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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.