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The Effects of Education on the Natural Rate of Unemployment

The Effects of Education on the Natural Rate of Unemployment Abstract This study develops a natural unemployment rate based upon education attainment. Behind this natural rate are labor force participation rates that vary positively with education attainment; observed unemployment rates that are inversely related to education attainment; and deviations of the observed unemployment rate from this hypothesized natural rate that are related to several expectation-based variables. With a lower natural unemployment rate today compared with years past, results point to a number of education-based challenges that employers will face. Matching employer needs with education will become more complicated as both education and needs become more specialized. Global labor markets will play an increasing role both in terms of skills and cost considerations. Next, the retirement of the baby boom generation will pose a unique challenge. Aside from the challenge of finding replacements from a pool of new workers smaller than the pool of retiring workers, retirements will not be easily predictable, thanks to the elimination of the earnings penalty for social security benefits. Finally, as college degrees become more prevalent, postgraduate studies will likely rise in importance as a distinguishing feature among skills. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Business Economics Springer Journals

The Effects of Education on the Natural Rate of Unemployment

DePrince, Albert E; Morris, Pamela D
Business Economics , Volume 43 (2): 10 – Apr 1, 2008
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References (18)

Publisher
Springer Journals
Copyright
2008 National Association for Business Economics
ISSN
0007-666X
eISSN
1554-432X
DOI
10.2145/20080205
Publisher site
See Article on Publisher Site

Abstract

Abstract This study develops a natural unemployment rate based upon education attainment. Behind this natural rate are labor force participation rates that vary positively with education attainment; observed unemployment rates that are inversely related to education attainment; and deviations of the observed unemployment rate from this hypothesized natural rate that are related to several expectation-based variables. With a lower natural unemployment rate today compared with years past, results point to a number of education-based challenges that employers will face. Matching employer needs with education will become more complicated as both education and needs become more specialized. Global labor markets will play an increasing role both in terms of skills and cost considerations. Next, the retirement of the baby boom generation will pose a unique challenge. Aside from the challenge of finding replacements from a pool of new workers smaller than the pool of retiring workers, retirements will not be easily predictable, thanks to the elimination of the earnings penalty for social security benefits. Finally, as college degrees become more prevalent, postgraduate studies will likely rise in importance as a distinguishing feature among skills.

Journal

Business Economics – Springer Journals

Published: Apr 1, 2008

Keywords: economics, general; political economy/economic systems; business and management, general

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