When I was born, in 1967, only 5.2 percent of men between ages 25 and 54 were jobless. Over my lifetime, I have watched that number grow relentlessly to 16.6 percent today. This ocean of underemployment is the country’s most difficult social issue, because we are far from agreeing about how to get America working again.
Those on the left favor infrastructure spending; the right wants to reform the social safety net. Political action, however, will require finding middle ground — or this shameful waste of valuable human capital will continue.
The accompanying chart shows prime-age unemployment for men since World War II. My focus on male statistics does not imply that I’m not equally concerned about women who seek work and can’t get it. But formal labor force statistics poorly measure many women’s work experiences: No mother of three young children is really jobless, even if she doesn’t draw a paycheck.
For the first 25 years after the war, male employment waned with recessions and then, as a recovery began, increased again. After 1970, however, a new pattern emerges. More men still were out of work during downturns, but the jobs never fully returned. Even during the best years of the 1980s and 1990s, the joblessness rate was always more than double its 1967 level.
The current recovery continues this same pattern, but, like everything else post-Great Recession, takes it to a new extreme. Between 2007 and 2009, the share of prime-aged males without jobs rose from 12 to 17.5 percent and then fell to 16.6 percent in the first quarter of 2014. That’s more than 10 million men looking for work.
Long-term joblessness can have terrible consequences. We learn skills on the job, but our talents depreciate when we’re out of work. Skill erosion helps explain why short-term unemployment becomes long-term unemployment. Joblessness can also destroy a sense of self-worth and lead to awful social isolation. There is a strong statistical connection between unemployment and unhappiness. The social consequences can’t be overstated for an America in which one in five adults aren’t connected to the productive economy.
As joblessness has risen, the left-wing narrative has emphasized powerful economic shifts that left too many Americans behind. According to this view, technological change, accompanied by globalization and weakening unions, reduced demand for the less-skilled. Middle-aged workers who spent their lives in blue-collar occupations found their factory-specific skills had become worthless. They chose to leave the labor force or go on disability.
The right-wing narrative emphasizes social programs which pay people not to work, including extended unemployment insurance during the recession and disability insurance. According to this view, men worked during the 1960s because they had no other choice. By expanding the safety net, we’ve followed the European path towards long-term unemployment.
Truth surely lies between the extremes. Technological changes and globalization have hit less-skilled workers hard, and being jobless is less awful than it was five decades ago.
We have a myriad of government programs, including food stamps, Medicaid, Section 8 housing, and unemployment insurance that have generally increased in generosity over time. They do, in fact, reduce the incentive to work.
Disability insurance is the most important policy linked to long-term joblessness. In 1970, 1.5 million Americans received federal disability insurance. By 2013, 8.9 million Americans received such aid. This rising number of disabled Americans is particularly remarkable since American health has improved steadily over the same time period.
Understanding how we got here should inform the best way forward.
The first priority is to reform disability insurance. The biggest downside to going on disability is that it pushes people out of the workforce almost entirely. A better system would use more graduated payment based on the variations in the level of a worker’s disability and provide more support to get the disabled back to work sooner, as economists David Autor and Mark Duggan have suggested. The system should also place fewer restrictions on working — no one should ever remain jobless because they are scared of losing their disability payments.
Next, we should consolidate social welfare programs, as Paul Ryan has suggested. It would be far better to have a single delivery regime that could tailor aid to individual needs — some people might require more housing assistance while others need food stamps. Even more important for people using the safety net: the steep decrease in benefits they experience when they earn money through paid work. This represents an implicit tax at about 30 percent across all benefits programs, a major disincentive to work.
Ryan has likewise embraced devolving control to the states. I am less confident about the benefits of decentralization, but there are surely advantages in allowing local innovation.
A third step would be to make use of tax credits, including the Earned Income Tax Credit, to increase wages instead of raising the minimum wage. It would be far better — and fairer — to employ public funds rather than impose the added costs on firms that are hiring lower wage workers. Unlike the minimum wage, government support encourages job creation.
Finally, we must recognize that we don’t know all the answers right away. We need to be open to experiments and design policies in ways that allow for reevaluation. This is a hard problem and we need to continue fighting for employment, which means learning how to get Americans the jobs that bring both economic prosperity and pride.