Sunday, September 25, 2016

The New Men Without Jobs Conservative Excuse

FRED notes that the employment to population ratio for men aged 25-54 was 87.5% before the Great Recession. It fell to less than 81% during the Great Recession and has risen back to only 84.5%. Keynesians like myself see this as evidence that we still need more of an aggregate demand boost. We had fun with the Tyler Cowen porn excuse but it seems Nicholas Eberstadt (AEI) also thinks the low level of employment for this group is due to some inward shift of their labor supply curve:
“In the half-century between 1965 and 2015, work rates for the American male spiraled relentlessly downward, and an ominous “flight from work” commenced…The collapse of male work is due almost entirely to a flight out of the labor force—and that flight has on the whole been voluntary. The fact that only 1 in 7 prime-age men are not in the labor force points to a lack of jobs as the reason they are not working.”
Pardon the interruption Nick but I have a couple of problems already. The relentless spiral started with the Great Recession as any downward trend before that was quite mild. But you seem to contradict yourself already. You note there is a lack of jobs even as your measure of its importance is very suspect. And yet you claim it is a flight from work. A decline in the labor force participation rate is not necessarily a voluntary leaving of the labor force. I guess the AEI never heard of the discouraged worker effect. But let’s have Nicholas continue:
“America’s prime-male workforce participation has been declining at a virtually linear rate for half a century–a trajectory unaffected by good times or recessions.”
Another misrepresentation akin to this relentless spiral but don’t let me interrupt:
“these unworking men are floated by other household members (wives, girlfriends, relatives) and by Uncle Sam.”
I am unaware of some Congressional decision to expand the safety net so is he saying hard working ladies are taking in lazy boyfriends for their good lucks? I can only speak for my city but this does not describe the dating scene in Manhattan. I’m sorry Nick – please continue:
“There is one other important piece to this puzzle, and it has to do with crime and punishment. Everyone knows that millions of criminal offenders today are behind bars–but few consider that many millions more are in the general population: ex-prisoners, probation cases and convicted felons who never served time. In all, America may now be home to over 20 million persons with a felony conviction in their past, and over 1 in 8 adult men. Men with a criminal history have much worse odds of being or staying in the labor force, regardless of their ethnicity or educational level. The explosive growth of our felon population, unfortunately, helps to explain some of the otherwise puzzling peculiarities of America’s male work crisis.”
I’m having a difficult time squaring this spin with the decline in the crime rate over the past generation. But here is the one thing neither Nick nor Tyler bothered to square with this alleged inward shift of the labor supply curve story. Under their story, real wages would have increased. And yet, real wage growth has been quite weak. Do they teach basic supply and demand at GMU or the AEI anymore?

15 comments:

Magpie said...

I am unaware of some Congressional decision to expand the safety net so is he saying hard working ladies are taking in lazy boyfriends for their good LOOKS? I can only speak for my city but this does not describe the dating scene in Manhattan.

Damn! Another hope quashed. Here I was daydreaming about moving to the Big Apple.

Bob Sharak said...

I wouldn't discount the conviction effect as a contributing factor. I say conviction rather than incarceration because a conviction is enough in an era of ubiquitous background checks. Moreover, our "meet 'em and plead 'em " public defender system means many people accept a conviction just to stay out of jail. It is a very real issue in workforce development circles and impacts men more than women.

Why haven't wages increased, or increased more? Well, increased female LFP, the ability to shift work overseas, and weak aggregate demand are partial explanations. No?


Bob Sharak said...

I wouldn't discount the conviction effect as a contributing factor. I say conviction rather than incarceration because a conviction is enough in an era of ubiquitous background checks. Moreover, our "meet 'em and plead 'em " public defender system means many people accept a conviction just to stay out of jail. It is a very real issue in workforce development circles and impacts men more than women.

Why haven't wages increased, or increased more? Well, increased female LFP, the ability to shift work overseas, and weak aggregate demand are partial explanations. No?


Owen Paine said...

Paine

As usual pgl misses half the analysis

Yes slacker preference increases reduce supply but if there's a corresponding reduction in demand

Say from technical change

Not off set by a reduction in real wages ...

reason said...

Bob Sharak
"Why haven't wages increased, or increased more? Well, increased female LFP, the ability to shift work overseas, and weak aggregate demand are partial explanations. No?"

So you agree with the OP then? It is lack of demand.

ProGrowthLiberal said...

Paine says I missed the demand side of this debate. Actually it is the conservatives who want to dismiss the demand side. I on the other hand think the demand side is an important part of the real story. Me thinks Paine equates a critique of the conservative theme as an endorsement. Not quite.

ProGrowthLiberal said...

Reason - thanks. I am willing to concede that part of the decline in the labor force participation rate is from the supply side but the premise that all or even most of the decline is from the supply side and not from aggregate demand factors is not shown by the actual evidence - no matter how the right wing tries to spin this.

eric said...

Wapo says they're all in their parents' basements playing video games, which are now so good that they have come to be even more entertaining than low-wage work.

Denis Drew said...

Real wage growth has been quite weak? Really? You guys don't even know where to start looking:

"It's the American dream, dog: flush toilet down the hall, AM radio, electric light in every room." All the incentive to keep American raised workers working -- the best working folks every had it -- and the year is 1916 -- and let's call it $200/week job level.

100 years later, American raised workers are not going to work for $400/wk. In 1968, the fed min wage was $440/wk -- at half today's per capita income. Poor country raised immigrants will -- which only exasperates the missing American collective bargaining.
***************************
JUST LEFT THIS COMMENT ON ANGRY BEAR:
I don”t know — just saying — if the 110 Belizeans are going to make their homes on the Mexican side of the border (and not send too much money back to Belize), then, maybe they might create enough extra economic activity to support 10 more Mexican worked jobs.

The big factor to consider here is of course labor union density — of course.

Of course, if labor’s price is pretty much everywhere set by collective bargaining, then, there might not be any financial motivation (cheap labor) to hire the 110 Belizeans in the first place. ???

Conversely, if labor’s price is set by collective bargaining, then, there would probably be an advantage to hire local Mexican labor which would be at least somewhat more in tune with management (when different languages are involved like US/Mexico, a bigger advantage).
******************************
I would guess that the social pathologies in the white rust belt areas are probably parallel to the pathologies in the black ghetto areas: all basically anchored in low skilled jobs that could be paying $800 only paying $400 -- all due to nationwide de-unionization.

5% union density in private business is a strange pathological condition -- that nobody sees. All discussions on economic and/or political degeneration take place within this uniquely American de-unionized context without ever recognizing that the context is what should be being discussed! !!!

How to make the scales drop from all (ignorant) American lives?

ProGrowthLiberal said...

Not sure what Denis Drew's comment is about besides saying the US has higher wages than some other nations. Of course that is true but the issue was not levels but growth rates. Highly recommended is this from the EPI:

http://www.epi.org/publication/charting-wage-stagnation/

Anonymous said...

another individual who lacks basic compassion

people like him, who were espousing the same economic philosophy, also blamed the millions of people out of work during the great depression in the 1930's for their own plight

it was at the time when this was occurring that Keynes explained the concepts of involuntary unemployment caused by inadequate aggregate demand

involuntary unemployment

Denis Drew said...

The "other nations" I'm referring to are not rich country nations like Germany, Denmark or Australia -- more like poor country nations like Mexico, Pakistan and Nigeria. I thought that was mirrored in the Belizian example. Hence the pathology of poor country raised immigrants combined with lack of collective bargaining.

I assume anyone reading these blogs understands I am saying that today's $400/wk jobs could pay $800 with collective bargaining.

I also pretty much assume that our academic liberal types (not to mention our so-called progressive politicians) all, to a man and woman, seem locked into examining and diagnosing all the symptoms or de-unionization -- without realizing the de-unionization is the core cause of all the symptoms, to be concentrated on first, last and mostly -- mostly never thinking about de-unionization of the US at all!

AXEC / E.K-H said...

From gossip to the correct employment theory
Comment on ProGrowthLiberal on ‘The New Men Without Jobs Conservative Excuse’

Economists love to psychologize about their fellow citizens. A long-standing topos is that the unemployed are drunkards, sluggards, criminals, social parasites, or smart optimizer who simply prefer leisure over work.

It is pretty obvious that NO way leads from this brain dead folk psychological gossip to the explanation of employment/unemployment for the economy as a whole. Nonetheless, economists are quite sure how to cure unemployment: “We economists have all learned, and many of us teach, that the remedy for excess supply in any market is a reduction in price. If this is prevented by combinations in restraint of trade or by government regulations, then those impediments to competition should be removed. Applied to economy-wide unemployment, this doctrine places the blame on trade unions and governments, not on any failure of competitive markets.” (Tobin, 1997, p. 11)

In more than 200 years, employment theory has not risen above this substandard intellectual level. Time for a sketch of the formally and empirically correct employment theory (2012; 2014). The basic version of the objective structural Employment Law is shown on Wikimedia:
https://commons.wikimedia.org/wiki/File:AXEC62.png

From this equation follows inter alia:
(i) An increase of the expenditure ratio rhoE leads to higher employment (the letter rho stands for ratio). An expenditure ratio rhoE greater than 1 indicates credit expansion, a ratio rhoE less than 1 indicates credit contraction.

(ii) Increasing investment expenditures I exert a positive influence on employment, a slowdown of growth does the opposite.

(iii) An increase of the factor cost ratio rhoF=W/PR leads to higher employment.

The complete AND testable employment equation is a bit longer and contains in addition profit distribution, public deficit spending, and import/export.

Items (i) and (ii) cover Keynes’s arguments about the role of aggregate demand, which have been commonsensically right but formally defective. More precisely, Keynes’s multiplier is provable false. The factor cost ratio rhoF as defined in (iii) embodies the price mechanism which works very different from what the representative economist hallucinates. As a matter of fact, overall employment (in the world economy or a closed national economy) INCREASES if the average wage rate W INCREASES relative to average price P and productivity R.

So, in simple terms, full employment (in any definition) can be achieved by increasing overall demand (expenditure ratio, investment expenditures etc.) or by INCREASING the average wage rate or by a combination of the two.

Both, the Walrasian and Keynesian approaches have produced misleading policy advice. Unemployment is ultimately the result of theory failure, that is, of the utter scientific incompetence of economists who are mainly occupied with gossiping about whether the new men without jobs are floated by wives, girlfriends, relatives or by Uncle Sam. It is only a question of time before these new men get the idea to tar and feather the ‘throng of superfluous economists’ (Joan Robinson).

Egmont Kakarot-Handtke

References
Kakarot-Handtke, E. (2012). Keynes’s Employment Function and the Gratuitous
Phillips Curve Desaster. SSRN Working Paper Series, 2130421: 1–19. URL
http://ssrn.com/abstract=2130421.
Kakarot-Handtke, E. (2014). Towards Full Employment Through Applied Algebra
and Counter-Intuitive Behavior. SSRN Working Paper Series, 2456184: 1–25.
URL http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2456184.
Tobin, J. (1997). An Overview of the General Theory. In G. C. Harcourt, and P. A.
Riach (Eds.), The ’Second Edition’ of The General Theory, volume 2, pages 3–27.
Oxon: Routledge.

RAM said...

Heard from my daughter the singer: "What do you call a musician without a girlfriend?" Answer: "Homeless." So there's that...

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