Friday, August 13, 2010

Mulligan points out that summer still happens

Casey Mulligan's economix blog post asserts that labor supply is an important part of the labor market. That's hard to argue with, but it's also hard to swallow the evidence he offers as a particularly clear-cut reason why the "stimulus law is partly responsible for today’s low employment, precisely because so many of its components have eroded work incentives."

Mulligan show that seasonally unadjusted employment for 16-19 year olds has continued to jump each summer. His graph also shows that while the seasonal summer spike is still there, it too has fallen lower each year along with the rest of the monthly trajectory as the recession has taken its toll. (Or as anti-recessionary policy has created disincentives, if you like.)

I'm not surprised that the recession hasn't halted summers! Or put differently, summer activities. Something tells me that some moms and dads still ship their kids off to summer camp, where some of the workers are ... 16-19 years old. But there are probably fewer parents doing that than normal, because some are now unemployed and can spare the time themselves, or they're cutting camp costs out of their tightened budgets. Camp employment is surely not all of the spike among 16-19 year olds, but I'm not convinced that it's a pure labor supply effect, with idled teens facing a lower price of time (during the school year, the opportunity cost of working is skipping school!). It seems to me that there is probably a seasonal labor demand effect too, tied in to seasonality in preferences.

Greg Mankiw's take is that Mulligan offers a reason to eschew extreme Keynesianism (demand-driven everything) in favor of more of a synthesis view. It's hard to argue with that one, too!