The Declining Economic Position of Men

'The composition of unemployment has shifted towards less skilled workers, who suffer comparatively long spells of joblessness and whose rewards from work have fallen sharply. In both these respects, they resemble the growing class of men who have simply withdrawn from the labour market'.

The 1970s and 1980s marked a striking break from the historic pattern of soaring real earnings of less skilled workers in the twentieth century. Until then, natural labour market forces, in conjunction with the pressures imposed by wage setting institutions, seemed to promise a bright economic future for the less skilled. The last 20 years however, have seen substantial declines in the average levels of real earnings among the less skilled, which contrasts with the increasing earnings of more skilled and educated males, to show an ever widening wage earnings gap.

It does not necessarily follow that the overall economic position of the less skilled has worsened. The decline in wages received by the less skilled could have been associated with the increased hiring of those workers. Had more men among the less skilled obtained jobs, the change in the economic welfare of all less skilled men would not be clear (Blackburn, 1990). The opening quotation suggests the decline of the economic position of the unskilled on two levels. Firstly, the incidence of unemployment among the group has increased proportionately more than other occupational groups. Secondly, and less obviously, there is the increasing phenomenon of non-employment as people 'withdraw from the labour market'. This is more subtle and constitutes a hidden form of unemployment. The non-employment rate captures the effects of both unemployment and non-participation and reflects lower rates of labour force participation as well as higher rates of unemployment (Murphy and Walsh).

I will examine the Irish economy in relation to these issues, comparing domestic trends with international ones, and outline some causes and effects of the declining economic position of men.

International patterns of unemployment show rising joblessness to be concentrated among groups with declining real wages. In contrast, groups with constant or real rising wages show stable or declining unemployment and non-participation. A logical conclusion therefore, is that secular increases in both unemployment and non-participation are demand driven. Based on observable indicators of skill, such as experience and education, it is well known that unemployment is greater among less skilled individuals. The 1966 Irish census showed a 21% unemployment rate among those in 'depressed occupations' compared with an overall rate of 6.3% in non-agricultural occupations.

To understand why joblessness has risen, we must explain why it has risen only among less skilled persons. Long-term patterns of joblessness suggest comfortable changes in labour demand favouring more skilled workers. The American experience provides evidence to support the 'de-industrialisation' thesis - namely the view that the shift from manufacturing employment to 'post-industrial' service work has had a negative effect on employment and wages. Employment has been stable or declining in the manufacturing industries where wage inequality is relatively low, while it has been growing rapidly in the services sector where it is considerably higher. Thus the pattern of employment has moved away from industries, that were dominated by male labour without formal qualifications, resulting in a 12% decline in employment for the unqualified group relative to graduates in the U.K.

There was an even greater movement away from low skilled work within industries. Not only did mining and construction firms contract in size, they also reduced employment of unqualified male labour by more than the average. It is important to discover what lies behind this inter- and intra-industry move from unskilled labour. Contrary to a widely held belief, Robert Kuttner states that changing technology is not the main explanation for the inequality of wages in America. Many analysts of wage inequality, both liberal and conservative, contend that the main cause is the interplay of globalisation and technology. In this view, skills matter more than ever and U.S. workers who were once overpaid, relative to their skills, are now being compensated according to global norms. One plausible model that links external product markets to internal labour markets is the Heckscher-Ohlin general equilibrium model. This model operates over a time period that is sufficiently long to allow costless detachment of workers and capital from their original sectors. According to the model, the news of economic liberalisation in, say Eastern Europe, is carried to the U.S. and European labour markets by declines in the prices of labour intensive tradeables. This, coupled with the de-industrialisation thesis, paints a forbidding outlook for the unskilled.

The above does not fully hold in the Irish economy. Huge multinational (MNC) investment in pharmaceutical and technology fields have produced a 'stop-gap' in the de-industrialisation process. Production plants, such as those of Intel and IBM, employ workers at the lower end of the earnings spectrum in a production process that involves a narrow skill scope. The longstanding trend of decreasing employment for unskilled workers has not been dramatically halted because these MNC production workers are classified as skilled or semi-skilled. This claim is often refuted as spurious on the basis of the lack of transferability of skills involved. In line with this trend, the proportion of the live register that is unskilled has declined over the same period. It would seem therefore, that 're-categorisation' of unskilled workers massage the estimates to reveal less harsh statistics.

Although there is no doubt that the shift in aggregate employment has occurred from production to services, demand factors alone do not explain the declining fortune of the unskilled. Attention must be focused on changes in the relative number of unskilled men due to the quality of their schooling and also on changes in the supply of other workers who might be relatively close substitutes for the less skilled.

Blackburn and Freeman suggest that the interaction between demand side industrial shifts and supply side educational requirements results in the degree of wage erosion being monotonically related to the level of schooling completed. Disaggregating the mean real annual earnings for U.S. workers by education and by industry between 1973 and 1987, they found that the real wage for workers without high school qualifications had dropped to 82% of its 1973 value. The corresponding ratio for those with high school diplomas was 94%.

The conclusion of the study was that those people whose education went beyond the high school diploma were able to maintain their real mean earnings in contrast to the uneducated. The incidence of higher overall wage inequality is directly related to the increasing rewards for college education and the increasing penalties attached to not completing high school. Overall wage differentials between college graduates and high school drop outs also grew by a staggering 38% in the same period.

The Irish situation is very similar to the international example. The unqualified find it harder to get a job than do other job seekers, and equally, they are also more likely to lose a job and become unemployed. The magnitude of their relative disadvantage is remarkably similar in both respects. Comparison with those with Leaving Certificate qualifications shows the unqualified to be half as likely to get a job when unemployed and twice as likely to lose a job and become unemployed.

Labour market differentials (such as those between different educational qualifications) widen through time. Education and early labour market history influence the duration of unemployment and also the kind of job the individual acquires. Poor education generally leads to jobs that are of poor quality. Such jobs are likely to be short lived and so, a pattern emerges to reinforce the effect of poor education - one of long spells of unemployment followed by short periods of unskilled employment. People's labour force histories become poorer in the sense of making them less attractive to employers. State training and 'back to work' schemes do not seem to be greatly effective. Even for these schemes, the likelihood of entering training is linked to educational qualifications - the higher the qualifications, the more likely is entry to such a scheme. Negligible long-term effects on employment exist for these schemes because those who entered a job directly from training were just as likely to lose it again as those who had entered directly from unemployment.

This demand-oriented thesis is far more plausible than the argument that increases in inactivity among men are labour supply responses by the individuals concerned. This view states that as a society becomes wealthier, people may be in a position to choose to work less, retire early or adjust patterns of labour supply within the household. This would reveal declining activity rates to be consistent with efficient optimising behaviour on behalf of the individual, but unfortunately itis not backed by convincing empirical evidence. In their examination of the British labour market, Schmitt and Wadsworth show that the share of unqualified workers in the population has fallen sharply, which is inconsistent with the idea that people 'choose' to work less. Increased educational attainment reduced the number of workers without formal education in their study by 56%. Their conclusion was that inactivity has risen primarily within skill and age groups and not because there are more individuals in the population who are prone to inactivity. This fall in participation has, not surprisingly, been confined almost exclusively to those who lack any formal qualifications.

Participation estimates have always been a contentious issue. The British estimate of the economically inactive has consistently exceeded the number classified as unemployed, with the result that the official unemployment rate seriously understates the extent of joblessness. A shrinking working population is supporting a growing non-working population. The conclusion is that high unemployment rates have depressed male labour force participation rates. In other words, inactivity has risen because more members of the high-risk groups (those without formal qualifications) have withdrawn from the labour force, not because the at-risk population has grown. Again, the Irish example is not quite so straightforward.

The 1974 ESRI report on unemployment between 1954 and 1972 noted:

The more recent picture is quite different and in the absence of tight labour markets, quite a high proportion of our unemployed has been labelled 'unemployable'. Of 20 OECD countries in 1994, only Finland and Spain surpassed Ireland's unemployment and non-employment rates. Ireland's trend of rising male non-employment is similar to widely observed international trends. There is also some evidence from international studies that high unemployment rates depress male labour force participation rates. Ireland is an exception to this generalisation. Indeed, Ireland has remarkably high labour-force participation rates in view of the high unemployment rate. Reasons for this may include the high mobility of labour in the Irish economy. The effect of altering the definition of unemployment, by treating 'discouraged' workers as unemployed rather than inactive, is to raise the unemployment rate by about 8% in 1996 - from 11.9% to 12.9% (Walsh and Murphy, 1997).

On an international scale, the increase in female participation is the single most important development in the labour market over the last 40 years. Between 1980 and 1992, women accounted for 60 percent of the increase in the U.S. workforce and 66 percent of the increase in the European. Since the end of the Irish recession in the late eighties, the number of women at work here has also increased steadily. Over the same period, a decline in female unemployment rate relative to the male rate was observed. In 1983, the female rate was 17% higher than the male, but since 1992 the male rate has been marginally higher (Walsh and Murphy). The majority of the rise in participation amongst women has come from those who previously looked after the home. However, rising unskilled male unemployment cannot be explained by a decrease in their labour supply due to increased female labour force participation. Neither have female wages reduced male labour supply through wealth and substitution effects within households. This is due to the fact that the largest increases in women's participation and income occurred in the households of high-wage men, who exhibit stable employment patterns. Thus, not only has the distribution of employment across skill groups become progressively unequal, this rising inequality has been reinforced by the concentration of employment in two earner households.

A view of Irish occupational trends shows that the female share of total employment is expected to increase fastest in what were traditionally considered 'typical male occupational jobs'. These jobs are in the manual supervisory area in which women were very poorly represented in the past. Women are also expected to gain more jobs than men in managerial, professional and brokering occupations. In short, female employment growth is almost double the average in fields, such as the managerial and professional areas, that require highly qualified workers.

To further highlight the declining economic position of men, women's share of employment in declining areas, in which men traditionally dominate (i.e. labouring) is also increasing. This means that men now have increased competition for the limited number of jobs in this area, which for an increasing proportion of male workers, is the only source of employment left.

The problem for men is not just that women are taking more jobs; it is that significant proportions of men are dropping out of the job market altogether as women enter it. The percentage of working-age men in the EU outside the labour force rose from just 8% in 1968 to 22 percent in 1993. There are numerous explanations for female success in business at the expense of men. They tend to be better educated; they stay in jobs longer (especially women with children); low-paid jobs are growing quickly and women are more ready to accept them than men. An obvious response to such shifts in female economic activity might be for men to move into areas of the economy that are expanding. But, despite the claim that concepts like 'man's work' or 'woman's work' are outmoded, men on the whole are not doing this, as is evident from their labour force decisions. Men continue to spurn even well paid work in areas dominated by women. An EU report on 'Occupational Segregation of Women and Men' noted that male manual workers are 'willing to undertake low-paid and low-skilled jobs provided they are not feminised'. The bottom line always seems to be the same: for economic and social reasons, men are suffering at the hands of women, with unskilled and ill-educated men being hit disproportionately hard.

Having outlined the evidence of international trends of rising male joblessness, as accounted for by rising unemployment and non-participation, and having also dismissed the idea of decreasing male labour supply as optimising behaviour within households, it is peculiar to find that household incomes and living arrangements of the long-term unemployed have remained stable over time. This would seem to suggest that a declining economic position doesn't necessarily imply a declining social position. For, as a group, unskilled jobless workers don't become poorer. Theory suggests that a long-run decline in the demand for various types of labour may increase the natural rate of unemployment because the rewards of employment decline for marginal workers. So it must be the case therefore, that the marginal worker endeavours in some other form of earning activity with higher relative economic rewards than are on offer in the legitimate job market. Reductions in the legitimate earning opportunities for low skilled men led to a decrease in the hours worked for those at the bottom of the wage distribution (leisure is obviously a normal good in this case). This finding is consistent with an increased allocation of time to crime among American men according to Freeman. He discovered that for many young men, illegal work may be temporary or transitional work that supplements difficult, low-wage or otherwise unsatisfactory work. For others, legal work provides alternatives to riskier illegal work or perhaps broadens markets for sellers of illegal goods or services.

American data show that incarceration figures have tripled in the last twenty years while the crime rate stabilised and in some instances increased. It is fair to deduce from this evidence that men respond substantially to the economic returns of crime. The supply of crime is elastic due to the low reservation wage of committing crime, given by depressed labour market wages. The blunt economic reality of crime seems to be that while non-working women are mothers, non-working men are, quite simply, a blight.

The implications of joblessness for society must not be understated. An American study has established a link between unemployment and family break-up insofar as joblessness reduces the attractiveness of men as marriage partners. Only 61% of the unemployed in America were married in 1989. Men generally link employment and marriage; that is, men who cannot support a family are usually less likely to form one. Dr. Patrick McKeon of Aware Depression Support, recognising the acute link between unemployment, depression, and suicide, stressed the necessity of understanding the feelings of 'the guy who lost his job...that commits suicide'. Both these issues result in a downward spiral of serious social issues that are often misdiagnosed. Rather than being poverty issues, the problems discussed in most cases have economic foundations. The ESRI study of crime in Ireland remarks:

Similarly mass unemployment (not poverty) can destroy the institutions that enforce social behaviour, such as small clubs, firms, informal networks and above all, the family, as discussed above.

As always, the problem diagnosis is far easier than the resolution. Such a multi-faceted issue requires careful attention and strategic focus.

The ESRI point to the need to address the problems of early or unqualified school leavers, before they leave school. It argues that while much concern is focused on this cohort at ages 15 and 16, the genesis of the problem, which arises at much younger ages (4-10), is for the most part ignored. It would be far cheaper and more effective in the long run to intervene at an earlier age by investing more heavily in education. To consolidate this point, it is worth remembering that long-term results of after school training programmes are, for the most part, inconclusive. This highlights the importance of early intervention in education, which is bound to be less expensive and more effective. The issue of long-term unemployment and non-participation is of paramount importance. In order to improve future employment prospects, maintaining a worker's attachment to the labour force must be a priority. Educational attainment seems to be the single most important factor likely to influence the chances of reintegration in this regard.

Labour market inefficiencies that lead to a glut of predominately low skilled jobless men must be tackled. One solution favoured by Blackburn et al. is to increase the tightness in the overall labour market. This is occurring in the U.S. for a number of reasons. Firstly, labour market entry has declined in accordance with the 'baby boom' pattern of the 1970s (birth rates declined substantially in the late 70s, from all time high rates). Secondly, incidence of education among young men is increasing in some instances. If labour demand can grow at a reasonable pace in this environment, employment and earnings of less educated men will also grow. This scenario in isolation, however, is not enough.

More general and far reaching social and economic changes are necessary to rehabilitate less skilled males. Legitimate work must be made more attractive to youths than crime. A carrot and stick policy must be pursued in this instance by:

• Increasing the penalty for crime;
• Increasing legitimate opportunities for the less skilled.

This is a huge problem, considering that men under the age of 24 are responsible for 50% of America's violent crime. There would simply be widespread reluctance by employers to ignore poorly educated youths, regardless of training schemes or newly acquired skills. The carrot and stick may not work every time.

I have shown that the Irish employment and labour force situation, more often than not, displays traits similar to international ones. Nevertheless, certain quirks do arise from time to time. Agriculture as a predominant, though declining industry provides one such divergence from the convention. But by all accounts, the employment problems of the less skilled outlined in this essay are not as severe in the Irish economy. FÁS Director General, Mr. John Lynch, has expressed his concern that there will be a shortage of 'less qualified' unskilled workers in the Irish economy in the years ahead. Recently, the migration flow (which has served as a kind of economic safety valve in the past) has changed direction - more people are moving to Ireland than are leaving. These days, American firms advertise in Boston newspapers to fill vacancies in their Irish businesses. This change is not merely at the top end of the job market either.

Despite the apparent bias towards top management and professionals, employment growth in the 1990s is more evenly spread across occupational groups than it was in the previous two decades. This trend is perhaps cyclical in nature and a product of the 'Celtic Tiger' boom in the Irish economy. The long-run will undoubtedly result in more flexible wages (downward) and labour markets will clear at a natural rate of unemployment, higher than the short-term rate experienced during the boom. Part of the reason for this, is the failure of FÁS to recognise and tackle the real problem of Irish long-term unemployment through retraining programmes, as outlined in an effort to counter hysteresis effects. Instead, FÁS suggests increased participation rates (via more women) in the labour force as a way to cope with the labour shortages of the unskilled, when this clearly compounds the problems for the jobless. Unemployment has not declined sufficiently because the economy's 'burgeoning demand for labour' has been met by rising participation in the labour force and the changing pattern of migration, as we have already discussed.

In conclusion, standard supply and demand factors explain the increase in non-employment. Evidence of sluggish real wage growth and rising wage inequality over the past 20 years has revealed increases in long-term unemployment and non-participation. Such joblessness is concentrated among groups of men with declining real wages, so the effect is doubly harsh. On the other hand, the labour market is increasingly friendly towards women, though men make more money internationally. Furthermore, there are a growing number of men who are outside the labour market are in a position to which, unlike their female couterparts, they are wholly accustomed. The decline of the economic position of men shows no sign of abating.