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Ending the “War on Work”

Podcast

Ending the “War on Work”

June 28, 2017
Economy, finance, and budgets

Edward L. Glaeser joins Brian Anderson to discuss the great American domestic crisis of the twenty-first century: persistent joblessness, particularly among “prime-age” men. This Ten Blocks edition is the first based on City Journal’s special issue, The Shape of Work to Come.

In 1967, 95 percent of men between the ages of 25 and 54 worked. During the Great Recession, the share of jobless prime-age males rose above 20 percent. Today, even after years of economic recovery, more than 15 percent of prime-age men still aren’t working. Technological changes, globalization, the educational system, and government policy have all contributed to the problem. “To solve this crisis, we must educate, reform social services, empower entrepreneurs, and even subsidize employment,” argues Glaeser in his article, “The War on Work—and How to End It,” in the special issue of City Journal.

Edward L. Glaeser is a professor of economics at Harvard University, a City Journal contributing editor, and the author of Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier.

Audio Transcript

Brian Anderson: The rise of joblessness, especially among men, is perhaps the great American domestic crisis of the 21st century.  Between 1945 and 1968 only about 5% of “prime-age” men between the ages of 25 and 54, that is, were out of the workforce.  During the height of the Great Recession that number rose above 20% and it remains high today even after several years of recovery.  As the demand for American muscle has ended, or eroded, government programs such as unemployment and Social Security Disability Insurance have taken its place.  These programs were poorly designed and actually disincentivize many people from getting back into the workforce.  Now, a future without any work isn’t inevitable or even likely, but how do we solve our present crisis of joblessness?  On today’s 10 Blocks Podcast, we will talk with Ed Glaeser.  He is a professor at Harvard University, a senior fellow at the Manhattan Institute, and a longtime contributing editor of City Journal about his agenda for ending the war on work before it consumes another generation of Americans.

Welcome back to 10 Blocks.  I am your host, Brian Anderson, and joining us on the show today is Ed Glaeser.  Ed is the Fred and Eleanor Glimp Professor of Economics at Harvard University, a senior fellow at the Manhattan Institute, a City Journal contributing editor and author, most famously, of the book Triumph of the City.  Ed’s latest essay, The War on Work and How To End It, appeared in our new, special issue of City Journal on The Shape of Work to Come.  Thanks very much for joining me, Ed.

Edward L. Glaeser: Oh, thank you so much for having me, Brian.

Brian Anderson: At the top of the show we mentioned the alarming rate at which prime working age American men have completely removed themselves or been removed from the workforce.  Many of the proposed policy solutions that have received a lot of attention to address this problem in recent years, like a universal basic income, which is starting to become a very popular nation, especially in Silicon Valley, focus on alleviating some of the material hardships of being out of work.  What would you say to advocates of this kind of guaranteed wage as a solution to joblessness?

Edward L. Glaeser: I think the important point is that the miseries of joblessness go far beyond mere material deprivation.  Just giving someone a slightly higher income isn’t going to eliminate the sense of purposelessness that goes with lacking a job, lacking a meaningful ability to contribute to the world.  There’s lots of different data sources that we have for looking at the misery that goes with joblessness.  We can look at the happiness data where the gulfs are enormous between people who are employed versus people who are unemployed.  And I have some of this, of course, in the essay.  The differences between earning $40,000 a year and $50,000 a year is minimal relative to the difference in happiness that is associated with not having a job.  You see this similarly in drug use, in divorce, in all sorts of measures of social problems that are so strongly correlated with joblessness, and viewing this simply as being a material problem where the important thing is making sure that there is enough cash floating around I think fundamentally misses the point.  It is a tremendous tragedy that American entrepreneurs have failed to figure out ways to give people useful lives.  And I think the great task ahead of us is not to figure out how to write checks to people in the hope that they are not going to starve.  After all, that is going to do exactly the opposite.  That is going to induce people to just live with being unemployed, just to hang out a little bit longer on their parents’ couches.  What we need to do is find out smart policies that by upskilling and perhaps changing the incentives to entrepreneurs and to workers that actually bring people back into the labor force and give them the prospect for a tomorrow that is not just about getting a handout from the government, but that’s about using their lives in a way that is genuinely productive.

Brian Anderson: Some of the research on the jobless suggests that they are not using their time productively.  They are, indeed, sitting on the couch playing videogames, or worse, getting on drugs and living kind of self-destructively, so that is very important to remember.  Manufacturing, you note in the essay, accounts now for about roughly 12% of the U.S. economic output.  It only accounts, however, for 9% of all workers, so technology has made manufacturing less dependent on labor.  But what can we do to adapt the 21st century workforce to this new reality?  Because there are jobs out there in manufacturing that are going empty, that companies can’t find enough people to fill these more skilled positions.  So, is it a skills issue primarily?  And you know, what might we do to encourage a better engagement of the jobless into these positions?

Edward L. Glaeser: Skills are certainly a big part of the issue, and certainly when we look at the gulf between the educated and the less educated in joblessness, that gulf is huge, right?  We are looking at perhaps 5% jobless rates for educated, for males with college degrees or more, as opposed to 20% for people who have a high school degree or less.  So, skills certainly are a big part of the solution.  And, you know, we just think about manufacturing, right?  Manufacturing used to be an issue of relatively unskilled workers doing basic labor.  That’s not what American manufacturing looks like.  If you want cheap labor you go somewhere else other than the United States and of course we have seen this adoption of technology in part to respond to the high cost of labor in the U.S.  But that technology needs skilled workers, it doesn’t need unskilled workers.  So, what can we do creatively around that?  For the young, for the next generation, we have a lot of tools, right?  There is evidence that early childhood interventions can make a difference, there is evidence that charter schools can be fantastic tools for upskilling America’s workforce.  I think we should be doing more to experiment with vocational training in schools, not just, you know, vocational tracks but vocational training that is provided on weekends, after school, on the summer, and not necessarily provided by traditional educators but by competitive entities.  Maybe the labor unions want to get into the business, maybe it should be private providers.  But let’s, you know, open the market up, let’s let them compete, let’s evaluate them, let’s let the good ones grow, and let’s shut the bad ones down.  And let’s turn this into a world in which America’s ingenuity can upskill our kids.  The harder challenge is for the older workers, where we have, you know, roughly 50 years of retraining programs failing over and over again.  Now, I think there is still room for more experimentation here.  There is still room for more, you know, randomized control trials around new job training programs, but I think probably the best recipe for a 45-year-old to upskill them is to get them back to work, and that’s why I think we need targeted policies that are about employing those workers rather than just focusing on job retraining.

Brian Anderson: You mentioned in the essay you are involved with a project on vocational training in the Boston area.  Is that correct?

Edward L. Glaeser: I am.  So, we are hoping to do a randomized controlled trial of something called “The Possible Project,” which has been involved in Cambridge for many years.  They are rolling out their program at Madison Park High School in Boston, which is a vocational school, been a relatively underperforming vocational school for 40 years now, and what they do is they provide entrepreneurship training after school.  So, they start people off selling donated goods on eBay and then work them up the ladder to come up with their own goods.  When you go to their facility it looks great.  It looks like you have kids who have found a purpose, who are feeling good about themselves.  I think the only way that we know whether or not this works, though, is we have a full-scale randomized control trial, and that is what we are excited by doing.  I want to stress that even though that training is given in the context of supposedly creating entrepreneurs, I could well believe that the right way to teach people basic mathematics, basic accounting skills, is by having them do a tangible task like selling goods over eBay.  That may be an easier way to actually teach them even basic skills than trying to get them to do it in some abstract setting.

Brian Anderson: Unemployment insurance, disability benefits, which were introduced in the 1960s, you argue that the way these programs are structured have contributed to the jobs crisis.  In part, because of their good intentions, they make it more bearable to be unemployed over time, or disabled over time.  But the effect is to reduce the incentive to find a new job.  Could you speak a bit about these programs and how they are depressing the jobs market?

Edward L. Glaeser: Sure.  So, there are two channels that go on here, one of which is, you can call it an income effect, which is just you making unemployment less unbearable.  And if we go back to the world before The New Deal, long-term joblessness tended not to be a problem because if you were a you know, jobless male, by and large you starved.  So, you were pretty much willing to do whatever it took.  I don’t think America is looking forward to a future in which we are going to have the jobless starving, and I don’t think we should be looking forward to that future, but we do have to ask ourselves whether or not we struck the right balance, of course.  But the other issue, the other problem with these programs is they create essentially an effective tax on working, right?  So, if I am on UI, I get my UI payments as long as I don’t go back to work, but I do have to search for a job.  So, that part of UI is good, in terms of the incentives.  But the bad part is I am essentially taxing my UI benefits if I actually get a job.  Similarly, there is an income threshold that you are allowed to earn and still maintain your disability benefits, but once you go above that income threshold you lose everything, you lose your disability benefits.  So, it’s a huge tax on working.  The work of Magne Mogstad has looked at a Norwegian experiment where they essentially allowed disabled people to keep a larger share of their earnings over the threshold.  They saw a lot of people working and doing well as a result of that, so I think we can rethink these programs in ways that are not particularly harmful to the people, even if they don’t get a job.  But they create stronger incentives to actually induce working.  Let’s say that you, you know, you don’t need to stay unemployed to get full-scale benefits.  So, for example, during the Great Recession, the time that you could receive unemployment was extended quite dramatically.  That meant that people didn’t face strong incentives to get work for a longer period, that meant that, you know, in fact they faced strong incentives not to get a job.  You could have imagined instead of doing that, giving people checks which they receive whether or not they worked or not during some extended period.  You could imagine giving them a lump sum at some earlier period.  There are lots of ways that you could design it, and I am not pushing any particular one, I am just urging that we really need to think carefully when we have these social insurance problems that we aren’t waging war on work.

Brian Anderson: Relatedly, one of the proposals in your piece is to support the idea of a wage support in the form of direct subsidies.  This, basically to incentivize companies to open jobs for lower-skilled workers.  Could you describe this proposal in a little detail?

Edward L. Glaeser: Sure.  So, we have had a policy called the earned income tax credit in the U.S. for twenty years.

Brian Anderson: Uh-huh.

Edward L. Glaeser: And the EITC has been shown to be effective.  It basically pays people who go to work.  It is typically targeted towards mothers, not towards fathers without, not towards men without kids, but it is shown to be effective, basically by providing a payment that goes up over a certain range while you work.  There are problems with the EITC.  One of which is it is targeted towards a narrow range and I think assuredly we need a larger set of adults for whom we are going to wrap up these incentives, it also is complicated, right?  So, a simpler model would be just saying there are a lot of advocates of a higher minimum wage right now.  I think there are lots of reasons why we want to be careful about telling companies they need to pay more to every worker.  That is going to, you know, that is going to deter those companies from creating jobs.  But why not instead think about a simple policy that just ups the minimum wage people receive not paying for it through the companies, not penalizing those companies that are doing what we should hope every entrepreneur is doing, finding jobs for the less skilled, but ones that still reward work, and do so out of federal tax-funded support.  And I think we can pay for this by fairly, you know, fairly easily by reforming other social programs which act as deterrents on work.

Brian Anderson: In ways of encouraging entrepreneurialism, what might we be doing better?  You talk about the ease with which somebody can start a company in Silicon Valley compared to opening a nail salon, I think it is, in New York.  What might we be doing better there to really boost job creation on that end of the economy?

Edward L. Glaeser: I think it is absolutely outrageous in this country that we regulate poor person’s entrepreneurship so much more strictly than we regulate rich person’s entrepreneurship.  As you just said, you know, and this is very much motivated by my own home metropolitan area of Boston, if you want to start a company in Kendall Square outside of MIT that does internet operations globally, you face just the lightest of regulatory burdens.  If you want to start a nail salon, or a little shop that sells something like milk products in a poor area in Boston, you face an enormous regulatory hurdle.  When you think about what we expect many of the less-skilled Americans do.  I think in many cases the right answer is the service economy, often in thriving metropolitan areas that have robust information economies, and yet they are so often stopped by outdated regulatory frameworks.  So, I think by and large we want to rethink those regulatory barriers.  We want to cut back a bunch of those rules, but we also perhaps want to think about better implementation methods.  So, one approach that I really like is the idea of one-stop permitting, so there is one person that you go to in your area who handles everything for you.  You don’t have to apply to 17 different agencies and get 17 different approvals, there is one person who is the interface for all of these different approvals.  This is an idea that is modeled on The Devens Enterprise Commission in Devens, Massachusetts, where after they shut down a military base they instituted a one-stop permitting agency and it looks like it has really done quite well in terms of speeding the permitting process.  One of the virtues of having one permitting czar is that you actually hold them accountable for the speed with which they work approvals through, which, of course, you can’t do if 17 different agencies are in charge of it because nobody knows who is actually responsible for the delay.

Brian Anderson: Final question: Do you school and industry leaders realize the scope of this joblessness problem?  How should parents be changing the way they are raising their children, perhaps, to prepare them for this new future that is coming very, very fast, technologically and otherwise?

Edward L. Glaeser: I think people often don’t realize this, and I think in many cases the geography of it means that it is in – the epicenter for this in the U.S. is in Kentucky, right, it’s far away from thriving metropolitan areas.  Now, joblessness has risen in metropolitan areas as well, but there is a large gulf between urban and rural joblessness, and cities really have done better at promoting employment.  I think, in fact, you know, industry leaders should be making the case for policies like less regulation, policies like, you know, thinking about reform around payroll taxes, right?  This is one of the best things that was done during the Great Recession, was to suspend payroll taxes on less-skilled workers, to be making the case that there are a set of policies that are favored by people who think they are trying to do good things for poor people but end up being counterproductive, but I think industry leaders can be engaged in this.  Now, as a parent, I think about this often and I am never exactly sure that I have any degree whatsoever of authority as an expert on parenting.  Certainly my own attempts at, right, my own, you know, well-meaning but often…

Brian Anderson: Right.

Edward L. Glaeser: …messy attempts at parenting certainly don’t give me that much faith in my expertise in this.  Nonetheless, I think having some focus on making sure that your children understand that there is joy in work and that actually working hard is not something that you want to avoid, but something that you want to, you know, live your life in order to do as well as being with your family, I think that is important as well.  And to urge them to understand that they should find modes of work that they are good at, that they like doing, but that sometimes they are going to have to do stuff they don’t like…

Brian Anderson: Uh-huh.

Edward L. Glaeser: …and they’ve still got to do it.  So, I mean, those are, you know, at least my thoughts on this for what they are worth.

Brian Anderson: Well, they are wise words.  Do not forget to check out Edward Glaeser’s essay, The War on Work and How To End It.  It is in our special issue, The Shape of Work to Come, and it is available on our website, city-journal.org.  We would also love to hear your comments about today’s episode on Twitter, @CityJournal with the hashtag #10Blocks.  Lastly, if you like our show and want to hear more, please leave ratings and reviews on iTunes.  Thanks for listening and thank you again, Ed, for joining us.

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