Dean Barber

Fall From the American Dream

In Corporate Site Selection and Economic Development on October 8, 2017 at 12:05 pm

This last one was different. Only now are we realizing the full extent of the damage. I’m not referring a hurricane, but rather the Great Recession, considered the largest downturn since the Great Depression.

Throughout our history, we have weathered recessions, 34 since 1854.  But this last one cut us to the quick, and to some degree it is still with us, despite the fact that job openings have risen to a record high and that wages are finally rising.

Still, there are indicators that not all is well. The labor participation rate — the proportion of people employed or looking for work in the U.S. — fell to 62.7 percent in September, near a 40-year low. Drug overdoses are now the leading cause of death among Americans under 50. And men have become less appealing to women as marriage partners.

Some economists believe all these are telling factors that are very much tied to this last downturn and the loss of millions of manufacturing jobs.

It’s Not Over

On Sept. 20, 2010, The Economist proclaimed, “It’s Over,” referring to the Great Recession that technically ended in June 2009. But is it really?

Using tax records to trace more than a million workers through the recession and its aftermath, Danny Yagan, an economist at the University of California, Berkeley, found that thousands of workers who lost their jobs ultimately stopped looking.

“The signals say the recession is over, but employment’s not back to normal,” Mr. Yagan told The New York Times “Recession effects aren’t supposed to last this long.”

Certainly, some parts of the country have yet to fully recover.  This holds true especially in rural America where the shutdown of a single major employer can have devastating effects. I have seen it firsthand as a consultant to communities and companies.

Distressed and Disconnected

Indeed, there is a “disconnect between national trends and local realities,” according the Economic Innovation Group, which recently published what it calls The 2017 Distressed Communities Index.

“Distressed communities are disconnected communities,” the report states, “to which the fates of their 52 million inhabitants are diverging from the rest of the country. These are places increasingly alienated from the benefits of the modern economy.”

And it is in these distressed, alienated places where many manufacturing jobs have evaporated. Since 1980, a full third of all manufacturing jobs — five million since 2000 — have been lost, due in part to automation and U.S. trade policies.

In a 2017 paper with the ominous title, “When Work Disappears: Manufacturing Decline and the Falling Marriage-Market Value of Men”, University of Zurich economist David Dorn found that employability and marriageability are deeply intertwined.

Deaths of Despair

A drop from 72 percent of U.S. adults being wed in 1960 to half that in 2014 is due in part to economic forces that are making men less appealing partners to women.

Dorn found that when towns and counties lose manufacturing jobs, fertility and marriage rates among young adults go down, while unmarried births and the share of children living in single-parent homes go up.

As manufacturing jobs are lost, there are also increases to mortality in men aged 18 to 39, Dorn says, with more deaths from liver disease, indicative of alcohol abuse; more deaths from diabetes, related to obesity; and lung cancer, related to smoking, and drug overdoses.

These “deaths of despair” have decimated one demographic group in particular: the white working class, and have taken over a million American lives in the past decade.

A Worsening Crisis

Princeton economists Anne Case and Angus Deaton contend that a gradual “collapse of the white, high-school-educated working class after its heyday in the early 1970s,” has resulted in death rates that have been rising dramatically since 1999 among middle-aged, less educated white Americans, reversing decades of longer life expectancy.

Opioids killed about 33,000 Americans in 2015. Overdose deaths in 2016 will likely exceed 59,000, the largest annual jump ever recorded in the U.S., according to preliminary data compiled by The New York Times. The evidence suggests the crisis is only worsening in 2017.

Last year, Princeton economist Alan Krueger made headlines with a study showing that nearly half of prime age men (or men ages 25 to 54) who are not in the labor force take pain medication on a daily basis. Two-thirds of those men, about 2 million, take prescription pain medication on a daily basis

In a new paper published last month by the Brookings Institution,  Krueger dives deeper and finds that opioid use could account for a 20 percent decline in men’s labor force participation from 1999 to 2015 and a 25 percent of the observed decline in women’s labor force participation.

Of the 35 member countries that make up the Organization for Economic Co-operation and Development, only Italy had a lower labor force participation rate of prime age men than the U.S. in 2016.

Loss of Hope and Identity

Many researchers believe the opioid crisis is due in large part to a loss of hope and identity among white blue-collar workers. The problem is especially acute in small town and rural America, where the unemployment rate remains high and a disproportionate number of residents are on Medicare or Medicaid, according to the Centers for Disease Control and Prevention.

Carol Graham, a senior fellow at the Brookings Institution and a professor at the School of Public Policy at the University of Maryland, says blue-collar whites have had more difficulty in adapting to the loss of manufacturing jobs.

“Discrimination gave blue-collar whites better access to those lifestyles than other groups. Today, minorities are gradually catching up and, perhaps due to their constant challenges in the past, they seem to be better at multitasking in the labor force. They are much more likely to take new low-skilled service jobs in sectors such as health, for example, than are whites, particularly white males,” she wrote.

“While there are challenges for many low-skilled workers in changing economic times, and minorities still face significant disadvantages, among blue-collar whites, due to trends in the economy, the labor and marriage markets, and in health, the fall from the American dream has been a longer and harder one, at least in relative terms.”

Causal or Symptomatic

Federal Reserve Chair Janet Yellen told a Senate Banking Committee hearing in July that rampant opioid abuse in the U.S. is related to the decline in labor force participation among prime-age workers.

“I don’t know if it’s causal or symptomatic of long-running economic maladies that have affected these communities and particularly affected workers who have seen their job opportunities decline,” Yellen said in response to questioning from Sen. Joe Donnelly, D-Ind., on the issue.

The U.S. is “the only advanced nation that I know of where in these communities we’re actually, especially among less-educated men, seeing an increase in death rates partly reflecting opioid use,” she added.

When he was chairman of the Federal Reserve, Ben Bernanke, warned during the recession and the recovery that workers who stayed unemployed too long might drift too far away from the labor market to ever return. That seems to be the case.

Scars Left

Stephen Gold is president and CEO of the Manufacturers Alliance for Productivity and Innovation (MAPI) has said that “maintaining our competitive advantage in global manufacturing starts with people.”

He tells of research showing that of a projected 3.5 million manufacturing jobs expected to be available in the U.S. between 2015-2025, and that 2 million of them could go unfilled.

I think it has become increasingly clear that a significant portion of our American workforce is, in fact, “damaged goods,” and some workers who have been unemployed too long are probably forever lost.

The Great Recession has left its scars and is still being felt in so many places, particularly in rural and small town America. Having treatment centers and vocational training made available in distressed and disconnected communities can only help. I only wish I had better answers than that.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. (Send us your RFPs.) Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com or at 972-890-3733.

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