February 01, 2015
Employment-Population Ratio By Education Level

There is concern that in the future robots, computers, and other forms of automation will cause mass unemployment. I share that concern but in the present I think it has already arrived among the less skilled and less talented. I think the use of unemployment rate as a measure of how many people aren't working has created a very widespread misconception about how this problem only lies in the future. Really, it has already happened. Lets have a look at US Bureau of Labor Statistics data on unemployment rate, labor market participation rate, and employment-population ratio. It is the last one that tells us the real story.

As of December 2014 the gap in the employment-population ratio of high school dropouts versus those with at least a bachelor's degree is 31% points. 41.5% versus 72.5%. See below. High school grads and those with some college education lie between high school dropouts and college grads.

HOUSEHOLD DATA
Table A-4. Employment status of the civilian population 25 years and over by educational attainment
[Numbers in thousands]
Educational attainment Not seasonally adjusted Seasonally adjusted
Dec.
2013
Nov.
2014
Dec.
2014
Dec.
2013
Aug.
2014
Sept.
2014
Oct.
2014
Nov.
2014
Dec.
2014

Less than a high school diploma

Civilian labor force

10,754 11,168 11,003 10,763 10,709 10,691 10,831 11,153 11,031

Participation rate

43.7 45.8 45.3 43.7 45.2 44.5 45.3 45.7 45.4

Employed

9,641 10,213 10,007 9,703 9,738 9,806 9,975 10,201 10,079

Employment-population ratio

39.2 41.9 41.2 39.4 41.1 40.8 41.7 41.8 41.5

Unemployed

1,113 955 996 1,060 971 884 856 952 952

Unemployment rate

10.4 8.6 9.1 9.9 9.1 8.3 7.9 8.5 8.6

High school graduates, no college(1)

Civilian labor force

36,473 35,432 35,281 36,292 36,286 35,937 36,183 35,478 35,164

Participation rate

58.4 57.7 57.7 58.1 58.1 57.9 58.0 57.8 57.5

Employed

33,894 33,499 33,406 33,743 34,046 34,016 34,127 33,476 33,310

Employment-population ratio

54.3 54.5 54.6 54.0 54.5 54.8 54.7 54.5 54.5

Unemployed

2,580 1,932 1,875 2,549 2,240 1,920 2,056 2,002 1,854

Unemployment rate

7.1 5.5 5.3 7.0 6.2 5.3 5.7 5.6 5.3

Some college or associate degree

Civilian labor force

36,926 37,320 36,845 37,157 37,503 37,421 37,304 37,246 37,140

Participation rate

67.4 66.9 66.3 67.8 66.8 66.6 66.5 66.7 66.9

Employed

34,730 35,579 35,079 34,885 35,490 35,389 35,460 35,422 35,310

Employment-population ratio

63.4 63.7 63.2 63.7 63.2 63.0 63.2 63.5 63.6

Unemployed

2,197 1,742 1,766 2,272 2,013 2,032 1,843 1,824 1,831

Unemployment rate

5.9 4.7 4.8 6.1 5.4 5.4 4.9 4.9 4.9

Bachelor's degree and higher(2)

Civilian labor force

49,612 51,342 51,727 49,704 50,162 50,449 50,471 51,222 51,772

Participation rate

75.0 74.9 74.5 75.2 74.7 74.7 74.6 74.7 74.6

Employed

48,053 49,799 50,350 48,039 48,561 48,983 48,937 49,608 50,290

Employment-population ratio

72.7 72.6 72.5 72.7 72.3 72.6 72.4 72.3 72.5

Unemployed

1,559 1,543 1,377 1,665 1,600 1,465 1,534 1,614 1,482

Unemployment rate

3.1 3.0 2.7 3.4 3.2 2.9 3.0 3.2 2.9

Footnotes
(1) Includes persons with a high school diploma or equivalent.
(2) Includes persons with bachelor's, master's, professional, and doctoral degrees.

NOTE: Updated population controls are introduced annually with the release of January data.

Think about the classic jobs available to high school dropouts such as factory assembly line worker, janitor, fast food worker, trash truck worker, and even truck driver. Lets take manufacturing first. From 1992 to 2009 employment of high school dropouts in manufacturing dropped 47.3% while employment of those with advanced degrees (masters, Ph.D) rose 44.4%. Even high school grad employment in manufacturing dropped 38.6% over the same period.

Next comes janitors. Machines will clean floors and vacuum carpets. Larger buildings will have dedicated cleaning robots. At night while we sleep autonomous vehicles will deliver cleaning machines to smaller buildings to get each building cleaned in succession.

In fast food restaurants cashiers will go first. We will order on our phones and pick up the food as we walk in. Equipment will automate the cooking too. Trash trucks won't need drivers. The trucks already grab trash cans off the curb. Long haul trucks will become autonomous as well.

So what will high school dropouts do for a living 20 years hence?Anyone see a future for them in the labor force?

Share |      Randall Parker, 2015 February 01 08:27 PM 


Comments
Kudzu Bob said at February 1, 2015 9:08 PM:

The rich will extract blood from younger proles to use in anti-aging therapies, much to the approval of Tyler Cowen

Wolf-Dog said at February 2, 2015 12:58 AM:

In the future, everything will depend on the availability of cheap energy: if new and large quantities of cheap energy can be developed (new kinds of solar and nuclear energy, new artificial liquid fuels manufactured thanks to the latter forms of cheap energy), then robots will become capable enough to take care of the unemployable masses. For example, robots will then be able to build cheap government-owned studio apartments for millions of unemployed people, and robots will manufacture food for these unemployed people. But if new energy cannot be developed, then the automatated economy will not be able to take care of the unemployed for free, and then either millions will starve or there will be global wars that can make the previous century look very peaceful. So the development of new energy will be key, and the governments of developed countries should get together and launch an emergency long-term program to develop new energy as soon as possible.

BernardZ said at February 2, 2015 4:16 AM:

Maybe it is not the education that leads to lower unemployment but the sort of person who does better in education is a harder worker

jp straley said at February 2, 2015 6:49 AM:

I look forward to very entertaining break-dancing.

Radford Neal said at February 2, 2015 7:25 AM:

What about women adopting a traditional homemaker role? They would often have low education, and of course wouldn't be in paid employment. But I think you don't want to count them as evidence for your thesis.

Marcopohlo said at February 2, 2015 11:53 AM:

I'd like to caution you about extrapolating from current trends. Yes, the low-education jobs are the low-hanging fruit.

But two decades hence? Even doctors and lawyers and civil engineers will not be safe from expert systems.

Randall Parker said at February 2, 2015 9:51 PM:

BernardZ,

The biggest cause of differences in outcomes is differences in IQ. The people dropping out of high school are not very bright with some exceptions of course. Educational level is a proxy for IQ. Though huge differences in IQ can be found among college grads. You can get closer to a person's IQ by looking at what degree they earned and the ranking of their school.

Marcopohlo,

I certainly expect certain kinds of professional jobs to get automated. Anything that involves remembering large bodies of facts in order to render judgments (e.g. medical diagnoses) will get automated.

David Friedman said at February 3, 2015 12:22 AM:

The situation is more complicated than your discussion suggests. The invention of new technologies doesn't make old technologies disappear. One can imagine a world with a bunch of high skill people living at a consumption standard of ten million dollars per capita and a bunch of low skill people running a mid-20th century economy at a consumption standard of, say, $20,000 per capita.

What limits this story is the degree to which the low skilled people need inputs they don't have to run their economy. They need capital, which can also be used to produce robots. They need some high skill people—who they can only get by paying them what they could get in the high skill economy. They need land, and may have to bid against the high skill people to get it.

One can imagine one future as described above and an alternative one in which the low skill people can only make $3000/year, because that's all they can produce without inputs that have now become much more expensive. One can also imagine a future in which the low skill people are better off than they would have been in the mid-20th century, because there are inputs, or demands, from the other economy that increase their value.

The other part of this story is the degree to which the low skill people are unemployed not because the jobs don't exist but because jobs paying what those people could have gotten fifty years ago aren't jobs they are willing to take, given the alternatives of unemployment compensation, welfare, and the like. It's worth noting that a very large number of people from poor countries are happy to come here, overcoming serious barriers in the process, to find and take low skilled work.

And in the future where the upper half of the population are living at ten million per capita, they may decide that providing the lower half welfare of a mere hundred thousand a year is a small cost for the benefit in feelings of virtue and social stability—in which case very few of the low skill will choose employment.

It's worth trying to separate the effect of absolutely falling employment opportunities for the lower part of the distribution from the effect relatively falling ones.

BernardZ said at February 3, 2015 4:48 AM:

Randall Parker,

I partly agree with you but there is also the fact that many do not have the willpower to study hard. A person with a *good* degree has both a high IQ and the willpower. It may not be the degree but the high IQ and willpower.

Aleahy said at February 3, 2015 12:07 PM:

An interesting question is whether the skew toward higher employment at higher educational levels is in no small part generated by government policy and/or the fact that employers can get college graduates to do jobs that they wouldn't have taken many years ago. The last phlebotomist to draw my blood told me that she had a bachelors in psychology. I'm personally skeptical that phlebotomy is a job that should require four years of any type of training let alone a bachelors degree in a seemingly unrelated field, but there you are. My father only had a couple of years of college but worked for decades managing food services at colleges and universities. He couldn't get hired today because, of course, you now need a bachelor of science in food management for any of these positions. Again, his job back then required a lot of people skills (which B.S. degrees don't necessarily provide, by the way) but I'm not sure it also needed a B.S. level education. (Then again, I may be wrong: Pile enough regulation on top of any job and pretty soon you'll need a law degree just to figure out how to do your job right. Witness the recent Title IX tsunami . . .) Also, when you have plenty of employable people with bachelors looking for work, and an employer needs to choose between two comparable people--one with a degree and one without, why shouldn't the employer play it safe? I'm sure our litigious culture doesn't help much. ("It's our policy that all our employees have an advanced degree in their field . . . " so how could we be negligent?)

There may also be a policy explanation for the blowout in low-skilled factory jobs that we've seen in this country in recent years. I'm not an economist, but I've always been fascinated by Milton Friedman's explanation for why free trade will eventually result in an equilibrium: Every time we buy a Chinese product, somebody somewhere along the way had to sell dollars to buy yuan to buy the product. If you try to convert too many dollars, their value in terms of the yuan goes down and the price of Chinese goods goes up. It might be interesting to tally up how many trillions of dollars we've dumped on China over the last decade or two, but that currency shift hasn't happened yet. I'm sure the Chinese send a lot of money back to those Apple engineers who design the products they manufacture, but I also wonder if the need to fund our $1T federal deficits have had anything to do with it.

My other favorite example of this regulatory preference toward the highly educated comes from a time when my daughter broke her arm. The Egyptians were evidently setting bones 6000 years ago, but over the years inflation certainly has taken its toll: the final sticker price on this encounter with the orthopedic surgeon was (brace yourself) over $100K. Happily, I'm a high-skill worker so my insurance company stepped in, negotiated a lower price, and covered most of the rest. But I've always been struck by the audacity of sending someone a bill--for what? 20-30 hours of labor int total for everyone involved?--that amounted to more than my annual salary. I can't imagine being in a minimum wage position and being asked to pay half of my weekly income just to hear that I had a cold. But if you set up, say, an Isabel-aided kiosk at Walmart that would be practicing medicine without a license. So, again, I think Friedman nailed it when he pointed to regulatory licensure as being a problem. Medicine is the most heavily regulated, heavily subsidized segment of our economy--and it provides great jobs for the well-certified people in the business--but in many respects it's an utter disaster for consumers. (Same for education itself, by the way.)

I don't deny that highly intelligent people have a significant advantage in the job market. But high credentials aren't necessarily high ability, and I worry that our economy rewards and protects the former rather than the latter. Interesting, though lightweight article on the phenomenon in Slate recently:

http://www.slate.com/articles/news_and_politics/politics/2015/01/the_upper_middle_class_is_ruining_all_that_is_great_about_america.single.html

Mercer said at February 3, 2015 5:27 PM:

The women will take care of old people. The men might be security guards.

Brett Bellmore said at February 5, 2015 2:57 AM:

"I'm personally skeptical that phlebotomy is a job that should require four years of any type of training let alone a bachelors degree in a seemingly unrelated field, but there you are."

Yes, my wife is currently studying to be a dental hygienist. (Actually, working her way through the prerequisites.) I think it's great that she's boning up on her English skills and algebra, but I hadn't noticed the hygienist writing any essays at our dentist's office. Or even solving systems of equations.

It's a highly selective program, many more applicants than slots, and they're using largely unrelated requirements to thin the herd. I think there's a lot of that going on, especially in the medical field.

Well, at least she'll be better at helping our son with his homework in the coming years.

Randall Parker said at February 7, 2015 10:19 AM:

Mercer,

We'll have security robots.

BernardZ,

I certainly think that cognitive traits other than intelligence matter. But I suspect that higher IQ, a lower discount rate, higher self control and other attributes needed to do productive work were all co-selected to some extent.

David Friedman,

I agree that the welfare state makes it easier to not work. An RN who analyses workers compensation settlements tells me there's huge amounts of fraud and lots of people who could work are getting paid not to for the rest of their lives. However, the higher up one's earnings potential goes the less attractive is the welfare state as an alternative. The welfare state becomes more attractive the further down one's prospects get.

Just how poor will the bottom get in a future parallel economy of the less skilled? Interesting question. My worry is that even the Amish path could become impossible if there's not enough land for farming and wood. If the wealthy do what I've previously guessed and move their robot factories off into low population countries then lots of extracted minerals and agricultural products will never even show up in sizable amounts in areas where the poor live.

I think we need to enable the poor to cluster in areas with really low requirements for housing unit size and easy permitting so they can build a society commensurate with their low earnings potential. I also think the non-criminal poor need power to keep the criminal poor away from them. So imagine a town for poor people that has the right to exclude convicts from residence.

Dr. Franklyn said at February 16, 2015 6:47 AM:

If higher education and employment is not proportional than hard workers and lazy people will become equal. Got it?

dindunuffins said at December 5, 2016 4:05 AM:

Yup IQ,so what are we going to do with all these useless thug blacks.Lowest IQ and most useless demographic.Oh,that's right all the smart weak cuck white men will watch their football thug heroes and "bakkaball" heroes bang their white wives and rape and breed out their white daughters.Good job losers!

Post a comment
Comments:
Name (not anon or anonymous):
Email Address:
URL:
Remember info?

                       
Go Read More Posts On FuturePundit
Site Traffic Info
The contents of this site are copyright ©