Education and Demographics: How Do They Affect Unemployment Rates?.

The relationship between the changing demographic composition and educational level of the labor force in the US and the impact of those factors on the structural rise in unemployment were examined. Attention was directed to how the labor market has adjusted to the increased supply of relatively young and inexperienced but well-educated workers emphasizing particularly the job market experiences of high school and college graduates. The effect of cyclical trends on the job market performance of workers with varying levels of education between January 1967 and December 1986 also were analyzed. Shift-share was used to examine the role of the changing educational and demographic composition of the labor force on the rise in the adult unemployment rate over the 1967-87 period. This technique allowed the change in the overall unemployment rate to be allocated among 3 components -- the changing rate of unemployment of each educational attainment group each groups shifting labor force share and the covariance or interaction between the first 2 conditions. The largest percentage-point increase in the actual unemployment rate for any educational attainment group (2.7 percentage points) occurred among high school dropouts. The analysis showed that overall dropouts exerted a downward pressure on the overall unemployment rate. The marked decline in the role of dropouts in the overall labor market over the 1967-79 period mitigated the effect of the rise in that groups unemployment rate on the overall unemployment rate. Changes in the groups labor force share and unemployment rates were interrelated. Discouragement and crowding were in some instances important. High school graduates with no additional education accounted for the bulk of the 1967-79 rise in the unemployment rate a result of an above average increase in their jobless rate together with a sizable labor force share increase. The group unemployment rates for individuals with 1-3 and 4 years or more of college grew in line with the overall rate but those groups also accounted for a disproportionately large share of the increase in the overall unemployment rate. The overall adult unemployment rate rose by 1.4 percentage points between 1979-87. Again the labor market experiences differed among the various educational attainment groups. Almost all of the 1979-87 change among high school graduates was attributed to rising unemployment as their labor force share continued constant at 40%. In sum the supply of both high school and college graduates has grown markedly but there has been a relative increase in the demand for college graduates largely at the expense of the demand for high school graduates over the 1967-87 period.