Robert Hall caused a stir among labor economists when he presented evidence before the Senate Finance Committee last month that the decline in labor force participation since the 1990s is concentrated among affluent families, not poor ones.
From the late 1990s to recent years, Hall and co-author Nicolas Petrosky-Nadeau found that men ages 35 to 59 in families making less than the median income supplied more labor and that men in families with above-median incomes supplied less. They found the same pattern for women. Teenagers worked less regardless of family income, but Hall and Petrosky-Nadeau found a much larger decline among teenagers in affluent families.
Their conclusions surprised most observers. Other studies have found trends going in the opposite direction: the more affluent were working more and the less affluent working less. The source of their surprising statements is the Survey of Income and Program Participation.
To facilitate discussion, my colleagues and I replicated the chart Hall published in his testimony–except that we used data from the Current Population Survey instead of the SIPP. As shown above, we found different results, especially for 35 to 59-year-olds.
From Current Population Survey data, we found very little change in labor force participation among men and women ages 35 to 59 making more than the median income. But both men and women in families with below-median income decreased their participation by three percentage points.
Among teenagers, we found only slight differences between those in below- and above-median income families. Altogether, our analysis finds the reverse of Hall and Petrosky-Nadeau: the decline in labor force participation is concentrated in families making less than the median income.
One issue with the approach Hall and Petrosky-Nadeau take is that participation and income are not at all independent. All else being equal, those who work less earn less. But their approach may prove useful for understanding differences between the Survey of Income and Program Participation and the Current Population Survey.
Originally published in The Wall Street Journal
