Lock-up nation.

Photographer: David Paul Morris/Bloomberg

Out of Prison, Out of Work

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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About 7 million American men of prime working age (25 through 54) are not in the labor force, according to the Bureau of Labor Statistics. That means they don't have a paid job and haven't been actively looking for one.

This figure does not include those in jail or prison.  It does include students and men staying home to take care of children or other family members -- but, as Nicholas Eberstadt estimates in his important new book, "Men Without Work," these two categories seem to account for less than 15 percent of what he calls the NILFs (for not in labor force). And the NILF share of the U.S. prime-age male population has been growing and growing.

Rise of the NILFs
Share of men ages 25 to 54* who aren't in the labor force
 
Source: Bureau of Labor Statistics
*Civilian non-institutional population

This disappearance of millions of American men from the labor force is one of the great economic problems of our age. One of the great puzzles, too. What has been causing it?

One obvious culprit is technological progress. As economist Larry Summers wrote last week in reaction to Eberstadt's book:

Job destruction caused by technology is not a futuristic concern. It is something we have been living with for two generations. A simple linear trend suggests that by mid-century about a quarter of men between 25 and 54 will not be working at any moment.

Trade has been another likely cause. As economists David Autor, David Dorn and Gordon Hanson have showed in multiple studies, the rise in imports from China in the 2000s destroyed lots of manufacturing jobs in the U.S. that weren't replaced by other work.

This summer, University of Chicago economist Erik Hurst raised eyebrows with the suggestion -- backed up by some data -- that social media and better video games have "have increased the value of leisure time" and thus made work less attractive to young people.

Eberstadt, occupant of the Henry Wendt Chair in Political Economy at the right-leaning American Enterprise Institute, plays up the role of motivation and social norms. After showing that immigrants and married men are under-represented in the NILF ranks, he writes:

Neither a wedding ring nor a green card confers innate advantage in the competition for jobs. Rather, marriage and migration decisions point to motivations, aspirations, priorities, values, and other intangibles that do so much to explain real-world human achievements.

He also reports that 57 percent of prime-age NILF men in 2013 lived in households receiving some sort of disability benefit. But it isn't clear whether that's evidence of government benefits luring men out of the workforce or a weak job market (and poor health) pushing them there.

I imagine that all of the above factors have played some role in the decline in male labor-force participation. But none of them really explains this:

American Exceptionalism
Share of men ages 25 to 54 who aren't in the labor force
 
Source: Organization for Economic Cooperation and Development

The percentage of NILFs has risen since the 1970s all over the developed world, which definitely fits with the technology-displacing-jobs explanation. But the trajectory has been much steeper in the U.S. than in other rich countries. Why is that? Eberstadt digs through the data and comes up with a surprisingly simple answer:

A single variable -- having a criminal record -- is a key missing piece in explaining why work rates and LFPRs [labor-force participation rates] have collapsed much more dramatically in America than other affluent Western societies over the past two generations. This single variable also helps explain why the collapse has been so much greater for American men than women and why it has been so much more dramatic for African American men and men with low educational attainment than for other prime-age men in the United States.

It isn't that men in prison are dragging down the labor force participation rate -- as noted above, they're excluded from the calculation. But the great incarceration wave that began in the 1970s has produced millions of ex-convicts who are ill-prepared for jobs or are discriminated against by employers even when they are prepared. Eberstadt cites an unpublished study that estimates that 12 percent of the adult male civilian non-institutional population (that is, men not in jail) in the U.S. has been convicted of a felony, and figures the percentage must be even higher for prime-age men given that the "incarceration explosion" didn't start till the 1970s.

This is on the one hand tragic: Millions of American men who were imprisoned in the 1970s through 1990s have been thrust into a labor market that really doesn't want them. On the other hand, it is at least potentially fixable. Job displacement by technology is probably unstoppable, but how we punish crime is a public-policy choice. Incarceration rates have already been falling with the big declines in crime since the early 1990s, and the past few years have seen the growth of a bipartisan consensus (interrupted by the current presidential campaign, to be sure) that the U.S. throws too many people in prison for too long and doesn't do nearly enough to rehabilitate them. Prison and sentencing reform might actually be the country's best shot at thwarting that "linear trend" that would put a quarter of prime-age men out of work by 2050.

  1. There were 2.2 million inmates in adult correctional facilities at the end of 2014, according to the Bureau of Justice Statistics.

  2. They are counted neither in the numerator (the labor force) or the denominator (the civilian non-institutional population).

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor responsible for this story:
James Greiff at jgreiff@bloomberg.net