Economics: The Missing Fifth

As my colleague David Leonhardt pointed out recently, in 1954, about 96% of American men between the ages of 25 and 54 worked. Today that number is around 80%. One-fifth of all men in their prime working ages are not getting up and going to work.

According to figures from the Organization for Economic Cooperation and Development, the United States has a smaller share of prime age men in the work force than any other G-7 nation. The number of Americans on the permanent disability rolls, meanwhile, has steadily increased. Ten years ago, 5 million Americans collected a federal disability benefit. Now 8.2 million do. That costs taxpayers $115 billion a year, or about $1,500 per household. Government actuaries predict that the trust fund that pays for these benefits will run out of money within seven years.

Part of the problem has to do with human capital. More American men lack the emotional and professional skills they would need to contribute. According to data from the Bureau of Labor Statistics, 35% of those without a high school diploma are out of the labor force, compared with less than 10% of those with a college degree.

This is a big problem. It can't be addressed through the sort of short-term Keynesian stimulus some on the left are still fantasizing about. It can't be solved by simply reducing the size of government, as some on the right imagine.

It will probably require a broad menu of policies attacking the problem all at once: expanding community colleges and online learning; changing the corporate tax code and labor market rules to stimulate investment; adopting German-style labor market practices like apprenticeship programs, wage subsidies and programs that extend benefits to the unemployed for six months as they start small businesses.

Reinvigorating the missing fifth — bringing them back into the labor market and using their capabilities — will certainly require money. If this were a smart country, we'd be having a debate about how to shift money from programs that provide comfort and toward programs that spark reinvigoration.

For more, see The Missing Fifth by David Brooks, May 9, 2011 at NYTimes.com.