Where you grow up can affect your chances of employment

The share of men with a job has been on the decline since about the 1960s.

While the overall U.S. employment-to-population ratio has been on the decline since 2000, the decline in the male employment rate far precedes the turn of the century. The share of men with a job has been on the decline since about the 1960s, and that trend holds up for men of all ages as well as for men in their prime working years (ages 25 to 54). What could explain this structural decline? Explanations often focus on trends that affect workers once they are in the labor market such as globalization and technological change. But new research points to the potential influence of one’s childhood environment.

This new research is part of the Equality of Opportunity Project, headed by Raj Chetty of Stanford University and Nathaniel Hendren of Harvard University, and is also co-authored with Frina Lin of Stanford and Jeremy Majerovitz and Benjamin Scuderi of Harvard. Like the rest of the research in the project, this paper used administrative tax data to look at long-term trends. In this case, the paper focuses on children born in the 1980s, looking at the gender differences in employment rates.

Looking at the aggregate data from the Bureau of Labor Statistics, you’ll notice that men have always had a higher overall employment-to-population ratio than women in the United States. But the data from Chetty and his co-authors show that this gender difference doesn’t hold up once we look at the family background of the worker. Men from low-income families (below the 20th percentile of family income) are less likely to have a job than women at the age of 30. Above that rough income threshold, however, men are more likely to have a job than women at that age.

What’s also interesting is the significant amount of geographic variation in this gender employment gap for children of low-income backgrounds. The authors note that the gap is only 3 percentage points for low-income boys from New York City, while the gap is 12 percentage points for Charlotte, North Carolina. These two areas are symbolic of the large variation across local labor markets in the United States. In some areas, boys from low-income backgrounds actually have higher employment rates than girls later in life.

Using this variation in the gender gap, Chetty and his co-authors see what aspects of local labor markets are correlated with the gap. They find three characteristics that are strongly associated with lower male employment relative to female employment:

  • A higher share of African Americans in the population
  • More income and racial segregation in the area
  • Less stable family structures, measured by a higher share of single mothers

The authors find that the first characteristic—a higher share of African Americans in the local population—is the most strongly associated with the gender employment gap.

However, when controlling for all three of these variables simultaneously the results show that the black share of the population and the amount of segregation are still statistically significantly associated with gender employment gaps, while the share of single mothers is no longer significant. Looking at just the causal effects of a neighborhood, based on other work by Chetty and Hendren, the authors find the correlation between segregation and worse outcomes for men is due to the effect of growing up in a more segregated area, as opposed to the kind of people who grow up in that area.

So while explanations for why employment rates for men have been on the decline focus on events in adulthood, we’d do better if we also looked at what happens during boyhood. Trends like increased income and racial segregation interacting with reduced economic opportunity may be pushing young men toward crime and a criminal justice system that seems to do more to reduce further employment than reduce crime. Turning more attention toward these structural problems seems like a worthy endeavor.

February 8, 2016

AUTHORS:

Nick Bunker

Topics

Economics of Place

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