The Danish Labour Force 1980-2015 — and the importance of education

Billede af publikationens forside
28-02-2018
DREAM

In this paper, we analyse the development in labour force participation of cohorts of males and females with different levels of education.

Abstract

In this paper, we analyse the development in labour force participation of cohorts of males and females with different levels of education. We present a thorough description of the historical development in the participation rate, highlighting the policy changes, data breaks and changes in administrative practices that have affected these trends and that help explain the discrepancies between alternative participation rate measures. Using panel data covering three and half decades we apply a cohort based approach that allows us to identify and quantify the effects of factors that have influenced labour force participation (e.g. business cycles, labour market policies and administrative practices). We investigate the effects of cohort impacts such as the increasing educational attainment across cohorts and the potential scarring effect of entering the labour market during times of persistently high unemployment rates. We show through estimated gender and education specific cohort effects that only the unskilled and to a lesser extent the vocationally trained males and females have been affected negatively by the so-called displacement effect whereby the participation rates may have decreased as a result of increasing educational attainment of consecutive birth cohorts elevating the more resourceful individuals out of the unskilled groups. In contrast, the labour force participation of the tertiary educations have so far been largely unaffected by displacement. These results have important implications for the size and the composition of the labour force going forward. We also find that the vocationally and tertiary educated males who entered the labour market during times of high unemployment rates have low lifetime labour force participation, while unskilled males have been unaffected by such scarring effects.