Milton Friedman was famous for noting that you couldn’t combine immigration with a welfare state. Here’s a New York Times article that suggests that modern electronics might be a greater threat to the welfare state’s sustainability than immigration:
At the bottom of all this, perhaps, is declining economic growth. As Nicholas Eberstadt points out in his powerful essay “Our Miserable 21st Century,” in the current issue of Commentary, between 1948 and 2000 the U.S. economy grew at a per-capita rate of about 2.3 percent a year.
But then around 2000, something shifted. In this century, per-capita growth has been less than 1 percent a year on average, and even since 2009 it’s been only 1.1 percent a year.
For every one American man aged 25 to 55 looking for work, there are three who have dropped out of the labor force. If Americans were working at the same rates they were when this century started, over 10 million more people would have jobs.
According to Bureau of Labor Statistics time-use studies, these labor force dropouts spend on average 2,000 hours a year watching some screen.
SSDI and SSI have been around for a few decades, but the shift from work to welfare seems to coincide with the rise of inexpensive big-screen TVs, HDTV (1998), 500-channel digital cable, smartphones (T-Mobile Sidekick, 2002), broadband Internet, personal computers, Xbox (2001), 4G/LTE mobile data, etc.
How much fun was it for a working-age guy to cash government checks while watching soap operas designed for women on three (count ’em!) TV channels displayed on a 19″ CRT in the Never Twice the Same Color system (483 lines of resolution!)? His modern-day counterpart can watch Netflix, play Xbox, surf the Web, Facebook with friends, etc.
What do readers think? Are welfare programs set up in the 1960s and 1970s incompatible with today’s electronics?
Related:
- Stupid white man criticizes smart Chinese woman (regarding the same NYT author)
- Book Review: The Redistribution Recession (what does it take to get an American worker to stay at home)
http://www.vulture.com/2017/02/video-games-are-better-than-real-life.html
This supports your theory.
Recessions have always produced big drops in employment-population ratio and the great recession largely explains the changes since 2000. Extended unemployment due to soft labor demand is a known risk factor for permanent withdrawal from the labor force. Whatever impact modern electronics are having it appears to be relatively small.
https://fred.stlouisfed.org/series/EMRATIO
Neal: if “recession” is a shrinkage in economic output, why couldn’t the cause and effect go the other way: people stop working so the economic output shrinks. That’s the point of the U. Chicago economic who wrote The Redistribution Recession. Government incentives to quit work explain most of the shrinkage and slow growth observed. (The book has some good data to support this direction of causality. Americans who actually did seek jobs during the purported “Great Recession” had a pretty easy time finding them.)
Severe periodic shrinkage of economic output associated with lower employment-population ratio occurred before the development of “government incentives to quit work” suggesting there may be other causal factors.
Translating into econo-speak, you’re thinking that the increased attractiveness of leisure is strong enough to cause a decline in the workforce participation rate?
If leisure is that powerful, we would expect it to also affect people’s decisions about how many hours to work, not just whether they work at all. That is, we would expect to see the average employed person working fewer hours as well, choosing to spend more time on leisure. But that’s not what we see: between 1979 and 2007, average work hours for employed male workers rose by 4.4%. EPI.
Looking at the Canadian data, the workforce participation rate has indeed declined since 2008, but it looks like it’s primarily due to demographic change — the population is aging, so more people are retiring.
Regarding The Redistribution Recession, Noah Smith provides counter-arguments. Paul Krugman refers to Mulligan’s argument as “soup kitchens caused the Great Depression.”
Maybe the shift in productivity has nothing to do with electronics. Maybe it is all due to baby boomers retiring. Starting about 2000 the oldest baby boomers hit age 55 in big numbers and started retiring and goofing off. They watch tons of TV. They went on unemployment. They goof off and play games. They left work to the younger generations. So work knowledge started dropping and productivity went down. Then in 2008 many of those same boomers started drawing Social Security in big numbers. All these effects have been increasing due to more and more boomers getting older and retiring and taking their work knowledge away.
Bill: your idea sounds good but the NYT story is about an age group under 55. (And societies with older median ages, such as Singapore, don’t exhibit a shrinkage in overall labor force participation).
Noah Smith takes down that book pretty easily. You mention NTSC TV and women’s soap operas. During the 1970s and 1980s the number of American women with job increased steadily and significantly. This was during the same years when families were replacing their black and white televisions with color models. As a matter of fact, consumer electronics have been getting better and cheaper continually for three quarters of a century or more.
Setting aside the question of leisure, David Brooks raises a good question:
If the biggest challenge facing the country is the decline of blue-collar work, then one obvious thing to do would be to borrow a trillion dollars and use it to build new infrastructure (and repair existing infrastructure). That would create a lot of construction jobs. Bannon:
Expect to see this in 2018.
Given the U.S. track record in building government-funded infrastructure, why would we want to spend more money on it? See http://www.newyorker.com/magazine/2017/01/23/where-the-second-avenue-subway-went-wrong for “American infrastructure projects often cost five to six times what they cost in other developed countries.”
A transit system that would be a good investment in Europe or Asia would be a terrible investment here because the cost would be 5-10X and the return would be at best 1X (probably less because it also costs us a lot to run transit systems, which leads to cuts in schedule frequency and therefore most people have to drive anyway).
“Given the U.S. track record in building government-funded infrastructure, why would we want to spend more money on it?”
To increase demand for blue-collar labor. But the US should also take a close look at why recent public infrastructure projects have been so expensive and try to do better, not just give up. Surowiecki mentions one way to improve return on investment: focus on repairing existing infrastructure instead of building new infrastructure.
Russil: If all we want to do is create demand for blue-collar labor, why not pay Americans to weed yards and plant flowers? At least then we will have a pleasant environment instead of a train to nowhere that runs every 2 hours. [Or stop accepting immigrants to do unskilled jobs and that would create demand for unskilled Americans (or at least those Americans who lack the skills to get onto SSDI).]
“try to do better”? If trying to do better were effective, wouldn’t our schools be better than Finland’s? Our semiconductor fabs more efficient than Taiwan’s? Our LCD and OLED manufacturing better than Korea’s or China’s? If it is as easy as trying to do better, why not just double the size of our economy by suddenly doing awesome? Then it won’t matter how much we waste on infrastructure because we’ll have $18 trillion extra every year.
“‘try to do better’? If trying to do better were effective, wouldn’t our schools be better than Finland’s?”
If other developed countries are able to build infrastructure for 1/6 the cost, shouldn’t the US take a look at what they’re doing differently, and try to follow suit? You seem to be making a pretty radical argument here: improvement isn’t just difficult, it’s completely impossible!
“Or stop accepting immigrants to do unskilled jobs and that would create demand for unskilled Americans”
Makes sense. Paul Krugman.
@philg:We are already trying harder: US per capita GDP is higher than Finland, Taiwan, Korea, or China.
Mismanagement of the Bay Bridge Replacement was legendary, but the cost of the Akashi Kaikyō Bridge in Japan seems to have been roughly comparable (certainly much less than 6x difference).
The US could spend (does spend, actually) plenty on infrastructure even without building any trains to nowhere. Actually, I didn’t notice where Russil proposed doing so.
Neal: We’re richer than the Finns? Maybe they forgot to steal a whole continent of temperate farmland and oil/gas/coal from the Native Americans. And perhaps they forgot to build an ocean between themselves and various warring European powers. But even if they had the kind of natural resources that we have, and they hadn’t had to deal with European wars, we could still be richer than the Finns while being incompetent at building taxpayer-funded infrastructure. There are other things that we do as part of our GDP.
Russil: “If other developed countries are able to build infrastructure for 1/6 the cost, shouldn’t the US take a look at what they’re doing differently, and try to follow suit?”
What they’re doing differently is that they have a completely different culture, tradition, and form of government. I don’t think American officials failed to notice the off-the-charts prices over the past 50 years. I don’t know that any government employee starts the day saying “Oh let’s just spend 5X on this project compared to what the Germans would spend and have the build quality be such that it lasts only half as long.” Certainly efforts have been made over the past 50 years by government at all levels to contain costs. Nearly all of those efforts have failed. Given that Americans are not becoming smarter or better educated on average (actually the reverse seems to be true), it is not reasonable to say that future efforts will be successful. It would make a lot more sense to put money behind stuff where Americans have been successful.
I’m not sure this is a big mystery. If we’re building “infrastructure” as a way to put people to work, then doesn’t it figure that a 5 billion dollar project is going to be better than a 1 billion project every time? Just drum up some numbers where it looks “viable” and you’re all set. Union members vote!
“What they’re doing differently is that they have a completely different culture, tradition, and form of government.”
This is starting to remind me of the difference between American and Asian views of education!
American parents think of abilities as innate and largely unchangeable: either you’re good at math or you’re not. If you’re not, you can’t do much about it. Asian parents will ask, “If so-and-so can do it, why can’t you?” If you’re not doing well at math, you need to work harder.
You’re saying that the US is incompetent at building public infrastructure, because of culture or tradition or something, and there’s nothing to be done. This strikes me as completely at variance with reality. If I can make a gross generalization about American national character, Americans are good at building stuff. What is it that Americans are lacking? Engineering skills? Project management skills? An experienced blue-collar workforce?
Maybe the government should give all welfare recipients a Dell XPS 13 2-in-1. Maybe they will get frustrated with it and seek out a job.
Russil: Maybe a simpler example is to look at airplanes. Americans can build commercial airplanes and jet engines at reasonably competitive prices (though Brazil seems to be taking over the business jet and regional jet market, but they’re not undercutting us by 5X). But when the American government wants to buy and operate some airplanes the cost goes up wildly. There was nobody in the U.S. military that wanted the F-35 fighter jet program to soak up 20 years in the design and testing phase and then $1.5 trillion overall. Certainly various smart and conscientious people in the Pentagon over the years have tried to cut costs, but none have achieved significant results. It doesn’t make sense to throw money at infrastructure projects in the hopes that, at some point during the spending of that money, the government will figure out a way to do everything at 20% of the originally budgeted cost.
The bloat is also accelerating, as the inflation adjusted price of bridges becomes lower, the older the bridge is. Or perhaps the US inflation projections themselfes are unreliable.
I wrote about this in http://philip.greenspun.com/blog/2015/09/24/longfellow-bridge-repairs-will-now-take-about-as-long-as-the-original-construction/
Not only is the rehab of the old bridge costing 4X as much as the bridge cost to build, but it is taking just as long. Again, as noted above, it is hard to see how this is the kind of thing that we’d want to spend more money on. If anything we should figure out the bare minimum of government-built and government-run infrastructure that we need and spend our hard-earned dollars on other stuff.
@philg: and have the build quality be such that it lasts only half as long.” Certainly efforts have been made over the past 50 years by government at all levels to contain costs. Nearly all of those efforts have failed.
City Council for a nearby city just approved a 20-year $20 million dollar bond issue to build a new $20 million dollar police department headquarters to replace the 30-year old one. Five years ago, they built a $10 million City Hall to replace the 40-year old one. Two years ago they build an $8 million fire station headquarters to replace the 20-year old one. Three years ago they took a large vacant waterfront parcel off the tax roles when they outbid private developers, paying $2 million with a plan to develop it into a city-run marina; no proposals have been put forth and zero work has been done on the parcel.
@philg: There was nobody in the U.S. military that wanted the F-35 fighter jet program to soak up 20 years in the design and testing phase and then $1.5 trillion overall.
One of the large Boston-area government defense contractors put food on the table for five generations of my family! My 90-year old grandmother is still collecting my grandfather’s pension and he retired 40 years ago!
“If anything we should figure out the bare minimum of government-built and government-run infrastructure that we need and spend our hard-earned dollars on other stuff.”
I think that’s fair — but even a bare minimum is going to be a lot of money. McKinsey estimates that just keeping up with maintenance will cost the US an additional 0.7% of GDP each year, on top of the current 3.4% of GDP; that’s a total of $730 billion annually. So it makes sense for the US to look for ways to make sure that this $730 billion gets spent more effectively, rather than just assuming that most of it will be wasted.
A couple obvious ideas: (1) Focus on maintenance and repair, rather than building new infrastructure. (2) Focus on smaller projects, rather than larger ones.
McKinsey has collected some best practices for large infrastructure projects (which tend to be the ones that spin out of control):
I seem to remember a certain very large Boston transportation project finally completed about ten years ago at more than $10B over the original $3B price tag. Total price was almost $500 million per mile for the 3 mile long project.
^ Correction: almost $5B per mile!
re: Longfellow Bridge..
I’ve never built, or repaired, a bridge.
But I’ve built a couple of houses, and renovated a few very old ones.
As anyone will tell you, renovation often takes longer, and can easily be just as expensive as building new. Especially if you get into structural stuff, major hazard abatement, or retrofitting for earthquake safety, maintaining full use by occupants, etc.
On a smaller scale, but more personally annoying, the Larz Anderson bridge repairs are being conducted under the same management style.