what the labor pool collapse means

businessinsider | “If today, the country had the same proportion of persons of working age employed as it did in 2000, the U.S. would have almost 14 million more people contributing to the economy. Even assuming that these additional workers would be 25% less productive on average than the existing labor force, U.S. gross domestic product would still be more than 5% higher ($800 billion, or about $2,600 more per person) than it actually is.”

Makes sense.

The larger question concerns how and why this happened. I have my own theories about this, but let’s first look at the evidence that Vedder himself comes up with to show that most of this can be explained by transfer programs like food stamps, disability insurance, student subsidies, and unemployment payments.

Let’s look at each.

Food stamps were a slightly goofy subsidy to the big agriculture lobby back in the 1960s, fobbed off on the public as somehow essential to ending hunger. Today, food is cheaper and more plentiful than ever, and American waistbands reveal this fact. People talk about the plight of the hungry, but it is mostly a myth. We are the most stuffed society in the history of the world.

Yet even now, 47.5 million people are receiving food stamps, with an average benefit of $125 per month. That’s 15% of the population. That’s some pretty serious grocery purchases there. Big Ag is very happy about this. Must be nice to a have a pool of guaranteed customers who live off others.

Vedder makes the point that a major reason people work is to eat. If the eating part is guaranteed, why bother working?

With disability benefits — the government program most famous for massive fraud and abuse — it’s the same story. Back in 1990, only 3 million people took checks. Today, that number is through the roof, so much that almost 8.6 million people get checks that provide the equivalent of a full-time income. And this has happened at a time when medical technology is better than ever at dealing with real disability.

Next comes the whole student racket. Back in 2000, not even 3.9 million young people received Pell Grant awards to go to college. Today, the number is approaching 10 million. Going to school is a great way to avoid having to work. Hey, but maybe all these desk sitters are absorbing fabulous information that they will soon spring on society in the form of dazzling innovations and productivity, and we will look back and say, wow, that was worth it after all.

OK, stop laughing.

Next comes unemployment. In the past, it was never possible to stay unemployed for a full year and still receive benefits. Now it is normal. Congress just keeps extending benefits, probably out of fear that if these people are pushed into the labor market, unemployment will go up and wages will fall and there will be a revolution. It’s literally the case that government is paying millions of people to shut up and stay at home.

What are we to make of Vedder’s picture of the workforce? One gains the image of many millions of people sitting at home drawing checks, pretending to be students, stuffing their faces with tax-funded potato chips, and otherwise just living it up. If that’s really true, that’s not really suffering, is it? The data reported above indicate no real disaster, except for those of us footing the bill.

I actually don’t think this is entirely the right way to look at it. The reality is that the labor market is broken today because it is not really a market in any normal sense. Many people are shut out due to more substantial problems. People are saddled with debt, terrified to lower their wage expectations, and completely shut out of a system that doesn’t seem to accommodate the old expectations.