NILFs: Men At Work

Men Without Work: America’s Invisible Crisis
by Nicholas Eberstadt
Templeton Press, 2016, 205 pages, US$12.95
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This is a smart, unsettling, fact-packed book. Its message is sobering. Beware of letting prime working-age males fall out of the workforce into gloomy pension-feathered indolence. America has done it. The consequences are disconcerting to say the least. Eberstadt begins by noting something basic, so basic in fact that it looms over everything else in the book. Put simply, America is a wealth-generating machine. Yet no longer is it a wage-work-producing leviathan. Wealth creation and job creation have parted company. That is the most crucial social fact of our age.

Governments that fail to understand the uncoupling of wealth-making and wage-labour fail to grasp the tectonic rearrangement that has occurred in the social landscape over the past six decades. As is so often the case, America has led the way for the rest of the world. Eberstadt emphasises that these big changes have been almost invisible. They have slipped past the notice of makers of public policy. They have been so imperceptible they have not yet become part of public discourse. In time they will.

For all that though, Eberstadt observes, we now live in an age that produces more wealth for wealth-holders and less work for workers. In the eighteenth and nineteenth centuries, capitalism and asset-owning were more significant than wage-labour. From 1910 to 1970 that reversed. The wage-worker dominated economy and society. The proletarian became chic. In the wake of the New Deal, the troika of big government, big business and big unions captured the American popular imagination. But from 1950 an almost undetected countervailing shift began. Income from wage-work started to slacken while income from asset-holdings grew. Capitalism was rebounding. This was hardly noticed though because of the massive growth of the welfare state after 1970. By a sleight of the imagination, the society of the wage-worker was bundled together with the culture of the jobless beneficiary. The proletarian became the pensioner.

For sixty years, income generation gradually shifted from wage employment to asset utilisation. Like most social change this was not a uniform process. The social anomalies that resulted are the subject of Eberstadt’s book. Some social groups fell out of wage employment but failed to make the necessary transition into asset-holding and capital work. These are what American statisticians call NILFs, those who are “not in the labour force”. They are neither wage-earners nor are they temporarily unemployed. Rather they are a class of un-workers in the prime of life.

Between 1967 and 2015 the proportion of prime-age men, twenty-five to fifty-four years old, participating in the US workforce dropped from 94 to 84 per cent. In 1967 6 per cent of this core social group were out of the workforce; in 2015, 16 per cent. Over the period the number of prime-age males in the population grew 1.3 per cent per year. The number of un-workers among this cohort grew 3.5 per cent per year. Today there are 64 million prime-age males, of whom 10 million are out of the workforce. Three million of those are in education. Another million have the kind of serious impairment that prohibits independent living or working. The remainder make up almost 10 per cent of the prime-age male cohort.

If NILFs don’t work, what do they do? They don’t look after kids. They don’t do household chores. They don’t read newspapers. They don’t look for jobs. They don’t travel and they don’t join voluntary associations. They watch television. “NILFs not in education” watch an average of six hours of television or movies a day. One or two hours of television a day is the maximum before the medium begins to rot the brain and the soul. Watching six hours a day is highly destructive.

How do they survive financially? Most rely on government means-tested benefits or disability pensions. In 2014 the mean NILF household income was $41,000, placing these households in the fourth income quintile. The spousal contribution to this was $10,000. In 1985 4.2 per cent of prime-age males received a disability benefit; in 2013, 6.1 per cent. Historical statistics for the combined patchwork of US state and federal schemes are very poor. But the trends are clear. The example of the Social Security Disability Insurance program is typical. It enrolled 2.2 per cent of forty-five-to-fifty-four-year-old males in 1967. By 1996 that had climbed to 5.4 per cent while the cohort’s labour participation rate had fallen from 95 per cent to 89 per cent.

The rise in disability numbers occurred despite the fact that rates of non-fatal industry injuries per capita and automobile injuries per mile travelled in the US declined markedly after 1970. The safer the society, the higher the numbers receiving disability benefits. In other words, disability became an economic rather than social phenomenon.

Each time a recession occurs two things now happen: blue-collar jobs decline; disability recipients increase. Not all rich democracies, though, have seen a super-sized prime-age male un-working class develop. America has one of the highest incidences of this in the OECD. Why did it happen there? Eberstadt offers three reasons. Demand: the number of US manufacturing jobs shrank. Supply: the un-working class was able to opt into pensions in place of jobs. Other: the rise in the crime rate and criminal convictions in the US after 1970 de-credentialled a lot of American men for prime-time work. To that list, I would add two other factors.

The first is the single-parent family. Eberstadt suggests that rising incarceration rates of young males, following the 1970s crime boom in the US, might explain why so many prime-age men have dropped out of work (employers are reluctant to hire ex-felons). Yet Eberstadt also notes that the prime-age male exit from the labour force started well before the 1970s. These contradictory facts can be explained by the precipitous long-term rise of the sole-parent family in the US. Being raised in a single-parent family strongly correlates with both a poorer record of employment and higher rates of incarceration. In the US today, 28 per cent of children live in single-parent households. This is markedly more than in most other OECD countries. In Australia the figure is 18 per cent. Simply put, fatherless families lead to male un-working. This is passed down the generations. As Eberstadt observes, male un-working strongly correlates with being unmarried or divorced.

A second extra factor to consider is mobility. Being mobile is simultaneously a demand and supply factor. Because of its size, history and exceptional nature, America is a series of regional economies woven together. As one region shrinks, another grows. This requires labour to move in big numbers between regions. In the nineteenth century, vast numbers of American farmers relocated across the continent, many of them several times. This forged the Western Settlement of the US. Subsequently during the Great Depression two and a half million individuals moved from the dust-bowl-afflicted Plains states. They were followed from 1940 to 1970 by five million African-Americans who moved from the agrarian South to the industrial North. Conservative Pentecostal country-music-listening whites and Democrat-voting blues-music-listening Pentecostal blacks alike took jobs in the booming wartime and peacetime manufacturing industries on the West Coast and in the Great Lakes states.

The American economy depends on periodic waves of internal migration. If these fail, external migration fills the gap. What is striking in the last fifty years is the marked decline in the rate of American economic mobility. Americans, less and less, get up and go. That is neither economically nor socially healthy. The decline in the rate of interstate mobility matches the rise in the rate of prime-age male un-working. When men lost their jobs in manufacturing and agriculture in the industrial mid-West they did not move to states with high employment demand. Instead they stayed put in states where jobs were disappearing. In 1948 3.25 per cent of the American population moved interstate; in 1988 3.1 per cent did; only 1.4 per cent moved in 2010. The post-industrial era produced a sedentary American society.

In the 1960s American movies often began with a journey cross-country to start a new life and a new job in a new city. That motif later became less and less common. As the impulse to migrate internally in the United States dried up, it was replaced by external immigration, legal and illegal. Mid-Western males from small old de-industrialising mill towns were not interested in hauling themselves across the country. They chose instead to un-work. But someone had to do the work in expanding economies like California and Texas. When a vacuum is created nature finds a way of filling it. So Mexicans and others, mostly illegals, 11 million of them, disproportionately males, with a median household income of $36,000, were employed in place of home-grown Americans, who preferred to stay in towns increasingly dominated by family breakdown, sole parenting, drug-taking, failing public schools, and de-industrialisation with its options of lower-paid low-benefit service work or exit from the labour market.

Starting in 2013 and peaking in 2016 the American political tide in the United States has turned against foreign immigration. Yet there seemed to be little understanding of the necessary corollary of that. Given the nature of America’s vast economy and geography, if external immigration is switched off then large-scale internal immigration has to be switched on.  When demand for labour in a region rises rapidly, labour has to be imported from somewhere. If prime-age high-school-educated males are not to be exiled to a life of chronic television viewing, the first step is to reform benefits in order to encourage mobility. Eberstadt agrees with Henry Olsen that America’s current system of government benefits discourages geographic mobility.

Because of populist politics, perhaps little can be done about prime-age male NILFs already on long-term pensions. But the system can be reformed for the future. Japan offers a good model. It has 2 per cent of its population on a disability pension.  This is consistent with the 2 per cent of the population in advanced societies who have a disability that precludes independent living or working. A decent society will provide income and assistance for those individuals. But 2 per cent is not 6 per cent. Nor is it the 10-to-20 per cent that disability industry activists like to push. The Australian Network on Disability claims that “one in five” Australians have a disability.

Japan’s pension system focuses on physical and intellectual impairment. It identifies three commonsense categories: impairments that require constant attention or else preclude independent living or working. The American system in contrast defines “disability” as the inability to engage in “substantial gainful activity”. The focus is not on the ability to work but rather to earn an income. Those are not the same things. By conflating them the American system has turned disability insurance into a form of long-term income insurance. Activists applaud the “very inclusive” definition of disability in Australia’s 2013 National Disability Insurance Scheme, engineered by the Labor Party. The NDIS legislation speaks vaguely about “substantially reduced functional capacity”, which is an invitation to ever-escalating numbers of participants.

Eberstadt points out that Japan has maintained its prime-age male work participation rate much better than the United States. This is in spite of two decades of slow growth. Like the United States, Japan is one of a small handful of genuinely successful modern societies. These are the exceptional societies built on two things: dual-headed nuclear households and a strong work ethic. Japan has maintained its strong work ethic. The Japanese look on work not just as an economic matter but as a spiritual discipline. This is rooted in Zen Buddhism. In America the Protestant and Augustinian work ethics have weakened, as has the couple-based household. Today in the United States 28 per cent of children live in sole-parent households, mainly single-mother families. The figure for Japan is 12 per cent—that was the American figure in 1970. The state with the lowest sole-parent cohort in the US today is Utah. Yet even in Mormon-dominated Utah, 19 per cent of children are being raised in sole-parent households.

Eberstadt argues that the exodus of working-age blue-collar men from the American workforce did not occasion any great political eruption or convulsion across five decades. That overstates the matter. The 1980s saw a wave of US Congressional industrial-decline populism. Senators stood on the steps of the Capitol Building and smashed Japanese goods. The Missouri Democrat senator-turned-lobbyist Dick Gephardt was a prominent economic populist in the 1980s and 1990s. The populist wing of the Republican Party, small though dogged in the 1990s, burgeoned between 2013 and 2016. Rick Santorum, a conservative and former senator from Pennsylvania, proposed a theory of the 2016 election in his 2014 book Blue Collar Conservatives. Santorum’s theory was adopted and then adapted by Donald Trump, who embraced the book’s mid-Western blue-collar electoral strategy but dumped all of Santorum’s thoughtful conservative policy proposals.

One hundred thousand voters across three mid-West industrial states provided the narrow Electoral College winning margin that got Trump into the White House. The last time Republicans in a presidential election dominated the industrial mid-West was in 1988. Trump managed this by appealing to disillusioned Democrats. These people are not so much the NILF benefit class but the next social tier up.  They are fearful, with reason, of themselves being NILFed. They are high-school-educated, rural small town and suburban voters, particularly males, earning $30,000 to $50,000 a year. Their finances are deteriorating. They view the local job market as worsening and the national economy as poor. They are not conservatives but rather self-identified political “moderates”. In short they are disenchanted old-school Democrats who think that international trade takes away US jobs. Hillary Clinton ignored this group as she campaigned in the mid-West, preferring rallies in community colleges and universities.

A correct theory of an election does not necessarily make for a correct social theory. What kind of public policy can fix the condition of Trump male voters from the rural and ex-urban hinterland of the mid-Western Great Lakes industrial economy? In his 2016 Republican presidential primary bid, Santorum offered blue-collar voters vocational training. This was a down-scale twist on the Clinton-era Democratic Party’s “give them education” refrain. Marco Rubio did the same. The problem with this is that education does not create jobs. Eberstadt notes that NILFs are more likely to have a high-school-only education. But this correlation is not in itself causally significant. Training or college cannot put people into jobs that do not exist.

What can? Trump campaigned on infrastructure spending, raising protectionist tariffs and reducing illegal immigration. The theory is that mid-Western industrial jobs have been taken by foreign-born workers or exported to China and Mexico. But today the globalisation of labour is rapidly coming to an end of its own accord. Factories are relocating back to the United States. Yet this does not mean that factory jobs are. Machines are replacing labour. The glory days of blue-collar work, the 1960s, are now little more a lachrymose memory. Even China is replacing factory workers with robots and focusing on creating a service economy. As for infrastructure spending, Japan has gone through twenty years and five recessions doing that, to no net good effect.

Even with the rise of China, thanks to automation America has remained the number two manufacturer in the world. With robot factories it will probably become number one again. A big chunk of Michigan’s market today for its industrial goods is its trade rival Mexico. A trade war with Mexico would only destroy the Michigan market. Likewise with China.

Does this mean there is no future for those who have been left behind? On the contrary. Demand for high-school-educated labour is rising relative to the demand for college-educated workers, which is declining. The machines that decimated the blue-collar labour force are now doing the same for white-collar and pink-collar labour. As Eberstadt notes, the US female labour force participation rate peaked in 2001.

Does this mean doom? Not at all. While there is shrinkage there is also growth. Eberstadt sums up the latter with one word: entrepreneurialism. While that sounds Silicon Valley-like, it is not. What it means is that factory and office work is doggedly disappearing but self-employment, sole trading, partnerships and micro-businesses are growing. The American challenge is to transform the NILFs who watch television six hours a day into a do-it-yourself self-employed class. Difficult? Yes. It requires a number of very tricky things. First, the revalidation of the work ethic and marriage. Second, the replacement of fantasy images of high-wage small-town factory jobs with realistic aspirations. During the 2016 campaign a remarkable number of Trump voters told journalists how they once had a classic blue-collar job, lost it, created a viable yeoman business, micro-business or portfolio of work for themselves, and yet still passionately wanted to see the return of the mill-town world that had disappeared. This paradise lost is not coming back. Not ever. Trump won an election by targeting the false-hope vote. The problems created by pipe-dream politics are now owned by the populist wing of the Republican Party. Their policy recipes are no more viable than those of the old Democratic Party populists.

Americans have to re-learn the lesson of the Western movies of the 1940s and 1950s, that they are a “migrating people”. Morris Birkbeck coined the phrase in 1818 in his Notes on a Journey in America. Americans migrate between states much as foreigners migrate between countries. American public policy needs to re-invigorate this ethos. First, by refocusing disability insurance eligibility on serious impairment; then by rebuilding internal labour-force migration by tying public benefits to economic mobility. U-hauling cross-country is the first, most elementary, form of American entrepreneurialism. This is not about technology or education. It is about “get up and go West young man”, the founding cry of America’s distinctive continental economy.

In addition to mobility, public policy can also help bridge between the old shrinking wage-labour economy and the new world of capital work, where employment is self-created in yeoman businesses. One way of doing this is to return the 50 per cent of taxes spent on education, health, and retirement back to taxpayers. Mandated savings accounts (financed by tax rebates, tax credits and personal saving incentives) can provide the structured basis for everyone to acquire a personal capital fund. This is crucial in an age when wealth creation and job creation have been fundamentally disconnected.

Mandated savings accounts were often cited by Santorum in Blue Collar Conservatives. Donald Trump stripped out the sound conservative policy and replaced it with populism and nationalism. He ring-fenced entitlement programs and decried external immigration. Yet any successful cut to external immigration also requires increasing internal immigration. That means removing public policy incentives for NILFs not to move interstate and re-enter the workforce. America, like all the great successful modern societies, is a society based on exceptionalism, not nationalism. Part of America’s exceptionalism is that it is a nation of regions. American immigration is as much internal as external. America is a fractal of the world. The nationalist-populist wing of the Republican Party will switch off mass external immigration. But who will switch on internal immigration in its place? Republicans and advocates of American exceptionalism will have to make the case. A good place to begin is Nicholas Eberstadt’s very fine and most instructive book.