Posted by Everyone needs to read Don Peck’s superb Atlantic Magazine piece on why the jobs aren’t coming back anytime soon. It confirms what I began writing back in late 2008 – that most often economic crises of the kind we have been seeing last a decade or more.
Most recessions end when people start spending again, but for the foreseeable future, U.S. consumer demand is unlikely to propel strong economic growth. As of November, one in seven mortgages was delinquent, up from one in 10 a year earlier. As many as one in four houses may now be underwater, and the ratio of household debt to GDP, about 65 percent in the mid-1990s, is roughly 100 percent today. It is not merely animal spirits that are keeping people from spending freely (though those spirits are dour). Heavy debt and large losses of wealth have forced spending onto a lower path.
So what is the engine that will pull the U.S. back onto a strong growth path? That turns out to be a hard question. The New York Times columnist Paul Krugman, who fears a lost decade, said in a lecture at the London School of Economics last summer that he has “no idea” how the economy could quickly return to strong, sustainable growth. Mark Zandi, the chief economist at Moody’s Economy.com, told the Associated Press last fall, “I think the unemployment rate will be permanently higher, or at least higher for the foreseeable future. The collective psyche has changed as a result of what we’ve been through. And we’re going to be different as a result.”
One big reason that the economy stabilized last summer and fall is the stimulus; the Congressional Budget Office estimates that without the stimulus, growth would have been anywhere from 1.2 to 3.2 percentage points lower in the third quarter of 2009. The stimulus will continue to trickle into the economy for the next couple of years, but as a concentrated force, it’s largely spent. Christina Romer, the chair of President Obama’s Council of Economic Advisers, said last fall, “By mid-2010, fiscal stimulus will likely be contributing little to further growth,” adding that she didn’t expect unemployment to fall significantly until 2011. That prediction has since been echoed, more or less, by the Federal Reserve and Goldman Sachs.
The economy now sits in a hole more than 10 million jobs deep–that’s the number required to get back to 5 percent unemployment, the rate we had before the recession started, and one that’s been more or less typical for a generation. And because the population is growing and new people are continually coming onto the job market, we need to produce roughly 1.5 million new jobs a year–about 125,000 a month–just to keep from sinking deeper.
Even if the economy were to immediately begin producing 600,000 jobs a month–more than double the pace of the mid-to-late 1990s, when job growth was strong–it would take roughly two years to dig ourselves out of the hole we’re in. The economy could add jobs that fast, or even faster–job growth is theoretically limited only by labor supply, and a lot more labor is sitting idle today than usual. But the U.S. hasn’t seen that pace of sustained employment growth in more than 30 years. And given the particulars of this recession, matching idle workers with new jobs–even once economic growth picks up–seems likely to be a particularly slow and challenging process.
This is important for a huge number of reasons. The first and most obvious are that increasing poverty is tough on people. But almost every assumption we have made about how the coming decades will play out has assumed we were wealthy enough to do most of what we wanted or needed to do – that we could expect to be able to invest where we wanted, make what changes we wanted. But that’s not true of countries in the grips of an economic crisis – the combination of our enormous indebtedness and dependency and the lingering effects of the crisis, *even if nothing else happened* should call into question where the money will come from for vast projects like a conversion over to renewable energies, or how people will pay for energy when carbon is more appropriately priced.
Our assumptions about the baby boomers and what they can expect economically, about how our children will grow up and what they will do, about college and education – all of these things are brought into play simply by our economic crisis. Racial inequities, inequities between the sexes and among immigrant communities are heightened by this situation. Add in the other crises and things get complicated and painful indeed. We have somehow managed to compartmentalize our thinking – so our assumptions about the future still include the idea that we can grow and expand as much as we like. But those days are over.
And none of that pays proper attention to the human costs, which Peck does an excellent job of describing:
Strong evidence suggests that people who don’t find solid roots in the job market within a year or two have a particularly hard time righting themselves. In part, that’s because many of them become different–and damaged–people. Krysia Mossakowski, a sociologist at the University of Miami, has found that in young adults, long bouts of unemployment provoke long-lasting changes in behavior and mental health. “Some people say, ‘Oh, well, they’re young, they’re in and out of the workforce, so unemployment shouldn’t matter much psychologically,’” Mossakowski told me. “But that isn’t true.”
Examining national longitudinal data, Mossakowski has found that people who were unemployed for long periods in their teens or early 20s are far more likely to develop a habit of heavy drinking (five or more drinks in one sitting) by the time they approach middle age. They are also more likely to develop depressive symptoms. Prior drinking behavior and psychological history do not explain these problems–they result from unemployment itself. And the problems are not limited to those who never find steady work; they show up quite strongly as well in people who are later working regularly.
Forty years ago, Glen Elder, a sociologist at the University of North Carolina and a pioneer in the field of “life course” studies, found a pronounced diffidence in elderly men (though not women) who had suffered hardship as 20- and 30-somethings during the Depression. Decades later, unlike peers who had been largely spared in the 1930s, these men came across, he told me, as “beaten and withdrawn–lacking ambition, direction, confidence in themselves.” Today in Japan, according to the Japan Productivity Center for Socio-Economic Development, workers who began their careers during the “lost decade” of the 1990s and are now in their 30s make up six out of every 10 cases of depression, stress, and work-related mental disabilities reported by employers.
A large and long-standing body of research shows that physical health tends to deteriorate during unemployment, most likely through a combination of fewer financial resources and a higher stress level. The most-recent research suggests that poor health is prevalent among the young, and endures for a lifetime. Till Von Wachter, an economist at Columbia University, and Daniel Sullivan, of the Federal Reserve Bank of Chicago, recently looked at the mortality rates of men who had lost their jobs in Pennsylvania in the 1970s and ’80s. They found that particularly among men in their 40s or 50s, mortality rates rose markedly soon after a layoff. But regardless of age, all men were left with an elevated risk of dying in each year following their episode of unemployment, for the rest of their lives. And so, the younger the worker, the more pronounced the effect on his lifespan: the lives of workers who had lost their job at 30, Von Wachter and Sullivan found, were shorter than those who had lost their job at 50 or 55–and more than a year and a half shorter than those who’d never lost their job at all.
It is not a perfect response by any means, but the one thing that perhaps can be offered to people outside the conventional workforce is a chance to make a real economic contribution in the informal economy. Building on the work of Teodor Shanin and other Peasant Economists, I argue in _Depletion and Abundance_ that the informal economy, the world outside of GDP statements that includes subsistence labor, household labor, under the table labor, barter, crime (note, I’m not suggesting crime as a career here, just including this for the sake of accuracy – at this point, crime is often the only segment of the informal economy available to people, as Peck points out in his sections on minority and urban unemployment – strengthening the non-criminal informal economy is obviously to everyone’s advantage) and other work that exists outside conventional calculations can do something not only to mitigate the economic costs of unemployment, but also to mitigate the social costs – that living in the informal economy, as hard as it can be, can offer people a place rather than the “no place” of unemployment.
Edited to add: I should add that I don’t agree with all the article’s assumptions – Peck assumes that young people who are marginally attached to the workforce, maybe living with parents will experience the same ills from unemployment as past generations, and the case he makes about false expectations may be right. It may also be the case that this is a generation more open to complex employment options and instability than past ones. My observation is that the culture of younger, unemployed folk that I know tends to seem like less of their identity is bound up in their jobs than past generations – after all, when your job sucks, why identify with it? Again, this is overly simplistic and I don’t mean to understate the difficulty that unemployment represents – but I also think that Peck leaps to the conclusion that the extended family model that seems to be emerging as younger people return home is a failure, not a success, and I’m not sure that’s true.
The cost ot men is something I’ve written about before, but this seems to be bearing out my concerns. My own father, I think was never quite the same after an extended period of unemployment in the early 1990s, and it has given me a sense of the ways in which extended unemployment scars people. I think Peck is right here:
In this respect, the recession has merely intensified a long-standing trend. Broadly speaking, the service sector, which employs relatively more women, is growing, while manufacturing, which employs relatively more men, is shrinking. The net result is that men have been contributing a smaller and smaller share of family income.
“Traditional” marriages, in which men engage in paid work and women in homemaking, have long been in eclipse. Particularly in blue-collar families, where many husbands and wives work staggered shifts, men routinely handle a lot of the child care today. Still, the ease with which gender bends in modern marriages should not be overestimated. When men stop doing paid work–and even when they work less than their wives–marital conflict usually follows.
Last March, the National Domestic Violence Hotline received almost half again as many calls as it had one year earlier; as was the case in the Depression, unemployed men are vastly more likely to beat their wives or children. More common than violence, though, is a sort of passive-aggressiveness. In Identity Economics, the economists George Akerloff and Rachel Kranton find that among married couples, men who aren’t working at all, despite their free time, do only 37 percent of the housework, on average. And some men, apparently in an effort to guard their masculinity, actually do less housework after becoming unemployed.
Many working women struggle with the idea of partners who aren’t breadwinners. “We’ve got this image of Archie Bunker sitting at home, grumbling and acting out,” says Kathryn Edin, a professor of public policy at Harvard, and an expert on family life. “And that does happen. But you also have women in whole communities thinking, ‘This guy’s nothing.’” Edin’s research in low-income communities shows, for instance, that most working women whose partner stayed home to watch the kids–while very happy with the quality of child care their children’s father provided–were dissatisfied with their relationship overall. “These relationships were often filled with conflict,” Edin told me. Even today, she says, men’s identities are far more defined by their work than women’s, and both men and women become extremely uncomfortable when men’s work goes away.
The national divorce rate fell slightly in 2008, and that’s not unusual in a recession: divorce is expensive, and many couples delay it in hard times. But joblessness corrodes marriages, and makes divorce much more likely down the road. According to W. Bradford Wilcox, the director of the National Marriage Project at the University of Virginia, the gender imbalance of the job losses in this recession is particularly noteworthy, and–when combined with the depth and duration of the jobs crisis–poses “a profound challenge to marriage,” especially in lower-income communities. It may sound harsh, but in general, he says, “if men can’t make a contribution financially, they don’t have much to offer.” Two-thirds of all divorces are legally initiated by women. Wilcox believes that over the next few years, we may see a long wave of divorces, washing no small number of discarded and dispirited men back into single adulthood.
The high cost to women and men, and growing social and racial inequities are among the things that worries me enormously – rises in domestic violence and family poverty and instiability, exacerbated by stress, divorce and discrimination are a really bad thing – and dramatically reduce our ability to respond to our situation.
Again, while hardly a panacea, here I think the valorization of the informal economy is an essential response – only if people can get identity and value from the subsistence and informal work they do can the unemployed not suffer the loss of identity that comes with it. No, you can’t fix everything by growing food, but the sense of contribution and participation itself is as valuable as the real economic considerations.
This is an important article, but like so many articles good at showing us the data, it has a terrible, weak conclusion. The conclusion is that given the class and economic disaster that accompanies an extended period of job growth, we should borrow more money, raise more taxes and make jobs growth “an unflagging national priority,” But of course, Peck has already shown us the complete ridiculousness of any hope that jobs could grow fast enough to get us out of the before enormous damage is done – so the higher taxes and debt difficulties that come with this will fall upon the already burdened folks he describes in the article. Having made such a compelling case against potential jobs growth, he then falls back on the obvious.
The reality is that the odds are good jobs aren’t going to grow quickly – in fact, there’s a real chance that they will continue to decline. Yes, we should do what we can to soften the employment blow, but most of the money we’ve spent has done no such thing. Instead, we need to invest money in creating an informal economy that can support people and give them a reason to go forward – we need to invest in our safety nets, of course, to keep them stable as people struggle, but also in ways of decoupling identity from employment, and providing ways to live outside the formal economy without feeling like a failure.
The informal economy constitutes 75% of the world economy – most people don’t instinctively realize that the world of GDP statements is the smaller, rather than the larger components. This size implies a resilience that the formal economy manifestly does not have. Removing the stigma from subsistence labor, from household work, from cottage industry and other subsistence work, and valorizing it is a far more possible reality than magically creating full employment. It is not a magic bullet – but it isn’t based on false assumptions, either.
Sharon
February 12, 2010
February 12, 2010
February 12, 2010
And what will we end up with? I’m no economist, but all of a sudden we’ll have a crapload of people with paychecks who want to spend some money, get their heat turned back on, and maybe even catch a movie. Huh, that might involve them patronizing businesses and helping the economy after all! To quote Tyler Durden: “I’ll bring us through this. As always. I’ll carry you – kicking and screaming – and in the end you’ll thank me.”
February 12, 2010
February 12, 2010
February 12, 2010
February 12, 2010
February 12, 2010
February 12, 2010
February 12, 2010
February 13, 2010
February 13, 2010
February 14, 2010
February 14, 2010
February 16, 2010
March 2, 2010
November 27, 2011