The Utilization of Human Capital in the US, 1975–1992

The experience that comes with age and the productive capacity of youth are both assets widely
underused in the American labor market, according to Research Associate Robert Haveman and
co-authors Lawrence Buron and Andrew Bershadker of the University of Wisconsin. To
measure the use of American labor, the authors developed an indicator called the capacity
utilization rate (CUR). Using male workers for their study, they first determined the earning
capacity of males based on such characteristics as basic ability, schooling, skills, work
experience, and health status. The earning capacity was then compared with actual earnings to
arrive at the CUR.

The authors found that not only is male labor underused, but this underutilization is increasing,
especially among low-skill groups such as minority males who have dropped out of school. Also
in decline is the labor utilization of older males. For older males the underutilization is often
voluntary-the result of early retirement. For younger males, however, the underutilization is more closely
related to exogenous constraints—personal factors such as illness
and family responsibilities discourage many from seeking work.

These declines in labor utilization should be of concern to policymakers. Underutilization of
older workers is occurring at the same time that many policymakers think working lives ought to
be extended. More worrisome is the underutilization of youth because the nation’s production in
future years will depend on their labor.