:format(webp)/cdn.vox-cdn.com/uploads/chorus_image/image/51250551/nm_11_tall.0.jpg)
A lot of people are worried about the growing ranks of jobless young men. George Will says America is suffering a “quiet catastrophe” in which men simply no longer want jobs.
Erik Hurst, an economist at the University of Chicago, recently came up with a novel theory to explain this. He suggested that young American men aren’t working because they’re too busy having fun playing video games and living in their parents’ basement. Derek Thompson wrote it up in the Atlantic, and Tyler Cowen enhanced the argument by suggesting that young men are also enjoying internet porn, thus eliminating a key non-monetary incentive that drives young men to get a job and their own place.
At the same time, people on both ends of the political spectrum have been anxious to declare the recession over and the damage it did to the labor market fully repaired.
With Barack Obama in the White House, Democrats prefer to emphasize the positive. They like to note that unemployment is way down and the economy has enjoyed many consecutive months of job growth. A lot of conservatives, meanwhile, have been arguing for years that the Federal Reserve was doing too much to prop up the economy. So they’re naturally hostile to theories that the economy still needs help from the Fed.
People talk about these things as if they are separate issues. But they’re not. Young American men are playing video games instead of working because the demand for workers is weak. And demand is weak because the labor market never fully recovered from the Great Recession. If the Federal Reserve raises interest rates too quickly — as it is threatening to do later this year — it could delay the recovery process even further.
Even though things are much better than they’ve been in the recent past, there are still plenty of able-bodied people out there who could use jobs, and there’s reason to believe we have plenty of room left to recover.
The labor force has shrunk
The key sign that the economy has not yet fully recovered from the recession is that despite the marked improvement in the unemployment rate, the share of the total population that holds a job remains well below its 2007 level, to say nothing of its peak in 2000.
Much of this is due to the aging of the population — old people are less likely to work — but it remains true even if you focus attention on “prime age” workers between 25 and 54:
Many of these non-working people do not show up as unemployed in the official statistics because they are not actively looking for work.
That could be because they are unable to work (due to disability, say) or don’t want to work (they’re happy as full-time homemakers), but it could also be that they’ve simply given up. The unemployment rate is on the low side now, but it was very high for a long time. That means many Americans were looking for jobs for more than a year without finding them. Long-term joblessness can itself be a barrier to finding a new job, and at a certain point you simply drop out.
The focus on men is misleading
This declining participation rate has been widely noted, but often in a somewhat misleading way that focuses exclusively on men.
Nicholas Eberstadt of the center-right American Enterprise Institute released a book, Men Without Work, earlier this year has helped spark many man-centric conversations about labor force participation. Eberstadt argues that if you ignore differences in retirement age, American men are now less likely to work than European men, and that male labor force participation has been declining for a few generations now. This is all true. But focusing exclusively on men gives a misleading portrait of the recent situation.
After all, for most of the period Eberstadt considers, the labor force participation rate for women was rising. That reflected women’s growing educational attainment, declining rates of marriage and childbirth, and an increasing tendency for mothers of young children to work.
But employment rates have not recovered to where they were at the start of the Great Recession for either gender.
This means that while the long-term structural decline of American men’s attachment to the labor market is an interesting and important issue, it’s not really an alternative to the theory that current low participation rates reflect an overall weak labor market.
The issue is America, not men
What’s true here is that non-working women are much more likely than non-working men to be spending their time on things like caring for children or for elderly or disabled relatives. In that sense, the paucity of jobs for men is arguably cause for a different level — or at least a different kind — of social concern.
But in terms of understanding labor market dynamics, there is nothing special happening to American men that isn’t also happening to American women.
What’s unique and different, in other words, isn’t American men — it’s Americans in general. Over in the United Kingdom — a country that also has video games, deindustrialization, and other major social and technological trends — the employment rate is currently at an all-time high.
Things can, and probably will, get better
Perhaps the best and clearest evidence that the labor market continues to be depressed is that employers have had an easy time getting people to work at a discount. The Employment Cost Index — the government’s most comprehensive overall account of what employers spend on wages and benefits — has grown at a sluggish pace since the recession hit.
We have seen meaningful improvement in this metric over the past year, confirming that the labor market really has improved, but we’re still clearly not back to where we were before the crisis hit.
This is important because while it’s interesting for some purposes to ask why, exactly, the people who’ve left the labor force have left what’s really important to know is how fast can the economy grow. If the “missing” workers are really having so much fun playing video games that they refuse to work or are otherwise unhireable, then employment costs would be rising sharply and the Federal Reserve would have no choice but to tap the brakes to stop an inflationary spiral.
The fact that employment cost growth is still on the low side suggests that the opposite is the case. The economy can safely keep adding jobs at the current pace — or, ideally, a faster one — for quite a while, just by drawing workers off the sidelines back into the labor force.
This could be particularly beneficial to the most disadvantaged groups.
Justin Fox recently argued at Bloomberg View that the problem of nonparticipation is especially concentrated among America’s large population of ex-offenders. He reads that data as suggesting that the US criminal justice system is responsible for the decline in male work. But the causation could equally go the other way. When workers are abundant, companies have little reason to take a chance on people with a criminal record. Managerial expertise in hiring, training, and supervising marginal job candidates becomes less prized. In a tighter job market, that dynamic would change — as it would for other disadvantaged groups like the long-term unemployed.
But to get this happy outcome, we need patience from American policymakers — most of all at the Federal Reserve. Eagerness at an elite level to proclaim the recovery complete is understandable but premature. Slow, steady growth over the past few years has done enormous good, and we can afford to let it continue.
