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Krugman's Peculiar Sense of History

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Paul Krugman makes a claim in his column (appearing in today’s New York Times) [2] that is both wrong and misleading.

The column features his familiar theme that ordinary Americans are suffering terribly as a result of the decrepit shape of America’s current, GOP-ransacked economy.  Krugman’s offending statement is the one in bold:

Our [that is, ordinary Americans’] bleakness partly reflects the fact that most Americans are doing
considerably worse than the usual economic measures let on. The
official unemployment rate may be relatively low — but the percentage
of prime-working-age Americans without jobs, which isn’t the same
thing, is historically high.
[emphasis added]

Sounds ominous.  But what does this figure mean?  The closest statistic that I can identify to "percentage of prime-working-age Americans without jobs" is to start with (one minus) the labor-force-participation rate of Americans aged 25-54.  Then adjust that figure for the unemployment rate of Americans in that age group.

For example, if 90 percent of Americans between the ages of 25-54 are participating in the labor force (that is, either have or are seeking employment), then ten percent of Americans in this age-group are without jobs by choice (some, for example, are stay-at-home parents).  These ten percent of Americans without jobs are not "unemployed," for they are not in the labor force.

Then, to determine the actual number of prime-working-age Americans who are "without jobs," we must add to this 10 percent of Americans, in this age group, who are without jobs because they aren’t in the labor force whatever percentage of the remaining 90 percent of Americans aged 25-54 are unemployed.  BUT because there’s no reason to suppose that unemployment is hitting workers in this age group today significantly any harder or less hard (relative to workers in other age groups) than in the past — and because, by Krugman’s own admission, today’s unemployment rate of 5.1 percent isn’t especially high — we can ignore this unemployment rate for my purposes.

So what am I getting at?  This: Krugman’s statement that "the percentage
of prime-working-age Americans without jobs, which isn’t the same
thing, is historically high" is, as I said above, both wrong and misleading.

Look at Figure 1B on this page from the San Francisco Fed [3].  (HT Russ.)  It does not show the labor-force-participation rate for all Americans aged 25-54; rather, it breaks down the participation rate for Americans in this age group by sex.

Look at the labor-force-participation rate of men (aged 25-54).  That rate is indeed lower than in the past.  For the full time period reported in this Figure, that rate is indeed at an all-time low.  It peaked in 1953, and has been declining ever since.

Now look at the labor-force-participation rate of women (aged 24-54).  Not surprisingly, it has surged in recent decades, although leveling off a bit since around 1990 and even declining a tiny bit since around 2000.

It’s highly unlikely that, given that today prime-working-age women participate in the labor force at rates vastly higher than was true even in, say, 1975, that the percentage of all Americans aged 25-54 who are "without jobs" is today lower than it was thirty or even twenty years ago.

Whatever is the percentage of prime-working-age Americans who are today "without jobs," it surely isn’t — contrary to Krugman’s hysterical claim — "historically high."

One possibility is that Krugman saw these, or similar, data and confused "men aged 25-54" for "all workers aged 25-54."  If so, then he’s correct that the percentage of men in this age group "without jobs" is "historically high" (where "history" here is confined by the data that go back no farther than the late 1940s).  But today’s "historically high" figure is part of a trend that began during the first year of the presidency of Dwight Eisenhower.  At that time, George W. Bush was seven years old.

(Note also that, although the labor-force participation rate of prime-working-age men has been declining for a half century, the trend is slight.  Even today’s "historically" low figure is pretty darn high.)

So, to summarize.  Krugman is simply wrong to assert that the percentage of Americans of prime-working-age without jobs is "historically high" — and misleading to suggest that, whatever this percentage might be today, that it is evidence of some major economy malady.  A rise in the percentage of prime-working-age persons "without jobs" might just as well reflect greater middle-class prosperity — resulting in more years of schooling or early retirement — as it reflects economic hardship (such as workers so discouraged by their futile job searches that they just call such searches to a halt).

BTW, this post from Megan McArdle [4] on labor-force-participation is worth reading.

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