In a New York Times op-ed Harvard economist Greg Mankiw points to a paradox in today’s economy:
With unemployment at 3.8 percent, its lowest level in many years, the labor market seems healthy.
But that number hides a perplexing anomaly: The percentage of men who are neither working nor looking for work has risen substantially over the past several decades.
It can’t be explained by staying in school longer or retirements.
Yet schooling and retirement explain only part of what has occurred. Consider prime-age men, those from the ages of 25 to 54. These men are generally well past their schooling and well before their retirement. Yet this group has also been exiting the labor force.
In 1950, only 4 percent of prime-age men were not working or looking for work. Today, that figure is 11 percent.
As one might expect from a full-time academic he suggests education as a remedy:
One step in the right direction would be to expand opportunity by increasing educational attainment and skills training. Doing so would help expand opportunity, as well as address many other problems facing the economy. But that is easier said than done.
Spending more on education might help, but is a tough political sell. And improving the educational system could require not just more money, but fundamental reforms that are hotly contested by the various stakeholders.
Real per capita spending on education has more than doubled over the period of the last 25 years. Any notion that more spending alone will solve the problem borders on insanity.
Additionally, he never actually comes to terms with the reality that to succeed in college you really need an IQ that is at least at the median. What about the rest of the people? Real spending on vocational training has plummeted over the last couple of decades. We’re just writing most people off.
Over the last several decades the emphasis in automation has gone disproportionately to automating jobs filled by people with less education rather than more. Some of that is natural but some is an artifact. It is my considered belief that if the weavers’ guilds had been as well-mobilized a couple of centuries ago as members of the “learned professions” are today we’d still be wearing hand-woven underwear. Or none at all more likely.
Let me offer another suggestion. We are subsidizing health care to the tune of no less than $1.5 trillion per year and education by approximately another trillion. Both sectors, the so-called “caring professions”, attract and are predisposed to hire women. Since money is fungible, that’s $2.5 trillion that isn’t spent on building or making, sectors that tend to attract and hire men.
Subsidizing? So all of that $1.5 trillion is rent? Medicare patients should get free care?
Steve
Yep. That’s exactly what it is. Back in 1965 we made a choice not to allow the elderly to do without health care which many of them were doing. That doesn’t mean it’s not rent-seeking. Indeed, it’s rent-seeking both by the elderly and by people who work in the health care sector.
Without Medicare, Medicaid, the VA, sponsored government employee health care plans, and the various other government-subsidized health care plans, health care spending would be significantly less than it is now. How much less? I don’t know and neither does anyone else. To believe that health care spending would be exactly what it is now without all of the federal spending on health care is to believe that the elasticity of demand for health care with respect to price is zero. That is not credible.
I’m not advocating that we return to the pre-1965 situation. I just think we ought to realize that a) these are all rents and b) that has broader implications than just expensive health care.
Mankiw is a doctrinaire free-trader. He is perfectly happy with the loss of manufacturing jobs, because he only looks at aggregate dollars. He is also indifferent to income distribution. He, a senior academic at a prestigious school, is a member of the Ruling Class, and he has participated in the Ruling Class looting of America.
While free-trade is economically efficient and enhances economic growth, our semi-hereditary Ruling Class has not only captured all of the economic growth of the last 30 to 40 years, they have even clawed income away from working class people. Mankiw’s personal wealth and high income are monies taken from the working class. The middle class incomes have stagnated, and they (we) have not participated in economic growth.
Whenever you read Mankiw, remember that he has actually taken money away from you and your family.
It would need some quantification, but the postulate in the last paragraph has an undeniable construction.
I might add that the cash economy, the dark economy (gangs) and the govt subsidized non-worker must have a material effect. In Florida the cash economy is absolutely rampant. And we see the on-the-dole effect all the time.
I don’t think that I’m ready to conclude that the percentage of men involved in illegal or off-the-books activities is increasing yet.
So what you postulate, is that our health care would cost half as much as it does now, making it cost less per person than just about any other OECD country other than, maybe, the UK. Seems awfully unlikely.I don’t really think, nor do you, that all of those old people would be getting free care. Those who could afford it would be paying for it. Since private health care costs a lot more, I suspect our total health care spending would still be less, but probably of the order of 20% less. So not all of that 1.5T is rent. We would accomplish this by having many, many more people not have insurance coverage. Scrooge would approve.
Steve
What I think is that, had Congress controlled the growth of costs in the early to mid 1970s, health care would have been somewhat cheaper than it is now. How much? I don’t know but I’d guess 25%-35% cheaper. In other words it didn’t require letting old people die for lack of the health care they needed but could not otherwise afford. It took prudent stewardship on the part of Congress.
The challenge going forward is to push the cost of health care in that direction. We don’t really have a choice. We can’t afford the way that the cost of health care is growing.
“I don’t think that I’m ready to conclude…….”
I (no one) could ever really prove it. But its a similar logic to what you describe. More immigrants, more cash trade. More gangs…
They are not shy in Florida. They will absolutely request cash or checks made out personally. For myriad services.
How many of those men not looking for work are on permanent Social Security Disability? The number of people applying for it skyrocketed in the early part of this decade, and they are still running over 2 million (I could’t find statistics on how many are currently on SSD). If you’re on the dole for life, and you can earn extra bucks under the table, what’s the incentive to becoming a job-holding taxpayer with all the responsibilities that go with it?