BPEA | 2002 No. 1

Current Unemployment, Historically Contemplated

Chinhui Juhn,
Chinhui Juhn University of Houston
Kevin M. Murphy, and
Kevin M. Murphy University of Chicago
Robert H. Topel
Robert H. Topel University of Chicago

2002, No. 1

Eleven years ago, our Brookings Paper “Why Has the Natural Rate of
Unemployment Increased over Time?” analyzed long-term changes in
joblessness among American men.1 We documented the dramatic rise
between 1967 and 1989 in both unemployment and nonparticipation in
the labor force among prime-aged males. Our main conclusion was that a
steep and sustained decline in the demand for low-skilled workers had
reduced the returns to work for this group, leading to high rates of unemployment,
labor force withdrawal, and long spells of joblessness for lessskilled
men. We found that time spent out of the labor force and time
spent unemployed accounted in roughly equal measure for the long-term
growth in joblessness. We concluded that structural factors, primarily the
decline in the demand for low-skilled labor, had dramatically changed the
prospects for a return to low rates of joblessness any time soon.