How Many People Belong in the Labor Market?
Brad DeLong offers the following chart to illustrate the severity of our economic woes:
Now one thing you will notice here is that today’s employment-population ratio is actually higher than it was at the peaks of pre-1980s business cycles. The difference-maker is feminism, which substantially increased women’s labor force participation. But while I think it’s fair to say that the United States of 40 years ago was suffering from a major social justice problem related to women’s unequal access to labor market opportunities, it’s not at all clear that we were actually facing an objective labor shortage.
Maybe instead of settling into a long-run equilibrium where overall labor force participation is way higher than it was in the late 1960s we ought to be headed for an equilibrium in which women’s labor force participation is way higher but overall participation is only slightly higher. More stay-at-home dads, in other words.
Now to be clear, what we’re seeing today is the result of an economic collapse. And it’s a collapse that’s disproportionately led to men losing their jobs, because the hardest-hit sectors have been male-dominated ones. But that’s not the same as a voluntary shift toward more stay-at-home fathers. Still, looking at the chart it’s hard for me not to wonder about the future. Will recovery, when it comes, really ever entail returning to the employment-population ratios we saw in the late 1990s?
41 Responses to “How Many People Belong in the Labor Market?”
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July 3rd, 2009 at 11:37 am
Proper employment ratios will be determined when we have sorted out:
-Income/wealth distribution
-Financial sector share of GDP
-Jobs policy
-Immigration policy
-Minimum safety net/real wage policy
July 3rd, 2009 at 11:41 am
Moving to more stay-at-home dads (or, indeed, returning to more stay-at-home mums) would imply moving to more jobs that can support a family; and for the last few decades, things have been moving the other way.
July 3rd, 2009 at 11:44 am
I think you are over-crediting feminism for increased labor-force participation rates. A more likely cause has been the stagnation in incomes since the 1970s. This stagnation has led households to decide that married women with children can no longer afford to remain at home in order to maintain the standards of consumption that were once possible with a single wage earner.
July 3rd, 2009 at 11:47 am
Thanks, Cap & Gown, I wondered if Matt was even aware of changes in relative rates of compensation for single wage earners.
July 3rd, 2009 at 11:49 am
You certainly won’t see a jobs recovery happening while small business owners feel such uncertainty over the rules that will hit them. It’s not even so much the rules themselves (although I have plenty of disagreements with those) – it’s the fact that things are uncertain. Obama has ceded all direction to the Congress, and that means that all bills: Climate Change, Stimulus, Bank Reform, health (etc, etc) are riddled with payoffs to favored special interests. Obama seems utterly uninterested in trying to scale that back in any way shape or form. Thus, anyone with money is going to sit on the sidelines until the dust settles.
July 3rd, 2009 at 11:53 am
I don’t think Matt has written on the topic, but it’s a well-known fact among economists that male labor force participation has utterly plummeted since the 1970s. It’s not the case that increasing female participation explains all of the posted graph.
July 3rd, 2009 at 12:00 pm
I suspect the feminism per se only increased labor force participation among women of middle-middle-class SES and above. Women of lower-middle-class SES, and certain down into working-class and poor, have ALWAYS worked at remunerative employment. Although not always on the books, paid (think of free labor provided to father’s/husband’s small business), or counted in the official employment statistics.
Cranky
July 3rd, 2009 at 12:06 pm
Let’s just go to shorter work weeks. Decrease is to 32 hours from 40. We already make and buy too much worthless junk anyways.
July 3rd, 2009 at 12:19 pm
What Cap and Gown, ajay, and Ron said. In my opinion, widespread feminism is probably an effect of women entering the workforce rather than a cause.
July 3rd, 2009 at 12:22 pm
France tried shorter work weeks – there are two problems:
1) Less work means less pay for hourly workers (or highter prices if you insist on paying the same)
2) Confusion in the white collar workforce (which is the larger piece in the US anyway)
What does a “40 hour week” even mean for most people working in, say, software?
July 3rd, 2009 at 12:23 pm
This post is ignoring a lot of important issues but, hey, it’s a blog! I think once you can get affordable healthcare independently you might see new balances emerge in the workforce with more flexible working hours. It doesn’t make sense for both members of a marriage to work 40 hours a week. Especially with kids. And the only expenses that can really stretch their pocketbooks are medical and housing. The latter is mostly an ordered good and the former needs to be handled by better social policy. Everything else is either cheap or optional.
On the other hand, there are so many other factors that can screw with this balance because the workplace doesn’t make sense that you may never really get to a true ‘balance’.
July 3rd, 2009 at 12:29 pm
But while I think it’s fair to say that the United States of 40 years ago was suffering from a major social justice problem related to women’s unequal access to labor market opportunities, it’s not at all clear that we were actually facing an objective labor shortage.
Well, although a social justice problem with respect to equal access to jobs existed in the US of forty years ago (and still does today to a certain extent), I doubt this had much bearing on the lower female labor participation rate of 1969. Women could find work, in other words, just not very solid, remunerative work. Surely millions of women in 2009 would love to stay home with their kids (or stay home retired), but can’t afford to.
I agree with your point about more stay-at-home dads. There’s obviously no law of physics stating it can’t be the male who stays home. My point is simply that non-two earner couples are something our increasingly dysfunctional economy can’t provide for, absent a substantial expansion of social insurance. I doubt even in that instance this would be feasible, given the experience of the Europeans.
July 3rd, 2009 at 12:51 pm
Because the Y-axis in this graph does not begin at anything close to zero, the extent of the changes (both up and down) is significantly exaggerated.
July 3rd, 2009 at 12:53 pm
Many people already jumped on the issue that stagnant real wages and other issues have necessitated more dual-income households. I’ll just note that I don’t think a lot of dual-income households is a problem per se, provided that includes households where at least one partner is part-time. The bottomline for most households is that even if they have kids, once the kids are in school (and I think pre-school is a good idea), most “stay-at-home” parents are likely to be more fulfilled if they at least do some productive work.
July 3rd, 2009 at 1:06 pm
> Many people already jumped on the issue that stagnant
> real wages and other issues have necessitated more
> dual-income households.
The 1910s were a quite wealthy time in the US, both on an absolute and a relative scale, but you might consider the situation of working-class women toiling 12 hours/day in canneries, sweatshops, home-based businesses, in those years etc before using phrases such as “more dual-income households”.
Or to quote a 1980s Doonesbury: “You’re as busy as you WANT to be, Ms. Fonda. I’m as busy as I HAVE to be.” [character speaking being the fictional Jane Fonda's fictional (female) housekeeper].
Cranky
July 3rd, 2009 at 1:10 pm
I agree that feminism had a major (and good) part to play in this. And so did consumerism. If the “pursuit of happiness” is tied to a flat-screen cable monitor in every room, computers and mobile phones for every member of the family, plus the granite countertops, and front doors that a marching band could pass through, then, of course, both mother and father are going to have to work their butts off.
July 3rd, 2009 at 1:10 pm
You certainly won’t see a jobs recovery happening while small business owners feel such uncertainty over the rules that will hit them.
Aah, small business owners, that mythical creature which seems to have nothing to do with actual people who own small businesses!!
So what explains the slow jobs recovery after the shallow 2001 recession? What, the Bush administration was also “utterly uninterested” in looking out for small businesses?
July 3rd, 2009 at 1:14 pm
While it doesn’t account for all of the recent decline, shouldn’t an aging population lead to a progressively lower percentage of the population being in the workforce? I.e., a larger and larger share of the population is composed of retirees?
July 3rd, 2009 at 1:16 pm
most “stay-at-home” parents are likely to be more fulfilled if they at least do some productive work.
Socially productive, not bubble-y productive.
July 3rd, 2009 at 1:25 pm
And so did consumerism. If the “pursuit of happiness” is tied to a flat-screen cable monitor in every room, computers and mobile phones for every member of the family, plus the granite countertops, and front doors that a marching band could pass through, then, of course, both mother and father are going to have to work their butts off.
That’s an easy drum to bang, but I don’t think it speaks to the struggles undergone by most American families.
July 3rd, 2009 at 1:30 pm
Cranky,
You are obviously correct that non-working non-disabled adults are historically a luxury only the middle classes and above have enjoyed. But on the other hand, in the immediate post-WWII era, we actually got to the point that lots of working class households had that option as well (or, if you like, the line between working class and middle class got awfully blurry). Then that trend reversed again, and now we are increasingly back to the situation where only professional/managerial class households and above have that option (or, if you like, the middle class has retreated back out of the working class).
July 3rd, 2009 at 1:32 pm
Socially productive, not bubble-y productive.
I’m not quite sure what you mean by “bubble-y productive”, but if you mean working at a job you don’t particularly enjoy or otherwise find intrinsically worthwhile just for the sake of additional conspicuous consumption, I agree.
July 3rd, 2009 at 1:42 pm
Another change from earlier periods is that we now have 30% of households that consist of a single person. Unless they are independently wealthy, the vast majority (male or female) must be in the workforce if they expect to eat.
July 3rd, 2009 at 1:49 pm
> I’m not quite sure what you mean by
> “bubble-y productive”,
Pretty much everything done in the FIRE sector (finance, investment, real estate) from 2002-2008 was “bubble-y”, for example. Lots of people took home lots of wages, and many very powerful people skimmed off billons of dollars of economic resources and squirreled them away safely for the future, but nothing of real future value to the economy was accomplished.
This contrasts somewhat with the dotcom boom, which as some bubble aspects but also laid some real foundations for future economic activity.
Cranky
July 3rd, 2009 at 2:14 pm
I think we are going to have to start a drinking game where you take a drink every time Matt writes “to be clear …”
Not one based on spelling/usage errors, for god’s sake.
July 3rd, 2009 at 3:27 pm
Matt acts like a return to single-income families is even possible for most Americans.
The average 2-income family makes 42k a year. For one family member to drop out of the workforce, wages would have to significantly increase BEFORE it becomes a viable option. Either that, or you’ll have to lower the standard of living for the vast majority of Americans plummet like a stone.
As the average opinion on this blog appears to be that the size of the labor market in relation to available jobs has no effect on wages (Given the average response to an immigration plan ‘quest’ worker program, you clearly believe that wages are entirely independent of the size of the labor pool), I’m not sure how MY thinks this is possible without causing a social meltdown.
July 3rd, 2009 at 3:44 pm
This is really representative of how much a new equilibrium needs to be found in terms of work balance in the economy.
If there are 150 million willing workers in the economy and there’s demand for about 4.5 billion labor hours per week, it doesn’t actually make sense from a broad perspective to employ 113 million people at 40 hours a week and leave the other 37 million people unemployed.
Ideally, the system should trend towards a work-week length that maximizes employment (which enables workers to more effectively leverage their skills in negotiations), and employers should also see a benefit in spreading their work more evenly between workers.
Instead, we have a mandatory 40-hour workweek that is one (though by no means the only) tool used to help keep laborer wages artificially low. :/
So what explains the slow jobs recovery after the shallow 2001 recession? What, the Bush administration was also “utterly uninterested” in looking out for small businesses?
I don’t see why that claim is inherently unreasonable. Neither party is interested in supporting small businesses, because sole-proprietorships and other businesses employing small numbers of people are not able to contribute financially to campaigns at the level that large conglomerates do. I think you’d be hard-pressed to find a major policy issue in the last, I dunno, fifteen years where the Federal government has taken a stance on a major policy issue that was beneficial to entrepreneurs and small businesses in preference over large corporations.
July 3rd, 2009 at 4:25 pm
> I think we are going to have to start a
> drinking game where you take a drink every
> time Matt writes “to be clear …”
At the end of the day I would agree with that.
Cranky
July 4th, 2009 at 12:55 am
I wrote a series of posts arguing why high-IQ Asian/European immigration is a must if we intend to compete in the global technological marketplace. It’s related to the labor force and a shortage within our STEM sector. Note: My site is very similar to iSteve and HalfSigma.
http://onestdv.blogspot.com/2009/07/do-we-need-asian-immigration-part-1-of.html
July 4th, 2009 at 2:18 am
Re: wrote a series of posts arguing why high-IQ Asian/European immigration is a must if we intend to compete in the global technological marketplace.
Meanwhile back on Planet Reality, intelligent, well-educated native-born Americans are having trouble finding well-paying work. Let’s not import foreign resources while we have idle resources of our own. If Microsoft can’t hire gim-crack programmers for 30K a year maybe they ought try doubling that, and tossing in some good benefits.
July 4th, 2009 at 4:14 am
What I love about this chart is what you see when you add marks for the inaugurations of Carter, Reagan, Clinton, and Bush II.
If you want more employment, vote Democratic!
July 4th, 2009 at 7:16 am
Well I imagine you didn’t read my post. I advocate very limited immigration into a sector of the marketplace where we have a current shortage (very high-IQ STEM workers), based on average SAT scores and a growing STEM market. I explicitly discourage immigration of unskilled and less intelligent workers. My immigration plan will not displace any American workers because not enough native talent can be supplied for the current demand of high-IQ engineers and scientists.
July 4th, 2009 at 8:28 am
re: My immigration plan will not displace any American workers because not enough native talent can be supplied for the current demand of high-IQ engineers and scientists.
I find it simply impossible to credit that a nation of 300 million people does not have enough native talent.
As I know from personal experience (physics degree in hand) the reason why American students avoid the sciences is that there are too few jobs available for them. I ended up in IT for some years, now I am with one of those evil big banks. A lot of hard science abd math degrees went that route.
July 4th, 2009 at 8:34 am
@ JonF:
OK so ignore the data based solely on your own assumptions. Also, it’s inevitable that many STEM majors will not work in their field. I knew many STEM majors in college who had no desire whatsoever to pursue a career in their chosen major. It had nothing to do with jobs, it was a result of more lucrative job trajectories, disinterest in work, and simply not being good enough (college degree is incredibly easy to get, that was at my blog as well).
I know it sounds crazy, but SAT data shows we don’t have a ton of high-IQ, willing STEM workers. Please look at the data before you go on pontificating about how wrong I am.
Anyone else who is a fan of Sailer or HalfSigma, please visit as well.
July 4th, 2009 at 6:50 pm
The 90’s brought the Internet bubble. The aughts brought the real estate bubble. Now we’re having a government bubble that is no more sustainable than the first two. What happens after G-bub pops and what should we be doing to get there faster? Washington is in the driver’s seat, but does not appear to be steering in the direction of the answer.
@MY – “it’s not at all clear that we were actually facing an objective labor shortage.”
That would have shown up in rapidly rising wages. Nope.
“Maybe instead of settling into a long-run equilibrium where overall labor force participation is way higher than it was in the late 1960s we ought to be headed for an equilibrium in which women’s labor force participation is way higher but overall participation is only slightly higher. More stay-at-home dads, in other words.”
We’re going to see more stay-at-home men, but not because they’re taking care of the kids. Instead, males are losing the skills race vs females, in high school, college, and grad school. Combine/reinforce that with the ongoing collapse of the family and you get lots of working single mothers and lots of unemployed/marginally employed single males who live on the edge. The economic crisis is revealing the power of those forces, by slashing so many traditionally male jobs.
@Cap and Gown – “A more likely cause has been the stagnation in incomes since the 1970s. This stagnation has led households to decide that married women with children can no longer afford to remain at home in order to maintain the standards of consumption that were once possible with a single wage earner.”
But households have much higher consumption levels today. I see feminism as enabling the mass emergence of two-income middle-class families rather than economic “necessity” as the driving force. When women found they could earn a significant income (lawyer, not nurse) working started making a lot more sense, e.g., they could earn more than they’d have to pay for day care, etc.
@James Robertson – “You certainly won’t see a jobs recovery happening while small business owners feel such uncertainty over the rules that will hit them.”
It’s not only small business that’s reeling from uncertainty. Heads are down in nearly every industry that Washington hasn’t blessed.
@DJ – “So what explains the slow jobs recovery after the shallow 2001 recession? What, the Bush administration was also “utterly uninterested” in looking out for small businesses?”
Bubbles produce hangovers! 9/11 also played a role. Add limits on skilled immigration, other countries’ increasing competitiveness, and it’s quite an uphill climb. Not that Bush’s policies were that great…
@Just Dropping By – “shouldn’t an aging population lead to a progressively lower percentage of the population being in the workforce?”
That and prosperity among the (on average, highly skilled) winners. Many of them reach a point at which they’d rather play than work, and they have enough so they can. You could also blame public pension schemes, which have gotten stunningly lucrative and start early.
@charlequin – “If there are 150 million willing workers in the economy and there’s demand for about 4.5 billion labor hours per week, it doesn’t actually make sense from a broad perspective to employ 113 million people at 40 hours a week and leave the other 37 million people unemployed.”
That assumes way too much. That:
- the unemployed have the skills to fill those jobs
- that today’s workers would accept the income drop from going part-time
- but most fundamentally, that there is a fixed amount of work to do. Instead, the amount of work depends on skill levels, overall growth, whether hiring firms hire in the US or someplace else, and if here, whether they make money doing so.
“Instead, we have a mandatory 40-hour workweek that is one (though by no means the only) tool used to help keep laborer wages artificially low.”
Lots of people work more or less than 40 hours! Part-time work is at an all-time high. And in lots of occupations, workers would be stunned to think of working that little.
@JonF – “intelligent, well-educated native-born Americans are having trouble finding well-paying work.”
Sorry, but good enough isn’t good enough. We need the best from the global talent pool to remain competitive. 300M is large, but 6.5B is 22x bigger. And we have an awesome system for finding the very best – our universities and incredibly seductive environment for entrepreneurs. I love Friedman’s idea of stapling a green card to the back of every new BS, MS and PhD degree.
July 4th, 2009 at 9:41 pm
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July 5th, 2009 at 8:12 am
Re: Also, it’s inevitable that many STEM majors will not work in their field.
Hm, increase pay and benefits?
Re: know it sounds crazy, but SAT data shows we don’t have a ton of high-IQ, willing STEM workers.
I’ll bet you if you gathered together every person with a degree in math, engineering or the hard sciences and weighed them there would be much more than a ton of human flesh in that group. And you are ignoring the fact that I am one of these people– and I am telling you that jobs just aren’t there (and not just now during the recession). I believed the hype the back in the 80s that we wouldn’t have enough science grads soon an got a degree in physics. and then discovered that job prospects were downright bleak. So I made the switch to IT. Your stats don’t impress me one bit– they do not reflect the realworld job market. Firms that agitate for importing foreign talent in these fields are just looking for coolie labor.
July 5th, 2009 at 9:46 am
I guess I’m the only gray beard here.
Women were active in the labor market during WWII. Anyone here remember seeing a “Rosie the Riveter” poster? When the war ended and the troops came home there were now too many people in the workforce. So women were fired left and right to make room for the boys back from the front.
Rosie became an house Frau, raised the kids and slowly went insane from not being able to meaningfully contribute to society as well as losing her freedoms to a new societal system based on the military hierarchy that pushed women down to the level of lowly privates.
It weren’t Ozzie and Harriett, Father Knows Best or Leave it to Beaver. (Check old black and white TV shows). Women getting a college degree and making their own money was a radical concept. It was them Feminist’s that wanted to be freed from the grips of a militaristic social system.
Yes women from the working class have always worked, but with the new burgeoning middle class the mommy track was all the that was available for the majority of women.
Women are now the majority of students in college. It’s still all about freedom, not having to rely on someone else to live your life.
Sometimes you need to read history to understand econ data.
July 7th, 2009 at 9:10 am
[...] week, Matt Yglesias suggested we look at the numbers differently: The employment-population ratio began to rise in [...]
July 7th, 2009 at 9:10 am
[...] week, Matt Yglesias suggested we look at the numbers differently: The employment-population ratio began to rise in [...]
July 7th, 2009 at 12:38 pm
Thanks for the inspiration, Matt. We took a slightly more global look at the gender and the recession today at NewDeal2.0. How will it all play out? I’m sure not everyone will agree….