Labor Market Trends and Outcomes: What Has Changed since the Great Recession?

• Published date: 01 May 2021
• Author: Harry J. Holzer,Erica L. Groshen
• Date: 01 May 2021
• DOI: 10.1177/00027162211022326
• Subject Matter: Overview Papers

ANNALS, AAPSS, 695, May 2021 49

DOI: 10.1177/00027162211022326

Labor Market

Trends and

Outcomes:

What Has

Changed since

the Great

Recession?

By

ERICA L. GROSHEN

and

HARRY J. HOLZER

1022326ANN The Annals Of The American AcademyLabor Market Trends And Outcomes

research-article2021

This article describes 40 years of trends in wages and

labor force participation for the “working class”—

workers with a high school education or less— compared

to workers with a college degree or more. We compare

cyclical peaks over the entire period 1979 to 2019, with

particular focus on the Great Recession (2007–2010)

and recovery (2010–2019). We also present results by

gender and race. We find real wage growth for all work-

ers in the recovery from the Great Recession, but not

enough to change the long-term trends of growing

inequality and stagnant wages for the less educated. We

also find that labor force participation continued to

decline for the less educated, even during the recovery.

Gaps between whites and Blacks grew, while Hispanics

and Asians made more progress than Blacks. We con-

sider various explanations for these findings and show

that the early effects of the 2020 to 2021 pandemic

recession hurt less-educated workers and those of color

more than anyone else.

Keywords: wages; participation; working class; Great

Recession

It is no longer news that most U.S. workers,

especially those without college degrees, saw

wages stagnate over the past four decades; that

inequality rose dramatically in this period; and

that millions of prime-age workers left the

labor market (Groshen and Holzer 2019).

Equally true is that during the past dozen years,

the U.S. labor market experienced unusually

wide swings in labor market conditions, which

also affected workers’ outcomes. As we now

experience the ongoing COVID-19 recession in

2020 and 2021, this article assesses how those

two powerful influences (the long-run trends

Erica L. Groshen is a senior economics advisor at

Cornell University–ILR.

Harry J. Holzer is the John LaFarge Jr. SJ Professor of

Public Policy at the McCourt School of Public Policy,

Georgetown University.

Correspondence: hjh4@georgetown.edu

50 THE ANNALS OF THE AMERICAN ACADEMY

and the recent business cycles) interacted in the U.S. labor market, with particu-

lar focus on continuing disappointing trends for noncollege-educated workers.

On one hand, the Great Recession of 2007 to 2010 was a cataclysmic event for

U.S. workers, generating the worst declines in employment observed in the

nearly 80 years since the Great Depression.1 And while the recession was deep,

the recovery from it occurred quite slowly.2 On the other hand, though, the

recovery was the longest of any on record, ultimately resulting in the lowest U.S.

unemployment rates since the late 1960s. Indeed, by February 2020, we had had

nearly five years of unemployment rates at or below 5 percent, which is also the

longest such period since the 1960s. Then, starting in March and especially in

April 2020, the labor market deteriorated very rapidly because of the COVID-19

recession. It recovered partially in the late spring and early summer, but the

recovery then slowed and eventually flatlined after October.

These labor market oscillations likely generated some lasting outcomes for

workers, both negative and positive. The severe and long Great Recession had

detrimental effects on workers that may have continued long into the recovery.

Economists refer to these long-lasting effects of temporary recessions as hyster-

esis, as some workers are scarred by lengthy spells without work, reducing their

attractiveness to employers and/or their skills and labor market contacts. On the

other hand, a relatively tight labor market that lasts for many years can support

higher wage growth and career opportunities, perhaps with differentially large

impacts on less-educated workers.

Economists still debate the extent to which the labor market tightened during

the recovery. Various forms of “hidden unemployment” persisted, and wage

growth was modest throughout most of it. Yet both the length and depth of the

recovery clearly brought many workers back into the labor force who had left and

enabled many to enjoy several years of positive real wage growth. But after these

years of progress, the pandemic recession of 2020 again imposed great employ-

ment losses on less-educated workers and people of color.

In this article, we examine wage and employment outcomes for prime-age

U.S. workers—that is, aged 25 to 54—over the period 1979 to 2019, with particu-

lar emphasis on the later years. Prime-age workers are the ones whom it is most

sensible to analyze, since they have mostly completed their schooling but have

not yet begun to retire. The years 2000 to 2007 and 2007 to 2019 constituted two

full business cycles, with cyclical peaks in 2000 and 2007, a Great Recession

trough in 2010, and another peak in 2019. We, therefore, present a range of

employment outcomes for the years 1979, 2000, 2007, 2010, and 2019—but with

a particular focus on the Great Recession and its recovery between 2007 and

2019. We also contrast outcomes for workers with bachelor’s degrees or above

with outcomes for workers who, at most, finished high school (these constitute

the “working class” in many analyses, including ours), with outcomes also broken

down by gender and race.3

NOTE: We thank Ryan Nunn and Duncan Hobbs for their assistance in tabulating our

employment outcomes and Cait Chamberlain for general assistance. We also thank the editors

and other volume authors for helpful comments.