Job Market Paper 2019-2020

The Not-So-Marginal Marginally Attached

When considering questions of labor market tightness and labor force participation rates, it is common to look at the rates and levels of a few broad labor market subgroups for answers. There is a notion that there is a hierarchy of sorts when it comes to a tightening labor market, and that certain groups will likely transition to re-employment before others. This paper seeks to better understand the Marginally Attached subgroup of the United States labor market, through the behavior and characteristics of these individuals.  Those who are marginally attached are often seen as rarely participating in the labor force and being of little consequence when considering the health of the labor market, however, those who are marginally attached transition to employment at rates similar to or greater than those who have been unemployed more than one month. The Bureau of Labor Statistics defines individuals as marginally attached if they are not employed, not actively looking for employment, but would take a job if offered. However, the reasons that individuals cite for being in such a situation vary. The heterogeneity in reasons for marginal attachment is reflected in notably different rates of transition to employment. Those who are marginally attached and those who are employed differ by demographic, industry and occupation characteristics. The most notable difference between the marginally attached and the unemployed is that the marginally attached have higher transition rates to out of the labor force. Utilizing a Maximum Likelihood approach to compare the offer and reservation wages of the marginally attached and unemployed I conclude that the marginally attached have higher reservation wages and lower offer wages on average. These results suggest that the marginally attached, due to heterogeneity, likely have important consequences for the labor market, and should be considered when questioning labor market tightness and labor force participation rates. 

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