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Tuesday, September 8, 2015

Generational War: Do Older Worker Squeeze Today's Young Out of Jobs? Weekly WREL Radio Show

Click on Figures to enlarge!
Figure 1

Mike Smitka

I generally focus on the medium-run picture of the US labor market, the recovery process from the Great Recession. (Here is an example from this blog, replete with graphs.) As noted last week, my analysis shows we're on track to reach "normalcy" in 2018, assuming various headwinds don't slow us down. That's also the bottom line of the latest July 2015 IMF Article IV review of the US economy: we still have lots of excess capacity, in this case people who would like a full-time job but either have stopped looking on a regular basis (and hence are not counted as "unemployed") or are on involuntary short hours.

To track that, I look at participation. Those data do show a drop in prime-age labor force participation consequent to the Great Recession, a topic I'll return to that later this fall, since it's an analysis I'll use at some point in my Fall 2015 classes. Two longer-term changes jump out of the data, my topic in this post. One is the rise in the share of older Americans at work over the past 20 years (the Bureau of Labor Statistics didn't begin to track older age brackets until 1994, so this may stretch back much further). The other is the very sizable drop in teen employment. One step down took place in the period after the collapse of the dot.com bubble; the other, larger decline was during the first two-some years of the Great Recession. In other words, (er, that rings odd!) I'm drawn to Figure 1 on the right. To make the contrast clear, Figure 2 depicts labor force participation by prime-age workers, using the same scale. [Note these two graphs track changes relative to 2007: an index, not an absolute change.]

Figure 2

What is going on here? Are older Americans no longer retiring? Indeed, given that this period would include the large Baby Boom cohorts, are they not only not retiring but also squeezing teens out of the labor force? There's a lot of research on older Americans. We are not only living longer but are healthier into old age. Fewer are engaged in manual labor, and so work is less tied to health. And then there are those who have been left hanging without pensions, or who duly saved but realize they might live much longer than any of their relatives ever had, and did not factor in the rise in healthcare costs. Too, many people actually enjoy their jobs, being out of the house, socializing with co-workers, customers, vendors. To them the end of mandatory retirement at age 65 was a boon. So it's not all one cause, and it's not all because older Americans have to work to keep bread on the table and (more important) pills in the medicine cabinet.

So I poked around the data a bit more. Is this a gender story? Figure 3 presents the breakdown for teens. First, these data are not corrected for seasonality. As you can see, there's a sharp sawtooth of summer jobs versus school studies, though that is less pronounced today than in the 1950s and 1960s. And yes, fewer young men are working. At the same time, and in contrast to the 1950s and 1960s, the data no longer show a gender distinction. In the generally minimum wage jobs in which this group labors, all received equally bad treatment. And both work less come the 21st century, with a sharper drop-off in 2007-2010; there seems to be a recession effect. For young 20-somethings, in Figure 4, there is less seasonality. This again matches intuition: while college students may have summer jobs, most Americans do not go to a 4-year college and/or delay their education, and even those in college graduate by age 24. And while fewer young men are working, again that is offset in part by more women working. Similarly, both curves decline during the Great Recession.

The final Figure 5 presents the "M" curve for select years. In 1976 proportionally far fewer women worked than today, and there was a tendency for women to drop out of the labor force in their child-rearing years (as my mother did) and then re-enter the labor force (again, as my mother did). Come 2006 and participation was far higher, while the "M" is almost gone. So in general this is not a story of women staying home so the men could work. If anything it's the opposite: more men stay home, and the women work.

Figure 3 Figure 4 Figure 5

As indicated by the "M"-curve in Figure 5, age-specific graphs indicate a consistent narrowing of gender distinctions, but this is much more pronounced at younger than at older ages. Maybe the Baby Boomers were different – but to answer that, you'll need to come back in another 5 or 10 years, when the generation that follows them begins to hit the historic retirement age. To get a better sense of this, see Figures 6, 7 and 8.

Figure 6 Figure 7 Figure 8

So maybe the old are squeezing out the young. Are teens less reliable? Less socialized into hard work? Have done fewer jobs and are harder to train? Maybe. At the same time, I found data in the BLS "Tableau" on work versus schooling. I graph those data in Figure 9 and Figure 10 below. What is striking is that the "work plus school" share is fairly constant. Now this provides no hint on the decisions that lie behind this. Are the young pursuing schooling (which includes technical training) because they can't find a job? Or are they wanting more education/training, and thus have chosen not to work? I've no time to delve into the research of labor economists on the issue. The one thing that is clear is that on average the young aren't sitting around playing games on their cell phones all day. Or if they are they're doing it in class and on the job and (it seems) while driving. Oh, and I'm a mean old professor: I require students to stow phones, pads and laptops in their backpacks during class.

Figure 9 Figure 10