The slow death of the middle-class American male

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By Leith van Onselen

American men in their prime have left the US labour force at an astonishing rate, according to a new report from the Federal Reserve Bank of Kansas City (FRBKC):

The labor force participation rate for prime-age men (age 25 to 54) in the United States has declined dramatically since the 1960s, but the decline has accelerated more recently. From 1996 to 2016, the share of prime-age men either working or actively looking for work decreased from 91.8 percent to 88.6 percent. In 1996, 4.6 million prime-age men did not participate in the labor force. By 2016, this number had risen to 7.1 million.

Prime-age men [aged 25–54] are at their most productive in terms of working years, and a decline in their participation has important implications for the future of the labor market and economic growth.

… “job polarization,” a phenomenon that describes declining demand for middle-skill workers in response to advancements in technology and globalization, has been a key contributor to the increase in nonparticipation among prime-age men.

…job polarization had not changed the composition of jobs in the labor market in the past two decades, 1.9 million more men would likely be employed in 2016, representing a 3.6 percent increase in overall employment of prime-age men. However, the effects of job polarization are unlikely to unwind any time soon—survey evidence suggests nonparticipating prime-age men are unlikely to return to the labor force if current conditions hold…

Chart 2 shows that while the non-participation rates rose for all education groups over the past two decades, the largest increase was for those in the middle-education groups, who had only a high school degree, some college, or an associate’s degree. More specifically, the non-participation rate for prime-age men with only a high-school degree rose from 8.8 percent in 1996 to 14.9 percent in 2016 (a 70.3 percent increase), while the non-participation rate for prime-age men with some college or an associate’s degree rose from 6.8 percent in 1996 to 11.0 percent in 2016 (a 61.7 percent increase). The non-participation rate for prime-age men in the highest education group, who had a bachelor’s degree or higher, increased more modestly, from 4.1 percent in 1996 to 6.0 percent in 2016 (a 45.9 percent increase). Similarly, the non-participation rate for those in the lowest education group, who had less than a high school degree, rose only slightly, from 18.3 percent in 1996 to 20.3 percent in 2016 (only a 10.6 percent increase)…

These changes in non-participation rates have shifted the educational composition of nonparticipating prime-age men toward the middle education groups. Chart 3 shows how the educational composition of all prime-age men has changed over the past 20 years, while Chart 4 narrows this focus to show how the educational composition of nonparticipating prime-age men has evolved…

As with education, a change in the age composition of the labor force could influence non-participation. I divide prime-age men into three age groups: those age 25–34, those age 35–44, and those age 45–54. Chart 5 shows the non-participation rates for all three groups over the past two decades. Although the non-participation rates for all three groups increased over time, younger prime-age men saw the largest increase. From 1996 to 2016, the non-participation rate for younger prime-age men surged from 6.7 percent to 11.3 percent, a 67.0 percent increase. Over the same period, the non-participation rate for men in the 35–44 age group rose from 7.6 to 9.5 percent (a 25.1 percent increase), while the non-participation rate for men in the 45–54 group rose from 10.8 to 13.4 percent (a 24.4 percent increase)…

Labor demand and the skill composition of jobs have changed dramatically over the past 40 years in response to advancements in technology and globalization. The employment share of middle-skill jobs has declined significantly, while the employment shares of low- and highskill jobs have rapidly increased. This aggregate shift in employment away from middle-skill jobs and toward low- and high-skill jobs is called “job polarization”…

Technological advancements help explain why the share of workers employed in middle-skill jobs has fallen so sharply. Middle-skill jobs are considered “routine” occupations, as workers typically perform tasks that are procedural and rule-based. The tasks performed in many of these jobs have become automated by computers and machines…

International trade and weakening unions have also contributed to the decline in middle-skill jobs. Many jobs in this category, particularly those in manufacturing, have been offshored to countries where workers can perform similar tasks for lower wages…

Chart 9 shows that the share of nonparticipants remaining out of the labor force from one month to the next declined rapidly from 2008 to 2009. However, this share started rising again in mid-2010 and reached an average of 83.8 percent (higher than its pre-recession rate) in 2016. Thus, recent flows data do not suggest nonparticipating prime-age men are likely to return to the labor force…

Full report here.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.