In the USA over the last 15 years, there has been a steady fall in the number of young people in the labour force in America. Before 2000 and 2015, the employment rate for male workers without a degree dropped from 82% to 72% and a fifth of this group had not worked for a year. This took place at a time when the unemployment rate nationally dropped to 5% and almost 3 million jobs were created in the economy.
As the time spent in work decreased, time spent on leisure activities increased, with the main leisure activity being on-line gaming. Economists have struggled to explain this fall in employment among this group. One view relates to the trade-off between work and leisure whereby the more one works, the less time one has to enjoy the benefits of one’s increased income. Therefore, by implication, this cohort is satisfied with a low income and more leisure because the additional leisure time allows them to engage in their favoured pastime. Linked to this is the idea of “leisure luxuries” which are the leisure activities one spends more time on as one has more leisure time. They correspond to the idea of luxury goods which are income elastic. For example, as one’s income rises, one might spend proportionately more on restaurant meals since they are a luxury item. Similarly, according to this view, put forward by Hurst, Aguair, Bils and Charles last year, as one has more leisure time one does not spend more time washing dishes or eating breakfast, one spends significantly more on one’s preferred hobbies. For these people, the marginal utility of an extra hour of leisure which they can spend on their preferred activity exceeds that from the income provided by an extra hour working. The authors are clear that not everyone behaves like this since some will prefer to work longer in order to be able to afford better goods and services, e.g. the two-week holiday remains at two weeks but is spent in more exotic destinations, paid for by the higher income from work.
Given that the longer one is unemployed, the more difficult it is to get a job, the implication of this trend is that this group of missing workers, mainly but not entirely male, will find it difficult in the future to get a job and pay for the non-leisure activities people need such as housing, furniture, food and a car.
Economics Department Blog 