Increasing wage gap between educated peers driving young, white men out of the labour market, study says
Author of the article:
Bloomberg News
Alex Tanzi
Published Dec 16, 2022 • 2 minute read
7 Comments
Pedestrians walk along a street in New York’s financial district. Photo by Amir Hamja/Bloomberg A decline in social status relative to better-paid peers is a key reason why so many American men have dropped out of the labour force, according to the latest paper to examine a conundrum that’s baffled economists for decades.
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Men’s sense of their status in the labour market is highly dependent on how much they earn compared with male peers of similar age, according to the research by Pinghui Wu, an economist at the Federal Reserve Bank of Boston.
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And as their wages got left behind by the earnings of their better-educated peers, men without a college degree have been more likely to exit the labour force, Wu wrote. Younger, white men in particular are more inclined to leave the job market when their expected wages fall in relative terms, she wrote.
The findings add to the vast body of research trying to explain why about one in nine men in so-called prime working age — 25 to 54 — are out of the labour market today, compared with one in 50 in the mid-1950s. Wu’s study pins some of the blame on widening income inequality in the US over recent decades.
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“If the increasing wage gap between high and low earners directly or indirectly affects men’s aggregate labour supply, wage inequality might have carried wider implications to the economy than previously believed,” Wu wrote.
Other researchers have cited potential causes including the decline in manufacturing jobs traditionally held by men, an increase in household income as more women entered the labour market, a rise in government aid, and drug addiction. There’s also now a record number of young adults continuing to live with their parents for longer than in the past.
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Article content Wu zoomed in on the loss of status and incentive to work for men who saw their social standing and earning power erode over time.
After adjusting for inflation, median weekly earnings fell 17 per cent for U.S. prime-age non-college men over the last 40 years, while their college-educated peers experienced a 20 per cent gain, Wu wrote.
Women far outpaced their male counterparts over the period, regardless of their education levels, with a 32 per cent increase. But they started from a much lower base. And Wu found that men’s status and participation in the job market is primarily correlated with earnings of other men — not women.
Last month, the share of men older than 20 who were working or looking for work dropped to 70.2 per cent, a three-month low and a rate that’s well below pre-COVID-19 levels.
Bloomberg.com