December 12, 2014
The NYT had an interesting piece on the decline in employment rates among prime age male workers. While it discusses many of the causes of this decline, it missed the most obvious: policy decisions that have depressed demand in the economy. Many readers of the piece may wrongly believe that the current low employment rate is primarily the result of a long-term trend. This is not true.
From 1979 to 2000 the employment to population ratio (EPOP) fell by 2.1 percentage points. If it had continued this pace of decline, it would have fallen by roughly 1.4 percentage points since 2000. In fact, it has dropped by 5.1 percentage points. The most obvious explanation for this more rapid rate of decline is weak demand. The weakness of demand is in turn caused by a decision to keep down the size of the budget deficit and to sustain an over-valued dollar. These are both policy decisions made in Washington that have nothing to do with the character and skills of the workers who do not have jobs.
It’s also worth noting that wages for the jobs that these men may be able to get would be considerably higher if the government decided to run a high employment policy. As Jared Bernstein and I show in our book, wages for those at the bottom of the income distribution are strongly influenced by the unemployment rate.
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