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A Depressing Trend: Men Without Work

A Depressing Trend: Men Without Work

Tuesday, 31 July 2018 09:14 AM Current | Bio | Archive

Labor Force I: Bottom Line. For a change of pace from the daily grind of Trump World, Melissa and I decided to update our demographic analysis of the US labor force today. The bottom line is we don’t expect that the many prime-working-age males (PWAMs) who’ve dropped out of the labor force will be coming back. So the low unemployment rate accurately reflects the tight labor market.

Yet we believe wage inflation may remain subdued. As we explained last week, lots of Baby Boomers are staying in the labor force well beyond the traditional retirement age of 65, and they aren’t demanding or getting any meaningful pay increases. Many Millennials are minimalists without much affinity for the traditional work model (a.k.a. “rut”) of toiling 9-5 for the same company. Instead, thanks to Wi-Fi, they can work whenever and anywhere they like, and they enjoy that freedom. The quid pro quo for this easy-going lifestyle is relatively low pay and small pay increases. They won’t be advancing in status and pay from AVP, to VP, to SVP in a corporate business setting—and don’t care.

Labor Force II: Prime-Working-Age Male NILFs. According to Urban Dictionary, the phrase “Man up!” means “to fulfill your responsibilities as a man, despite your insecurities.” More and more adult American men seem to need someone to tell them: “Why don't you man up?” Unfortunately, some may be too depressed, disabled, or ill to do so.

“The progressive detachment of ever-larger numbers of adult men from the reality and routines of regular paid labor poses a self-evident threat to our nation’s future prosperity. It can only result in lower living standards, greater economic disparities, and slower economic growth than we might otherwise expect.” That quote comes from a 1/30 essay titled “Men Without Work,” written by Nicholas Eberstadt for the conservative American Enterprise Institute. In the essay, the economist and demographer summarizes and updates the findings from his September 2016 book with the same title.

Eberstadt’s research chronicles a depressing trend: Over the past several decades, the labor force participation rate for US PWAMs, who are 25-54 years old, has declined significantly (Fig. 1). During the late 1940s and 1950s, it was around 96%-98%. Since the Great Recession of 2008, it has been mostly around 88%-90%. The number of PWAMs who are not in the labor force (PWAM-NILFs) rose by 1.70 million from January 2008 to a record high of 7.40 million during April 2014 (Fig. 2). It was down to 6.85 million during June of this year. The percentage of PWAM-NILFs in the PWAM cohort’s population basically doubled from around 6% during the 1970s to 12% during 2014, and is only back down to 11% recently (Fig. 3).

The story isn’t as bad as it seems when we recognize that the population of the cohort under review has been relatively flat around 65 million people for the past 15 years, after growing rapidly from the 1970s through the 1990s (Fig. 4). Obviously, that had a lot to do with the Baby Boomers turning “prime” over that period. By 2001, the oldest ones all turned 55 years old, i.e., they weren’t prime. By next year, all the Baby Boomers will be 55 years or older.

Melissa and I have been watching for signs that the PWAM-NILFs might rejoin the labor force. (See our 3/21 and 6/22 Morning Briefings on the subject.) Fed Chairman Jerome Powell has been waiting for this to happen too. He repeatedly has expressed his hope that PWAM-NILFs will come back, encouraged by the availability of jobs now that the unemployment rate is so low.

If they do so, then there would be more slack in the labor market than suggested by the low jobless rate. Melissa and I discuss Powell’s perspective on this subject below. Before going there, let’s consider the following questions: Why have prime-age men been dropping out of the labor force? What are the primary characteristics of these men? What are they doing with all their free time? Here goes:

(1) Disabled, ill, & popping pills. Disability or illness is the most commonly reported personal situation among PWAM-NILFs. That’s according to Didem Tüzemen, an economist at the Federal Reserve Bank of Kansas City who published a 2/21 paper titled “Why Are Prime-Age Men Vanishing from the Labor Force?” She analyzed the survey-based Current Population Survey (CPS) labor-force flows from 1996 to 2016. During 2016, according to the Fed economist, nearly half—i.e., 48.3%—of PWAM-NILFs reported that they were disabled or ill, 14.6% reported taking care of family, 13.8% reported being in school, 13.2% reported “other situations” as the reason for nonparticipation, and 10.0% reported being retired.

Tüzemen cited the widely referenced research of Alan Krueger, a Princeton University and NBER economist. Krueger’s 2017 paper on NILFs, titled “Where Have All the Workers Gone? An Inquiry into the Decline of the U.S. Labor Force Participation Rate,” cites findings that nearly half of prime-working-age NILFs “take pain medication on a daily basis, and in nearly two-thirds of these cases they take prescription pain medication.” Krueger concluded: “Labor force participation has fallen more in areas where relatively more opioid pain medication is prescribed, causing the problem of depressed labor force participation and the opioid crisis to become intertwined.”

(2) Lacking incentive, lacking skills. The “system” may be supporting the unfortunate habits of lots of PWAM-NILFs. They may have less incentive to work because they are supported by government programs. That’s according to a 2017 paper titled “Declining Prime-Age Male Labor Force Participation, Why Demand- and Health-Based Explanations Are Inadequate” by Scott Winship of George Mason University. Using an after-tax income measure adjusted for inflation that includes non-health and non-cash benefits and pools income with cohabitants, Winship found that 76% of PWAM-NILFs have managed to avoid poverty. That may be because the income of the average SSDI recipient about matches the after-tax income of a full-time worker earning minimum wage. Plus, the SSDI recipient gets Medicare benefits.

Winship finds that the increase in PWAM-NILFs labeled “discouraged” job seekers—i.e., reporting that they want work but aren’t actively seeking it—accounts for only a quarter of the rise in overall woebegone group since the data became available in 1994. “In contrast, the increase in self-reported disability explains” nearly half of the rise. In other words, the increase in PWAM-NILFs mostly reflects a rise in those of them who aren’t interested in work because they say they are disabled.

Controversially, Winship discredits the 2016 analysis of the Obama administration’s Council of Economic Advisers (CEA), which concluded that reductions in the demand for low-skill labor is an “important component of the decline in prime-age male labor force participation.” Tüzemen didn’t take a position on the CEA’s research. Like the CEA, the FRB-KC economist finds that “job polarization” is an issue. More specifically, she states that the “declining demand for middle-skill workers in response to advancements in technology and globalization, has been a key contributor” to the increase in PWAM-NILFs.

(3) Doing time, catching cheap thrills. Who are these PWAMs dropping out of the labor force, and what are they doing with their time? Tüzemen wondered “whether the increased share of nonparticipating prime-age men in school could explain the especially dramatic hike in the nonparticipation rate for younger prime-age men.” That would neatly explain the 67.0% surge in the nonparticipation rate of younger PWAMs (aged 25-34) from 1996 to 2016. However, the FRB-KC study found that only one-third of the increase in nonparticipating younger PWAMs reflected being in school. Further, Eberstadt noted that most PWAM-NILFs do not have more than a high-school degree. Most of these men are not taking care of children, either. According to Eberstadt, a key characteristic is that most are unmarried with no children. About one in three of all PWAM-NILFs has a criminal record, according to Winship.

So if they are not at work, in school, or taking care of kids, then what are they doing? Nothing very productive, the researchers suggest. PWAM-NILFs devote about eight hours a day to “socializing, relaxing, and leisure,” according to Eberstadt, referencing the American Time Use Survey, a nationwide sample survey managed by the Census Bureau.

By comparison, men who are unemployed—and looking for work by definition—spend about two hours less a day on these activities. They also gamble, use drugs, and watch more television than working or unemployed men.

It's no wonder that these men report finding “relatively little meaning in their daily activities,” observed Krueger. Of course, legitimate health conditions prevent some men from working. But it’s hard to ignore Eberstadt’s distressing moral conclusion that appears to apply to far too many: “[T]hese men appear to have relinquished what we ordinarily think of as adult responsibilities: not only as breadwinners, but as parents, family members, community members, and citizens.”

Dr. Ed Yardeni is the President of Yardeni Research, Inc., a provider of independent global investment strategy research.

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By comparison, men who are unemployed—and looking for work by definition—spend about two hours less a day on these activities. They also gamble, use drugs, and watch more television than working or unemployed men.
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Tuesday, 31 July 2018 09:14 AM
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