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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

What Explains the Decline in Labor Force Participation?



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Matt Yglesias offers the following hypothesis, which strikes me as obviously true:

Male labor force participation rates were declining in the ‘50s and ‘60s, and in the ‘80s, and now in the aughts.

Maybe the value of leisure is increasing? The past 70 years have seen the popularization of television, color television, cable, VCRs, mini satellites, video games, CD players, computers, DVDs, HDTVs, MP3 players, and a host of other fun gizmos. At the same time, it’s worth noting that stagnating real working-class wages are calculated by using a meaningless overall average rate of price inflation. Some things—college tuition, apartments in Manhattan, health care—have gotten more expensive much faster than average. This means that people who buy a below-average amount of those things are better off than the statistics show. A healthy person living in an unfashionable city with no student loans to pay off can get by on a fairly modest income. The flipside of the declining marriage rate is that fewer men are supporting families. To a certain puritanical frame of mind that views toil as a virtue in and of itself, this may seem unfortunate. But in many respects it’s a natural outgrowth of progress. On the whole, the American population has grown less desperate over time and less interested in working—an entirely typical pattern, globally and historically.

The short-term jobs situation is a real crisis, but the longer-term decline of work is an opportunity. If men want to tempt women back into marriage, they’ll have to use more of their free time to pitch in with housework and child care, building a more egalitarian tomorrow. If employers want to tempt people back into working, they’ll have to offer higher pay or more pleasant jobs. Most likely we’ll get some of both, and more loafing on the couch too. George Jetson, after all, only worked nine hours a week. Why should we aspire to anything less?

We already see affluent college-educated men consuming more leisure, much of which is devoted to co-parenting. That is, Matt’s more egalitarian tomorrow is a reality in at least the affluent slice of the population. A deeper concern is that we see a divergence in who is choosing more leisure and what kind of leisure we are collectively choosing. Some Americans, typically non-college-educated Americans, have been choosing more leisure time, as Aguiar and Hurst have found:

Taken together, the results of Table 6 and Figures 6a and 6b document an increase in the dispersion of leisure favoring less‐educated adults, particularly in the last 20 years. This corresponds to a period in which wages and consumption expenditures increased faster for highly educated adults. Moreover, this divergence reveals a discrepancy between the time‐series and cross‐sectional evidence on income and leisure. We have documented a general increase in leisure over the last 40 years, potentially suggesting that higher income implies greater leisure. However, the recent divergence between educational classes suggests that, cross‐sectionally, lower income implies more leisure (although the early surveys suggest that leisure is invariant to income in the cross section). The larger increase in leisure for less‐educated adults is an empirical implication that any quantitative model should match.

One explanation for why highly educated adults haven’t been choosing to consume as much leisure as less-educated adults is that highly educated adults are more likely to find their market work more engaging and fulfilling, whether because of the intrinsic qualities of the work or because they have a lower threshold for what counts as engaging and fulfilling work.

Moreover, different kinds of people select different kinds of leisure. Among college-educated workers in knowledge-intensive services, leisure activities are a way to invest in cultural capital that can then be deployed professionally through the cultivation of networks of like-minded people. In Silicon Valley, for example, it is not uncommon for entrepreneurs and aspiring entrepreneurs to socialize with one another, and to engage in leisure activities that are thinly-veiled team-building efforts. This is part of what Tim O’Reilly means when he refers to “watching the Alpha Geeks.” Rob Horning has written critically of “entrepreneurial subjectivity“:

[I]n the neoliberal world, “work is personal” and there are no boundaries separating work and nonwork. This fits with the tendency for our consumption to increasingly serve a productive function in the economy as “immaterial” or “affective” labor, contributing to marketing innovations and enhancing brands’ equity and devising new uses for goods, new consumer wants, new ways to get pleasure from spending. As more of our self-presentation can be captured digitally and tracked and amalgamated, particularly through social media and mobile communications, our identities themselves become productive factories of economic value.

The boundaries separating work and nonwork are much clearer for those who do not work in the knowledge-intensive service industries, or for the non-college-educated more broadly. 

To put this in Matt’s terms, let’s say that the entire population has grown less desperate over time yet that only some people have grown less interested in working, i.e., let’s say that there is an achievement-oriented minority that for whatever reason — the discovery of novel, stimulating challenges; an attraction to tournaments and positional competition, etc. — has not only grown less interested in working but that has grown more interested in working, particularly performance-based compensation represents a higher share of its total compensation. Isn’t it obvious that this will tend to magnify income and wealth dispersion? And those who choose more leisure relative to their other options (e.g., work that is neither well-remunerated nor particularly stimulating) will over time see their relative economic position deteriorate as they find fewer attractive wage-earning opportunities, and thus have less disposable income to devote to asset-building. 

Under this model, the “culprits” behind income and wealth dispersion start to look a little tricky. One culprit is that some people, like the sleepless elite, have unusual proclivities that make them well-adapted to the working world while most people do not. These people are unevenly distributed across different societies, and some of those societies have chosen political economy regimes that reward these qualities more than others. Whether we choose to restrain or unleash this minority will depend on whether we see them as a destructive force, which fuels positional arms races and that amasses wealth and power in a manner that might threaten democracy, or as a constructive force, that drives material progress and helps finance a social safety net.

Another culprit could be that work for most workers, particularly less-skilled workers, isn’t sufficiently stimulating, though of course there will always be a heterogeneity of preferences. As Matt suggests in his column, one interesting development has been the rise of jobs that compensate workers through the “interestingness” of the work involved rather than through higher wages, a phenomenon than Reid Hoffman and Ben Casnocha touch on in The Start-up of You

In the spring of 2010, I wrote a short piece on a related theme, namely that unemployment in the early 2010s was a less harrowing experience than unemployment in the early 1980s. I made a very measured case, but I was sorry to see people react to it with great hostility. 



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