This is the second of our two chapters addressing alternative explanations for labor market changes over the last quarter-century. In our analysis in the first six chapters we examine explanations based on a variety of “objective” and quantifiable variables such functional literacy, education, race/ethnicity, age, and occupation; and in the previous chapter we explore the impact of such “objective” variables as imports, immigration, location, technological change, and structural changes in production. To complete this analysis it is necessary to examine the role of several “subjective factors” and “institutional factors” believed to play important roles in the labor market.

The impact of these subjective and institutional factors is easiest to study in the employment process. Subjective factors influencing employment include work attitudes and other soft-skills affecting the way workers interact with others, as well as employer preconceptions about these skills. Institutional factors influencing employment are those practices and policies that shape the functioning of the labor market.

Of course, some influences on the labor market have both an objective and subjective component. For instance, the gender and race/ethnicity variables included in the list of objective variables also have some important subjective and institutional implications.

We turn first to subjective factors influencing employment at a single point in time. This leads us to consideration of certain such factors that change over time. Finally, we survey briefly some institutional factors that affect our results.

Subjective Factors Influencing Employment at a Single Point in Time

A large social science literature focuses on work attitudes influencing employment.