The Real Cause of America’s Declining Labor Participation Rate? Boys and Their Joysticks

A wily and widespread addiction has caused a massive epidemic among young men — one so bad that they are no longer working. This addiction has a name: video games. That’s right, video games have sapped America’s male youth of its ability to be productive, to function eight hours a day at a job. Their brains are fried.
That’s what you would conclude from media reports on a study titled “Leisure Luxuries and the Labor Supply of Young Men,” which states that between 2000 and 2016, young men have put a premium on leisure accounting for 23 to 46 percent of the decline in their market work.
The reason, according to the study’s authors: Young men would rather play video games.
The four researchers conducting the study found that young men worked 12 percent less time in 2012-2015 than in 2004-2007. At the same time, they dedicated 2.3 hours more to leisure activities. Eighty-two percent of that extra leisure time went to recreational computing and video gaming.
By comparison, men 31-55 only decreased their hours worked by 8 percent over the same period, but without the commensurate uptick in video game playing.
This is where that chicken and egg question gets cracked, and columnist James Pethokoukis concludes that “America faces a massive array of daunting economic challenges but Overwatch, Final Fantasy, and Call of Duty are not among them.”
First of all, it’s a red flag that the big gaps in hours and employment between younger and older men emerged during the Great Recession and Not So Great Recovery. There are lots of potential non-video-game explanations for this. For instance, employers might have started demanding more education or experience before hiring during a time of economic tumult. …
The big jobs event in 2007 wasn’t the release of Halo 3. It was the start of a severe economic downturn.
If the recession and recovery played a big role in young men working less, then work rates should improve the further we move into the economic expansion. And that’s exactly what seems to be happening.
The employment-to-population ratio — the share of a particular population with a job — for 20- to 24-year-olds fell to 61.3 percent in 2010 from 72.7 percent in 2006, the last full non-recession year. But that number has since rebounded to 66.2 percent. Is video game quality suddenly getting worse?”
Obviously, the answer to that question is no. Even the study’s authors note that since the economic recovery kicked in, total leisure time enjoyed by non-employed young men fell five hours per week between 2012-2015.
So if young men are not working and not playing (and not in school and not caring for children, say the authors), what are young men doing? Maybe looking for work? Or maybe they’re doing chores for their parents since the percentage of young men living with a close relative between 2000 and 2015 increased by 12 points.
That’s a nice thought, though it is not the answer, according to the study’s authors.  Not under consideration in the analysis: time spent on Facebook or web browsing. Also not included in the analysis, how many people are multi-tasking: playing on a computer game while riding the bus, for instance.
Even if men aren’t working, they don’t seem too upset about it. Surveys find that 21-30-year-old men were also 7 percentage points happier than men of their age in the early 2000s. Why? Well if you’re not working and you live in your parents’ basement, you probably have few cares. Voìla, instant satisfaction.
Pethokoukis notes that “gamers can still be workers,” and workers are still in demand even as the labor force participation rate for young men is decreasing. And that’s all the more reason to ask what is motivating younger workers to sit out the jobs. The answer is not conclusively video games.

Upward Mobility: New Routes in the Race For America’s Fastest Growing Cities

Wake up, America. We have a mobility problem. And we’re not talking about former First Lady Michelle Obama’s “Let’s Move!” campaign or the number of potholes on the highways to America’s fastest growing cities.

Yes, infrastructure maintenance and improving the physical health of children are important. But for the kids who sit in front of electronics for the better part of a day, as long as they live in the American northeast, much of the Midwest and a good portion of the West, they are poised for a better life than their parents.

For children who live in Appalachia and the “Rust Belt,” on the other hand, the cards are stacked against them — even if they never lay eyes on a digital screen, always eat healthy school lunches, are physically active. That’s because their future employment opportunities are dwindling, as is their ability or likelihood to pick up and move down the road to another city with a more promising employment future.

For these kids, “Let’s move” isn’t that simple. Why? Because America’s post-recession recovery is more one-sided than we would like.

A recent Economic Innovation Group (EIG) report shows that while the United States has been recovering economically as a whole, the individual areas where new businesses have popped up – and employed people – are very limited.

According to the report, 20 counties alone generated half of the country’s new business establishments.

Most children in the United States are growing up today in counties with a poor record of fostering upward mobility. As the geography of U.S. economic growth narrows, it may become even harder to prevent further retreat of economic mobility.”

How do we change this? How do we spread out new business ventures and incentivize entrepreneurs to start and grow successful companies in areas that are currently economically depressed? How do we tighten the gap that only seems to be growing as economically vibrant cities get stronger and blighted cities become more depressed?

A recent piece by AEI’s James Pethokoukis on “left behind” America cites some creative ideas, including relocating large federal departments that don’t need to be inside Washington, D.C. (which usually enjoys low unemployment) into cities that do need help building economic infrastructure.

Pethokoukis also explores “Universal Basic Service,” an idea that would focus on helping to build communities in areas where demand is high, but supply is low. He cites economist Diane Coyle, who says,

If teachers or nurses do not want to move to Detroit and West Virginia … then there should be a pay premium large enough to overcome their reluctance. And the quality of service in local transport networks should be as good in declining as in wealthy areas.”

A third proposal uses tax breaks as incentives to encourage private investment – a route most strongly favored by the EIG itself. Yeah, that sounds boring, but the implementation is a whole rethinking of how America is structured today, and looks at removing regulatory hurdles to create specialized regions like Silicon Valley for technology and Raleigh-Durham for biotech research. Quoting venture capitalist Marc Andreessen,

Imagine a Bitcoin Valley, for instance, where some country fully legalizes cryptocurrencies for all financial functions. Or a Drone Valley, where a particular region removes all legal barriers to flying unmanned aerial vehicles locally. A Driverless Car Valley in a city that allows experimentation with different autonomous car designs, redesigned roadways and safety laws. A Stem Cell Valley. And so on.”

These three very big ideas would likely take quite a bit of political maneuvering for the legislation to begin the restructuring, let alone passage of laws to begin implementation, but there are other ways, smaller ways, to help people in distressed areas seek employment and help propel themselves toward upward mobility.

Pethokoukis colleague Michael Strain suggested multiple proposals to address relocation, disability, minimum wage, immigration, entrepreneurial endeavors, and more.

Ultimately, if we want America – all of America – to enjoy the benefits of our economic recovery, we need to make changes that make it possible for all citizens to earn their success with hard work.

“Let’s move” can have a whole new, broader meaning when we consider how we can offer a hand up to those who want to climb and make a better life for themselves and their families.

Are Happiness and Economic Growth Linked?

What makes you happy? Family, friends, a strong community? How about “economic growth”? It’s not typically a buzzword to trigger your feelings, but a recent report suggests a nation’s economic growth is a variable in one’s personal happiness.

Of course, happiness isn’t entirely dependent on economic growth, a national measurement for determining overall well-being, but it sure seems like it could contribute to one’s personal outlook.

Yet, the authors of a global happiness report seem to suggest that happiness and economic growth have been decoupled. The just-released World Happiness Report 2017, an annual survey of 1,000 people in 150 nations, places the United States just 14th on the happiness scale. But the real eyebrow raiser is that the top five happiest countries are facing slower economic growth.

Business journalist (and Former Jeopardy champ) James Pethokoukis says that the authors’ conclusions may not be what they seem.

One of its highly touted findings is that the world’s ‘happiest’ nations — such as Norway, Denmark, and Switzerland — have been growing more slowly than the world as whole, including the number 14-ranked U.S., in recent years. The report’s authors fully embrace the goal of pushing ‘happiness’ as the best measure of social progress rather than the ‘tyranny of GDP.’ And as economist Jeffrey Sachs writes in the report: ‘The predominant political discourse in the United States is aimed at raising economic growth, with the goal of restoring the American Dream and the happiness that is supposed to accompany it. But the data show conclusively that this is the wrong approach.’

But is that what the data show, really?

The whole thing seems a little weird when you take a closer look.

Pethokoukis points out that the “happiest” countries are small — an average of 11 million people in the first 13 happiest nations (all the ones in front of the U.S.). The “happy places” are also culturally homogeneous, particularly the Nordic nations that rank at the top. Not surprisingly, the happiest nations also want faster-rising incomes, a component of economic growth.

Pethokoukis adds that the happiest nations also suffer from their fair share of unhappiness, with high suicide rates (and possibly low expectations)! Americans, on the other hand, “are demanding, complain when dissatisfied, and by the way, also produce the hard-driving entrepreneurs like Steve Jobs and Bill Gates who push the technological frontier so Europe doesn’t have to.”

He suggests national identity and culture most certainly has to be a variable in the happiness outlook, but more than that happiness isn’t the result of higher incomes, but more opportunity to create “a life of deeper human flourishing.”

Read Pethokoukis’ full article.

The American Dream Still Lives Despite Growth Rate of Millennial Incomes

Researchers from Stanford, Harvard, and the University of California recently proclaimed that the American Dream is “fading” because millennial incomes are not as high as their parents’ incomes were when they were their children’s age. The American Dream may have taken a beating recently, blogger and Jeopardy champ James Pethokoukis concedes, but mobility is not the deciding indicator of whether the dream is alive.

Why not? Guess it comes down to definitions. The Equality of Opportunity Project defines the “American Dream” as “absolute income mobility,” meaning that kids are doing better than their parents. The project found that just 51 percent of American 30 year olds earn more than their parents did at their age, a decline from 92 percent of 30 year olds in the early 1970s who earned more than their parents did at their age.

Several factors are at play when it comes to a slowdown in absolute mobility: automation, trade, slower economic growth overall in the U.S., and greater disparities in income. But the forlorn conclusions are not as severe as suggested when looked at with regard to the overall picture.

Pethokoukis points to Scott Winship for a deeper explanation. Winship who used to manage research for the Pew Economic Mobility Project, says the project’s data are probably accurate. Absolute mobility is slower now than in the 1950s, ’60s, ’70s, and ’80s. But this has been true for decades so should not come as some tragic surprise, especially since the research is concentrating on the trend and not the actual level of absolute mobility, as reported in breathless newscasts.

What is surprising, however, is the number of variables that the research paper does not include in its analysis when it comes to measuring that level. Among selected measurements excluded, Winship notes, the adjustments for cost of living, which if counted would suggest that the absolute mobility rate would rise 3-4 percentage points. Additionally, government transfers and taxes are not accounted for and baseline incomes are probably higher than what is reported in the research.

If we assume that the incomes of everyone not experiencing absolute mobility in the baseline numbers actually are higher by $5,000 than the baseline figures indicate, that would push up the share of the 1984 cohort achieving upward mobility by about 5 percentage points. Why might that be a reasonable assumption? Health benefits and other nonwage compensation are one factor. Nothing in the Chetty paper includes such benefits as income. Cohabitation is another. Two cohabiters will be two ‘families’ in the Census Bureau data used in the paper (and will be two ‘tax units’ in the paper’s tax data). In reality, cohabiters pool their incomes, just like married couples.

Undercounting of income is a third reason to think that the reported incomes in the Chetty paper are too low. Undercounting is a pretty bad problem in the bottom third, especially in the CPS and census data, but also potentially in the tax data, where people don’t report under-the-table earnings. (I reviewed this evidence in Appendix 3 of my recent paper on poverty trends). A caveat here is that parents also have understated incomes because of these issues, but nonwage compensation, government health benefits, cohabitation, and undercounting of income have all increased over time, so their impact is greater on children.

Put all this together and it looks to me like size-adjusting pushes the absolute mobility rate up 10 points, using the PCE deflator another 3 to 4 points, taxes and transfers another 2, and the rest (plausibly) another 5 points. That’s 20–24 percentage points, which would put the absolute mobility rate at 70–74 percent. Two-thirds seems like a safe conservative estimate.

For adults who were poor children, absolute mobility rates almost certainly remain above 90 percent. This is hardly evidence that the American Dream is ‘fading,’ as the paper’s title claims. The period from 1939 to 1969 was one of exceptionally strong income growth. That growth translated into very high absolute mobility rates. Income growth has slowed since then, though it has not reversed. Thus, absolute mobility rates have fallen, though most people still do better than their parents did at the same age.

What does it all mean? Pethokoukis notes that a 2014 study concluded that the probability of mobility — the chance of moving up or down the income ladder — is about the same as when the parents of today’s millennials were in their shoes.

He optimistically adds that policies that promote work and opportunity, policies that may be coming back into vogue, are a likelier method to faster and more inclusive economic growth than any redistribution methods, an outlook shared by the study’s “superstar” author.

So, as Pethokoukis concludes,

The American Dream still exists, although it’s a bit dinged up. And the United States remains the Land of Opportunity, although it could definitely be better. All of which should pass for good news in a year with precious little of it.

Read James Pethokoukis’ article on the American Dream.

Read Scott Winship’s analysis of the study’s conclusions.