Abstract: Recessions are known to be particularly damaging to young workers’ employment outcomes. I find that during recessions the hiring rate falls faster for young workers than for more-experienced workers. I show this cannot be explained by the composition of jobs or workers’ labour supply decisions, and I conclude that firms preferentially hire experienced workers during periods of high unemployment. I develop a new model of cyclical upgrading that relaxes the classic assumptions of exogenous firm size and rigid wages. I show this model predicts larger log wage decreases during recessions for young workers than for experienced workers, a prediction that is supported by the data. I conclude that policy makers should consider extending unemployment insurance coverage during recessions to new labour market entrants.
pre-publication version: http://publish.illinois.edu/elizaforsythe/files/2022/01/Forsythe_Youth_Hiring_prepub_version_2021.pdf
U of I News Bureau: “Paper: Young workers hit hardest by slow hiring during recessions” (May 2016)
Abstract: We study the distributional consequences of the Covid-19 pandemic’s impacts on employment, both during the onset of the pandemic and over recent months.Using cross-sectional and matched longitudinal data from the Current Population Survey, we show that the pandemic has exacerbated pre-existing inequalities.Although employment losses have been widespread, they have been substantially larger – and persistently so – in lower-paying occupations and industries. We find that Hispanics and non-white workers suffered larger increases in job losses, not only because of their over-representation in lower paying jobs, but also because of a disproportionate increase in their job displacement probability relative to non-Hispanic white workers with the same job background. Gaps in year-on-year job displacement probabilities between black and white workers have widened throughout the course of the pandemic recession, both overall and conditional on pre-displacement occupation and industry. These gaps are not explained by state-level differences in the severity of the pandemic or the associated response in terms of mitigation policies. We also find evidence that suggests that older workers have been retiring at faster rates.
Previous version: Upjohn Institute working paper 20-327
U of I News Bureau Coverage: “Paper: Pandemic-fueled job losses exacerbating preexisting inequalities among workers” (June 2020)
Labour Economics, Volume 69, 2021, 101955, ISSN 0927-5371, https://doi.org/10.1016/j.labeco.2020.101955.
Abstract: We investigate the sources of heterogeneity in the levels and cyclical sensitivity of unemployment rates across demographic groups. We develop a new methodology to decompose cyclical and level differences in unemployment rates between groups into flows between three states (employment, unemployment, and out-of-the-labor-force). We find that increases in unemployment rates during recessions for young, non-white, and less-educated groups of workers are primarily driven by reductions in the job-finding rates, which can explain more than 60% of cyclical fluctuations in the unemployment rate across demographic groups, compared with under 20% driven by separations. However, separations are the most important factor in explaining the persistent gap in unemployment rates between each disadvantaged group and their respective counterpart group, with important differences between groups. For less-educated workers, separation rates explain most of the unemployment gap, with 75% of the separation rate attributable to industry and occupation. Less-educated workers also spend less time searching. For younger workers, we find separation rates explain all of the unemployment gap, while industry and occupation explain only 60% of their elevated separation rates. For non-white workers, hiring explains almost half of the unemployment gap. Non-white workers search more intensely for work than other groups, but spend less time interviewing per search time, suggesting that labor market discrimination contributes to non-white workers’ persistently high unemployment rates.
Forsythe, E., Kahn, L. B., Lange, F., & Wiczer, D. (2020). Labor demand in the time of COVID-19: Evidence from vacancy postings and UI claims. Journal of public economics, 189, 104238. (https://www.sciencedirect.com/science/article/pii/S004727272030102X)
NBER Working Paper No. 27061