Monday, February 20, 2017

Miserable 21st Century

Nicholas Eberstadt in Commentary, (HT Marginal Revolution) offers a revealing look at what's wrong with "middle" America's stagnation. Read the whole thing, but the following snapshot jumped out at me.

He starts with a review, probably familiar to readers of this blog, of the sharp decline in work rates, even among prime-age men and women.
As of late 2016, the adult work rate in America was still at its lowest level in more than 30 years. To put things another way: If our nation’s work rate today were back up to its start-of-the-century highs, well over 10 million more Americans would currently have paying jobs.
Why are so many not working, not studying for work, and not even looking for work? What is going on in their lives? One answer:
The opioid epidemic of pain pills and heroin that has been ravaging and shortening lives from coast to coast is a new plague for our new century...
According to [Alan Krueger's] work, nearly half of all prime working-age male labor-force dropouts—an army now totaling roughly 7 million men—currently take pain medication on a daily basis.
I think Krueger had a different idea in mind: that they are in pain, indicated by medication, so can't be expected to work. How the explosion in disability jibes with a much safer workplace is an interesting puzzle to that view. Eberstadt has a different interpretation, and the lovely thing about facts is they are facts, not interpretations.
We already knew from other sources (such as BLS “time use” surveys) that the overwhelming majority of the prime-age men in this un-working army generally don’t “do civil society” (charitable work, religious activities, volunteering), or for that matter much in the way of child care or help for others in the home either, despite the abundance of time on their hands. Their routine, instead, typically centers on watching—watching TV, DVDs, Internet, hand-held devices, etc.—and indeed watching for an average of 2,000 hours a year, as if it were a full-time job. But Krueger’s study adds a poignant and immensely sad detail to this portrait of daily life in 21st-century America: In our mind’s eye we can now picture many millions of un-working men in the prime of life, out of work and not looking for jobs, sitting in front of screens—stoned.
(Mark Aguiar, Mark Bils, and Kewin Charles and Erik Hurst have a new paper coming soon, which I just saw presented, "Leisure Luxuries and the Labor Supply of Young Men", with some more facts about time-allocation of non-working young men. They emphasize cheaper and better video games and leave out drugs.)
But how did so many millions of un-working men, whose incomes are limited, manage en masse to afford a constant supply of pain medication? Oxycontin is not cheap. As Dreamland carefully explains, one main mechanism today has been the welfare state: more specifically, Medicaid, Uncle Sam’s means-tested health-benefits program. Here is how it works (we are with Quinones in Portsmouth, Ohio):
"[The Medicaid card] pays for medicine—whatever pills a doctor deems that the insured patient needs. Among those who receive Medicaid cards are people on state welfare or on a federal disability program known as SSI. . . . If you could get a prescription from a willing doctor—and Portsmouth had plenty of them—Medicaid health-insurance cards paid for that prescription every month. For a three-dollar Medicaid co-pay, therefore, addicts got pills priced at thousands of dollars, with the difference paid for by U.S. and state taxpayers. A user could turn around and sell those pills, obtained for that three-dollar co-pay, for as much as ten thousand dollars on the street."
You may now wish to ask: What share of prime-working-age men these days are enrolled in Medicaid? According to the Census Bureau’s SIPP survey (Survey of Income and Program Participation), as of 2013, over one-fifth (21 percent) of all civilian men between 25 and 55 years of age were Medicaid beneficiaries. For prime-age people not in the labor force, the share was over half (53 percent). And for un-working Anglos (non-Hispanic white men not in the labor force) of prime working age, the share enrolled in Medicaid was 48 percent.
By the way: Of the entire un-working prime-age male Anglo population in 2013, nearly three-fifths (57 percent) were reportedly collecting disability benefits from one or more government disability program in 2013. Disability checks and means-tested benefits cannot support a lavish lifestyle. But they can offer a permanent alternative to paid employment, and for growing numbers of American men, they do. The rise of these programs has coincided with the death of work for larger and larger numbers of American men not yet of retirement age. We cannot say that these programs caused the death of work for millions upon millions of younger men: What is incontrovertible, however, is that they have financed it—just as Medicaid inadvertently helped finance America’s immense and increasing appetite for opioids in our new century.
The VA has also been a part of getting veterans addicted to pain killers.

If you dozed off, the main point: Half of non-working prime age men take daily pain medication. Half of non-working prime-age people are in Medicaid, which pays for re-sellable opiates. Three-fifths of non-working prime age Anglos receive disability payments. The latter benefits disappear if you take a job, or if you move, a steep disincentive that Nick does not mention.

I knew the story, but was not really clear on the magnitude. Half.

An advantage of government-subsidized drugs Nick points out: crime is down. However, our criminal justice system offers another barrier to employment and advancement:
...rough arithmetic suggests that about 17 million men in our general population have a felony conviction somewhere in their CV. That works out to one of every eight adult males in America today.
In the understatement of the year,
we might guess that their odds in the real America are not all that favorable.
The bottom line
And when we consider some of the other trends we have already mentioned—employment, health, addiction, welfare dependence—we can see the emergence of a malign new nationwide undertow, pulling downward against social mobility.
Actually looking at people's lives in this way is devastating to the nostrum that "inequality" is mysteriously increasing and just needs more transfers, or its just a lack of "jobs" which can be brought back by left-wing "demand" or right-wing trade restrictions.
people inside the bubble are forever talking about “economic inequality,” that wonderful seminar construct, and forever virtue-signaling about how personally opposed they are to it. By contrast, “economic insecurity” is akin to a phrase from an unknown language.
This is I think an inartful choice of language. I hear "insecurity" a lot from the left, for example just how it is that obese people have trouble paying for food. And, Orwellian language or not, they do have a point. "Insecurity" is not the core of the problem. "Barriers to Advancement" sounds too old fashioned. "Caught in the web of awful disincentives" is more accurate but does not sing.
The abstraction of “inequality” doesn’t matter a lot to ordinary Americans. ...The Great American Escalator is broken—and it badly needs to be fixed.
With the election of 2016, Americans within the bubble finally learned that the 21st century has gotten off to a very bad start in America.
Reading the Weekend New York Times, especially the Review, I think this is actually false. Americans within the bubble are still foaming at the mouth with Trump Derangement Syndrome. But when they get a grip,
Welcome to the reality. We have a lot of work to do together to turn this around.

23 comments:

  1. So does all this sad stuff make some form of universal basic income seem more attractive? A UBI done right would scrap almost all of disability and means tested programs and also eliminate a lot of the disincentives faced by poorer people built into the current system. I’m not especially happy to give healthy young men cash, but I’d rather give them cash than Oxycodon.

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    1. See here: http://johnhcochrane.blogspot.com/2016/06/universal-basic-income.html

      Short: The attraction of UBI INSTEAD of large, complex programs is that it can remove lots of unintended disincentives. UBI WITH the programs, which is what most of its advocates want, just bloats the budget and adds more disincentives. Alas a $20,000 UBI (say) is pretty little in America today, especially if it comes in place of all other government support -- health insurance subsidies, food stamps, affordable housing boondoggles, disability, medicare, medicaid, job training schemes, and so on and so on. Anything more, and we run out of other people's money to spend. There is a certain logic to complex systems that actually can give more help to people who need it.

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  2. Totally agree. Good analysis. Yes, shocking. db

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  3. As is always the case - what do we do about it? This goes back to the post about how costs of education have exploded but the results haven't shown up anywhere.

    It seems we've been cognizant of these developments for some time . Disability - basically a version of the basic income guarantee, along with large increases in education spending, welfare and medicaid spending have all been responses to this long run secular trend.

    A grim thought - well, at least these people won't have kids so its a kind of one time malaise that will work itself out. And since opiod users are unlikely to live to the point of collecting large scale medicare benefits, we may be spared that spending as well.

    But that's a horrible way to think about the issue, but its the only result that makes sense to me. We simply have no way of denting long term job dislocation. Every other method has failed spectacularly or been met with perverse incentives.

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  4. Read book of Exodus.., right now charging straight into open Seas.

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  5. I'm not sure your analysis jibes with this data from FRED.

    https://commons.wikimedia.org/wiki/File:Unemployment_and_employment_statistics_for_the_US_since_2000.png

    I don't have the raw data to drill through but it appears to me that many folks got off the gerbil wheel in 2008 and 2009 and never went back.

    It is my suspicion that if you went back further in time then 2001 that the civilian-employment population ratio is reverting to historic norms. That is to say the ratios that were present in the US prior to women joining the workforce.

    I don’t believe there is anything sinister going on here; anecdotally, I have seen this with many friends who quit working but has a spouse who still does.

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  6. Egads, what an awful mess.

    Still, I think good macroeconomic policy regards very-tight labor markets, even "labor shortages," as a feature, not a bug…

    If the goal is labor shortages, then the justification for many social welfare programs is lessened. A nation with labor shortages is a happy nation.

    Yet we have a central bank that targets having at least one of every 20 Americans who want to work, to be out of work. More, if central bankers think inflation is too high.

    We have an establishment that contends that illegal immigrants, desperate for work, are just an inevitable, or even desirable, feature of the US jobs scene.

    Other changes are needed too: The elimination of property zoning, and the decriminalization of push-cart, truck or motorcycle sidecar vending.

    Retailing is something ordinary people without much capital can do---and start their own businesses. Push-cart vending, the norm in many Third World nations.

    But in US cities, a guy who tries to vend is told he must rent space zoned retail. Gee, property zoning limits the supply.

    Funny how right-wingers frame an issue.

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    1. I agree, I refuse to vote for politicians who have ever complained about the possibility of "labor shortages". We should be trying to achieve labor shortages. Labor shortages are how poor people become rich.

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  7. From the same piece.....
    "America’s population of non-institutionalized adults with a felony conviction somewhere in their past has almost certainly broken the 20 million mark"
    Curiously close to the 30 million number of Trump enthusiasts.
    Felony conviction.... refused employment ..... now easily angered.
    The one thing I like the Brothers Koch for is their opposition to allowing felony convictions to be a factor in hiring.
    --E5

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  8. Rumors of the death of the US economy are overblown. For the past five years, US real GDP is just a tad lower than it was for much of the 2000's and late 90's yet they weren't complaining about the economy then.

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    1. The US economy is doing fine. It's a subset of the American population which has been left behind and is NOT doing fine.

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    2. Good thing there are the same number of people in this country as then, or else there would be real problems.

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  9. I like the video games/leisure thesis you put out here. It seems that it is increasingly easy for people to satisfy their basic and leisurely needs with much less money than before, and hence choose to work less. As a surfer I know many people like this, who live to surf and only work the bare minimum to support their hobby, so they can maximize the amount of time in the water. However increasingly entertaining video games, TV etc, make this "cheap" leisure almost accessible to anyone - with an internet connection, although illegal you can get most of this stuff for free.

    However, I don't agree with the link of health insurance/medicaid to opioids. Of course health insurance will facilitate access to prescription drugs, and the infamous opioids are included in that list. But many countries in Europe have single payer or universal healthcare systems without this pill popping culture that the US faces, with doctors that have no accountability when recommending these drugs.

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    1. "pill popping culture that the US faces" .... no wonder. Just look at the pharmaceutical industry's advertising energy. US doctors are presented with patients who are already persuaded to demand particular fancy-named pills. Other countries have less intense industry-driven consumerism. Here in the US, more than anywhere else, the idea that swallowing a pill will fix all our problems is most powerful.
      Could Hoover or Cato, purveyors of influential ideas, change this mind-set?
      --E5

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  10. Doc at the Radar StationFebruary 21, 2017 at 6:46 AM

    I am generally sympathetic to Eberstadt's narrative here, but... I've got a couple of quibbles:
    1) The participation rate had been declining well before 2000.
    2) "Daily pain medication". Unless I am reading this incorrectly, this includes Tylenol and ibuprofen, and other OTC pain relievers. I've got coworkers who take "daily pain medication". Could this have been broken out to show Schedule II prescription pain meds only?

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    1. The Krueger study actually says 2/3 of those on pain meds (so, 2/3 of 47%) take prescription meds, like opioids -- although, some prescription pain meds aren't opioids, but are strong anti-inflammatories. So, the real percent of opioid users is probably a little lower. Almost all those on meds receive some kind of disability payment, mostly employers comp, though. In other words, most of those paid not to work are paid by private, not government, sources.

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  11. Frankly, a lot of federal spending on needed infrastructure projects and social service low-level assistance jobs could take a lot of these people out of their misery and into employment (and would also improve care of the roads, parks, water systems, elderly, and children). It's crazy that we want people sitting around to keep wages low and it's very unproductive. If there was some sort of job guarantee, most of these people, not all, WOULD be working.

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  12. Maybe this is what histerisis looks like up close

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  13. Thanks John, just come here from NakedCapitalism. Will come more often.

    The opioid abuse seems to be a US phenom. In Australia, we used up men in their 50s tend to drink or smoke pot, or both, to relieve our pain.

    Yet, the misery of this century could only have a few years left for us to endure. You would know that respected, intelligent, people are saying 90% of us gone in 3 years, 100% in 10.

    See - Guy McPherson

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  14. When I lived in South Florida between 1998 and 2011, it was easy, in my opinion, to go to a pain clinic advertised in the back of a weekly newspaper called New Times and for around $200 get a prescription for a painkiller (Vicodin, Oxycontin).

    I lived in Colorado between 2011 and 2014 and for around $200, you could go to a pain clinic and get a prescription for marijuana. These clinics were advertised in the back of a weekly paper called Westword.

    It's as if we want to purposefully create a sedated society.

    Florida also had a high percentage of young women with illegitimate children. These women were permanently attached to the welfare system as far as I could tell. They had very little incentive to work, even part-time. When strapped for cash, they would become weekend escorts, which would often include drug sales. The drugs were supplied by boyfriends, etc.

    For example, I was told about a woman with two illegitimate children. She was receiving medicaid, food stamps and $1100 a month for rent. When she had a third illegitimate child, her rent benefit was increased to $1500 so she could rent a bigger house.
    If the kids were attending public school, they would get breakfast and lunch free.

    I am 70 years old and taught Math at the college level for years and heard many, many stories. I am not confident it will be easy to recreate a work ethic in the US.

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  15. Imagine being in pain that makes working pretty miserable. And then imagine you make minimum wage, along with all the indignities that generally come along with minimum wage jobs (lack of respect, uncertain scheduling, etc). If you can get by without working, you probably will, because going to work is such a net negative for you (ie the rewards such as wages and respect are outweighed by the negatives). It sounds to me like people are acting logically here. We have basically disrespected 90% of the work done in America, and so people aren't willing to do it.

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  16. It is often claimed that immigrants take jobs that "Americans" don't want to do. And the conversation then ends, as if that statement (regardless of it being true or false) is a valid excuse. "Oh, well, if Americans won't do those jobs then ...". Nobody ever then addresses the issue of why Americans won't do those jobs. Maybe Americans won't do those jobs because many in society have removed the shame associated with being an out of work bum, being out of work (or not wanting to work) is being subsidized by state and federal welfare programs (of which Medicaid is only one). It's not that Americans don't want those particular jobs done by immigrants, too many don't want ANY job and we make it easy and acceptable for them to have that attitude.

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