Steven Malanga joins Brian Anderson to discuss the decline in labor force participation and the factors that might be contributing to it.
Audio Transcript
Brian Anderson: Welcome back to the 10 Blocks podcast. This is Brian Anderson, the editor of City Journal. Joining me on the show today is my colleague, Steven Malanga. He's a senior fellow at the Manhattan Institute and City Journal's senior editor. He writes about state and local governance, economic policy, many other matters ranging from taxation to unionization to birth rates. His work has appeared in many other outlets along with City Journal, including the Wall Street Journal, where he appears regularly.
Today we're going to discuss Steve's feature story in our summer issue, which is called “Unemployable,” and it's about the growing number of Americans who are out of work, not because there are no jobs out there, but because they're no longer fit for work for various reasons. So Steve, thanks as always for joining us on 10 Blocks.
Steve Malanga: My pleasure.
Brian Anderson: So you open this essay, “Unemployable,” by talking about how both American parties, major parties, the Republicans and the Democrats have in different ways been arguing and contending that they want to recapture American manufacturing jobs for the country, to build up the manufacturing sector again for workers. Before he dropped out of the campaign, President Biden was pushing for policies that would in fact penalize firms for sending jobs overseas, and he'd reward them for bringing jobs back home. Donald Trump had imposed tariffs when in Washington to protect domestically produced goods. He also wanted to motivate companies to keep manufacturing jobs here in the country.
But as you point out in this essay, all of these efforts are running into the same obstacle, which is a growing labor shortage. Many construction firms, for example, can't fill the many open positions they've got. An ever-growing number of adult working-age Americans, as you note, are out of the workforce and they're not looking for work. So the first big question is why are so many Americans not working, particularly when there are these kind of openings?
Steve Malanga: Yeah. Well, first of all, there isn't a single answer to this question. I guess if there's an overarching single reason, it's because it seems to be becoming more and more acceptable not to work. And sometimes it's because government and government policies incentivize people not to work. But we have a situation where in America, for decades now, the number of men who've either been working or looking for work has been declining as a percentage of the workforce for years. When women started working, they made up for that shortfall at least a bit for years. But starting really in the early 2000s, the number of women who are in the workforce plateaued, and then that started dropping, and it really accelerated during Covid. And the really troubling thing during Covid is that a lot of people who left the workforce, or were kicked out of the workforce, haven't subsequently rejoined it.
Now, the reasons go to all kinds of things. Number one, there were tremendous incentives that the government provided people in terms of extended unemployment and also just sending checks to households when they shut the country down. And they didn't just do this over a short-term period. In the beginning of Covid, Trump did it initially, and then he renewed the program. Then Biden extended it. And one of the things that we know is that the longer people stay out of work, the less likely they are to come back to work. So one of the big motivations seems to have been that people were given this extra money and they were out of the workforce for a while, and a large number of them did not rejoin the workforce.
Before Covid, there were 95 million adult Americans who were not part of the labor force, and that includes a lot of different people. That includes, for instance, parents who are staying home with their kids. So it's not all a terrible thing. There are reasons for it. But before Covid, there were 95 million. There's now about a hundred million adult Americans. So that's a sharp upturn.
There are many other things that happened during Covid that accentuated what is a long problem. The number of people claiming mental health problems and mental health disability has been going up for years, and it soared during Covid. The number of people who have drug problems, which is going back to the opioid epidemic for the last several decades, has been a growing problem, for the employment of men in particular. That problem really ratcheted up during Covid, so that one study actually estimates that as much as a quarter of all the people who dropped out of the workforce during Covid did so because of drug problems.
So you see, you have these combination of factors coming together, but the end result is a single situation where a smaller and smaller percentage of adults are working. And that creates this problem, not only an economic problem, but it creates social problems too, because adults who are out of the workforce tend to be less happy. It tends to be more easy for them to fall into addiction. They're less involved in the community. They're less likely to be married. So you also have a whole bunch of social problems coming along with this rise in non-working adults.
Brian Anderson: You note that the decline, and I guess this is pretty widely recognized, that the decline is especially dramatic among men, and that's not something that's just really started with Covid. It goes back for some years now. So I wonder what's going on with the history of labor force participation among males? When was the high water mark for that and when did it start to decline?
Steve Malanga: Well, in the post-World War II environment, men especially those who had served really wanted to get back to work. The economy was booming, and as many as 95% of all working-age men worked during that period, the '50s and the early '60s. The decline started later on around the time of the late '60s and the early '70s. There were a whole bunch of reasons. There was an explosion in Social Security disability recipients. It became easier to get Social Security disability, to qualify for it. Oftentimes when people qualified, they were put on permanent disability even when it wasn't necessarily true that they were permanently disabled. But it became easier and easier to qualify for this. They opened up new categories, disability categories, including for mental health. And so one of the figures you see is the explosion in the number of people on Social Security disability.
So that in the 1970, in the early '70s, there were about 1.5% of the adult workforce or working-age people were on disability. And that's now exploded to about 3.7%. And when you think of the increase in the size of the population at the same time that 3.7% represents millions of additional people. So that was certainly one trend that we saw.
We've seen a lot of others. Again, drug epidemics. The cocaine epidemic had quite a lot to do with this. The rise in crime in America had quite a lot to do with this, because what happened is the disorder of the late '70s and the early '80s, particularly in our cities in the mid-'80s and especially the cocaine epidemic during that period, it drew a lot of marginal people, kids and young adults in neighborhoods into essentially the criminal justice system. And people who are ex-felons are among the hardest to get re-employed. A very small percentage of them when they come out actually get jobs and stick to them. So that was another reason why.
So we saw this really long decline. You can get all the way into the '90s, and in the late '90s you have the opioid epidemic. And so it's a combination of a lot of different factors. We also had welfare without work requirements for a very long time. Remember, the welfare to work reforms didn't happen until the late 1990s. So that was another magnet, if you will, to draw people out of the workforce. And again, as I said, some of this increase was masked by the fact that women were entering the workforce. They were making up some of these numbers, but they weren't able to completely fill in for men, particularly because we also saw a decline in high schools and in the American education system. We saw a decline in trade education.
So a lot of people who might have come out trained for blue collar trade jobs, well-paying trade jobs didn't get that opportunity, and they became kind of disenchanted. Many of them were kind of directed into college programs, and they really weren't ready or interested for that and came out of college being very much underemployed, and some of them have dropped out of the workforce too. So again, a whole series of factors coming together, including just this notion of increasing incentivization by government of for not working, of not working.
Brian Anderson: Yeah. You noted a few moments ago that the pandemic really brought with it a lot of social problems, probably due to the enforced isolation, including increased drug use. And you note in the piece some pretty striking numbers about the growing percentage of workers who are failing drug tests in industries like trucking. And we've all heard about, of course, the just awful opioid crisis in the country. So I wonder what's being done to tackle this problem? How extensive is it in industries like trucking? I've seen some proposals out there that say, well, you shouldn't have to have drug tests in these areas of work. But that seems ridiculous, right?
Steve Malanga: Well, yes, except that you say, what's being done to tackle this problem? And I would say, if anything, what we're doing is only expanding the problem. Legalization of recreational marijuana has normalized the use of marijuana. So we see large increases, particularly in the number of young adults who are smoking or using products in different ways. And there are a lot of safety-sensitive industries where they test for drug use because it can be a hazard, obviously. It's not just like an industry's preference. But if you're a truck driver, if you're in any kind of transportation, if you're in the aerospace industry, if you are in construction and manufacturing where a safe workplace is paramount, these companies are testing people and the percentage of people failing has been rising for years.
It hit a 10-year high in 2021. And let's say in the trucking industry in particular, a lot of the people who are failing drug tests, they are required to go take a federal program to kind of get re-certified. And many of them are not even entering these programs. So you wonder where they're going. The trucking industry is paying well these days. Obviously transportation logistics is extremely important to the economy with the rise of Amazon and the like. But a lot of these people are not even entering the workforce.
And the federal government is kind of being pulled apart in two ways because on the one hand, the Biden administration said they want to relax some of the prohibitions, the federal prohibitions against marijuana, which is now considered a Schedule I drug, which is the most restrictive. They want to make it Schedule III. At the same time, federal agencies, particularly the Department of Transportation, they're warning about the dangers of the rise in the number of people who are on the work site or are driving commercial vehicles and testing positive for marijuana.
And as you mentioned, there are a whole bunch of states which essentially are saying, they've even passed laws, Washington State, California, which is saying, well, you can't even if you're an employer test people for marijuana because you're excluding too many people from the workforce. We've made it legal and they shouldn't be excluded for that reason. The one thing these laws can't do is they can't supersede the federal law, which essentially says if you're in these sensitive industries, you have to test people. But the response to this problem from states that have legalized in some cases is not to try to fix the problem, but to say, oh, you just can't test. Which in a way is pretty troubling if you think about some of the consequences of being under the influence while you're in the workplace.
Brian Anderson: Operating heavy equipment could lead to a lot more injuries and even fatalities.
Steve Malanga: And in addition to that, let me add that one of the other reasons that... I mean workplace safety is number one, but one of the other reasons that for years companies have tested is because there's plenty of evidence. I cite some of these numbers in my piece and other pieces I've done. There's plenty of evidence that people who habitually, regularly use marijuana are more prone to workplace accidents. They're more likely to miss days at work. They're less likely to advance in their career. So there are all these other workplace issues that employers understand, and so there's a reason they test. They're not doing it because they want to punish people needlessly. They're doing it to protect themselves, and the states are giving them a hard time about it. So we're going in the opposite direction from fixing the problem.
Brian Anderson: Well, given the magnitude of the problem that we're discussing here, it's pretty daunting to try to think about how to turn it around. At the end of your story, you run through several concrete suggestions, though, that might move us in the right direction. So I wonder where should we be putting our efforts if we want to get some of these folks back into the workforce? Because being out of the workforce, all the evidence shows is a very, very bad thing.
Steve Malanga: Yeah, again, there's no single solution, because as I've gone through some of these causes, there are multiple causes. But I would say there are few overarching things. First of all, government, the first policy of government should be to do no harm. And there are way too incentives for people not to work these days. We saw in the 1990s the value, for instance, of welfare to work in getting people back into the workforce, requiring the people who are going to be on welfare, but are able-bodied to get back to work. There's been a lot of proposals to extend this to other government benefits too, because there's a whole menu of government benefits now that people receive and they've failed. In addition to that, many states are backtracking on welfare to work, and if the federal government doesn't basically hold states to the welfare to work requirements and the Biden administration hasn't, then they're just relaxing it. So what we're doing is we have all this menu of disincentives to work, and that's the last thing government should be doing.
In addition to that, there are I think a lot of positive things we can do. We need to reform our K through 12, but especially our high school educational system so we bring trade employment back into these schools. We almost completely lost it in many school districts. And the reason it's so important is study after study has shown that for a certain kind of kid, this is someone who becomes more motivated working with his hands or her hands in a trade environment than they do going to college and studying for some kind of an office job. And a lot of those programs have disappeared, and it's been a kind of a de-motivation for kids for whom that's the best choice.
We really need to bring those back. And as you know, City Journal has written quite a bit about apprenticeship programs and other programs that are proving to be successful, but there are far too few of them. It gets much harder to try to do things like re-employ ex-convicts, for instance. They have a lot of personality problems. A large percentage of convicts have, for instance, substance abuse problems. So there's a reason why employers are very reluctant to hire ex-cons. It's not just that they were once in jail, they have a whole menu of other problems. However, there are programs that can help.
There's been a suggestion for a kind of federal insurance that you can offer to employers if they employ ex-cons so that they're kind of held harmless if there are any bad problems that result out of this. Maybe that's an incentive that you can get for employers to participate in some of these programs. But the problem remains that once a person develops this kind of out-of-work attitude, whether it's because of drugs or mental health problems or bad government incentives, it's hard to get them back into the workforce. It's much easier if individuals don't develop these problems in the first place. And we just seem to be on a rollercoaster in society right now where we have growing mental health and drug problems, and as a result, you see a large percentage of young adults who are out of the workforce.
Right now the work participation rate for young adults today is about half of what it was. Rather, the number of young adults who are out of the workforce now is about twice as much as during the Baby Boomers in the '70s. So clearly you've got generation by generation, we have fewer and fewer young people entering the workforce, and really that's a time when, at their ages they should be grasping the opportunities that are out there. And that's the irony of this. In well-paying industries like manufacturing and construction, if you're well-trained, there are plenty of opportunities these days, and the fact that people aren't grabbing them is very troubling, and it's because of this sense of it's a kind of illness in the society right now.
Brian Anderson: Well, Steve, thanks very much for that overview. The essay, which is in our latest issue is called “Unemployable,” and it's a terrific overview of this very significant social and economic problem. Don't forget to check out Steve Malanga's work on the City Journal website. We'll link to his author page in the description. You'll be able to find not only this article we've been talking about today, but lots of others that relate to this topic. You can also find City Journal on X @CityJournal and on Instagram @CityJournal_MI. As always, if you like what you've heard on today's podcast, please give us a five-star rating on iTunes. Steve, thanks again.
Steve Malanga: Thank you.
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