To accelerate economic growth, Americans need to work longer.
That common-sense observation by Jeb Bush has been seized upon as if Ebenezer Scrooge had canceled the Christmas half-holiday. The former Florida governor spelled out the logic of his economic agenda to the Manchester Union-Leader on Wednesday:
My aspiration for the country—and I believe we can achieve it—is 4 percent growth as far as the eye can see. Which means we have to be a lot more productive; workforce participation has to rise from its all-time modern lows. It means that people need to work longer hours and, through their productivity, gain more income for their families. That's the only way we're going to get out of this rut that we're in.
Is he wrong?
The average length of the American working week declined sharply between 1960 and 1980, and has since then remained persistently below its historical peak. The percentage of the population at work or seeking work has dropped to the lowest levels since women entered the workforce in large numbers in the 1970s. Most troublingly of all, prime-age men—aged 18 to 54—have been dropping out of the labor force for years. The Great Recession accelerated the trend, but it began before—and it is continuing afterward.
Those who work less, earn less: In 2011a, only 18.5 percent of the poorest quintile of households contained a full-time worker, as compared to 60.5 percent in the middle quintile, and 78.2 percent in the top quintile.
An economy in which many people earn less than they could is, obviously, an economy underperforming its potential.
Is this such a heinous thing to notice? Was it heinous when President Clinton noticed an earlier phase of the trend back in the 1990s and promised to “make work pay”? A number of liberal writers have waxed rhapsodic about how working less enables Americans to spend more time on personal pursuits. Ezra Klein of Vox tweeted: “The point of becoming a rich country is, in part, so people don't have to work endless hours at jobs that they hate!”
Reality check: What is happening is not that a wealthy country has cut the length of the normative working week. What has happened is that many Americans who want and need full-time work must settle for part-time work—and some other Americans, including men in their prime working years, have given up on work entirely. Nor are these under-employed Americans for the most part devoting themselves to childcare, elder care, community involvement, or self-improvement. As sociologists such as Robert Putnam have noted, contemporary Americans do less of all those things than their longer-working counterparts of half a century ago. Instead, as Americans reduce their work commitments, they increase their hours watching TV and playing video games.
Nobody imagines that Jeb Bush is talking about indenturing unwilling labor or even—as President Clinton did—imposing financial disincentives on nonwork. To date, he has not offered any specific proposal to redress the trend he remarks, although presumably that will occur over the course of the campaign. The one policy commitment he has stressed earliest and most often—more immigration—will likely make the problem of American nonwork worse. According to economists like Giovanni Peri, immigration promotes wage growth by displacing natives from lower-paid jobs and driving them to seek higher-skilled and better-paid work. But in the process, experience shows, many of those displaced natives will drop out of work altogether.
The most troubling question about Jeb Bush’s remarks is: Has he got hold of the right problem in the first place?
The core idea of the emerging Jeb Bush economic policy is that a bigger Gross Domestic Product will translate into more opportunity and higher wages for the average person.
Over the past generation, however, rising GDP has not always improved living standards. A close look at the period in the past 40 years when living standards did improve, in the second half of the 1990s, reveals that the improvement was driven by a (temporary) pause in healthcare cost inflation. When the cost of employee benefits rises more slowly, employee pay can rise more quickly. The tragedy of the American workplace is that employers continue to pay more for labor—but workers don’t receive that money. It is siphoned off by the healthcare industry.
Total GDP is a useful measure of the fiscal and military health of the state, in a way that per capita figures can’t entirely capture. Denmark has a higher GDP per capita than the United States, but 5 million Danes earning an average of $60,000 a year still cannot buy much of a navy.
But focusing solely on growing the overall GDP won’t improve American living standards, especially if that GDP is built the wrong way. Jeb Bush takes pride in Florida’s 4 percent growth under his 1999-2007 governorship—but that growth was achieved thanks to a housing boom that ended in disaster.
His current advocacy of liberalized immigration as a solution to the economic problems of Americans seems equally unsustainable. Importing more low-wage workers may expand total GDP, but it can actually depress GDP per capita. Expanding GDP is a predicate for improved living standards, but it’s no guarantee that they will actually improve, as Americans have discovered over the past decade and a half. The health of American society is best judged by the condition of the typical working American. What that person needs is a tighter labor market, and healthcare costs that rise more slowly. Instead, Democrats are readying an offer of more regulation, more government spending, and more income redistribution. Republicans will likely counter with more upper-income tax cuts, less health coverage, and more immigration.
Neither set of policies seems to speak to what Americans actually need. No wonder so many voters are turning to ideologues like Bernie Sanders, or to flim-flam men like Donald Trump.