Greg Ip reminds us of: Kim Clark and Lawrence Summers (1982), "Labor Force Participation: Timing and Persistence":
[L]ittle attention has been devoted to the question of persistence in labor supply. To a substantial extent, a demonstration of substantial persistence in labor supply decisions undercuts the plausibility of models based on a high elasticity of labor supply with respect to transitory wage movements since it is dificult to see why a long—run decision should be strongly responsive to transitory developments…
[P]ast work experience is a key determinant of current employment status…. Those who are employed longer tend to accumulate more human capital…. [T]he taste for work may be affected by work experience…. Persistence effects… imply that any measure which affects employment will have important long—run effects…
Persistence effects… yield a long—run increase in labor supply…. [C]oncurrent changes… understate the total increment to output from expansionary policy. The effects of persistence described here potentially complement the process of worker upgrading discussed in Okun (1973), and Thurow (1976). The relative empirical importance of timing and persistence effects in labor supply is an issue with important implications for macroeconomic theory and policy. Both effects essentially deny the "naturalrate" hypothesis as a medium—run proposition. They imply that policy can have an extended impact on the rate of employment without repeatedly fooling economic agents, because in both views labor supply is conditioned by past employment experience…
