The Great Recession and its Aftermath: What Role for Structural Changes?


Rothstein, Jesse. “The Great Recession and its Aftermath: What Role for Structural Changes?” RSF: The Russell Sage Foundation Journal of the Social Sciences, 3(3):22–49. April 2017.

The years since the 2009 end of the Great Recession have been disastrous for many workers, particularly those with low human capital or other disadvantages. One explanation attributes this to deficient aggregate labor demand, to which marginal workers are more sensitive. A second attributes it to structural changes. Cyclical explanations imply that if aggregate labor demand is increased then many of the post-2009 patterns will revert to their pre-recession trends. Structural explanations suggest recent experience is the “new normal.” This paper reviews data since 2007 for evidence. I examine wage trends to measure the relative importance of supply and demand. I find little wage pressure before 2015, pointing to demand as the binding constraint. The most recent data show some signs of tightness, but still substantial slack.