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Policy Hub: Macroblog provides concise commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues for a broad audience.

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July 20, 2018

Improving Labor Market Fortunes for Workers with the Least Schooling

A recent Wall Street Journal story observed that the strong labor market is having a particularly positive impact on those with the least amount of formal schooling. Research by our colleague Julie Hotchkiss has also highlighted the potential lasting benefits of a strong labor market for groups of workers who often struggle to find employment. For example, as chart 1 shows, the unemployment rate gap for those 25 years or older and for the same age cohort but with the least formal education is currently near the narrowest gap on record.

The narrowing of this gap over time probably reflects many factors, but one important development has been a systematic shift in the ethnic composition of the least educated workforce. Specifically, as chart 2 shows, the Hispanic (predominantly foreign born) share of the labor force without a high school diploma has increased from about 35 percent two decades ago to almost 60 percent today.

This shift in composition matters because, as chart 3 shows, the unemployment rate for Hispanics without a high school diploma is generally lower than for other ethnicities. Combined with the growing share of the least educated members of the workforce who are Hispanic, this shift in composition acts to lower the overall unemployment rate for that education group.

What's behind the lower unemployment rate for Hispanic workers? It's not clear. But among unemployed workers 25 and older who haven't completed high school, Hispanic workers generally have a higher likelihood of finding a job than do non-Hispanics, and in recent years they are also likelier to remain employed. Both factors have contributed to the relatively better labor market outcomes we have seen develop.

The narrowing unemployment rate gap for those with the least amount of schooling is good news. However, the continuing decline in the share of population without a high school diploma is probably even better news. This share is down from around 16 percent in the late 1990s to 9 percent today. For Hispanics, the decline is even more pronounced. But that decline might also reflect changes in immigration patterns, as it is mostly the result of a decline in the number of foreign-born Hispanics without a high school diploma starting in 2006—the peak of the last housing boom.