally, labor productivity growth in the U.S.
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From page 53... ...
The share of the 20.7 million new jobs created during 1975-1985 accounted for by the private nonmanufacturing sector was greater than in previous decades of the post-World War II period (Table 3-1~. Four industry groups (wholesale and retail trade; transportation and utilities; finance, insurance, and real estate; and services)
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From page 54... ...
The causes of the slow economic growth, high unemployment, and declining productivity growth rates that have afflicted the United States as well as other industrial nations since the 1960s are not well understood. Some portion of these developments can be ascribed to the disruptions in the global economy that occurred when oil prices rose in 1973 and 1979.
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From page 55... ...
economy since 1970, as well as the "oil shocks" of 1973 and 1979, all reduced the demand for labor, placing stronger upward pressure on aggregate unemployment rates than during the 1960s. Has the entry into the labor force of the huge baby boom cohort and a growing number of women, which increased the labor supply, contributed to higher aggregate unemployment during the 1970s and 1980s?
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From page 56... ...
The European baby boom postdates that of the United States by 5-10 years; Western European economies now are absorbing large increases in their labor forces that exert upward pressure on unemployment rates (Norwood, 1983)
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From page 57... ...
Bureau of Labor Statistics (BLS) 1984 survey of displaced workers focused on workers who had lost jobs because of plant shutdowns, an employer going out of business, or permanent layoffs resulting from other factors (Flaim and Sehgal, 19851.9 Displaced workers are widely cited (U.S.
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From page 58... ...
He estimated that 6.4 million workers were displaced during this period, yielding an average annual how of 1.6 million displaced workers.~° Significantly, Podgursky's comparative analysis of data from the 1984 and 1986 displaced worker surveys revealed little decline in the average rate of displacement 1.5 million workers per year during 1981-1984. Although the BLS estimate of the number of experienced workers displaced annually (regardless of the causes of displacement)
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From page 59... ...
Indeed, according to the Secretary of Labor's Task Force on Economic Adjustment and Worker Dislocation (1986) , each additional percentage point in the regional unemployment rate added 1-4 weeks to the average duration of unemployment for displaced workers in that area.
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From page 60... ...
also found that higher educational attainment was associated with shorter spells of unemployment after displacement. The evidence that higher levels of skill are associated with shorter unemployment is significant in view of the fact that many displaced workers have serious deficiencies in basic skills.
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From page 61... ...
The level of aggregate unemployment in turn strongly affects the ease with which displaced workers find new jobs, which influences the duration of unemployment they face and the level of wages associated Leonard (1986) notes that during a period of rapid growth in the labor force (1979-1982)
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From page 62... ...
civilian labor force grew by 2.3 percent per year on average, compared with a growth rate of 1.7 percent per year for the civilian noninstitutional population (President's Council of Economic Advisers, 19871. i3The civilian labor force consists of individuals, excluding members of the active-duty armed forces, 16 years of age and older who are employed or seeking employment.
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From page 63... ...
, the total projected growth in the labor force during 1984-1995 of approximately 14 percent is not large enough to cause significant changes in the gender or racial composition of the overall work '5The most recent detailed 1995 labor force projections of the U.S. Bureau of Labor Statistics (1986b)
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From page 64... ...
The reductions in labor force growth projected by BLS should lessen the labor market pressures that have been partly responsible for high rates of aggregate unemployment during the past decade. Structural and cyclical unemployment, however, will not vanish; as we note in Chapters 4 and 5, those workers who lack basic skills whether they are labor force entrants or experienced workers who have been displaced are likely to face employment problems in the future.
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From page 65... ...
Labor Force, 1959-1990 Table 3-3 depicts changes in the educational attainment of the civilian labor force since 1959. The median number of school years completed has increased only slightly: from 12 years in 1959 to 12.8 years in 1986.
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From page 66... ...
. Projections of future levels of educational attainment are subject to considerable uncertainty and are heavily influenced by gender-based, racial, and ethnic differences in educational attainment and by changes in these attainment levels.
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From page 67... ...
labor force is projected to grow relatively slowly through 1995. Although the 1984-1995 cohort of labor force entrants is projected to include a larger share of women and minorities than did the 1970-1980 cohort, as was noted above, these projected changes in the composition of the entrant cohort imply minimal change in educational attainment levels for labor force entrants through 1995.
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From page 68... ...
. 1973 and 1984 in the income effects of greater educational attainment in all of the comparisons in Table 3 4.2° These increases reflect the fact that changes in the structure of the economy, new technology, and increased international competition have expanded the returns to individuals (in terms of income)
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From page 69... ...
There are few reliable data on the educational attainment of the overall labor force in other industrial nations. For this reason, as well as the importance of labor force entrants' attainment for the projection of future trends in attainment levels, we present comparative data only on entrants in seven other industrial nations.
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From page 70... ...
labor force entrants. Recent time series evidence, in the form of scores on standardized tests, suggests that the quality of the educational preparation of entrants may increase in coming years.
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From page 71... ...
U.S. industries in which rates of technological change, productivity growth, and output cost reduction lag behind those of foreign firms may experience employment losses as U.S.
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From page 72... ...
Moreover, trends in labor productivity growth and unemployment strongly suggest that, consistent with the previous discussion of the effects of technological change on employment, productivity growth is not associated with higher aggregate unemployment. Figure 3-3 displays annual rates of productivity growth in
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From page 73... ...
Table 3-6 also distinguishes trends in manufacturing labor productivity from those in nonmanufacturing and shows that rates of labor productivity growth in manufacturing and in nonmanufacturing have behaved quite differently in recent years.
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From page 74... ...
performance, all industrial nations have experienced declines in productivity growth rates since 1973 (U.S. Bureau of Labor Statistics, 1986c)
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From page 75... ...
SOURCE: Calculated from U.S. Bureau of Labor Statistics, Office of Productivity and Technology, unpublished data developed by BLS from Department of Commerce (Bureau of Economic Analysis national income and product account data and the Federal Reserve)
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From page 76... ...
Within the nonmanufacturing sector, low productivity growth and rapid output growth (outside of mining, transportation, and construction) have resulted in a strong demand for labor.
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From page 77... ...
Since 1979 resurgent productivity growth and stagnant output growth in manufacturing, combined with rapid output growth and stagnant productivity growth in nonmanufacturing industry, have accelerated longstanding trends of decline in the manufacturing sector's share of total employment. What role has domestic technological change played in these trends?
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From page 78... ...
Exports U.S. exports since 1945 from the manufacturing and nonmanufacturing sectors alike have been goods whose production depended on large Widespread application of information and other computer-based technologies, however, is gradually changing the extent to which services for example, business, financial, and communications-can also be traded internationally.
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From page 79... ...
study of international trade in services corroborates this analysis for the nonmanufacturing sector; services exports tend to support high-wage, high-skill employment in comparison to overall U.S. nonmanufacturing employment.
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From page 80... ...
manufacturing jobs will continue to be threatened. Moreover, the nonmanufacturing sector will feel the effects of increased import penetration as well; workers in that sector who are displaced because of increased imports are also likely to be employed in relatively low-skill, low-wage jobs.
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From page 81... ...
and Foreign Manufacturing, 1950-1985 Technological change and productivity growth can accelerate output growth by enhancing the competitiveness of U.S. industry.
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From page 82... ...
Technological change, which affects labor productivity growth, played a major role in the behavior of unit labor costs during this period. The second panel from the top in Table 3-8 shows foreign labor productivity growth rates relative to those of the United States.
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From page 83... ...
Italy -0.7 5.6 8.1 9.7 8.5 Japan 3.8 7.0 9.5 3.0 -2.2 U.K. 1.2 2.5 3.9 9.7 3.7 Canada 0.8 0.8 1.3 2.5 1.4 Annual Growth Rate of the Foreign Exchange Rate, Relative to the U.S.
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From page 84... ...
manufacturing supported increases in exports and higher output growth, both of which could have led to growth or slower declines in manufacturing employment.27 2'Data on changes in foreign hourly compensation and labor productivity trends through 1986 are not yet available to bring this comparative analysis of unit labor costs up to the end of 1986.
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From page 85... ...
Differential rates of productivity growth in manufacturing and nonmanufacturing industry, combined with low rates of growth in the output of manufacturing industry, have contributed to higher rates of decline in manufacturing's share of total. employment during 1979-1985.
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