I periodically use a “most depressing” theme when writing about charts or tweets with grim data.
I’ve done that with regional data and also looked at depressing data from specific countries.
Today, we’re going to look at some “most depressing” information about the United States. Here’s a tweet from Yale Professor Alice Evans about labor force participation for working-age men in developed nations.
Let’s start by emphasizing that that the labor force participation rate (or the employment-population ratio, for those who prefer that data set) is a more important indication than the unemployment rate.
After all, our prosperity is tied to the quantity and quality of labor and capital in the economy. Which leads me to three observations.
- It is definitely bad news when labor force participation declines over time.
- It is even worse news when it declines for men in their prime working years.
- And it is utterly depressing when the United States falls behind other nations.
David Bahnsen has a new article in National Review on the topic of declining labor force participation. Here are a few excerpts. starting with some straight-forward economic analysis.
The labor-force participation rate (those working combined with those actively looking for work as a percentage of the non-institutionalized, working-age population) was steady and reliably around 66 or 67 percent for years before the financial crisis. The number dropped to between 62 and 63 percent after that and only started to trend higher after the deregulation and tax reform of 2017–18. That, of course, was upended by Covid and the 2020 shutdowns. …That problem is the failure of the labor-force participation rate to return to normal. At approximately 62 percent, we sit 1.5 percentage points below pre-Covid levels… While 1.5 percentage points may seem like a small number, with a working-age population of about 260 million people, it means we are about 4 million people below the trend-line… And paradoxically, this comes with more job openings than we have people looking for jobs.
This is an economic problem, but it should raise alarm bells for other reasons as well.
Simply stated, the decline in labor force participation may be a sign of eroding societal capital.
The American ethos values the dignity of work and sees purpose, meaning, and hope in productive activity. Not only does our economy desperately need the full weight of American ingenuity, innovation, and productivity, but our souls do as well. In a time of increased alienation, isolation, and desperation, a larger labor force would mean a greater number of people engaged in meaningful activity with attendant duties and responsibilities. It would allow for less substance abuse, less emotional angst, and more pursuits of passions. …Our goal must be not only maximum employment of those looking for work, but also that more people who are able to participate in the labor force actually do so. …A labor-force participation rate equal to our pre-2008 levels is attainable, but not without a resurgence of values focused on productivity. The end result would be far more meaningful than what we find in a GDP calculation.
He’s right, in my not-so-humble opinion.
Which raises the question of why the U.S. numbers are bad and what can be done to reverse the decline?
At the risk of admitting uncertainty, I’m not sure we have easy answers. For instance, I’m tempted to say the numbers will improve if we address some of the ways (subsidized unemployment, lax disability rules, licensing laws, etc).
But presumably those problems exist in the other nations in the chart. Indeed, most of those countries presumably have policies that are worse (such as bigger welfare states) than what we have in the United States.
Which means societal capital may be the problem (even though conventional measures suggest the U.S. ranks highly by world standards).
[…] Some of Biden’s supporters have been sidestepping that issue. They want to focus on the unemployment rate (while deliberately avoiding any discussion of grim data on labor-force participation). […]
[…] Some of Biden’s supporters have been sidestepping that issue. They want to focus on the unemployment rate (while deliberately avoiding any discussion of grim data on labor-force participation). […]
[…] seems to be one of Biden’s big legacies, especially when you compare the United States to other industrialized […]
[…] Center for Freedom and Prosperity President Dan Mitchell also lambasted the newspaper for “cherry-picking data.” As Mitchell put it, “That would be the only logical explanation for the failure to acknowledge what’s happened to median household income. And the author also conveniently ignores the data on labor force participation.” […]
David,
Take what Economic Policy Institute says with a grain of salt. I don’t believe they are credible. Cherry-picked numbers, heavily influenced by unions, etc. I used to be on their mailing list but canceled because they were too biased. Properly measured, wages and productivity gains HAVE tracked closer than EPI would have you believe.
Probably the biggest factor in the decline of the labor participation rate is the divergence of worker productivity with wages. According to the Economic Policy Institute, from 1979 to 2020, worker productivity increased by around 60% while wages only increased by about 17%. Anyone who understands market incentives shouldn’t be surprised that a decline in labor participation would follow a period like this. (and a couple of 4% rises in wages is not going to bring this back into equilibrium).
Another factor is the effect of long Covid. The Brookings Institute estimates that long Covid has removed 1.6 million workers from the workforce. The US has had more cases of Covid and a higher death rate from Covid than any other country. The fact that the LPR is worse in the US than in other countries shows by definition a correlation, if not a cause and effect relationship. The disparity between wages and productivity is also more pronounced in the US than in other countries.
Can’t help but wonder if it’s not a political bias that causes us to keep chalking everything bad up to social programs and wokeness, when other countries are more socialist and more woke than we are, and our LBR is the one that is the laggard.
One potential explanation is based on Ed Dowd’s analysis of insurance, disability and excess mortality data from 2020-2022. you can see his stuff on twitter.
Reblogged this on Calculus of Decay .
Steve, the graph covers only males aged 25-54 (prime working years), which basically eliminates the age demographic issue
Are the data used in the graph age adjusted or raw—is it possible the age distribution of US adult population may have changed since 1960s?
The causes of low labor participation in men 25 to 54 can be more clearly seen if you lived in times of high participation (I was born in 1949). Then, all men worked or they were outcasts. Most eligible school age boys worked in the summers doing something. Then came a political/social process to get girls involved, which was perfectly fine. Not fine was that this was the beginning of “wokeness” by elevating some to the detriment of others. Hollywood would run ads where every male was always the doofus and the woman was bright, bold and empowered. Schools started putting the thumb on boys (bad) and uplifting girls (good). Boys were put on medications in great numbers to get them to sit still and shut up. Teachers wanted every boy to be like the girls (meaning stop hitting each other and roughhousing). Boys simply liked working and doing stuff with their hands, which was discouraged. No more shop. Everyone was told you have to go to college to be somebody and many simply were not suited to college learning but going for a year or two to party was fine if someone else floated the boat. Team sports gave out trophies for participation, not accomplishment. Leaders like Jessie Jackson told everyone that just existing was sufficient to deserve accolades. Then there were drugs. And gangs. And an us vs. them attitude to law enforcement (often exacerbated by bad laws). Environmentalism started shutting down work in many male oriented industries needed by America, only to see those jobs shift overseas with even worse affect on the environment. Then came China with hoards of workers who would do what Bubba did at a fraction of the cost. Politicians saw a market and started funding what had been known as “worthlessness” in return for votes. Males that did go to college learned things not related to actual work and came away deeply in debt with no relevant job. Then came Covid and the trillion dollar flyover dumping more money on the first tier workers who made more money not working than working.
[…] just in from International Liberty’s Dan Mitchell: America’s Most Depressing Chart. […]
[…] America’s Most Depressing Chart […]
There is another aspect to the issue of working that we haven’t touched on and that is the sense of purpose, or gratification for the work we are doing. I am 77 and teach high school full time and college part time. I do not need the financial compensation I receive, but I would have a difficult time surrendering the gratitude and praise I receive from my students. This issue of working beyond “normal retirement age” (whatever that is these days) is a very personal decision.
Dale, social welfare programs encouraging people not to work is definitely one reason. Over the past 50 years or so the lower quintile has gone from generating roughly two-thirds of their income from work to only one-third. This ‘subtle narcotic’ is corrosive. However, there is also another issue over the past 50 years which is less corrosive: the entry of women into the workforce. Dan’s chart is for men only. Some husbands have dropped out of the workforce because their wife is the earner.
Phil, you don’t know it, but you’re kind of quibbling. The “quantity and quality of labor and capital” are related to “rule of law, property rights, sound money, fiscal policy, trade policy, and regulatory policy.” That is, when a government does a good job setting rule of law, property rights, etc, it encourages a greater quantity and quality of labor and capital. More accurately, it does less to discourage labor and capital. Labor and capital are more direct in leading to prosperity, but rule of law, property rights, etc are crucial upstream ‘institutions’ that either support or hinder labor and capital. But both categories can be said to create prosperity.
Burke Files, the more onerous taxes and regulations become, the more economic activity will get shifted to the cash (or ‘gray’) economy.
7omup, I tend to agree with you, as long as the non-working represents the free choices of a free people. As I said above, I’m pretty sure the falling labor force participation of men is due to both A) govt programs paying them to not work and B) married couples choosing to have the husband stay home. If govt programs are the reason some men aren’t working, that is unhealthy for them individually and all of us collectively. But if the reason is more wives are working, that is not so unhealthy.
7omup,
I really enjoyed your post. You’re thinking outside the box.
I especially liked this paragraph:
“And finally, the time when someone is in their prime for working is also when they are in their prime for skiing and scuba diving. People who choose to prioritise activity when they can do it with the understanding that they may need to sit at a desk in their early 70s are making reasonable decisions.”
I had never thought of it that way, but in a sense it is what I have done. My wife and I spent a ton of money when we were raising our children and they had lots of free time in the summer. We took them to Europe about 10 ten times. We also took them all over the U.S. Now here I am at the age of 67 still working (fortunately my job is not very taxing) and looking at working at least until the age of 70 (if not beyond) to get maximum social security. And while I’m not retired, I have built up to six weeks of paid vacation, so my wife and I can do a lot even though I still work. I don’t regret any of it for a minute. The experiences we shared with our children are priceless.
Thanks for your insights!
[…] Courtesy of International Liberty. […]
When we imagine a utopian society, I doubt anyone imagines a world in which everyone works all the time. Rather we imagine everyone having plenty of leisure and the opportunity for travel, time to work on their own projects, and even the freedom to create their own employment. We can see many people who are doing exactly that, for instance youtubers and etsy producers.
During lockdown one uber driver offered all his clients the option of paying him $50 a week and he would do all of their shopping and deliver their purchases in a contactless way. I doubt the chart captures this type of innovation.
And finally, the time when someone is in their prime for working is also when they are in their prime for skiing and scuba diving. People who choose to prioritise activity when they can do it with the understanding that they may need to sit at a desk in their early 70s are making reasonable decisions.
The chart is not depressing to me. It’s simply a visualization that things are changing, that we’re living longer healthier wealthier lives and so have options. That the US is moving in that direction more quickly is not at all surprising.
[…] Courtesy of International Liberty. […]
[…] Courtesy of International Liberty. […]
I agree with Date. I would also add that in many locations, they have not “quit” working but have shifted to the cash economy. My tree trimmer is now cash only, and my handyman is now cash only. Being curious about these things, I asked folks who used nannies and maids, yep all are cash only.
A graduate from ASU’s MBA program graduated “out of cycle” in January 2021 and could not find a traditional employment offer she liked. She decided to put her education to work and is doing very well with an eBay store. What’s very well, about 3X of her highest offer.
Changes underway before the pandemic were accelerated by the pandemic. Our measurements may need to chnage.
Dan, you write that “…our prosperity is tied to the quantity and quality of labor and capital in the economy.” But in the very link that sentence takes us to, we find:
“This is an understandable tendency, and I’m sometimes guilty of over-emphasizing fiscal policy. But all of us should realize that a country’s economic performance is governed by a wide range of policies.
“Indeed, the research suggests that there are five big factors that determine prosperity, and they’re all equally important.
“Rule of law and property rights
Sound money
Fiscal policy
Trade policy
Regulatory policy”
So, what does determine prosperity? What you wrote in today’s post (what I first quoted) or what I quoted from your 2012 post? I suppose one could say “All of the above.” (I happen to be a great believer in the importance of property rights in creating prosperity, something I picked up from the great Peruvian economist, Hernando De Soto – not to be confused with the explorer). But if it is “all of the above,” then your statement in today’s post about the roots of prosperity seems misleadingly simplistic.
Finally, if we rank high by world standards in social capital, how can that be the problem (your last sentence)? I think some more explanation is called for.
The present social welfare programs facilitate (actually encourage) people not to work. This is undoubtedly part of the problem. While reducing the welfare state would have a salutary effect on this problem, it is not the answer that will cure this problem. This is a social issue. The underlying social values that honor hard work are dissipating. While welfare programs play a part, our social fabric is worn and weak.