Call Me Back - with Dan Senor - The Hidden Jobs Crisis - with Nicholas Eberstadt

Episode Date: September 3, 2022

While the unemployment rate ticked up slightly to 3.7% in August from a low of 3.5% in July, job growth still remained well above the pre-covid trend. There are over 11 million job openings – that��s more than twice the number of unemployed people. But according to a growing body of economics and social science research, the headline jobs numbers that we all track conceals a much bigger problem – the hidden crisis of able-bodied workers in their prime working age (25-54 years old), actually choosing to completely withdraw from the labor force. This has been a growing trend since the 1960s, but the pandemic accelerated it. One of these experts is Nicholas Eberstadt, who wrote a book in 2016 called “Men Without Work: America’s Invisible Crisis”. He’s re-releasing the book this week, updated as the Post-Pandemic Edition. Eberstadt is at the American Enterprise Institute (AEI), where he researches and writes extensively on demographics and economic development generally. He has written numerous books. He earned his PhD and masters degree in political economy from Harvard, and a Master of Science from the London School of Economics.

If you were looking at the unemployment rate, you were missing four-fifths of the problem. And all of the happy talk from the Fed and from Washington about how we were at full employment or near full employment was missing the fact that we had this economic and social crisis under our noses. We didn't see this crisis because these guys were not rioting in the streets. They were sitting at home and all too many of them were getting ready to die deaths of despair. A new jobs report is just out. While the unemployment rate ticked up slightly to 3.7% in August from the half-century low of 3.5% in July, job growth still remains well above the pre-COVID trend. So labor market strength endures.

They're north of 11 million job openings. Think about that. That's more than twice the number of actual unemployed people. For every unemployed person today, there are more than two job openings available. But according to a growing body of economics and social science research, the headline jobs numbers that we all track so closely conceal a much bigger problem. The hidden crisis of able-bodied workers, predominantly men, in their prime working age, 25 to 54 years old, actually choosing to completely withdraw from the labor force. This has been a growing trend since the mid-1960s, but the pandemic accelerated it to a whole other level of crisis. One of these experts who has been screaming from the hilltops about this and its implications for

society is Nicholas Eberstadt. Nick was also early in identifying another worrisome trend, the coming population decline, which he joined this podcast earlier this year to discuss. Now, as for the hidden jobs crisis, Nick wrote a book in 2016 called Men Without Work, America's Invisible Crisis, and he's re-releasing the book this week, updated as the post-pandemic edition. Nick is at the American Enterprise Institute, where he researches and writes extensively on demographics and economic development generally. He's written numerous books. He earned his PhD and master's degree in political economy from Harvard and a master of science from the London School of Economics.

The Hidden Jobs Crisis. This is Call Me Back. And I'm pleased to welcome back to the podcast my friend Nick Eberstadt of the American Enterprise Institute, a demographer, a social scientist, an author of numerous books and studies and papers on a whole range of issues that all sort of intersect at the topic we will be discussing today. Nick, good to have you back. Hey, thanks for having me back, Dan. It's great to be here. So, Nick, you wrote this book in 2016 called Men Without Work, and you are in the days ahead

re-releasing the book, or I guess releasing a new edition. The new edition has a long new introduction that updates the book in 2016. But before we talk about the book now, that's coming out now, can you talk, just to set the stage here, can you talk about what the thesis of the 2016 book was about, the original Men Without Work? Well, I called it Men Without Work, America's Invisible Crisis, because for half a century, our country, our describers and deciders had ignored this gradually accumulating problem, which was the collapse of work for prime age men. That's a kind of a nerdy term of art. It means guys 25 to 54. They're kind of the backbone of the workforce, but they're also obviously pretty

critical to society since they form and raise families. Over a 50-year period, the work rate for these prime age men had fallen to a level that was then mirroring the tail end of the Great Depression. By 2016, work rates were actually lower than they had been in early 1940 when the national unemployment rate was almost 15%. So we had a depression scale problem in our country for guys and work. But in our modern era, this isn't because there was mass unemployment. It's because there was a flight from work by men that was eerily regular for like 50 years. No matter whether there were good times or bad times, recessions or flush booms, there was this regular retreat from the workforce. And so by 2016, when I wrote this book, there were four times as many guys who were neither

working nor looking for work as there were technically unemployed out of a job and looking for work. The point was, if you were looking at the unemployment rate, you were missing four-fifths of the problem. And all of the happy talk that we would hear from the Fed and from Washington about how we were at full employment or near full employment was missing the fact that we had this economic and social crisis under our noses. We didn't see this crisis because these guys were not rioting in the streets.

They were sitting at home and all too many of them were getting ready to die deaths of despair. But the point of my book was that we were not going to prosper as a nation unless our men, this non-victim class group, unless our men get back into society and back into economy in a prosperous, healthy way. That line, which is a pretty provocative line, which you also write in the book, I quote, America cannot prosper unless its prime age men do. So that is contrarian in some corners these days, but what is necessary for American society to prosper. So can you just explain,

just put a little more depth of what you mean by that? Sure. Until we have a population that is raised from hatcheries or special genetic stations, human beings are raised in families and human beings are raised by parents and parents ought to be able to sustain and nurture their kids and i don't think anybody you know outside of greek amazonia myths has come up with a way of having a society that doesn't involve men raising kids, providing for families and societies. It may not be the only thing, but it's pretty central pretty much everywhere. And what we had seen for over two generations was a decline in the male capability to serve as a provider and also as nurturer. The same guys who were checking out from the workforce were also checking out from families. They're checking out from society. It's not me saying this.

It's looking at the self-reported description by the labor force dropouts to the Bureau of Labor Statistics of what they do from the time they wake up in the morning till they go to bed. They were, by their own reports, they really weren't doing civil society much. They weren't doing much help around the house. They weren't doing much with family members. They weren't even getting out of the house that much. What they were doing was watching screens. We don't know from the surveys what they were watching or what kind of screens, but like 2,000 hours a year as if it were

a full-time job. Needless to say, this is not the way to hone skills to get back into the game. And since half of these guys were reporting that they were taking pain medication every day, you could see a pretty grim path that was being presented here. So you use that term, deaths of despair, and it's a term that's loosely thrown around. So just for our listeners here, deaths of despair refers to a 2015 study by Princeton economists, right? Anne Case and Angus Deaton that examined a striking phenomenon. Something like since the year 2000, you may have more current data, but I think since the year 2000, U.S. deaths from suicide, drugs, alcohol abuse, have turned sharply upward after having been flat, actually,

for I think a better part of the second half of the 20th century. You got it exactly right, Dan. And so they, yeah, economist Anne Case and her Nobel economist husband, Angus Deaton, wrote a series of papers and then a book about what they designated as deaths of despair. The causes that they defined as signs of deaths of despair were suicide, cirrhosis, drug overdose, drug poisonings um and all of those rates have been going uh spookily up for um for this well especially for less educated anglo um adults but you could add to that i mean they did not include for example deaths from deaths from cardiovascular disease, CVD, but deaths from cardiovascular disease have stopped declining and actually started increasing for certain segments of this group, which is a little bit too close for comfort to what was happening in Russia in the bad old days and in the days under Putin.

And so why, what's the, so just now that we've explained what deaths of despair, what it refers to, can you just tie it back directly to this phenomenon of men without work? Sure. Because you call it, because you say it's a crisis in hiding because there aren't, as you said, protests in the streets. There aren't violent uprisings around it. It's people kind of just withdrawing from daily American life

and then winding up in a really bad place, one of despair. Yeah. Well, it's, and if you were to be a kind of a bloodless social scientist, you'd say that it was a depletion of social capital in our country because of an increasing lack of connection between a critical segment of our population and the anchors of the economy, meaning employment, of society, meaning family, community. I think if we were to look at it a little bit more closely, and these data are a little bit harder

to get, I think we'd also find that it's a crisis of faith. I think we'd find that there's probably been a collapse of religiosity and belief there too, but I can't prove that. And all of these raise questions about meaning, meaning of life for people. They also exacerbate the crisis of trust that we have in America in our institutions. So it is not entirely unrelated to the broader political problem that we've been having in our country over the past generation. And you write in your book,

in the new edition, that part of the problem here in diagnosing, one of the challenges here in diagnosing the problem is that we are overly reliant on the headline unemployment number. Unemployment number is all we refer to, but in a world in which the not in labor force,

NILF, meaning these prime working age men that you describe, in a world in which that component is the fastest growing component of America's male population, the unemployment rate is meaningless because there are many more of these people not working than there are unemployed. Yeah, absolutely. So we're fighting the last war in our unemployment statistics, in our official unemployment statistics. We are working with a system that was devised to track the crisis of the Great Depression. And with a Great Depression mentality, it was entirely reasonable to ignore guys who were out of the labor force. Why would he be out of the labor force?

Well, maybe because you're incapacitated in some sort of sense. Otherwise, everybody's going to be looking for a job. That did not turn out to hold after World War II. It held for the first two decades after World War II. But starting in the 1960s, we saw this steady, seemingly unstoppable exodus from the workforce by prime age guys. And as I said, it's almost a straight line from 1965 to the present. It's close enough to a straight line that you'd call it a social science straight line. It's almost like it's a geological phenomenon. And if we don't pay attention to that,

we certainly will not be able to do the population arithmetic that'll tell us how fast the American economy will grow. We'll be blindsided by growing income and wealth gaps in the United States. We'll be surprised by the slowdown in mobility. We'll be surprised by the fragility of families. If you don't include this, you're going to be surprised by a whole lot of things and not in a good way. And just as far as the data is concerned, so it's more than 11 million jobs are open. So that's more than twice the number of unemployed right now, right? Like if every person that's capable of working chose to reenter the labor force,

they would have plenty of options for employment. Yeah, depending on the month, it's gotten up as high as twice. It's got the, uh, the unfilled slots in the United States economy are sometimes over twice as high as the number of unemployed people. I mean, we've, we've entered this strange new world. Uh, we've never, we've never seen this in peacetime. Let's put it that way in the the United States economy. And still, millions and millions of people who were former workers are sitting stubbornly on the sideline, despite all of the

bargaining that power they have with the great resignation. This is a huge new dysfunctional problem for our economy and our society. And in terms of the societal impacts, what does it mean when you have this many working age men electing not to work in terms of their role in their communities? Not just their families, their role in their communities, their changing and probably diminishing social status in their communities. Well, sure. I mean, economists have this mental tick. They're trained, and I say this as a recovering economist myself, they're trained to describe free time as leisure, right? Because leisure is a, uh, you know, because, because free time is a luxury good, you know, people want to have more of it.

Uh, you know, you can afford to have more of it if you have more income and so forth. Um, but, but that's like calling, sending money abroad, foreign aid. It presupposes the use of it, right? Presuppose that it turns out to be like aid. The people who have dropped out, uh, the guys who have dropped out of the labor force are not using their free time to, uh, study, uh, Schopenhauer and to, um, you know, to grow, uh, you know, the public gardens, uh, you know, in their communes, they're trapped for the most part in slothful, miserable syndromes, which is why the risk of deaths of despair has become so high. And being disconnected from the economy, family, and society in this sort of way can't help

but have an impact upon self-esteem for many people. And another tick that economists have is that they talk about poverty as if poverty is just like a material shortfall. You go back a century or a century and a half, and everybody over the age of 15 knew that there was a distinction between poverty and misery, or what they used to call vice. And the misery quotient for male dropouts in our society is not being measured very well, but I think it is unmistakably increasing to really tragic levels. for a lot of these problems are often sourced to decline in manufacturing, domestic manufacturing, the economic competition from China, the technological divide between those with college diplomas and those without. You argue that we're putting too much stock in those explanations? All of those, uh, all of those aspects of the received wisdom are unobjectionable. They're clearly there, and this is clearly a global phenomenon. Um, but they don't tell the

whole story for the United States. And I don't even think they tell most of the story. For example, if we really were seeing a problem that was demand driven, that was driven by the economic and structural change that the conventional wisdom imparts on us, we would not have this straight line going upwards of not in labor force percentage of the male prime population. You can't tell when recessions occurred in this, looking at this timeline. You can't tell when China entered the World Trade Organization or other disruptive technologies. There are a lot of other things which don't fit with the conventional wisdom, but I think the evidence of our senses kind of like smacks us around the head and shoulders when we see 11 million open jobs like we have right now.

Back in 2016, when the first edition of Men Without Work came out, one of the critiques of my thesis was, Eberstadt, you fool, there isn't any work out there. There's no work to be had. It's kind of hard to make that argument now. issues with friends who are in the business of the academic world, the economist world, they often cite a number of statistics, one of which is nominal net worth for US households, I think in the first couple of decades of the 21st century, surged by something like $100 trillion. You start breaking that down on a per capita basis, it's pretty jaw-dropping. So how do you react to that? Yeah, this may be a problem, but you're overstating it because the quality of life measured in economic terms has increased so dramatically. The wealth created

for American households during these couple decades that you're so concerned about has increased so dramatically? Well, I think point number one is the distinction between poverty and misery. I don't think any society in history has had as much wherewithal as we have today. But that isn't to say that we've banished misery. Poverty and misery have, wealth has been going up, but also misery has been going up. And there's something seriously dysfunctional there. Second point is, if you look at the dashboard for the economy, we've got three trends that are going in different directions that should all be going in the same direction. The US economy has been creating wealth in an absolutely wonderful and fantastic way. There's never been a wealth creating machine like the modern US economy. But if you look at what's been happening with the real economy, with GDP per

capita, goods and services, in the 21st century, so far, per capita income's been growing by 1% a year. I mean, if we were to keep this up, and I hope we don't, but if we were to keep this up, this would mean that we'd only get a doubling of our country's per capita income over the course of about 70 years. It means it would take until one's grandchildren grow up before you had a doubling of income in the United States. There's something seriously out of kilter with that. And if you look at what's happened with employment, our, our employment rates have gone steadily down, uh, consistently down and dramatically down since the beginning of the century. If we had the same work rates as, uh, back in, uh, back in 2000, we'd have 10 or 11

more, uh, 10 or 11 million more paid jobs than we have now and you can think how different our country would be. The point here is you don't have to be Larry Sabato to see that if you have a big increase in wealth for the wealth holders and a big drop in work for the workers, you're setting the stage for some pretty snaky populist reactions. And here we are. You write in this new edition that COVID introduced something different, work without men. And then you also say, parenthetically, is that it did COVID create this, the, the, your, your focus on women in the labor force or, or not in the labor force for that matter, in a way that you weren't focused on in your, in your pre COVID edition? Well, I, I wanted to focus in particular on the problem for men in the first edition of the book, just because that was like

such a flashing red light. It was also true that there was a growing problem of work for women at the time I was writing. From about the year 2000 onward, work rates for women were also declining as well as for prime age men. But the dimensions and the duration of the decline in work for men was much bigger and more acute. So I focused on the men. What we've seen since the COVID pandemic is this extraordinary eruption of a labor shortage. I mean, we all know about it. I mean, you don't need the statistics for it. You can't go anywhere without seeing employers practically begging for warm bodies. And so we've got this new and really different situation on our hands, and the unfolding of the pandemic crisis, and no less importantly, the government's

response to it. I argue in this new edition that Washington's response to the pandemic, while rescuing us from the very real possibility of a second global economic collapse, had the unintended effect of disin in all of recorded economic history. with a lockdown that seemed to be possibly teetering on collapse, in which disposable income was higher than it had ever been before. It was above pre-pandemic trend. After a little shock in the spring, expenditures were higher than on pre-pandemic trend. So during this economic crisis, American consumers had more money and were spending more than they had been doing before the pandemic. That's a pretty unusual economic trend. In fact, now, of course, the reason for this was that we opened the fiscal spigots like we'd never opened them before. We had this fire hose of fiscal stimulus and the transfers.

And Washington was transferring so much money to American households that they couldn't spend it all. And you as a market maestro must have seen this at the time. I mean, American savings- I don't know about maestro, but all right. But you must have seen- Market participant, yes. Well, you must have seen this at the time. I mean, US savings rates more than doubled

in 2021 and 2022. That's not what happens in economic crises, right? That's not what happens in contract crises, right? That's not what happens, you know, in, you know, contractions and jams like that. So during the, apart from all of the wealth effects that were created by the Fed's, you know, zero interest rate policies during that time, and all of the other heroic interventions that the Fed did with increasing equity asset values, Americans took home a kind of a pinata of over $2.5 trillion of extra net savings during those two years. And for the first time in a generation, the net worth of the bottom half of the United States really went up, went up above the level that had been at, you know, at the end of the Cold War. One of the problems, I think one of our social problems in the US over the past generation was that our wealth

machine hasn't been working to increase the assets of the bottom half of our society and that's a pretty big problem. Thanks to Uncle Sam and the COVID lottery, the bottom half of the United States saw its net worth almost double. And with that sort of money, you can either, you know, augment your earnings or maybe substitute for it. And what I argue we have seen is a lot of substitution, especially among older workers, workers over the age of 55. We've seen since the pandemic began,

a lot of people over 55 who have gone into a sort of a premature retirement. That's a big part of the manpower gap that's contributing to this unfilled work demand. And you argued in your first edition of the book that we had been building since the mid-60s, you go back to 1965, this sort of infrastructure in our welfare state that you now say has evolved into the first real experiment and when i say evolved meaning evolved through its next stage during the pandemic what you're just describing yep uh into a an experiment in universal basic income that this is basically universal basic income so first can you explain for those who don't follow this topic closely, what is universal basic income and why what

we just experienced is the closest we've had to an experiment? Sure. Universal basic income, also acronym UBI, is the concept of an unconditional guaranteed salary for all adults, depending on what group you decide you're going to have it for, by dint of being a member of society, a population, whatever. It's an argument or a concept that has been favored in some academic circles, in some development, economics, and foreign aid circles, in certain Davos circles for quite some time. And it has received increasing attention in the United States under the argument that there will be a massive displacement of labor by

new technology, AI disruption, and so forth, and you have to protect the population's livelihood. This is the background noise behind what just happened. With the pandemic uninsurance benefits, and you may remember those, the $600 a week and then the $300 a week thing, you did not actually have to be unemployed to receive those. They had a very broad purchase. And in fact, you didn't have to be below the poverty line. You could have, you know, some people had six-figure incomes who are getting the pandemic benefits. And so at one point in this 18-month experiment, we had over twice, maybe almost two and a half times as many recipients of these benefits as we had people actually unemployed, maybe 17 million more people receiving them than were actually unemployed. We were kind of stumbling into an experiment with a UBI.

Of course, one of the big questions about this is whether unconditional outside income is going to affect people's work behavior or their expectations about work and working in the labor market in the future. And so we're now into kind of like that phase of the experiment. And is there any effort to acknowledge this was a once-in-a-generation crisis? The government had to intervene with extraordinary measures. We are now out of that crisis, so we need to seriously begin to disassemble

what we created during the pandemic for the reasons you're arguing. Well, I mean, we had a, you know, it's like getting in the boxing ring with Mike Tyson being punched in the face. I don't, I think all of our strategy went out the window when we had this emergency on our hands and the policymakers, it's easy to second guess them now, but the policymakers were trying to prevent an, you know, an economic collapse in the United States. And so there were certain

things which they were going to get wrong, even if they got the big objective correct. What we have not seen now that we should have caught our breath is a kind of the retrospective in looking at what we did right and what we did wrong and what we can learn from this. And I still don't think we've had enough reflection on the unintended consequences of this absolutely unprecedented intervention in our economy. I try to provide a little bit of this in the second edition of men without work. I Want to you talk a lot in this in this book about the role in this

not in labor force and ILF of working age men in the prime of their working age lives, I think it's 25 to 54, as you said, the segment that is serving in prison, but I guess even more importantly, out of prison, so ex-cons. Can you, and you try to put this in context with the whole debate over mass incarceration, quote-unquote. But can you talk a little bit about that? Sure. Let me preface this with a prologue as a recovering economist, okay?

One of the things that modern economists are taught to do really well is to work with data sets, with well-behaved data sets. They can do fantastic stuff with our modern statistical tools with well-behaved data sets. But in a way that kind of makes us like dogs with a dog dish, right? Because if there isn't the right dog dish there, you kind of walk along and find another dog dish and you can do your neat tricks. For some reason, and I don't know what this reason is, the US government, which have been the world's leader in social, demographic, economic statistics, you know, since our first population census when our country was founded, decided it didn't want to collect figures after World War II on the explosive increase in our ex-con population. We had this crime wave that began in the 60s and was followed by a wave of

punishment that came a little later on. But we do not have any national figures on how many people in our society have been sentenced to a felony. We've got figures on how many people are in prison, on probation, on parole, but not how many people have been sentenced. Okay. So some defiant, you know, demographic brother nerds did these reconstructions of the felon population, the ex-con population of the United States. I think they did a pretty good job. Their work suggested that by 2010, there were almost 20 million men and women, obviously overwhelmingly guys, adults in the United States, who had a felony conviction in their background. If you do back of the envelope numbers, we'd be talking about well over 25 million today. Now, we know that we've got this mass incarceration thing going

on in the United States that's unlike any other affluent democracy. We've got over 2 million, mainly men, behind bars in the United States. But these numbers mean that for every person who's behind bars incarcerated, there are 10 ex-cons in society as a whole who are kind of invisible. And if you do the basic arithmetic, this means that something like one out of seven adult men has a felony in their background today, probably higher for the prime age men. This is a gigantic blind spot in trying to understand where we are as a society and obviously where our labor market is. Because if you don't collect information on this, you're going to be surprised by a whole lot of things. And we still don't have the evidence for evidence-based policies for what's called re-entry, for trying to get people who have

paid their debt to society to kind of get back in the job market, get back in families and all of that. Uh, so this I think is a, um, this is a, an immense and almost entirely ignored problem in 21st century America that we still haven't gotten our, uh, arms wrapped around. All right, Nick, we will leave it at that. Uh you for joining this conversation. We will post in the show notes your recent books and articles and essays, all of which are worthy of devouring as I have. It's a difficult topic, but it's one I'm fascinated by, and I think you've been early on it. And I think it's going to be a very big theme in our public policy debates over the next decade through the 2020s. So thanks for shedding some light on it and where we're going in the state. Thanks so much for inviting me, Dan. It's been a lot of fun.

That's our show for today. To follow Nick's published work, you can go to AEI.org. That's the homepage for the American Enterprise Institute. And you can also order any of his books at barnesandnoble.com or at your favorite independent bookseller or that e-commerce site that I think these days they're calling Amazon. Call Me Back is produced by Ilan Benatar. Until next time, I'm your host, Dan Senor.