U.S. Labor Market Trends – Alarming Data for Young Men

To the 21-30 year old men in the United States, I say a hearty Merry Christmas and a Happy New Year! I hope that your dutiful and doting parents gifted you with all of the latest video games and up-to-date console technology while simultaneously making your extended stay in their basement as comfortable and with as much hospitality as humanly possible.

Much like an Onion article, the above is meant to be partial satirical tongue in cheek while still hitting remarkably close and painful to the home [basement]. To get to the reality of the labor market forces for the United States as a whole and this young male adult group as a subset within it, we have to go on a longer journey through economic time to see the trends to show how today might be materially different than yesterday. Economist Russ Roberts recently interviewed fellow economist Erik Hurst on his EconTalk podcast on the topic of the dynamics of the U.S. labor market over the last two decades. Hurst and colleagues have researched and published a great amount of studies related to the labor force participation rate since 2000, and are on the cusp of releasing even more related to my specific topic at hand for this post. As a quick contextual note, whereas most headline trends focus on the unemployment rate (defined as the number of people without work/the number of people actively working or looking for work), Hurst and colleagues have emphasized the ratio of people actually working as a portion of the overall population. Arguably, this latter metric is a more useful guide as to strength of a nation’s labor markets and overall economic health, and is the metric Hurst and Roberts focus on throughout the discussion.

Hurst’s focus at a higher level is on the labor market for workers with less than a Bachelor’s degree for education attainment. Within this population, Hurst observes and makes the case that the downward trends in labor force participation is highly correlated with the decline in manufacturing employment over time. Meantime, downward trends in manufacturing were masked at the aggregate level (while still negatively impacting some local communities) by the housing boom that drew young male adults with lower education levels into select markets with relatively high pay for an extended period of time. Thus, Phoenix and Las Vegas localized booms masked Detroit and Dayton localized busts when the data was aggregated at a national level. Well, we all know how the low-interest rate, government subsidized and promoted, Freddie and Fannie leveraged housing boom turned out. In essence, while the housing boom masked the underlying job-market structural weakness for workers with lower education levels, it was more akin to a hasty application of Bondo on a rusty car than a replacement of the car panels. In other words, it was destined to come undone.

As Roberts indicates in the back and forth dialogue, manufacturing employment in the U.S. has been declining steadily since the 1950s, and this type of “creative destruction” is inevitable in any free-market economy and is not a malevolent force in the long run, especially since people, particularly younger generations, can see the market shifts and react and adjust accordingly. Agriculture is an excellent case in point – whereas agriculture used to employ 80% of Americans in the late 18th and early 19th centuries, it is now less than 2%. Within this type of adjustment to labor market reality, a slice of the population that is 50+ laid off manufacturing and construction workers is a challenge, just as a 55 year old blacksmith in 1915 was challenged with adjusting. But for the economy as a whole, this is a short-term problem. More ominous for the long-term would be a group of 25 year-olds with no discernible skills facing a structurally challenging labor market over the long-run. And indeed this is what Hurst reveals in his research.  Hurst’s conjecture, and Roberts seems to agree, is that the jobs of the past in manufacturing and construction likely are not coming back, so we are likely stuck with a relatively lower labor force participation rate for a long period of time, especially given (as we will prove in a moment) that it is the young rather than the old who are under-employed.

Beginning with some framing and comparative trends, since 2000 and amongst workers aged 31-55 without college degrees, hours worked throughout the year have decreased over 10%, from 2000 hours per year to 1750. This trend is a constant decline and not simply a result of the recession in 2008. Whereas other population groups have recovered, men without college degrees uniquely have not. And just to make the point that is made in the podcast about population sizes, the percentage of men without college degrees is still the overwhelming majority – close to 70%. I think this number shocks most of us who have college degrees and cluster with others just like us. Of course, there are other forms of developing education and skills, but American job markets seem to unfortunately place a singular premium on college degree attainment. Dropping out of college is about as useful, if not worse, than not going at all, and unfortunately, viable post high school training in vocations seems to be lacking.

The most provocative component of this podcast, and connected back to my choice of media graphic and opening satire, is that Hurst has also captured through a wealth of census information that much of this decrease in working hours amongst men is driven by younger men aged 21-30. Within this age group, hours worked have decreased a stunning 15% between 2000 and 2015. Even more depressing, fully 18% reported not working at all during the previous year. You might incredulously ask how on earth someone could get by living such a lifestyle. The answer is cohabitation, and yes it is with parents (did you expect me to say with a wife?). Fully 70% of those who reported not working were living with parents or another close relative. 90% of them were not married nor do they have kids. Hurst points out this these stark declines and the contrasts between young and old are unique to men. In short, women ages 21-30 are similar to their older peers in labor force participation. You might say that the education and labor force participation of young women is picking up the slack where young men are relatively idle.

Given this much higher level of idleness/not working, you might naturally ask what these young men are doing with their time. Using time studies, Hurst indicates that almost 100% of their time differences in lost work time since 2000 have shifted to computers and video gamesPerhaps even more distressing (for those of us with a propensity to value work and look down on idleness, anyway) is that these young men are reporting the same or higher levels of happiness compared to comparative years in which their age group was more occupied with paid work.

In short, a substantial portion of our population is idle in the form of young men without college degrees, and they are seemingly completely satisfied with the lifestyle. Roberts and Hurst spend some amount of time discussing more arcane economic concepts about whether the job market weakness causes a flight to video games and cohabitation, or whether the causation is the other way around and great video games draw young men from the labor market and push their reservation prices higher (the wage at which they could be drawn back into work). Either way, I have to believe that over the long run and when this group of men reaches their 40s and 50s that levels of satisfaction with an idle lifestyle coupled with dim long-term romantic relationship prospects and parents’ failing health (for which their more productive siblings will expect them to care for, no doubt) that the consequences to mental health and other factors will not be a positive societal force. Less malign, I also have to imagine that as more women graduate from higher paying fields such as medical school and engineering, and as relatively less men put in the effort in a critical part of their lives to develop useful skills, the existing gender gaps in aggregate pay will close. This is part of the quiet gender revolution in workforce status and relationships vis-à-vis men that is lost in all of the gender pay-gap handwringing that I posted about in a different blog (again, tellingly, on the back of another EconTalk podcast).  As far as prescriptions for how to improve the plight of the young idle male, I concur with points made by Roberts on this podcast that our primary education system has to become more competitive, diverse, open to vocational models, and more flexible and adaptable to change to provide the skills required in a global, digitally innovative, and constantly changing society.

 

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