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Home Publications Blogs Beat the Press Casey Mulligan Says There Are Jobs for Those Who Really Want Them

Casey Mulligan Says There Are Jobs for Those Who Really Want Them

Wednesday, 20 July 2011 13:27

The NYT featured another Casey Mulligan episode of There Is No Unemployment this morning. Mulligan's argument is that if we look at employment rates for the older population we see that they have actually risen in the downturn even as employment for people ages 25-55 plummeted. Mulligan interprets this as evidence that highly motivated older workers are able to find jobs, and if younger workers were equally motivated they would find jobs too.

This is an interesting story. The rise employment rates of older workers is a striking story in this downturn and one that I and others have often noted. However, there are other possible interpretations. Older workers almost by definition will have more experience than their younger counterparts. Employers tend to fire less experienced workers with less job tenure first. (Just as they tend to fire less-educated workers first.) This could lead to the pattern of lower employment rates among younger workers that we are seeing without having any direct relationship to the commitment of workers to the labor force.

There is a simple way to try to test this story. We can look at patterns in wage growth since the downturn. If Mulligan's story is right then we might expect to see the wages of older workers rise less rapidly than for younger workers. (These are nominal wages.) The idea is that the desperate older workers are willing to take big pay cuts to keep or get a job, while the young whipersnappers would rather lounge around on the couch watching TV.

The chart below shows the change in median weekly earnings between 2007 and the average of last four quarters (2010:3-2011:2) for men and women between the ages of 25-54, 55-64, and over age 65.


(Click for Larger Image)
Source: Bureau of Labor Statistics.

As can be seen, median weekly earnings rose slightly more rapidly for both men and women in the 55-64 age cohort than in the 25-54 group. They rose much more rapidly for over the 65 age group. There is not much evidence here of older workers who are desperately looking for jobs and willing to make whatever sacrifice is necessary. In other words, this is consistent with the demand side story where employers dump their younger workers first while holding on to older workers, so there are no jobs for the under 55 set.

It is the same story as with more highly educated workers. College educated workers saw less of a fall in employment than less-educated workers. However, this does not mean that less-educated workers could find jobs if they really want them, nor that there are even jobs for every college-educated worker who wants them.

Comments (6)Add Comment
written by skeptonomist, July 20, 2011 3:21
Certain industries have been hit harder than others (remember the housing bubble?). How has this affected employment by age?
Participation rate?
written by Some Guy, July 20, 2011 3:40
Older workers are probably more likely to be eligible for pensions or OASDI benefits. If they can't find or keep their jobs, they're more likely to drop out of the labor force completely. Thay might be part of the story, too.
Casey Is a Classical Economist of the Chicago School
written by Paul, July 20, 2011 3:54
As David Ricardo postulated two centuries ago, involuntary unemployment is impossible. Those who are so unemployed are actually just slackers who refuse to work for whatever wage is available.

Ricardo is a hero to all anti-Keynesians like Casey.
I left a comment at NYT on this blog post
written by Brett, July 20, 2011 4:25
And it wasn't posted. I guess it contained too many "spiteful" remarks about how Casey needs to "think about the argument he is making before posting it." It's hard to believe that he thought that this analysis was worthy of publication. I can't understand how Casey (and others like him) has a job teaching economics earning a six figure salary -- he should be laughed out of the field.
I thnk look at longer term trends contradict Mulligan's story
written by anonymous, July 20, 2011 5:33
The Bureau of Labor Statistics has data on unemployment rates and employment to population ratio since 1948.

The spike in unemployment rates over historical average and previous recession peaks among 55 to 64 year olds, and over 85 year olds is far higher than for younger workers.

The employment population ratio has been rising among the elderly since the early 1980s, and after the recent recession this rise has very sharply decelerated. This three decades long increase in the ratio among elderly can be said to have leveled off. The drop in the ratio continues for younger workers, though the rate of decrease has slowed slightly since the recovery began.

I think this picture is consistent with a demand side explanation, not a supply side explanation for what is happening on the current labor market.

There is no sign at all of a supply side substitution effect driving the age specific patterns. Unless one wants to over interpret very recent trends.
written by anonymous, July 20, 2011 5:36
The spike in unemployment rates over historical average and previous recession peaks among 55 to 64 year olds, and over 65 (not 85) year olds is far higher than for younger workers.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.