Tuesday, January 11, 2011

Employment for Young American Men

I have a feeling that, looking back from the future, the year 2000 will look like "Peak America", or certainly "Peak Opportunity in America", with the last gasp of the Internet bubble.

The graph above shows the employment-population ratio for men since then, broken out by age.  You can see that for all the groups below age 55, employment opportunities fell sharply between 2000 and about 2003, then recovered slightly until 2007 -- but not to the 2000 level.  Then they fall sharply in the great recession and have pretty much barely improved at all since then.

The one exception is the age group 55-64 who increased their participation through 2007, but we probably should see this is a sign of societal stress also - less ability for men to retire early.

However, the thing I wanted to highlight is the plight of younger men relative to those of us established in the workforce.  In 2000, employment was over 90% for both the 25-34 group and the 35-44 group - peak working years.  However, between then and now it's fallen by about seven percentage points for the 35-44s, but by eleven percentage points for the 25-34s.

Meanwhile, men aged 16-24 have gone from 62% employment to only 45% - a 17 percentage point drop - more than a quarter of the men in this age group who might have been working under the conditions of 2000 are not under the conditions of today.

Those of us in generation X are apt to complain that we are having a harder time than the baby boom, but it looks like the generations behind us have it a good deal worse again.

Of course, the way to make it look even more dismal is to focus on young black men - they are now down to only 1/3 of them working:

And, if asked to prognosticate, I would struggle to come up with a plausible story for how this is going to turn around.  With manufacturing jobs continuing to flee to Asia, construction in the doldrums for years to come, and more automation with each passing year, it seems more likely that the employment/population ratio will stagnate for a year, or three, or five, until the next shock/recession drives it lower still.

America has traditionally been the Opportunity Society, but it sure is looking less and less that way.


Unknown said...

As contorted as things might be looking from NY, year 2000 here was a unique combination of positive employment factors that probably only occurs once in a generation. Lots of young men actually delayed going to college to get a piece of the thriving dot.com economy. I spent most of my free time in college coding straight HTML at $20+/hr. Lots of my high school friends just never bothered with college at all (they all, of course, had to speedily correct that once the boom was over). I am not sure year 2000 is a great comparison.

Burk said...

Automation? Sounds a bit luddite, don't you think? The problems of employment have very little to do with productivity, which provides us all with more things we want, and provides US companies with one of the best ways to recapture jobs from low wage settings.

No, our employment issues have everything to do with macro-economic policy, in the form of the GDP share going to profits vs labor. Recent decades have seen the destruction of explicit labor power, as well as the monetarist obsession with maintaining higher-than-necessary unemployment as an army of the desperate to lower wage demands. All in addition to outsourcing, etc.

Inflation has been controlled, but at the cost of lower employment and lower pay for those who are employed (not as executives or financiers). This can all be reversed by a return to Keynesian economics.

Mr. Sunshine said...

Which part of it do you believe the country has abandoned?

"Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle.[1] The theories forming the basis of Keynesian economics were first presented in The General Theory of Employment, Interest and Money, published in 1936; the interpretations of Keynes are contentious, and several schools of thought claim his legacy.

Keynesian economics advocates a mixed economy—predominantly private sector, but with a large role of government and public sector—and served as the economic model during the latter part of the Great Depression, World War II, and the post-war economic expansion (1945–1973), though it lost some influence following the stagflation of the 1970s. The advent of the global financial crisis in 2007 has caused a resurgence in Keynesian thought. The former British Prime Minister Gordon Brown, former President of the United States George W. Bush[2] (also alleged being heavily anti-Keynesian by some), President of the United States Barack Obama, and other world leaders have used Keynesian economics through government stimulus programs to attempt to assist the economic state of their countries.[3]" Wikipedia

kjmclark said...

And where are the riots? Where is the crime wave? Only 45% of young men are employed, which means that 55% are doing ??? If they think about it, they should see that they don't have a very bright future, either. Yet they don't seem to be doing or saying much of anything. (Except, of course, Loughner, who happens to be in that age group. Eeek.)

There is always work that could be done. There's plenty of infrastructure we could be building or rebuilding. But unless there's some impetus to put these people to work, it doesn't look like we'll do much of anything. And somehow, the people most affected don't seem to be saying or doing anything.

Mr. Sunshine said...

@kjm: You pose an interesting question. I have a feeling that the power of belief and denial is stronger than anything but missing a few day's worth of meals and, to date, the invisible soup lines (food stamps, UI) have prevented too many from going absolutely hungry. Young people assimilate reality, they don't really process it.

Reality for most young people is still not hungry and the media, in which I spent many years and which makes up a large part of their reality, doesn't provide any reason for people to step out of line. John Dvorak once wrote in PC Magazine that "Perceived performance is more important than actual performance." Few people perceive things at all, if they aren't experiencing them right now, right here, and it can get a lot worse in the USA. Look at Mexico, for example - where are the riots there? It takes a lot for the peasants to revolt - at this point, and most poor people here don't see themselves as peasants. That self image seems to be confined to those with less hold on - and by - the status quo, aka, the lunatics.

Burk said...

Hi, Mr. S-

I agree that the administration has used some of the Keynesian tools recently, if grudgingly and insufficiently. We are at the point of tweeking, not of revolution. The distinction I mean is that of macroeconomic employment policy- whether the Fed and fiscal arms pursue primarily full employment, or only low inflation. Neoliberal theory maintains that these are exclusive- that some buffer of unemployment (NAIRU) is "natural" and needed to moderate inflation.

But the level of NAIRU is unfortunately not well characterized or defined.. it tends to be an ideological construction, varying with time and with the practitioner. Some mainstream economists are even claiming that the current unemployment is "structural", thus not something addressable by the state, but requiring gradual private sector adjustment- over a very, very long time.

Keynesians regard this as complete hogwash. Employment can be offered directly by the government to those who are unemployed. There is plenty to be done in the country- infrastructure and social services, etc. The government has plenty of financial capacity to do this, and the only reason not to do so is ideological / political. Over the long term, the government could likewise offer jobs to all who are unemployed, keeping to a minimum/decent wage to not compete unduly with the private sector. This would relieve a great deal of suffering, and also provide the kind of automatic fiscal stablilizer that would stabilize the macroeconomy more effectively than is being done now on an ad hoc basis. Inflation pressures should be relieved by other adjustments of the government taxing/spending balance, as well as the usual interest rate mechanism, if needed.

Anonymous said...

People often lament the skewed distribution of income. But what about the distribution of *work*?

An old chestnut of capitalist rationalization: unions are a conspiracy of 9 men to do the work of 10, throwing the 10th out of work. Of course, capitalists conspire to hire "only the best" leaving aside all the folks who couldn't or wouldn't be compliant enough during their schooling.

We have a world of intensely work-obsessed executive types delegating work only to those similarly obsessed. And these folks refuse to fund a dole for the "lazy" ones who can't keep up -- because it would be "rewarding" them for bad behavior.

Which are they hoarding more? The money or the work?

Adam Schuetzler said...

To be honest, I think this is the ultimate result of the rhetoric of the "merit society" and the "free market". My experience with other young people (early 20s-30s) is that many of them still believe that people get what they deserve, that the economy will improve, and that they will be okay.

Ironically, most of my friends are very clearly affected by the economy - I have college graduate friends who have trouble finding jobs or who work for $30k (in Hawaii, which is to say just enough to live on, not enough to save), people moving back in with their parents, etc. I met one of my graduate friends who is now homeless - with a math degree, no less! Now, certainly he is less than the ideal employee (his personality can be a bit difficult at times), but to fall to homelessness?

The rhetoric is that if we all have skills and talent we'll make it, but the backside of that rhetoric is that if we don't make it it's our own fault for having the wrong skills or not be a good enough employee or similar... And if we're making just enough and moving back in with our parents then that's because we didn't do what was needed for the magical market. I don't believe this anymore, but for society at large it's a powerful way to control the frustration of young.

Ultimately, the propoganda basically says that the poor are worthless so they deserve to be poor, and if you're poor then it's your fault. Most people buy it in America.

Luke Lea said...

Saw your NYT comment. You need to distinguish between the long- and short-term labor force participation rates. If wages go low enough the labor force participation rate will go up over time -- otherwise people starve.

An anecdote: during post-Katrina rebuilding process in New Orleans American blacks were complaining to a contractor that they were hiring Hispanics instead of African Americans. The contractor replied that African-Americans weren't willing to sleep out on the ground at night. Not sure if this is true or false, but it gets a point across.

In general anything that increases the supply of labor relative to demand lowers wages. That includes labor-saving technologies (including household appliances!), mass immigration and (indirectly) the import of labor-intensive goods from low-wage countries overseas, especially if they are populous like China.

Similarly anything that reduces the supply of labor relative to demand raises wages: a shorter standard work week, an immigration time-out, tariffs on imports from low-wage countries overseas.

We are talking real hourly wages here, adjusted for inflation, which is the best measure of a country's standard of living. Ours peaked in 1973, when I was a youth.

Organized political activity to change public policy is the answer, alas. I don't see it happening.