Wednesday, September 7, 2011

Who Lost Work During the Great Recession?

Copyright, The New York Times Company

Young people have seen their work hours drop the most during this recession, while the elderly are actually working more than they did before.



Using data from the Census Bureau’s Household Survey via the National Bureau of Economic Research, I calculated the average hours worked by age for 2007 (people not working during the week of the survey count as zero hours worked) and then again for 2010. The chart below displays each age group’s percentage change from 2007 to 2010. For example, the chart shows that the average 16-year-old in 2010 worked 40 percent fewer hours than the average 16-year-old did in 2007.

Author’s calculation from Census Bureau Household Survey

We all know that hours worked in 2010 were considerably fewer than they were before the recession began, which the chart shows: most of the age groups have a negative percentage change.

But the chart also shows that labor losses lessen with age and are positive for a number of age groups. In percentage terms, work hours fell the most for teenagers, reflecting the high teenage unemployment rate. After the teenagers, work hours fell the most for the age groups 20 to 29. Work-hours losses for groups in their 30s and 40s ranged 5 to 11 percent. Work hours also fell for age groups 50 to 59, but typically less in percentage terms than for the age groups aged less than 50.

As I noted a few weeks ago, average work hours actually increased for the oldest age groups.

Seniority layoff practices would tend to reduce hours worked most for young people because, naturally, they tend to be employers’ more recent hires. You might think it would make sense for employers to retain their most experienced workers, but downsizing employers tend to offer and encourage early retirement to people in their 50s and early 60s, who are paid more than recent hires and are starting to think about leaving the workplace.

Yet the chart does not show especially large declines in hours for those age groups (nor can seniority practices by themselves explain why the elderly end up working more).

Of course, an employer that shuts down does not lay off based on seniority but lays off everyone.

Another possibility is that the labor market distinguishes, at least in a rough way, among workers according to their willingness to work, and that the stock market and housing market crashes have especially stimulated older people to work more. (Young people, on the other hand, had fewer assets before the recession, so a decline in asset prices has little direct impact on them.) This effect tends to increase with age because the propensity to own assets for current needs and future retirement also increases with age.

To the extent that minimum wages reduce employment of people who would otherwise earn a wage less than the minimum, the minimum wage increases of 2007, 2008 and 2009 may be another factor, because propensity to earn near the minimum wage tends to decline with age (although that propensity is not particularly low for the elderly, who do not have work-hours losses on average).

It is also possible that the ability to efficiently find a new job in a tough labor market is a skill, and people tend to accumulate that skill with age.

Economists are still digesting the labor market data from the Great Recession, but for now it appears that getting back to the pre-recession labor market especially requires creating jobs for young people.

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