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The Outlook for US Labor-Quality Growth

The Outlook for US Labor-Quality Growth

(p.61) 2 The Outlook for US Labor-Quality Growth
Education, Skills, and Technical Change
Canyon BoslerMary C. DalyJohn G. FernaldBart Hobijn
University of Chicago Press

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 US 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.

Keywords:   demographic change, growth accounting, labor quality, wages

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