Thinking of jobs, the spotlight has been on sinking demand for manufacturing workers. But what about supply?
Video Games and Employment
On the supply side of labor markets, an alarming proportion of lower skilled men (less than a bachelor’s degree) aged 21 to 55 aren’t employed. The numbers? In 2000, 84% of these lower skilled men had a job. By 2015, the total was less than 77%. And no, the reason was not the great recession. The trend began before.
It gets even worse when we look at the 21-30 cohort. The employment rate for younger lower skilled men was close to 82% in 2000. By 2015 it fell to 72%. At the same time, 22% of lower skilled men, aged 21-30, had not worked for 12 months. In 2000, we were talking about slightly less than 10%. And no, they were not attending school.
From former Treasury Secretary Larry Summers’ blog, this graph displays the same trend:
A Possible Reason
Chicago Booth School economist Erik Hurst looked at young men in the American Time Use Survey (ATUS) and noted an increase in video game time. Knowing that many of these jobless men in their 20s lived with their parents or close relatives, Hurst checked the General Social Survey and saw that they were happy.
That led him to hypothesize that the tradeoff between leisure and work had changed. Since these young men had limited earning capacity, it was more attractive to stay at home and spend their time at the computer or game console than to work. Unmarried, with little if any rent or food expense, they could afford their unemployment.
The Impact
The worry is the future. Without the experience that a first or second job brings, these men will be ill-prepared to enter the work force when they age. And then, returning to the demand side, the need for their skill set will also diminish with the spread of self-driving cars and automated manufacturing. Add to that declining marriage rates and the contagion of non-work and you have the burden of an expanded dependent population.
And we have retired baby boomers also!
Our Bottom Line: Unemployment and Employment Rates
Because the unemployment rate compares the unemployed workers in the labor force to the entire labor force, it ignores the people 16 and older in the civilian population who are neither working nor looking for a job.
As a result, Chicago Booth economist Erik Hurst told econtalk host Russ Roberts that he prefers the employment rate as a statistical benchmark. By comparing the 16 and older total population to the number of individuals who are employed, he gets a different perspective.
Hurst’s employment rate data returns us to where we started. It leaves us with worries about the supply side of labor markets for less skilled men in their 20s. And it tells us what the unemployment rate hides.
My sources and more: I like to follow former Secretary of the Treasury, Larry Summers blog. Whether I agree or disagree, always his insight takes me to a higher level. It also created an ideal synergy with an econtalk episode on the men who are not working, this article and this paper.
