RECENT CHANGES IN THE CHARACTERISTICS OF UNEMPLOYED WORKERS October 2009 Marios Michaelides (IMPAQ International) Peter Mueser (University of Missouri and IMPAQ International) !!ABSTRACT We examine how gender, racial, and ethnic variation in unemployment and Unemployment Insurance (UI) receipt changed over time in the U.S. economy and how these changes are influenced by shifts in the occupational and industrial composition of employment. Using Current Population Survey (CPS) data, we find that, in the past 50 years, the unemployment rates for women, nonwhites, and Hispanics have been converging to those of the rest of the population. Between 1992 and 2007, women had the same unemployment rates as men; nonwhites still had higher unemployment rates than whites; and the rate for Hispanics was approaching that of non-Hispanics. Once we control for industry-occupation differences, women have higher unemployment and UI receipt rates than men, while Hispanics have similar unemployment rates but lower UI receipt rates than non-Hispanics. Nonwhites still have appreciably higher unemployment rates but the same UI receipt rates as whites. JEL Codes: J11, J15, J16, J65. Keywords: Unemployment, Unemployment Insurance, Gender, Race, Ethnicity. !!Recent Changes in the Characteristics Page 1 October 2009 of Unemployed Workers !1. Introduction In the past 50 years, the demographic composition of the U.S. labor force has experienced dramatic changes. The labor force participation of women has increased substantially, and currently women are nearly as likely as men to participate in the labor market. As a result, the U.S. labor force is almost equally split between men and women. The shares of nonwhites in the U.S. labor force have also increased over time, and the share of Hispanics has exploded. In the face of these changes, significant research has focused on documenting the shifts in demographic composition of the labor force in the past 50 years (Fullerton and Toossi, 2001; Toossi, 2002; Lee and Mather, 2008). During the same period, there were important differences in the unemployment experience of major demographic groups. Through the 1970s, women had higher unemployment rates than men, although this gap has most recently declined. It is also true that the unemployment rates of nonwhites and Hispanics have been appreciably higher than the rates for the remaining population. Nonwhites and Hispanics also faced higher unemployment durations and their labor force experience has been more sensitive to changes in the business cycle. Dramatic shifts in the industrial and occupation structure of the U.S. economy have had substantial impacts on overall employment and unemployment patterns (e.g., Hipple, 1997, 1999; Groshen and Potter, 2003; Devereux, 2005; Mosisa and Hipple, 2006). The U.S. economy has transitioned from a system in which a large share of employment was in manufacturing to one in which services play a dominant role. In addition, the employment share of white collar occupations has been increasing steadily over time, partly as a result of the declining role of manufacturing.!Recent Changes in the Characteristics Page 2 October 2009 of Unemployed Workers !The shifts in the industrial and occupational structure of the U.S. economy may have important implications for the overall unemployment patterns and for UI receipt. Historically, the service sector and white collar occupations have had lower unemployment rates than manufacturing and blue collar occupations, respectively, and they have been less volatile over the business cycle. The increasing share of services and white collar occupations may be, therefore, associated with declining and less volatile overall unemployment rates over the past 50 years. More generally, technology shifts are likely to be reflected directly in the distribution of employment by industry and occupation, so examining the effects of changes in employment composition provides a window into the possible impact of production innovation during this period. In addition, these changes may lead to a reduction in the proportions of workers receiving Unemployment Insurance (UI) benefits and to shifts in the composition of the UI population, as documented by previous work (Vroman, 1998; Fishman et al., 1999; Needels and Nicholson, 1999; Vroman, 2002; Lee, 2004; Nicholson and Needels, 2006; Burtless, 2009). Patterns of labor force participation and changes over time for various demographic groups are well documented (Juhn and Potter, 2006). There is also an extensive literature that examines the determinants of changes in unemployment taking into account demographic factors (Hipple, 1997, 1999; Shimer, 1999; Sincavage, 2004; Duca and Campbell, 2007). Unemployment changes have also been examined in terms of relative shifts in duration and incidence of unemployment by various demographic groups (Abbring, van den Berg and van Ours, 2001; Abraham and Shimer, 2001; Lauerova and Terrell, 2007). Finally, there are many analyses that attempt to explain racial and gender differences in earnings and labor force participations as a function of shifts in supply and demand (Black and Juhn, 2000; Juhn, 2002, 2003; Bound and!Recent Changes in the Characteristics Page 3 October 2009 of Unemployed Workers !Holzer, 2000).1 However, to our knowledge, there are no existing studies considering the role of changing industrial and occupational structure in understanding demographic differences in unemployment and their changes over time. This paper focuses on the role of the industrial and occupational shifts in the U.S. labor market in explaining recent patterns of unemployment and UI benefit receipt by gender, race, and ethnicity. The paper is organized as follows. First, we provide a brief overview of the historic shifts in the U.S. labor force and the unemployment rate by major demographic, industry, and occupation groups. We then turn to a more detailed analysis of changes in the U.S. labor force and unemployment for the period 1992-2007. We examine the extent