Decline of Male Labor Market Participation: The Role of Declining Market Opportunities

Regional patterns of employment changes of less-educated men in Japan: 1990–2007

“…This is in contrast with the findings in the U.S. literature in which it has been argued that falling wages caused less-skilled men to reduce participation (Juhn et al 1991, Juhn 1992). …”

“…Pencavel (2002) estimates labor supply elasticity for men using data from 1968 to 1999. He shows that the estimates for intertemporal substitution elasticity are positive while those for uncompensated elasticity are negative, and argues that estimates obtained by Juhn et al (1991) andJuhn (1992) are close to intertemporal substitution elasticity. While these studies tend to find large positive wage elasticity of less-educated men, Devereux (2003) reports some contradictory evidence based on estimates using regional variations in wage growth.…”

“…If the decline in employment is understood as a labor supply response to falling wages, as in the case of studies using American men (e.g., Juhn 1992), then policies aimed at changing the after-tax wage rate for low-wage workers would be expected to raise participation. If, on the other hand, the decline in participation cannot be understood as a supply response to falling wages, then other factors are likely to have played a role.…”

“…Juhn et al (1991) and Juhn (1992) estimate the relationships between the E-P ratio and wages for men from 1968 to 1988 when the participation of less-educated men fell significantly. Juhn (1992) reports that the wage elasticity of participation of less-educated men is positive and significant, and furthermore, the wage change explains most of the fall in participation of white men. Pencavel (2002) estimates labor supply elasticity for men using data from 1968 to 1999.…”

“…Separate estimation by education is also motivated by the fact that the value of labor supply elasticity could differ across skill levels. For example, Juhn (1992) shows that participation is more elastic to wage for workers at the lower end of the wage distribution. 4 Some of these variables are the ones that affect the labor demand side and not the labor supply side.…”