Free trade, more robots, disability benefits some of the causes
Millions of Americans who would have been working 20 years ago no longer do so because of vast changes in the U.S. and global economies.
The sizzling U.S. labor market has knocked the unemployment rate down to a 17-year low, but millions of Americans in their prime who would have been working back then do not have jobs now.
How come? China, robots, disability benefits, minimum wages and jail-time are the biggest culprits, according to a pair of researchers at the University of Maryland.
The percentage of the U.S. population with jobs sank from a record 64.7% in 2000 to a 28-year low of 58.2% by 2011 before beginning a gradual recovery. The brunt of the decline occurred during the 2007-2009 recession, but the problem had been long in the making.
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“These worrisome developments were exacerbated by the Great Recession, but their roots preceded its onset,” wrote economists Katharine Abraham and Melissa Kearney at the University of Maryland in a new report. Abraham is a former commissioner of the Bureau of Labor Statistics.
The problem is still acute among young people and even Americans in their prime working years of 25 to 54, especially men.
Surprisingly it’s not the case for older people nearing retirement age. The share of those ages 55 to 64 actually rose until just very recently.
Whatever the case, the impact on the economy is profound.
If men and women from the ages 25 to 54 took part in the labor market at the same rates as they did in 1999, another 3.5 million Americans could either be at work today or looking for jobs. That would be more fuel for the U.S. economy and a bigger source of workers for businesses crying out about a shortage of labor.
The China trade
What caused these people to leave the labor force — or not even enter?
Not surprisingly the acceleration in global trade, punctuated by the emergence of China, had the biggest impact, the researchers found.
Millions of jobs that used to be performed by working-class Americans shifted overseas or disappeared after the turn of the century. Manufacturing was particularly hard hit — more than 5 million jobs were lost from 1999 to 2016.
Trade with China flooded the U.S. with cheap imports, forced domestic firms to shift operations overseas and put downward pressure on wages of less-skilled Americans.
The rise of robots appears to be another critical factor even though the effects of automation are harder to determine, the report said. Think of how many bank jobs have been lost due to ATMs and online banking, for example.
A smaller but not insignificant factor is an increase in federal disability benefits. The percentage of men ages 25-54 on disability insurance rose by a third since the mid-1980s. Many used to work in manufacturing.
The disability program plays “an increasingly important role in providing income for less educated workers negatively impacted by” trade, automation and the like, the authors said. A “sizable” number of those approved for disability benefits would have worked if there applications were turned down.
Higher minimum wages are probably another cause.
After declining in inflation-adjusted terms from 1998 to 2007, minimum wages rose almost 11% in real terms between 2007 and 2016, Abraham and Kearney estimated. Firms may have outsourced jobs or spent more on automation to offset the higher costs of low-skilled labor.
A greater percentage of men serving time in jail, especially African Americans, had a similar impact as higher minimum wages. Even though crime rates fell, tighter sentencing laws resulted in more people going to prison.
The ill effects of a prison sentence also last well beyond time served. Companies are reluctant or unwilling to hire those with criminal records unless they have no choice.
Video games not to blame
The authors found little evidence to support other popular theories.
The share of unemployed men with working wives has actually fallen, for instance.The authors also could not find evidence that declining labor-force participation is tied to opioid addiction or more young men playing video games in their parents’ basements. Nor is lack of child care or more people getting food stamps to blame.
It’s possible these explanations played a role, but more research is needed, Abraham and Kearney said. Their report was published by the National Bureau of Economic Research.
Almost no employer is willing to hire anyone over the age of 55. It is actually advantageous for employers to pursue this line of thinking due to medical insurance costs, as well as being able to pay younger people less money. This is not only true in the unskilled jobs, but also does extend to the skilled and technical professions.
The 2008 recession hasn’t ended. The stock market blowing a big bubble. Most companies now have high deductible / high employee participation fee – the health care plans are worthless.
I know an engineer (about 60 yrs old) that works as a security guard.
I believe this is a big contributor to the ‘opioid epidemic’. A lot of people have been discarded and fucked over.
Not necessarily. Many over 55s come with health insurance. They are either insured under a spouse’s policy or have one from their previous employer. This makes them ‘cheap’ as the new employer does not have to provide one to them.
I beg to differ. You are incorrect. How does one have “health insurance” from a previous employer? Maybe in other countries, but not in the USA. Termination from employment terminates health insurance as well.
I was one of those terminated from employment due to age. The EEOC complaint that I filed was denied (“lack of merit” actually “wrong color”). I was lucky enough to be hired in a technical field at 60 years of age after a year-and-a-half period of being unemployed, but actively looking for work.
Easy! Virtually ALL public employees get to keep the health insurance plan they had once they are ‘vested’ in the retirement program. I kept mine after only 10 years service and it was why I could retire at 58. If I had to buy an equivalent private health plan it would have cost over $1400/month. It paid out more than the pension I got. Thank you local taxpayers.
Some retired private sector employees ( think Union and executive level) also get company paid health plans at least until they turn 65 and become medicare eligible.
Between 1979 and 2016, the share of prime-age men who aren’t working rose from 6.3% to 11.9% — at the same time, the share of prime-age women not working dropped from 29.8% to 24.1%.
Black men are twice more likely than white or Hispanic men to not be working. And those who do work are working fewer hours than people of other racial ethnic backgrounds and less overall.
The situation was worse for black men without a college degree. More than 25% of black men with a high school diploma and roughly 50% of those who had not graduated high school or earned a GED weren’t working.
Unemployment in private industry caused by: automation, cut-throat competition, 28-year old immigrants replacing 40+ year olds, outsourcing, cost-cutting. No overtime pay, no pension, no free healthcare, layoffs by the thousands at a moments notice.
Perpetual great employment in public sector. Retire at 50 with a pension that is more than your last salary (pension based on last year’s pay – not salary), full healthcare, never work an hour w/o getting paid, very few layoffs, no need to compete – just roll out of bed and clock in.
What a disconnect. Who really works for who? Taxpayers work for the ‘Public Service Employee’ unions.
Soon, the only jobs will be with government and Amazon.
We can see in the pic that it’s one old experienced dude who is reluctant to retire. The boss would have to hire 3 or 4 young workers to replace him. Then he’d have to hire a HR person to deal with the headaches of absenteeism and interpersonal problems; racial, sexual, disabled…. Bah, just close up shop and move to India.
Once again, the China took our jobs fallacy raises its head.
http://www.pewresearch.org/fact-tank/2017/07/25/most-americans-unaware-that-as-u-s-manufacturing-jobs-have-disappeared-output-has-grown/
US output has grown. US manufacturing as a percent of GDP remains unchanged. How is it possible then that China took the jobs?
US is consume more, financed by debt. China, and others, is filling that extra debt-driven consumption market. But that is NOT the same as saying China took our jobs. China created jobs and created a demand with low prices.
These idiots really are clueless.
Where did you think most of the MANUFACTURING JOBS have gone? Down the rabbit hole? When they rebuilt the Bay bridge the job specified American steel. They had to modify the RFP’s because there wasn’t enough steel produced in the U.S. even for that one job. So they used Chinese steel.
Cause they get free shit and they are not hungry. That is why they aren’t working.
Businesses are largely looting what they can right now, and calling it good.
The days where you built a company as a way to generate generational wealth are gone.
TPC – hardly. The opportunitiesfor the young will be legion.
Big Injun Chief strikes again!
We cannot take anything coming from the acedemic sector of the nation at face value the political control of the purse strings especially in the state of Maryland is off the charts . The threat of a Federal Government Shut Down has Annapolis legislators pissing themselves because the state loses approximately $2.5 MILLON a day in state income taxes if federal employees are not paid . Like all liberal run orginizations the money is already spent . The real industry was snuffed out decades ago and it is not coming back . The jobs the salaries are gone and that’s it ! The government schools and colleges clamor for more money to educate people for jobs that do not exist .
Certainly imports were a factor but I recall servicing cranes in 1980 at the largest steel plant in the country with rebuilt travel controls from the Baltimore trolley system . Hard to stay competitive with 1920’s technology that requires mechanics hustling overtime to keep shit from falling apart . Meanwhile in a Japenese Shipyard our counterparts could ease a 200 ton load down to touch an egg and not crack it with their equipment . Don’t give met that wage bull shit the foreign competitors paid full medical , vacation and retirement and were fined heavily for laying people off . You keep people working producing at a profit instilling faith and pride in what they do . Here we toss working tradesman aside like dixiecups ! No wonder young people say screw it !
I’m just throwing this out there. Could there be some UBI (univ basic income) ploy at work? The govt isn’t adverse to trial balloons to evaluate how things actually play out.
Henry Ford CREATED a market which had not existed when he paid his employees $5.00 per day. The average wage of the day was around $1.25 per day. Of course, the wall street types and the banksters howled that Ford’s wage rates would destroy capitalism. Guess what?? The OPPOSITE happened. Henry Ford knew one of the basic tenets of a truly free, capitalistic society, that a well-paid work force would be able to participate and contribute to a strong economy, unlike what is taught in business schools today–that wages must be kept to a bare minimum and that the stockholder is king. Our “free trade” politicians have assisted the greedy wall street types and banksters in depressing wages on the promise of cheap foreign labor and products. A good example of this is the negative criticism that Costco receives for paying its employees well above market wages. These same wall street types praise Wal-Mart for paying its employees barely subsistence wages while assisting them in filling out their “public assistance” (welfare) forms. Any sane person KNOWS that in order for capitalism to work, employees need to make an adequate wage. Unfortunately, this premise does not exist in today’s business climate.
Henry Ford openly criticized those of the “tribe” for manipulating wall street and banksters to their own advantage, and was roundly (and unjustly) criticized for pointing out the TRUTH. Catholic priest, Father Coughlin did the same thing and was punished by the Catholic church, despite his popularity and exposing the TRUTH of the American economy and the outsider internationalists that ran it . . . and STILL run it.
Our “race to the bottom” will not be without consequences. A great “realignment is necessary (and is coming) . .
I love it when people display their ignorance so openly as anarchyst. He puts forward the old Ford story as true, when it is a created legend made up in an effort to support higher wages.
Ford did not start out paying those wages. Quite the contrary. But he was unable to retain employees. He found that in order to retain employees to do a mind-numbingly repetetive job he had to pay them more than average. He found that by so doing his costs actually went down. The $5 a day story is also not quite accurate.
It had zero to do with anything else. It was a business decision based on costs. Imagine that.
Instead of spouting urban legend, people should do, you know, some actual research.
You are wrong. but only partially correct in one aspect. Henry Ford paid good wages in order to retain his employees. Assembly line work was boring, repetitive and not well liked by people who were traditionally farmers and craftspeople not accustomed to large-scale production practices.
Henry Ford’s own writings stated as such, that paying his people well would also allow them to buy his products. Until then, cars were “playthings for the rich”. Ford made it possible for almost anyone to afford his products, as “economies of scale” were able to reduce both costs and retail prices.
Henry Ford’s $5.00 per day was not a myth (as you stated) but was paid out $2.50 per day in direct wages and $2.50 per day deposited in an interest-bearing account, being made available to the employee after a certain amount of time.
It appears that you have swallowed the college “business school” model of how businesses should be run…the lowest common denominator of pay for the worker while the stockholder reaps great rewards. That model has never worked–and never will.