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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Should we subsidize higher education?

 

It is remarkable that most of the debates we have in today’s society are but constant echoes of our past. We have become the proverbial hamster running in a wheel. The same issue of whether to subsidize higher education was alive and well in this 1985 video that I viewed today courtesy of the American Enterprise Institute in which Milton Friedman has a conversation with students and continues to pose the simple questions to them of, “How do we justify the education welfare state? Why should I be forced to pay for your college education?” I appreciate how Friedman turns this pointedly into an issue of whether we should have welfare for students, dispensing with euphemisms such as “society should support higher education” and turning this into a debate about whether we think it is appropriate to have such a regressive form of wealth redistribution from low income to middle class and wealthy individuals. He pointedly asks the question of if this logic applies to education, why does it not apply to welfare transfers to those that start businesses irrespective of their income level? What is it about education that it requires income transfers from largely lower classes to the current or future upper echelons of society? Friedman makes this point in the video when he states that, “there is no other governmental program that so clearly takes from the low income groups and transfers it to high income groups as education.” When challenged by one of the students that society desires broad education as a goal, Friedman’s retort is a masterfully succinct, “societies don’t have goals, people have goals.” The implicit and unanswered question is why should we be forced to subsidize the individual student’s goals and future income?

Fast forward to the current day, I think Friedman could have accurately predicted today’s higher education malaise – tuition rising much faster than income or inflation growth, bloated administrations, colleges that constantly clamor for more funds while simultaneously  binge-building, unaccountable and tenured faculty that focuses more on research and publication than teaching, misaligned and misallocated resources that fail to connect to economic outcomes of the degree and so on. This is the predictable outcome of heavy government subsidization and regulatory involvement as seen in other rapid increase cost decoupled from quality outcomes industries such as healthcare that also have their fair share of government intrusion. Thus, the primary challenge of the rush by the Bernie Sanders crowd to fund college education as “free” for everyone is the simple fact that this doubles down and exacerbates the challenges – colleges would in turn have no incentive to focus on innovation, the needs of consumers, the creation of programs that align to the economy at large, and perhaps most perniciously, devaluing higher education entirely. To borrow a line from the villain Syndrome in The Incredibles, “when everyone’s super, no one will be.” In other words, mass production and a sharp increase in the supply of college graduates due to obfuscation of the pricing mechanism of higher education will only serve to muddle and devalue a college education at large, and the result will be those that still want to send a signal to the market of their higher worth relative to everyone else will still be willing to shell out more money for masters degrees, doctorates, and other forms of specialized training. We will have created a system full of more challenges that is further away from the moderating influence of market signals and fueled more cost increases while doing nothing truly in the name of equal access – which is a utopian and unfulfillable fantasy.

As an aside, one neat component of this clip is a young David Brooks, now a fairly moderate voice of reason at the New York Times. I hope you enjoy the video, if for nothing else, Friedman’s manner of speaking and his mannerisms always give me a chuckle.

Meanwhile, in the real world…

Yale

I am fascinated with the events going on at Yale and University of Missouri and the questions that arise from them: what does this mean for proper ways of engaging with humanity, how do we properly show the Christian concept of love of one’s neighbor, and what ails our institutes of higher learning that these clashes are occurring? I will admit here as a preface that one of my life’s guiding principles and beliefs has always been that America is the place where one can work hard and get ahead and that regardless of one’s birth circumstances the opportunities to improve one’s lot is easily within reach for those that want to grab hold and take them. Thus, I have long believed that grit and gumption are critical factors that determine happiness and success, much more so than any other measure of intelligence or inheritance, although I will admit that to some degree those things certainly help. My biases in life revealed, I also find myself working to achieve balance and understanding of issues in brotherly love before landing and espousing forceful opinions. A true form of courage is standing up for right in the face of evil regardless of where it comes from. People and their lives are inherently valuable, and standing up in the face of oppression is certainly a mark of bravery and virtue. Where there are grievances aired, it is best to explore those grievances and address them where they are well founded while separating real grievance from opportunist grandstanding that trends towards intolerance in the name of tolerance which feeds into mob and headhunting mentality, which ultimately upends and is counterproductive to the ultimate goals.

That preface concluded, it is with this video that I am increasingly convinced that evidence is mounting that the protest movement, specifically at Yale, has now entered the zone of a privileged class so out of touch with reality and so unused to confrontation with opposing views that it has no idea of what respect and tolerance actually means and is thus descending into that mob mentality more than high-minded debate and reform.

A warning that the video is full of foul language as the student at Yale pours vitriolic bile on an Administrator over an email that was sent from a Yale Master (someone that resides on campus to foster student community). I believe a reasonable interpretation of the email would conclude its contents included a mature encouragement that the students act as adults and handle amongst themselves the proper custom conduct and norms for Halloween. The linked Atlantic Article does a great job of expressing the heart of the matter at Yale. What these students seem to want is a complete closing off of any dissenting views or any responsibility to handle things that they disagree with in adult ways, which would mean conversations and development of social mores amongst a community without the forceful hand of an administrator. Notice the language of the student leading the rant against the Yale Master – “it is your job to create a place of comfort and home…you should resign…you are disgusting,” among other accusations laced with ad hominem attacks full of foul language that I won’t write here. Another student chimes in, “you are supposed to be our advocate.” Hardly the voices of reason and tolerance here.

Have our American campuses become so intolerant of dissenting views and free speech that we can’t bear to hear other viewpoints or tolerate that there are others among us with different viewpoints that don’t fit into the narrative of incessant grievances that require a unified view? I would argue that yes, for the most part the lack of any dissenting views and the overwhelming majority of college faculty members adhering to the leftist bent have denuded our colleges of what they should actually exist for – creating citizens capable of the highest order of intellectual thinking and leadership with the ability to logically reason through issues and discuss them from their own viewpoints, without resorting to hateful attack speeches and muzzling of opposing views (recall the strange episode of the University of Missouri professor calling for muscle to remove a reporter from the protest events.) The linked research confirms this reality. The article indicates that for every conservative faculty member, there are 14 liberal faculty members. 73% of them admit that they de facto give hiring preference for those that agree with them politically. The great irony here is that students demanding resignations and muzzling of school administrators is an example of getting eaten by one’s own ideological children. When there exist no alternative views on a campus, all one gets is a heavy dose of confirmation bias that goes unchallenged.

The result is intellectual atrophy and the closing of the mind. Yale and University of Missouri just happen to be in the spotlight at the current moment. Such intolerance could have happened at hundreds of campuses across the nation.

Meanwhile, in the real world, we all have to deal with unsavory people, ideas, and things that we vehemently disagree with in mature and adult ways. Sometimes that means speaking up and saying no. Sometimes that means building a coalition of people around you and leading them to change things. And yes, sometimes that means ostracizing or just plain ignoring and excising from your life people that are just not changeable. In the real world, what does not work is demanding someone listen to you, agree with you, or kowtow to your demands. Should not our colleges be laboratories in creating leaders for the leadership challenges they will face in the real world? Is providing, a “safe” and dissent free environment preparing them for that leadership? I would tend to think not.