Unemployed or unwilling to work: NILFs v. Help wanted

January 2022. Try to understand and then explain how an American economy has ten million jobs open and one hundred million working age adults on the sidelines. Let's start with a review of basics.

When teaching management and leadership, the first week or day of class included a presentation on some of the basic numbers in the labor force in the United States. Part of that lecture I included in a talk to the District of Columbia Catholic Business Network in November 2013. Some key facts, posed as a quiz, are excerpted (in italics) below.

I will start with a quiz.

1. What is the population of the United State? 314 million (332 million in 2022) http://www.census.gov/popclock/

2. How many working age Americans are there? 245m (262 million in Dec 2021) http://www.bls.gov/news.release/empsit.t01.htm

3. How many employed Americans? 136m (149 million in December 2021, down from a peak of 152 million in Dec 2019) http://data.bls.gov/timeseries/CES0000000001

4. How many Americans over the age of 65? There are now more Americans age 65 and older than at any other time in U.S. history. According to a new Census Bureau report, there were 40.3 million people age 65 and older on April 1, 2010, up 5.3 percent from 35 million in 2000 (and just 3.1 million in 1900). (54.8 million in 2020) http://money.usnews.com/money/retirement/articles/2012/01/09/65-and-older-population-soars

Here is the most startling fact. While our population has increased by almost 40 million people since 2000, the number of Americans actually employed – working in our labor force – is exactly the same as it was thirteen years and with forty million more people living in America.

Bring these data forward nine years and the situation is much worse. The problem is that most economists, pundits and politicians view the current data through the political lens of the pandemic. As bad as the pandemic has been for employment, the pandemic is not the root problem and, when the pandemic is finally determined to be an endemic rather than pandemic issue, return to the ‘old normal’ in the area of employment would be a problem, not a solution. The ’old normal’ employment patterns of the entire twenty-first century have to be corrected.

This leads me to a recent interview with Nicholas Eberstadt in the Wall Street Journal, The Underside of the ‘Great Resignation.’ The original article (file attached) and excerpts, indented and in italics, follow.

The Underside of the ‘Great Resignation’ - WSJ.pdf

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The Underside of the ‘Great Resignation’

The trend toward idleness has been years in the making, says the author of ‘Men Without Work.’ That’s an ill omen for the economy and the culture.

By Mene Ukueberuwa

Jan. 21, 2022 3:09 pm ET

The labor-force participation rate was 61.9% in December. That’s 1.5 points below the pre-pandemic level, and barely changed since August 2020.

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“Overall labor-force participation peaked in 2000 at about 67%,” Mr. Eberstadt says, counting everyone 16 and older. “We’re currently about 5 points lower than that.” Population aging is a major cause of the drop, with a greater share of Americans now at retirement age. “But the work rate for prime-age people—25 to 54—has also been going down since the turn of the century.”

The decline started with men, at the same time women entered the workforce en masse. “In 1961, labor-force participation for prime-age men was at 96.9%,” Mr. Eberstadt says. Since then, “the chart looks more or less like a straight line down.” By November 2021, “the seasonally adjusted rate was 88.2%.” Almost 1 in 8 men is sitting out during his best years.

That may not sound huge, but the drop is unprecedented. “Would we think it was a crisis if the work rate fell below the Great Depression level?” Mr. Eberstadt asks. “Well you can check that box. We’re already there.”

Women have started to backslide as well. “It isn’t as extreme,” Mr. Eberstadt says, “but we are seeing the same sort of drift.” The work rate for prime-age women peaked in 2000 at 77.3%, and it’s oscillated since then, standing around 75% today. The slowdown has come despite a long-term decline in marriage and childbearing, the factors most commonly thought to keep women out of work.

The sum of these trends is a lot of missing workers. Mr. Eberstadt estimates that if the U.S. maintained its employment-to-population ratio from 2000, we’d have more than 13 million more workers today. That would be more than enough to fill the record number of open jobs.

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The share of working-age Americans claiming Social Security Disability Insurance has roughly doubled in the past half-century, from about 2.2% in 1977 to 4.3% last year. The federal government spends more on disability insurance each year than on food stamps and welfare put together, and few recipients work.

As Mr. Eberstadt writes in “Men Without Work,” it’s hard to prove that these programs “caused the male flight from work.” But he argues that they at least “financed it.” The benefits cushion the impact of dropping out.

Further compounding the problem of correcting for economic stagnation and a broad decline in prosperity and the quality of life, is the usually well-intentioned but shortsighted and counterproductive to ignore this fact: Sustainable wealth creation is the necessary pre-condition to sustainable wealth re-distribution.Instead of recognizing and creating policies that promote this fact, politicians and progressives have focused exclusively on the re-distribution of wealth or, to cite Margaret Thatcher, “The problem with Socialism is that eventually you run out of other people’s money.”

This leads to Herbert Byard Swope, who said, “I cannot give you the formula for success, but I can give you the formula for failure - which is: Try to please everybody.” Trying to please every special interest or demographic group with a short-term ‘fix’ requires re-distribution of wealth yet usually no creation of wealth. Which leads to another paraphrased quip, “When you find yourself at the bottom of a hole, quit digging.”

“Digging” in this case refers to efforts to re-distribute (a declining creation of) wealth while failing to acknowledge the giant holes in economic development that have been created by all this digging for ‘solutions.’ And to be clear, this is not in reference to assistance to the truly needy and marginalized, those who are unable to take care of or fend for themselves. I am talking about providing assistance to those clearly able yet unwilling to take care of themselves…and more, to create wealth for others. Rather than receive taxpayer assistance, earn an income and pay taxes. Adopting this stance is inconsistent with progressive priorities and not simple to do, but it must be done. And while programs to “get people back on their feet,” such as paid apprenticeships, technical skills learning programs and tax breaks – especially Social Security taxes -- for low-income earners are a good idea, seeming ‘solutions’ like an increase in college loans or in the number of people attending college are not solutions; they are more ‘digging.’

There have been many proposed or practiced efforts to dig society’s way out of an already deep hole, and often these attempts are labeled as a form of ‘social justice’ or ‘equity’ yet, upon closer examination, they are not solutions not justice. These injustices or examples of further digging include: reparations, Social Security at age 62, payments for fraudulent disability claims, generous college loan/debt offers or debt forgiveness programs, UBI (Universal Basic Income) programs, and a higher minimum wage. All of these efforts discourage employment, employment that would create wealth, including tax revenues.

Recent news of ten million unfilled jobs and over four million work resignations provide important evidence for this thesis, even as official unemployment rates remain reasonably modest and the increase in the number of people in poverty has not been significant. With 262 million Americans of working age and only 149 million Americans employed, it is hard to imagine over 100 million people are all unqualified or unable to fill those ten million job openings. And while there a certainly several million Americans of age who are unable to work, there are also millions of those 54 million over-65’s who continue to work, so the number of Americans able yet unwilling to work still number about 100 million.

Of course, among those 100 million there are probably tens of millions of stay-at-home parents who choose to stay at home, in part because their spouse or partner works outside the home and provides an income. This is not an argument to force stay-at-home mothers with working spouses to “go to work,” but it does surface the problem of single-parent households, where the cost of daycare exceeds the value of the work produced by the single parent with a job outside the home. While a ‘quick fix’ here is to provide free childcare, there is some evidence to support the value of at-home care over ‘outsourcing’ parenting. And low-cost of subsidized daycare remains a cost and wealth re-distribution, not a form of wealth creation. The sustainable, long-term solution is two-parent families, households that can either afford to have one parent at home with their children or can afford to pay market rates for daycare from two incomes. This absence from the labor force also belies the canard that immigrant labor is needed “to do the jobs Americans won’t do,” as the government provides both incentives for Americans to stay out of the labor force while also creating incentives for migration to the United States. And, in the short run, the latter will also play a significant role in increasing the poverty rate, i.e., poor, poorly educated and unskilled immigrants who are willing or needful to take below-market wages and to work in the ‘shadow’ or cash economy, while still providing tens of millions of dollars of remittances to their home countries each year,.

A few years ago, after over forty years in higher education and teaching about leadership and management, wealth and poverty, United States and global economies, and prosocial and antisocial behaviors, I reached a useful if oversimplified explanation as to the causes of lives lived in poverty, and it was this: In prosperous economies, poverty is often the result of sex outside of marriage. In the much less prosperous economies, poverty is the outcome of sex within marriage. For the United States, this identifies the two primary demographics behind poverty which, in the United States, is concentrated among children, especially children of single-parent families and of families of recent immigrants, with the larger portion of childhood and household poverty to be found in those single-parent households, regardless of the race or gender of the single parent. This household structure is not only the center of poverty in the United States, it is also one of the largest barriers to employment for working-aged parents and the source of many other antisocial behaviors among children, including dropping out or performing poorly in school, engaging in criminal activity, especially drug-related criminal activity, being arrested, convicted and jailed, and becoming the mother or father of a single parent household.

In sum, social justice and optimum prosperity will best be possible when we have a culture that encourages, supports and invests in wealth creating behaviors and that discourages, disincentivizes, and minimizes poverty-creating behaviors. This means the triumph of individual prosocial behavior over individual antisocial behavior. This means more individual responsibility and less collective guilt. This means a focus on the family rather than on the village, as in “it takes a village,” including the current progressive interest in separating children from their families to make them wards of the state. We can -- and must -- do much better than that.