A surplus of affluent females?

1. Vincent Harinam writes,

There is an average yearly surplus of 2.2 million female undergrad enrolees between 2020 and 2029. Between 2030 and 2039, this number increases Morgan Stanley forecasts that 45 percent of working women between the ages of 25 and 44 will be single and childless by 2030, the largest share in history. to 2.3 million. Cumulatively, there will be a whopping 45.1 million women without an equally educated male partner between 2020 and 2039.

. . . Morgan Stanley forecasts that 45 percent of working women between the ages of 25 and 44 will be single and childless by 2030, the largest share in history.

This has many consequences. But one of them is that it bolsters the Democratic Party. The Democrats may not reap the demographic dividend long predicted based on rising numbers of minorities, but they can more reliably count on college-educated single women.

2. Or is it a surplus of bicycles relative to fish? (possibly obscure reference) From Aella, in an interview with Bari Weiss

When it comes to gender roles, the thing that men provide is typically protection, and the thing that women provide is typically reproduction. We no longer need protection, but we still need reproduction, so it’s like, ‘What do men do? Why are they valuable? Why are they even here?’ It’s kind of the ambient question in the background. . . .I feel like this is the thing that we’re going to have to figure out how to grapple with as a culture, because with any sort of advancement in a culture, we’re going to run into this problem where the role of one gender becomes unnecessary faster than the role of the other. This creates an imbalance in value. I think the imbalance in value ultimately is the thing that’s contributing to this sort of thing where women are able to rake in huge amounts of cash online while men are like sitting alone in their basements watching.

Two articles on assortative mating

Both from Quillette, which is what you should read instead of Twitter or Facebook.

1. Branko Milanovic summarizes a variety of findings, including

high-earning young American men who in the 1970s were just as likely to marry high-earning as low-earning young women now display an almost three-to- one preference in favor of high-earning women. An even more dramatic change happened for women: the percentage of young high-earning women marrying young high-earning men increased from just under 13 percent to 26.4 percent, while the percentage of rich young women marrying poor young men halved. From having no preference between rich and poor men in the 1970s, women currently prefer rich men by a ratio of almost five to one.

Read the whole essay.

2. Daniel Friedman writes,

A spot-check of a few dozen elite and selective schools suggests that there is near gender parity at the most elite private universities, and perhaps a slight tilt toward women among selective private schools and public flagships, but not one nearly as dramatic as the nationwide numbers would lead you to believe.

…In fact, it is the least selective schools that are driving the national gender gap in bachelor’s degrees. For example, at for-profit colleges, most of which have very low admissions standards, 63 percent of students are female.

He argues that the least selective schools do not confer such high status. He claims that a woman who graduates with a nursing degree or a teaching degree is not higher status than a man who becomes an electrician without a college degree. In terms of income, this may be true. But will the teacher be willing to marry the electrician?

In any case, I don’t think Friedman’s analysis is inconsistent with Milanovic’s data.

Elites and the economy

Donald Schneider writes,

The economy has undergone massive shifts over the last several decades. The opening of new markets exposed domestic workers to fierce competition and increased the returns to scale and management. The evolution of the product cycle contributed to the hollowing out of established industries. A decades-long shift from goods production to service provision changed the allocation and intensity of capital investment. New technologies increased the returns to education and disrupted established occupations. The shifting nature and intensification of competition begat the rise of a “winner take most” model and “superstar” firms. And a rising dispersion of productivity across firms and the slowing diffusion of innovation altered the competitive landscape for businesses.

The thrust of the article is that populist economic resentment is not justified.

1. He argues that average wages have kept pace with productivity. I view all aggregate productivity estimates with suspicion, so I am not a participant in this particular debate.

2. He argues that low-skilled workers have gained in real income. This depends a lot on long-term measurement of changes in the cost of living, which is quite difficult. I lean on the side of those who think that official statistics overstate the increase in living costs and by the same token understate the gains in real income.

3. He argues that although high-skilled workers have gained ground relative to low-skilled workers in recent years, this is not because elites are rigging the game.

I agree that there is no conspiracy to exploit low-skilled workers taking place. And for years I have cited four forces that converge to weaken the relative standing of low-wage workers: the New Commanding Heights (shift of demand toward health care and education; globalization; computerization; and assortative mating.

But I would count credentialism as rigging the game. It artificially inflates the incomes of professors and adminsitrators by raising the demand for higher education. It artificially inflates the incomes of health care professionals. In government, it artificially raises incomes for people who obtain degrees that have no bearing on their ability to perform.

Economics over sociology?

Consider Marriage Markets, by June Carbone and Naomi Cahn. They write,

At the top, there are more successful men seeking to pair with a smaller pool of similarly successful women. In the middle and the bottom, there are are more competent and stable women seeing to pair with a shrinking pool of reliable men.

. . .the conclusion is short and simple: it’s the economy, stupid. And any analysis or proposed solution that does not take growing inequality into account is based on a lie.

Thanks to a commenter for mentioning the book.

I will read it with some skepticism. I certainly see a strong arrow going in the other direction, from assortative mating to inequality. If there is a reverse causal arrow, then that implies a sort of positive feedback loop.

I am not sure what they mean by the first sentence quoted above. If you define success as “college-educated,” then it is the sucessful women who have to compete for a relatively small pool of men.

Consider the following alternate universes:

1. Boys grow up in households with their fathers in households with decent finances.

2. Boys grow up in households with their fathers in households with fragile finances.

3. Boys grow up in households without their fathers in households with decent finances.

Pretty much everyone assumes that in alternate universe (1) we would have fewer problems than we have today. If the authors really believe that “it’s the economy, stupid,” then it seems to me that they either believe that (3) would work about as well as (1) or that income redistribution would be sufficient to create (1).

I read conservatives as saying that scenario (2) leads to boys who can function well as adults, and that scenario (3) does not. And conservatives see income redistribution as leading to (3) rather than (1).

Assortative Mating

Alparslan Tuncay writes,

I look at assortative mating based on the permanent wage, which is constructed by removing age and year components from wage, and using couple rank correlation in the permanent wage as the measure of assortative mating. I then document that assortative mating increased from 0.3 for families formed in the late 1960s (initial cohort) to 0.52 in the late 1980s (final cohort).

Pointer from Tyler Cowen. This is something that many of us have speculated about, but here is some actual documentation. Tuncay also looks into the causes of assortative mating (he points out that marrying later makes it possible to know lifetime wage more reliably) and the consequences (he says that it accounts for 1/3 of the increase in family inequality).

This paper is an example of the road to sociology, but in a good way. First, it relates an economic outcome (inequality) to a sociological phenomenon. Second, it goes counter to the oppressor-oppressed ideology.

City income differentials widen

Thomas B. Edsall writes,

According to Romem, between 2005 and 2016, those moving into the San Francisco area had median household incomes averaging $12,639 a year more than the households of the families moving out, $70,015 to $57,376.

Conversely, in the struggling Syracuse metropolitan area (Clinton 53.9 percent, Trump 40.1 percent), families moving in between 2005 and 2016 had median household incomes of $35,219 — $7,229 less than the median income of the families moving out of the region, $42,448.

It’s a long essay, worth reading in its entirety. Edsall’s focus is on the evolution of the political coalition that makes up the Democratic Party. But I find the economic phenomenon interesting. The data support the Handle Hypothesis that urbanization has become a winners-take-most game. The article by Issi Romem that Edsall refers to is also worth reading. Romem writes,

Why do the expensive coastal metros exhibit positive income sorting? These metros are expensive because they have restricted their supply of new housing even as they continue to generate strong demand for it.

Kevin Erdmann and many others have been saying this for quite some time.

Related: Pew reports,

In 2001, 13 percentage points separated the shares of white and African-American renter households that were burdened: 26 and 39 percent, respectively. . .By 2015, the share of African-American-led renter households that were burdened had risen to 46 percent

Rent-burdened is defined as spending more than 30 percent of a household’s income on rent. Pointer from Tyler Cowen.

I think that the political threat to the Democratic Party is minimal. Group identity seems to overcome anything. The Democrats can be anti-Israel and still get most of the Jewish vote. Their policies make housing less affordable and drive African-Americans out of Washington, D.C. or San Francisco, but they still get most of the black vote.

Disaggregating the economy: clusters ten years later

A dozen years after coming out with The Clustering of America, Michael Weiss published The Clustered World, in 2000. This incorporated census data from 1990, which moved the analysis 10 years forward, but still leaves it well out of date as of 2017.

There was a movement to outlying locales that Weiss described as “repopulating rural America,” which struck me as a questionable description. I wonder if instead it represented metro areas spreading out into “edge cities.”

There was a rise in the Hispanic population, and Weiss claimed that this population was showing signs of wanting to stick together, rather than to assimilate into the rest of the country. He also saw an increase in isolation of the African-American population, which is the opposite of what one would have extrapolated based on prior trends toward integration.

Weiss used a survey of journalists to find that they lived predominantly in a few clusters toward the upper end of the income and status scale. It was already clear to him that they would have difficulty relating to people in middle-class and poor clusters.

Writing in 2000 and looking ahead, Weiss foresaw a continued increase in growth in far suburbs. Also, he made the straightforward projection that the Baby Boom generation would be headed toward a lifestyle characterized by retirement. With aging in general, he expected to see new clusters emerging with the age 55-75 bloc, as well as a cluster of people over 85 and ensconced in assisted living facilities.

He thought that there would be a distinctive Asian cluster, but my impression is that this has not developed. If I am correct about that, then the explanation is pretty simple. The “Asian” category is too broad, encompassing mainland Chinese, Taiwanese, Japanese, Koreans, Vietnamese, Indians, Pakistanis, and so on. These disparate nationalities do not all naturally congregate with one another. Instead, one is likely to find them dissolved into the rest of the U.S. population.

I would be curious to see what clusters would show up today. I assume that Charles Murray’s Coming Apart story means that we would see clusters that differ dramatically by marital status. We would see households with two married adults in relatively large numbers in affluent zip codes, and we would see single parents prevalent in poor zip codes.

I speculate that we would see a decline in the share of employment in the for-profit sector and an increase in employment in non-profits. This is based in part on the growth of the New Commanding Heights of education and health care. Also, I am guessing that the super-rich are inclined to fund non-profits, so that the size of that sector goes up as more wealth accrues to the super-rich. I do not know how significant a trend this is, or how well it can be measured.

I speculate that we would see an increase in the urban-rural divide. That is, compare average incomes in zip codes where most households are within, say, 25 miles of a major city (one of the top 20, say) with zip codes where most households are more than 50 miles from a major city.

I speculate that differences in average levels of education across zip codes now are even more predictive of income differences than they were twenty years ago.

I speculate that we would see little progress in integration of African-Americans and Hispanics. They would continue to appear in their own distinctive clusters more often than mixed in with clusters of non-Hispanic whites.

Disaggregating the economy/New Commanding Heights watch

A chart from Jeff Desjardins shows the largest employer in each state. The results: Wal-mart is the largest in 22 states. A health care network is the largest in 12 states. A university system is the largest in 11 states. That leaves 5 states with “other,” only one of which is a manufacturing firm (Boeing in the state of Washington).

I think that this reflects a Great Consolidation in retail and in health care. Mom-and-pop stores and small medical practices have been wiped out. That means you want to be really careful about interpreting statistics that seem to say that Americans aren’t starting new businesses the way that they used to. The opportunities are not what they used to be.

Ray Dalio’s data points

The essay is on inequality, but there are interesting statistics scattered throughout. For example,

While many of the major causes of death have been flat or falling over the last 15 years, deaths from drugs and alcohol more than offset it among the bottom 60%. And the rise in drug-related deaths is not happening across the world—the phenomenon is unique to the US.

Pointer from John Mauldin.

I could swear that when I first looked at Dalio’s piece, he had more tables with more statistics, including death rates that are preventable with health interventions (higher for the U.S.) Those tables, which are in the appendix, do not show up in the version of Chrome on my laptop. Ah, there they are. They show up fine on the Microsoft browser and on Chrome on my tablet. They appear to be graphics. If you don’t see a table called “Health Care Performance Measures Across Developed Nations,” try a different browser. Those tables are a big reason that I am sending you to his essay.

Peter Zeihan’s world view

I am reading his book The Absent Superpower. You can get a lot of his ideas by watching this video. You can also see his intellectual style, which is certainly more confident than mine. He deals in strong pronouncements, and he does not worry much about establishing causality or conceding the plausibility of alternative hypotheses.

I view recent history and the near-term outlook as dominated by the four forces: increased resources devoted to education and health care (the New Commanding Heights); bifurcated marriage patterns; globalization; and computerization.

Note that a lot of economists’ bandwidth these days is focused on the computerization issue. For example, Tyler Cowen attended a conference of heavy hitters on the economic implications of artificial intelligence.

Zeihan igores those four forces in order to focus on energy markets and demographics. In the case of energy, he sees the shale revolution as a geopolitcal game-changer. Where I assume that “oil is oil,” so that the location of supply matters less than the overall match between supply and demand, he attaches great significance to the ability of the U.S. to match its own oil supply and demand. He sees this leading the United States to completely lose interest in global security and the international trading system.

Zeihan asserts that without our adult supervision, the world playground will erupt into wars: along Russia’s borders, in the Persian Gulf, and in Northeast Asia as China and Japan struggle over the sea lanes for oil in a world of energy supply disruptions.

In the case of demographics, he sees financial markets in terms of a simple life-cycle model of behavior: younger workers spend, older workers (40 – 65) save and take financial risks, and retired workers become risk averse. The Baby Boom generation has been in the older-worker phase, helping to drive up prices of risky assets throughout the world. But they are transitioning to retirement, which means they want to shift away from risky assets to low-risk assets.

Also important is the overall aging of the developed world, with the U.S. a bit of an exception. See Timothy Taylor on Asia. This is going to expose many countries to financial strife. The ratio of workers to dependents will be too low to support pensions systems.

Watch the video and/or read the book. I am curious what you think.