A debate has raged for decades over the extent to which labor market outcomes--labor force participation, unemployment, and personal earnings--are constrained by the particular composition of industrial structures and labor market institutions in individual cities and regions. Most economists agree that short-term unemployment rates vary from one region to another depending on how the business cycle affects short-term industry demand and therefore industry employment levels. There is widespread disagreement, however, as to whether persistent differentials in labor force participation rates, group unemployment rates, and group wage rates strictly reflect differences in human capital or whether they are mediated by the industrial environment of various regions. This project will test hypotheses concerning the origins of the "underclass" in urban areas, and it will assess the extent to which the differential decline in manufacturing industries across metropolitan areas has contributed to the growth of the "underclass." The project also will examine the extent to which public policy should focus on "demand side" (economic development) versus "supply side" (human capital) interventions. The investigators will conduct an empirical investigation of changing labor market opportunities facing out-of-school youth. Using both descriptive statistics and multiple regression analysis, they will integrate Current Population Survey data and SMSA-specific data to produce a data base for comparing a cohort of young workers in the mid-1960s with one in the mid-1980s. This project addresses an issue of national importance, and it will also contribute to the resolution of demand- vs. supply-side theoretical issues. It will fill in some important gaps in our understanding of what has been happening in the labor market during the past 25 years. The analysis will contribute to the solution of societal problems related to the unemployment and underemployment of less-educated urban residents, and it will serve as a guide to developing policies to meet human capital and employment needs.
