At the onset, one should know that the author is employed by the conservative think tank, American Enterprise Institute (AEI). Predictably, the AEI promotes small government, individual accountability and personal freedom, entrepreneurship, and fewer regulations, etc. and so does the author.
However, this book is not a political rant. The author advances his argument with much clarity and extensive supporting data. The extent to which the author shares visual data (graphs, tables, etc.) is commendable. And, I only wish other social scientists would imitate him going forward. In the era of Big Data, Open Source, and very user friendly data visualization tools (web based such as FREDS, or software based), there is no excuse to not emulate the author in this regard.
Additionally, the author does not come across as any conservative fundamentalist. He is collegiate in his narrative. He also does something unique that I wish other social scientists would emulate. He invites two formidable colleagues (at least equally qualified and smart as he is) to forcefully rebut his theories. These two colleagues are given each their own separate chapter at the end of the book to really go at it and pretty much dismantle the author’s theories. The author gives himself the opportunity to rebut the rebuttal in the very last chapter, which is only fair. Within this last chapter, his attitude comes through very well. He appears open minded and truly interested in the arguments raised by the rebutters. And, he addresses them very diplomatically. He also finds areas of consensus between the three of them. I think they know each other personally, and have developed the rare group behavior of being totally comfortable disagreeing with each other. I only wish that politicians at all level could sustain such quality of discourse.
The author’s main objective is in analyzing and explaining the rapid decline in male (25 – 54 years old) labor participation rate. Notice how the author frames the hypothesis. He focuses on the 25 to 54 year olds. This pretty much controls for the effect of aging demographics. In the remainder of the text I don’t repeat every time that we are dealing with 25 to 54 years old for parsimony. But, remember that is the case. So, aging is pretty much controlled for.
He observes that the consistent decline in male labor participation has gone on since the 1950s.
And, that is way before the advent on a mass scale of personal computers, artificial intelligence, robots, etc. He also uncovers that the U.S. experience in declining male participation rate is far worst than for the majority of OECD countries. He advances this is due to several factors including:
1) a far higher incarceration rate and much larger population of released individuals with a permanent criminal record that have little chance of getting a job (he considers this a unique feature of US society relative to other OECD countries);
2) an increase reliance by a male underclass with little job prospects on government programs such as disability (he associates this trend with the creation of numerous social support program by Johnson in 1965); and
3) behavioral and social changes regarding male deteriorating work ethics.
Both rebutters, Henry Olsen and Jared Bernstein go at it in dismantling Eberstadt diagnosis. And, they both raise excellent points. They both indicate that Eberstadt overstates his supply side effects and understates the more popular demand side effects. In other words, Eberstadt ignores that the demand for labor has progressively declined due to the secular decline of manufacturing jobs since WWII. Also, the progressive increase in digital computerization has decimated many service jobs just like factory automation had decimated manufacturing ones. They also indicate that thorough studies have uncovered that disability insurance can explain only 10% of the volume of male workers leaving the labor force. Therefore, it is not a major driver of this whole phenomenon. And, even when you observe a correlation between disability claims and rising dropping out of the labor force, Jared Bernstein argues that Eberstadt has misinterpreted the causal direction of this relationship: “Weak labor demand could be a reason for higher disability insurance rolls rather than the disability insurance rolls being an explanation for weak labor supply.”
Both Bernstein and Olsen argue that Eberstadt has entirely missed the cyclicality of the male labor participation time series. They advance that Eberstadt thinks it is a straightforward linear time series (straight line with a negative downward slope over time). But, it is not that simple. The trend is one of a wildly cyclical wave with peaks during economic expansions and valleys during recessions. It is still downward sloping as after each recession a segment of the labor force gets permanently kicked out of the labor force. Agriculture and manufacturing jobs have disappeared permanently several recessions ago. Demand for labor with no high school degree has also permanently declined a long while back. And, so has the demand for labor with no college degree. Will we soon need PhDs to become merely employable? And, this entire causal explanation contradicts Eberstadt supply side arguments. So, what gives?
Eberstadt is not done. Within the very last chapter he nicely takes apart the manufacturing argument. He does so by comparing the loss of manufacturing jobs in France, Australia, Sweden, and the US. They all follow exactly the same trend (very rapid decline in all four countries since 1970 (graph on page 182). However, earlier on page 50 he shows a graph comparing this same countries and many others on male labor participation rates. And, the decline in the US is far more dramatic than for the other countries.
So, why has the US male labor participation rate dropped that much faster? Eberstadt advances it is due to his supply side factors. Bernstein and Olsen disagree that the trend has much to do with social entitlements and disability insurance in particular. They effectively rebutted that before. Additionally, France and Sweden have social entitlements that are far more generous than the US. Yet, their male labor participation rates have held up a lot better than the US.
However, there is one factor where all three social scientists agree. And, they feel it may well explain the divergence of the US experience vs its foreign counterparts: criminality. In other words, in the US a far larger % of the male population gets incarcerated and in turn released back in the civilian world with a criminal record. And, such former felons are damaged goods from a labor market standpoint. With a criminal record the chance of reentering the legitimate labor force is pretty low.
In order to supplement this debate between Eberstadt, the author on the conservative side, and his rebutters, Olsen and Bernstein, I studied one of Eberstadt most interesting references: “The Long-Term Decline in Prime-Age Male Labor Force Participation”, June 2016, Executive Office of the President. The debate entails what are truly the dominant factors in the decline in male participation rate?
- Are they supply side driven such as various social entitlements that have motivated males to remove themselves voluntarily from the labor force?
- Are they demand side driven as employers have reduced hiring individuals with lower education and skill sets?
- Are they institution driven including Government policies supporting one remaining in the labor force (subsidized child care, community college education, tax policies, etc.)?
- Are they related to criminalization?
After reading the mentioned reference, one observes that demand side driven factors have to be preponderant. And, it is simple to demonstrate. The unemployment rate and wage trends over decades have been deteriorating rapidly for individuals without college degrees vs. ones with college degrees. The males dropping out of the labor force are mainly not-college-graduates. Thus, they have been kicked out of the labor force more than they have voluntarily dropped out of the labor force.
The reference does indicate that disability insurance may play only a small role in labor participation. And, just as Bernstein did, it questions the causal direction of the relationship between disability insurance and labor participation. Individuals lean on disability insurance because they have been kicked out of the labor force more than their leaving the labor force voluntarily.
The reference somewhat lowers the influence of criminalization. First, the US higher rate of incarceration actually artificially boosts the labor participation rate. This is because incarcerated individuals are removed from labor participation rate calculations. You still have now to deal with the formerly incarcerated that have a criminal records and often become unemployable. The problem is there are no solid statistics on this population. Quick searches on the Internet, suggests there are over 60 million individuals with criminal records. Those figures are unsupported and appear wildly inflated. A somewhat more serioius estimate comes from a Center for Economic and Policy Research study. And, their estimate comes in at 7 million individuals based on 2008 data. But, even the latter is based on many assumptions to circumvent the lack of precise data on the issue. In view of the above, criminalization is a relevant issue related to male participation rate. But, it remains challenging to truly quantify its impact.
In conclusion, Eberstadt’s book raises a critical issue that is ignored by the Media. He shares a ton of very interesting data. He advances an interesting set of arguments. And, he invited others to rebut them within this own book (unheard of in a very good way). As indicated, he also provides interesting references inviting the reader to study the issue further independently of Eberstadt’s opinion.
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