A Non-Sokratic Dialogue on Social Welfare Functions: Hoisted from the Archives from 2003

Must-Read: Almost all of those believing that we are now near full employment here in the U.S. dismiss the low employment-to-population ratio by noting that the population is aging. They very rarely confront the collapse since the late 1990s of the prime-age employment-to-population ratio.

But when they do confront the collapse since the late 1990s of the prime-age employment-to-population ratio, what do they say? I have heard only:

  1. "Peak male"--that the rise of the robots will systematically disadvantaging male workers, and we are starting to see this already. The problem with this is that the decline in employment-to-population since 2000 is about equal for 25-54 year-old males and females.

  2. "It's too late"--that our failure to induce a rapid recovery in 2009-11 broke the connection of many prime-age workers to the social networks that allowed them to navigate the labor market, and that taking steps to get them back into the labor market could only succeed if accompanied by unwelcome and unthinkable inflation.

  3. "Stop and smell the roses"--that people found out in the late 1990s that they really did not want to work that hard and that long anyway.

May I say I find all three of these profoundly unconvincing?

Ben Zipperer: U.S. Job Growth Slows in January, as the Nation Remains Years Away from Full Employment: "Estimates of full employment vary, but one natural point of comparison is the tight labor market of the late 1990s...

...For the entire 1998-2000 period, the employed share of the prime-age population (ages 25 through 54) was at least 81 percent, reaching 81.9 percent in April of 2000. In the most recent business cycle, the prime-age employment rate was above 80 percent during the final quarter of 2006 and first quarter of 2007. A full employment standard of 81 percent therefore lies somewhere in between the peaks of the last two business cycles. Some of the brightest news in today’s employment report is that the employed share of the prime-age population moved to 77.7 percent, up from 77.4 percent in December.... Last month’s increase in the prime-age employment rate is excellent progress. But as part of its mandate to promote full employment, the Fed should consider the projected progress of the labor market as it considers slowing the rate of employment growth.