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Wage Inequality and the Rise in Labor Force Exit: The Case of US Prime-Age Men

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Abstract

This article offers the first empirical evidence that labor force exit rates rise when workers’ relative earnings fall. The model takes into account that a job not only provides economic security but also affirms a worker’s social status, which is tied to their relative position in the labor market. Based on the results, the decline in relative earnings for non-college prime-age men over the last four decades is estimated to have raised their labor force exit propensity by 0.49 percentage point, accounting for 44 percent of the total growth in their labor force exit rate during this period.

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  • Pinghui Wu, 2022. "Wage Inequality and the Rise in Labor Force Exit: The Case of US Prime-Age Men," Working Papers 22-16, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbwp:95258
    DOI: 10.29412/res.wp.2022.16
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    More about this item

    Keywords

    labor force exit rates; prime-age male labor force participation; relative earnings; wage inequality;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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