The Labor Force and the NEETs

Nicholas Eberstadt writes at The Wall Street Journal about working-age men who opt out of the labor force.

Who are America’s new cadre of prime-age male unworkers? They tend to be: 1) less educated; 2) never married; 3) native born; and 4) African-American. But those categories intersect in interesting ways. Black married men are more likely to be in the workforce than unmarried whites. Immigrants are more likely to be working or job-hunting than native-born Americans, regardless of ethnicity. High-school dropouts from abroad are as likely to be working or looking for work as native-born college grads.

What do unworking men do with their free time? Sadly, not much that’s constructive. About a tenth are students trying to improve their circumstances. But the overwhelming majority are what the British call NEET: “neither employed nor in education or training.” Time-use surveys suggest they are almost entirely idle—helping out around the house less than unemployed men; caring for others less than employed women; volunteering and engaging in religious activities less than working men and women or unemployed men. For the NEETs, “socializing, relaxing and leisure” is a full-time occupation, accounting for 3,000 hours a year, much of this time in front of television or computer screens.

The Beneficiary Society

Previous posts have discussed how many Americans receive federal benefits. The Pew Research Center reports:

As President Barack Obama negotiates with Republicans in Congress over federal entitlement spending, a new national survey by the Pew Research Center finds that a majority of Americans (55%) have received government benefits from at least one of the six best-known federal entitlement programs.

The survey also finds that most Democrats (60%) and Republicans (52%) say they have benefited from a major entitlement program at some point in their lives. So have nearly equal shares of self-identifying conservatives (57%), liberals (53%) and moderates (53%).

The issue of entitlements moved to center stage during the 2012 presidential campaign. The survey finds that among those who voted for President Obama last month, 59% say they’ve benefited from a major entitlement program. It also finds that 53% of those who supported Mitt Romney have benefited from a major entitlement program.

The survey, which was conducted by telephone from Nov. 28 to Dec. 5, 2012, among a nationally representative sample of 2,511 adults, asked respondents if they or a member of their household had ever received Social Security, Medicare, Medicaid, food stamps, welfare or unemployment benefits. Margin of sampling error for the overall results is plus or minus 2.2 percentage points.

The Fed and Grim Numbers

Our chapter on economic policy discusses the goals of the Federal Reserve.The New York Times reports:

When the Federal Reserve’s vice chairman said in a 1994 speech that the central bank “had a role in reducing unemployment,” colleagues were publicly dismissive. The very word “employment” did not appear in a policy statement until 2008. The Fed was focused on inflation, officials said time and again.

That era is over. The signs have been there for some time, but they are now unmistakable. Ben S. Bernanke, the Fed’s chairman, made clear on Thursday that job creation is its primary concern for the foreseeable future.

The remarkable transformation of the Fed’s priorities is partly a response to the grim reality that more than 20 million Americans cannot find full-time jobs. It is made easier by the fact that the Fed has been so successful in stabilizing inflation right around the 2 percent annual pace that officials consider most healthy.

But as circumstances have changed, so has the Fed itself. Under the leadership of Mr. Bernanke — with considerable prodding and support from a board almost entirely appointed by President Obama — the central bank has gradually concluded that it has a responsibility to act more forcefully, and, equally important, that it has the ability to spur job creation directly.

AP reports:

The number of Americans seeking unemployment benefits jumped to the highest level in two months, although the figures were skewed in part by Hurricane Isaac.

Applications increased by 15,000 to a seasonally adjusted 382,000, the Labor Department said Thursday. That's up from 367,000 the previous week. The four-week average, a less volatile measure, increased for the fourth straight week to 375,000.

Isaac made landfall as Category 1 hurricane on Aug. 28 in southeastern Louisiana and was later downgraded to a tropical storm. It disrupted work in nine states and boosted applications by roughly 9,000, Labor officials said.

Applications for unemployment benefits reflect the pace of layoffs.

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Jim O'Sullivan, chief U.S. economist at High Frequency Economics, said that after excluding the impact of the hurricane, applications are likely closer to 370,000. Still, the job market has shown little vigor this year.

Overall, the news is not good.  Bloomberg reports:

Industrial production in the U.S. unexpectedly fell in August by the most since March 2009, highlighting risks to the economic outlook a day after the Federal Reserve boosted record stimulus.

The 1.2 percent decrease at factories, mines and utilities followed a revised 0.5 percent gain in the prior month, figures from the Fed showed today. The median estimate in a Bloomberg survey of 81 economists called for no change. Another report showed purchases cooled at retailers excluding auto dealers and gasoline service stations.

A global economic slowdown is restraining demand for U.S. exports, making it harder for companies like Texas Instruments Inc. (TXN) and Dow Chemical Co. (DOW) to expand sales. Manufacturers are also challenged by the prospect of budget cuts and tax increases set to take effect at the end of the year and consumer spending that’s hampered by 8 percent unemployment.

Federal Benefits

Almost half of Americans receive some kind of federal benefit.  Just over a third live in a household receiving help from at least one means-tested program.

The US Census Survey of Income and Program Participation reports on people by receipt of benefits from selected programs: monthly averages, April, May, June, 2011. 

The figures for means-tested programs include anyone residing in a household in which one or more people received benefits from the program.

Percent            All people 100.0     Received benefits from one or more programs 49.0    Social Security 16.2    Railroad Retirement 0.1    Veterans' compensation 1.0    Unemployment compensation 1.7    Workers' compensation 0.2    Veterans' educational assistance  --    Medicare 14.9    One or more means-tested programs  35.1       Public or subsidized rental housing 4.5       Federal Supplemental Security Income (SSI) 6.5       Food stamps  15.8       Temporary Assistance for Needy Families (TANF) 2.0       Other cash assistance 1.8       Women, Infants, and Children (WIC) 7.5       Medicaid 26.4

Poverty

Hope Yen writes at The Associated Press:

The ranks of America's poor are on track to climb to levels unseen in nearly half a century, erasing gains from the war on poverty in the 1960s amid a weak economy and fraying government safety net.

Census figures for 2011 will be released this fall in the critical weeks ahead of the November elections.

The Associated Press surveyed more than a dozen economists, think tanks and academics, both nonpartisan and those with known liberal or conservative leanings, and found a broad consensus: The official poverty rate will rise from 15.1 percent in 2010, climbing as high as 15.7 percent. Several predicted a more modest gain, but even a 0.1 percentage point increase would put poverty at the highest since 1965.
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Demographers also say:

—Poverty will remain above the pre-recession level of 12.5 percent for many more years. Several predicted that peak poverty levels — 15 percent to 16 percent — will last at least until 2014, due to expiring unemployment benefits, a jobless rate persistently above 6 percent and weak wage growth.

—Suburban poverty, already at a record level of 11.8 percent, will increase again in 2011.

—Part-time or underemployed workers, who saw a record 15 percent poverty in 2010, will rise to a new high.

—Poverty among people 65 and older will remain at historically low levels, buoyed by Social Security cash payments.

—Child poverty will increase from its 22 percent level in 2010.

The "Killer Apps" of Western Society

At The Daily Beast, historian Niall Ferguson identifies six "killer apps" that enabled the United States and other Western countries to have a better standard of living than the reset of the world:

1. Competition. Europe was politically fragmented into multiple monarchies and republics, which were in turn internally divided into competing corporate entities, among them the ancestors of modern business corporations.

2. The Scientific Revolution. All the major 17th-century breakthroughs in mathematics, astronomy, physics, chemistry, and biology happened in Western Europe.

3. The Rule of Law and Representative Government. An optimal system of social and political order emerged in the English-speaking world, based on private-property rights and the representation of property owners in elected legislatures.

4. Modern Medicine. Nearly all the major 19th- and 20th-century breakthroughs in health care were made by Western Europeans and North Americans.

5. The Consumer Society. The Industrial Revolution took place where there was both a supply of productivity-enhancing technologies and a demand for more, better, and cheaper goods, beginning with cotton garments.

6. The Work Ethic. Westerners were the first people in the world to combine more extensive and intensive labor with higher savings rates, permitting sustained capital accumulation.

He adds:

Beginning with Japan, however, one non-Western society after another has worked out that these apps can be downloaded and installed in non-Western operating systems. That explains about half the catching up that we have witnessed in our lifetimes, especially since the onset of economic reforms in China in 1978.

He points to the possibility of a Western collapse and offers a remedy:

Social scientist Charles Murray calls for a “civic great awakening”—a return to the original values of the American republic. He’s got a point. Far more than in Europe, most Americans remain instinctively loyal to the killer applications of Western ascendancy, from competition all the way through to the work ethic. They know the country has the right software. They just can’t understand why it’s running so damn slowly.

What we need to do is to delete the viruses that have crept into our system: the anticompetitive quasi monopolies that blight everything from banking to public education; the politically correct pseudosciences and soft subjects that deflect good students away from hard science; the lobbyists who subvert the rule of law for the sake of the special interests they represent—to say nothing of our crazily dysfunctional system of health care, our overleveraged personal finances, and our newfound unemployment ethic.

Soaring Poor Aid

USA Today reports:

Government anti-poverty programs that have grown to meet the needs of recession victims now serve a record one in six Americans and are continuing to expand.

More than 50 million Americans are on Medicaid, the federal-state program aimed principally at the poor, a survey of state data by USA TODAY shows. That's up at least 17% since the recession began in December 2007.

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More than 40 million people get food stamps, an increase of nearly 50% during the economic downturn, according to government data through May. The program has grown steadily for three years

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Close to 10 million receive unemployment insurance, nearly four times the number from 2007. Benefits have been extended by Congress eight times beyond the basic 26-week program, enabling the long-term unemployed to get up to 99 weeks of benefits. Caseloads peaked at nearly 12 million in January — "the highest numbers on record," says Christine Riordan of the National Employment Law Project, which advocates for low-wage workers.

More than 4.4 million people are on welfare, an 18% increase during the recession. The program has grown slower than others, causing Brookings Institution expert Ron Haskins to question its effectiveness in the recession.

In The Wall Street Journal, Harvard economist Robert Barro, extending unemployment benefits to 99 weeks has backfired badly:

The unemployment-insurance program involves a balance between compassion—providing for persons temporarily without work—and efficiency. The loss in efficiency results partly because the program subsidizes unemployment, causing insufficient job-search, job-acceptance and levels of employment. A further inefficiency concerns the distortions from the increases in taxes required to pay for the program.

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The peak unemployment rate of 10.1% in October 2009 corresponded to a mean duration of unemployment of 27.2 weeks and a share of long-term unemployment of 36%. The duration of unemployment peaked (thus far) at 35.2 weeks in June 2010, when the share of long-term unemployment in the total reached a remarkable 46.2%. These numbers are way above the ceilings of 21 weeks and 25% share applicable to previous post-World War II recessions. The dramatic expansion of unemployment-insurance eligibility to 99 weeks is almost surely the culprit.