Employment and Wages in Recession and Recovery, 1954-2010

Project Date:
Jun 2011
Award Amount:
$223,250
Project Programs:
The Social and Economic Effects of the Great Recession

Even though the Great Recession officially ended in June 2009, Americans still face anemic employment prospects that, unlike the economy, show little sign of improvement. Despite recent upticks in the job growth rate, unemployment still hovers at around 9 percent, nearly 14 million workers are still unemployed, and the labor market is still 11 million jobs below the level needed to restore the prerecession unemployment rate. These trends raise questions that hold severe practical consequences for American workers: why did U.S. businesses shed so many jobs in the recession, and why hasn’t employment improved with the economy in the period since?

Erling Barth of the University of Oslo, James Davis of the U.S. Census Bureau and Richard Freeman of Harvard University, will explore these questions in their study of the recession and labor markets. Using several data sets, they intend to analyze the recession at the level of firms and establishments to better understand employer behavior. In particular, they will examine three possible explanations for the “jobless” recovery: first, they hypothesize that rising wage dispersion within sectors and firms contributed to sluggish job growth. A second hypothesis tests the notion that large multinationals invested less in the U.S. and more overseas during the recovery, resulting in fewer new jobs. Finally, Barth and his colleagues ask if the shift of executive compensation to stock options linked to short-term profits encouraged management to reduce employment rapidly during the downturn and to increase it slowly in the recovery.

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