Shocking facts from Erik Hurst’s (Professor of Economics at Chicago Booth) graduation address to The University of Chicago’s Booth School of Business, “Video Killed the Radio Star”
… Between 2000 and 2015, the employment rate for lower-skilled men and women between the ages of 21 and 55 fell by 7.5 percentage points. (…anyone with less than a bachelor’s degree.) … The decline has been persistent. It was falling prior to the recession, fell sharply during the recession, and has barely rebounded after the recession. … For low-skilled men in their 20s, employment rates have fallen by about 10 percentage points over the last 15 years—from 82 percent in 2000 to only 72 percent in 2015. … You might think it’s matched by a rise in school attendance for this age group. That is not the case. …
Is it possible that technology has changed the value of leisure? I think the answer is a definite yes. … In 2015, 22 percent of lower-skilled men aged 21–30 had not worked at all during the prior 12 months. … 51 percent of lower-skilled men in their 20s live with a parent or close relative. That number was only 35 percent in 2000. … On average, lower-skilled men in their 20s increased “leisure time” by about four hours per week between the early 2000s and 2015. … Of that four-hours-per-week increase in leisure, three of those hours were spent playing video games! …
How do we know technology is causing the decline in employment for these young men? … Lower-skilled young men in 2014 reported being much happier on average than did lower-skilled men in the early 2000s. This increase in happiness is despite their employment rate falling by 10 percentage points and the increased propensity to be living in their parents’ basement. …
Technological innovations…have made leisure time more enjoyable. This acts like an increase in an individual’s reservation wage. …
Yes, but only if someone foots the bill. Perhaps the more relevant question is: How much does the rising value of leisure, entitlements, and pay (for work without much intrinsic value) reduce work effort at the margin? Declining workforce participation might only represent the tip of the iceberg.