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When Both Men and Women Drop Out of the Labor Force, Why Do Economists Only Ask About Men?

That’s what New York Times readers were wondering when they saw Harvard Economics Professor Greg Mankiw’s column, “Why Aren’t Men Working?” The piece notes the falloff in labor force participation among prime age men (ages 25 to 54) for the last 70 years and throws out a few possible explanations.

We’ll get to the explanations in a moment, but the biggest problem with explaining the drop in labor force participation among men as a problem with men is that since 2000, there has been a drop in labor force participation among prime age women also.

In we take the May data, the employment to population ratio (EPOP) for prime age women stood at 72.4 percent.[1] That is down modestly from a pre-recession peak of 72.8 percent, but the drop against the 2000 peak of 74.5 percent is more than two full percentage points. That is less of a fall than the drop in EPOPs among prime men since 2000 of 3.2 percentage points, but it is a large enough decline that it deserves some explanation. In fact, the drop looks even worse when we look by education and in more narrow age categories.

In a paper last year that compared EPOPs in the first seven months of 2017 with 2000, Brian Dew found there were considerable sharper declines for less educated women in the age groups from 35 to 44 and 45 to 54, than for men with the same levels of education. The EPOP for women between the ages of 35 and 44 with a high school degree or less fell by 9.7 percentage points. The corresponding drop for men in this age group was just 3.4 percentage points.

The EPOP for women with a high school degree or less between the ages of 45 and 54 fell by 6.7 percentage points. For men the drop was 3.3 percentage points. Only with the youngest prime age bracket, ages 25 to 34, did less educated men see a larger falloff in EPOPs than women, 8.2 percentage points for men compared to 6.9 percentage points for women.

Looking at these data, it is a bit hard to understand economists’ obsession with explaining the drop in EPOPs for men. It is also worth noting that there are also drops in EPOPs for many groupings of more educated workers.

For example, there was a drop of 0.9 percentage points in the EPOP for women between the ages of 35 and 44 with college degrees.  The drop in EPOPS among women with college degrees between the ages of 45 to 54 was 1.6 percentage points.

Mankiw tosses out the usual suspects in explaining the drop in EPOPs among less-educated men. The problem is that the drop is for both men and women, including women with considerable education.

There is one simple explanation that could explain a decline in EPOPs among all of these groups: a lack of demand in the economy. The implication of this explanation is that if we get more demand we will get more people working. That has proven to be the case for the last four years, the period in which we have seen the unemployment rate fall below the level that many economists considered consistent with full employment. Some of us think that it would continue to be the case if the Fed allows the economy to continue to expand and the unemployment rate to fall further.

There is one other point in Mankiw’s piece that really needs a response. Mankiw gives the standard wisdom economist’s story about:

“…the tendency for advances in technology to enhance the productivity and wages of workers who have certain skills while reducing the demand for those who don’t. Unskilled workers are left with the choice of accepting lower wages or leaving the labor force. This hypothesis is consistent with the fact that labor force participation has fallen more for workers with lower levels of educational attainment.”

The problem is that advances in technology don’t reduce the relative demand and pay of less-educated workers. Government policies on advances in technology, specifically patent and copyright monopolies, reduce the relative demand and pay of less-educated workers.

If this is hard to grasp, imagine we snapped our fingers and patents and copyrights completely disappeared. Okay, everyone is now yelling that people will have no incentive to innovate and do creative work.

That’s partially true, but how much are advanced skills valued in this world without patent and copyright monopolies? Presumably not very much — at least they must not be highly valued if we think these people would have no incentives.

Patent and copyright monopolies are government policies to give incentives. It is these policies that reduce the relative demand for less-educated workers, not the technology. And these policies can certainly be altered. If we are concerned about inequality, we could have made patent and copyright monopolies shorter and weaker over the last four decades, instead of stronger and longer. We also could have used different mechanisms for financing innovation and creative work. (See chapter 5 in my [free] book, Rigged.)

Anyhow, let’s stop looking for labor market explanations that focus on the problem of men not working and instead look for explanations for the problem we actually see in the data: men and women not working.

Notes.

[1] It is helpful to focus on employment rates rather than labor force participation because whether or not someone who is not working gets counted as being unemployed, and therefore in the labor force, depends on the generosity of unemployment benefits. Many states have adopted stricter rules for unemployment compensation in the last two decades, which has resulted in a smaller share of people who are not employed being counted as in the labor market.

This article originally appeared on Beat the Press.

More articles by:

Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC. 

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