The Outlook for U.S. Labor-Quality Growth

Canyon Bosler, Mary C. Daly, John G. Fernald, Bart Hobijn

This chapter is a preliminary draft unless otherwise noted. It may not have been subjected to the formal review process of the NBER. This page will be updated as the chapter is revised.

Chapter in forthcoming NBER book Education, Skills, and Technical Change: Implications for Future US GDP Growth, Charles R. Hulten and Valerie A. Ramey, editors
Conference held October 16-17, 2015
Forthcoming from University of Chicago Press
in NBER Book Series Studies in Income and Wealth

Over the past 15 years, labor-quality growth has been very strong—defying nearly all earlier projections—and has added around 0.5 percentage points to an otherwise modest U.S. productivity picture. Going forward, labor quality is likely to add considerably less and may even be a drag on productivity growth in the medium term. Using a variety of methods, we project that potential labor-quality growth in the longer run (7 to 10 years out) is likely to fall in the range of 0.1 to 0.25 percent per year. In the medium term, labor-quality growth could be lower or even negative, should employment rates of low-skilled workers make a cyclical rebound towards pre-recession levels. The main uncertainties in the longer run are whether the secular decline in employment of low-skilled workers continues and whether the Great Recession pickup in educational attainment represents the start of a new boom or is simply a transitory reaction to a poor economy.

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This chapter first appeared as NBER working paper w22555, The Outlook for U.S. Labor-Quality Growth, Canyon Bosler, Mary C. Daly, John G. Fernald, Bart Hobijn
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