The surprising losers of the Great Recession

It is said that what doesn’t kill you makes you stronger. Obviously that’s not always true – especially when it kills bits of you that don’t grow back. That’s something that a nasty recession can do to the future prosperity of an entire nation – a phenomenon referred to as ‘economic scarring’. For instance, recessions can kill off investments in infrastructure, research, skills and other things vital to the long-term health of an economy.

Recessions can also blight the the future prospects of individuals – especially those looking for a job just as the shutters come down. It’s not the temporary loss of income that matters, but also the permanent gaps in the accumulation of experience.

Some groups suffer more than others. For instance, if a recession accelerates the decline of an already ailing traditional industry, then workers might have a hard time finding jobs in the new industries that lead the recovery. Thus we might expect older members of the workforce to feel the worst long-term effects. To trot out another dubious cliche: ‘You can’t teach an old dog new tricks.’

Evidence from the US economy contradicts that lazy assumption. America is creating jobs fast – many parts of the country are at full employment or close to it. Yet, as Jeannie Smialek explains in an important piece for Bloomberg, it appears to be the young not the old who’ve been left behind – at least among the male workforce:

“Men – long America’s economically privileged gender – have been dogged in recent decades by high incarceration and swollen disability rates. They hemorrhaged high-paying jobs after technology and globalization hit manufacturing and mining.

“The young ones have fared particularly badly. Many of them exited high school into a world short on middle-skill job opportunities, only to be broadsided by the worst downturn since the Great Depression.”

Moreover, they’ve been slowest to recover from this economic catastrophe. Compared to 2007, the labour force participation rate is nearly two percentage points up for men aged 55 to 64, but three percentage points down for men aged 25-34.

That drop equates to 500,000 young(ish) men ‘missing’ from the labour market.

What about their female contemporaries? Have they also been left behind by the recovery? No, the participation rate for women aged 25-34 is up by nearly two percentage points on pre-recession levels.

Furthermore, the gap in participation rates between younger men and the next age group (35-44 year olds), which widened during the recession has yet to close – unlike the gap between the corresponding female age groups.

We are now several years into the recovery, but these figures suggest that there is a group of Millennial males who have not recovered – and who, though still young, aren’t getting any younger:

“’At some point, you can have a bit of an effect of a lost generation,’ according to David Dorn, an economist at the University of Zurich. “If you get to the point where you’re turning 30, you’ve never held a real job and you don’t have a college education, then it is very hard to recover at that point.’”

To be clear, these individuals represent a minority of their peers. However, their numbers are concentrated among the least advantaged sections of society:

“About 14 percent of 25- to 34-year-olds with just a high-school degree weren’t in the labor force in 2016, up from 6.4 percent in 1996, according to Federal Reserve Bank of Kansas City analysis by economist Didem Tuzemen.”

Some researchers suggest that young men are disproportionately shifting their time to “video gaming and other recreational computer activities”. Others disagree, saying that this age group are rejecting dead-end jobs that do nothing to improve long-term earning potential – with computer games and other diversions filling their time by default.

Whatever the causal direction, we’ve embarked upon a civilisational experiment: to find out what happens if a society takes the rewards and respect out of ordinary jobs while at the time increasing the affordability and sophistication of its distractions.

If ‘all work and no play makes Jack a dull boy’ what will ‘all play and no work’ do to him?