AN OVERVIEW OF ECONOMIC, SOCIAL,AND DEMOGRAPHIC TRENDSAFFECTING THE U.S. LABOR MARKETRobert I. LermanStefanie R. SchmidtThe Urban InstituteWashington, D.C.Final ReportAugust 1999This report was prepared at the Urban Institute for U.S. Department of Labor, Office of the AssistantSecretary for Policy, under DOL Contract No. J-9-M-0048, #23. The views expressed are those ofthe authors and should not be attributed to the Department of Labor, or the Urban Institute, its trustees,or its funders. iAbstract This paper offers an assessment of broad social, economic, and demographic trends affecting the USlabor force now—in this time of strong economic growth—and in the future. The focus is ondemographic trends, work and family issues, health and pension patterns, technical change, adjustmentto low unemployment, globalization, and the plight of low-skilled workers. The paper identifies severalimportant trends and patterns, including: 1) the largest demographic shift relevant to the job market isthe impending decline in the share of prime-age workers; 2) over 60 percent of workers do not havetheir own children in their home, but an increasing share of workers care for elderly relatives; 3) theimpact of the substantial shift from defined-benefit (DB) to defined-contribution (DC) pension plans onworkers is unclear, but some estimates suggest that the typical worker will gain financially; 4) whileinvestment in computers is spurring technical change, the impacts on productivity in firms vary a greatdeal because of the varying organizational responses to technology; 5) the labor market has adjustedsurprisingly well to low unemployment, partly because college-educated workers have accounted forover 90 percent of the net growth in employed adult workers during the 1992-99 expansion; 6)globalization of production is unlikely to have weakened the position of US workers because overallforeign investment in the US has exceeded US investment abroad and foreign direct investment hasbeen nearly as high as US direct investment; 7) while the economic expansion greatly reducedunemployment and expanded job opportunities for low-skill workers, many less-educated men who leftthe labor force in earlier years have not reentered the job market.Brief DescriptionThis paper offers an assessment of broad social, economic, and demographic trends affecting the USlabor force now—in this time of strong economic growth—and in the future. The focus is ondemographic trends, work and family issues, health and pension patterns, technical change, adjustmentto low unemployment, globalization, and the plight of low-skilled workers.Keywords: Labor Market, Jobs, Economic, Social, Demographic iiTable of ContentsIntroduction1I. Demographic Change and the Future Workforce2II. Trends in Work and Family, Health Insurance, Pensions12III. Trends in Employer-Provided Health and Pension Benefits and Families24IV. Technology and Work Organization27V. Adapting to Tight Labor Markets34VI. Globalization55VII. The Low-Skilled Labor Market79 iiiTablesTable 1: The Changing Mix of the US Labor Force by Age, Ethnicity, and Sex: 1976-20064Table 2: Participation in Job-Related Education and Training by Age Group in theUS and Other Selected Countries10Table 3: Percent of Women in the Labor Force in Various Types of Families:Second Quarter of 199814Table 4: Percent of Men in the Labor Force in Various Types of Families: SecondQuarter of 199814Table 5: Annual Work Hours of Husbands and Wives with at Least One Child19Table 6: Gains in Employment-Population Ratios and Unemployment RateReductions by Age, Ethnicity, and Education: 1992-199839Table 7: Distribution of Net Employment Growth of Population, Ages 25 and Over,by Educational Status: 1992-1998, 1st Half41Table 8: Relationship Between Changes in Wage Rates and Weekly Earnings andState Labor Market Conditions: 1995:I to 1998:I45FiguresFigure 1: Relationship Between Unemployment Rate, Consumer Price Index (CPI), andEmployment Cost Index (ECI): 1980-199836Figure 2: Trends in Unemployment Rates and Labor Force Participation Rates: 1970-199838Figure 3: Distribution of Unemployment Rates by State: 1998:I43Figure 4: Average of Exports Plus Imports as a Share of Gross Domestic Product: 1959-199858 1IntroductionThe recent performance of the US job market has proved surprisingly strong. Unemploymentrates are at a 30-year low and far below what most macroeconomists predicted could be reachedwithout substantial increases in inflation. Job growth has been strong. Employers have expanded theirrecruitment to reach large numbers of youth, low-skilled workers, mothers heading families, and othergroups generally not favored in the labor market. Even wages, which had been rising only slowly, havebeen increasing more rapidly.In the context of today’s good times, it makes sense to step back and assess the broader trendsaffecting the job market of today and the future. One rationale is to put in place policies that can helpsustain the economic e