The Effects of Education on the Natural Rate of Unemployment |
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Authors: | DePrince Albert E Morris Pamela D |
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Institution: | (1) Dept of Economics, Middle Tennessee State Univ, Mufreesboro, TN 37129, USA |
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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. |
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Keywords: | |
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