Economist Erik Hurst is looking at how technology affects labor supply:
In my third summer project, I’m trying to understand the labor market and patterns in employment over the last 15 years in the US. Specifically, I’m interested in employment rates of young (in their twenties), non-college educated men. In prior work on changes in demand for low-skilled labor, the theory exists that as technology advances, both employment and wages fall due to decreased demand.
In this strand of my research, I’m almost flipping that theory on its head by asking if it is possible that technology can also affect labor supply. In our culture, where we are constantly connected to technology, activities like playing Xbox, browsing social media, and Snapchatting with friends raise the attractiveness of leisure time. And so it goes that if leisure time is more enjoyable, and as prices for these technologies continue to drop, people may be less willing to work at any given wage. This explanation may help us understand why we see steep declines in employment while wages remain steady — a trend that has been puzzling economists.
Right now, I’m gathering facts about the possible mechanisms at play, beginning with a hard look at time-use by young men with less than a four-year degree. In the 2000s, employment rates for this group dropped sharply — more than in any other group. We have determined that, in general, they are not going back to school or switching careers, so what are they doing with their time? The hours that they are not working have been replaced almost one for one with leisure time. Seventy-five percent of this new leisure time falls into one category: video games. The average low-skilled, unemployed man in this group plays video games an average of 12, and sometimes upwards of 30 hours per week. This change marks a relatively major shift that makes me question its effect on their attachment to the labor market.
To answer that question, I researched what fraction of these unemployed gamers from 2000 were also idle the previous year. A staggering 22% — almost one quarter — of unemployed young men did not work the previous year either. These individuals are living with parents or relatives, and happiness surveys actually indicate that they are quite content compared to their peers, making it hard to argue that some sort of constraint, like they are miserable because they can’t find a job, is causing them to play video games. The obvious problem with this lifestyle occurs as they age and haven’t accumulated any skills or experience. As a 30- or 40-year old man getting married and needing to provide for a family, job options are extremely limited. This older group of lower-educated men seems to be much less happy than their cohorts.
I am currently working to document this phenomenon, but there is a real challenge in determining what the right policy response might be to address the underlying issues.