…in 1954, about 96 percent of American men between the ages of 25 and 54 worked. Today that number is around 80 percent. One-fifth of all men in their prime working ages are not getting up and going to work. According to figures from the Organization for Economic Cooperation and Development, the United States has a smaller share of prime age men in the work force than any other G-7 nation. The number of Americans on the permanent disability rolls, meanwhile, has steadily increased. Ten years ago, 5 million Americans collected a federal disability benefit. Now 8.2 million do. That costs taxpayers $115 billion a year, or about $1,500 per household.
…There are probably more idle men now than at any time since the Great Depression, and this time the problem is mostly structural, not cyclical. These men will find it hard to attract spouses. Many will pick up habits that have a corrosive cultural influence on those around them.
The rise in disability comes across a time horizon when jobs are becoming much safer and health care is improving.
I am struck by the difference between how some economists talk about “the job market,” and how they talk about the job market in academia, which of course is the job market they know the most about.
When it comes to the job market in academia, most economists have few hesitations about blaming many of the jobless for their fate and applying extreme meritocratic views. “He spent seven years finishing.” “Her specification was not robust.” “He self-destructed in the interview.” Or, believe it or not, “We don’t even look at people from that school.”
(And as Robin Hanson noted, there is little talk of redistributing grades, Ph.d.s, enforcing mandatory co-authorship for job market papers, or redistributing other measures of academic accomplishment.)
Nonetheless there is clearly a significant cyclical component to academic unemployment, based largely on state government budgets for higher education; as of a few years ago, seventy-eight percent of students were in the state sector. If your department doesn’t have a slot, you probably can’t hire anybody, although a willingness to work for (much) less can lead to an adjunct job, even if many people won’t take one.
That cyclical component accounts for a lot of the short-run variation in hiring, but if you’re estimating the response to a demand shock, longer-term supply trends matter too and often they matter a great deal. If Ph.d. programs were stricter about enforcing standards of quality and relevance, rather than stringing along students to maintain the flow of revenue to the graduate program, the short run negative demand shocks would lead to a much less severe queuing problem. That’s simple microeconomics, and it should be macroeconomics too.
Furthermore short run negative demand shocks can reveal an unsustainable long-run trend in a new and sudden way, just as they do in financial crises.
When it comes to the jobless it is incorrect — and often hypocritical — to dismiss the common sense talk of traditional meritocratic factors, including structural problems on the supply side.
Addendum: Matt responds to Brooks, but his numbers don’t support his case. As I’ve argued before, it’s a lot “harder” to get a shift from ten to twenty percent unemployment than it is to get a shift from one to two percent. The cross-sectional distribution in unemployment, and its recent changes, are fully consistent with and indeed support the notion of major structural problems in the most vulnerable sectors, threshold-triggered by negative demand shocks. Again, it’s two blades of the scissors, not one.