A Former Treasury Secretary Has a Scary Prediction For the Economy
Good economic news has been easier to find as of late. We know that middle-class incomes are rising faster than anyone expected — faster than at any point on record, in fact — and that unemployment is way down from where it was several years ago. The President has even come out in favor of some one-time inconceivable policy ideas, including national paid sick leave. But, in the case you don’t want to be overly optimistic about your future, Larry Summers — former United States Treasury Secretary and director of Obama’s National Economic Council — has your back.
Summers, in a blog post from late September, levied a pretty scary prediction for the U.S. economy come 2050: “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,” he wrote.
He also included this graph to drive home his point:
Given that we’re already spooked by increasing levels of automation, companies on the lookout for cheaper labor through outsourcing or foreign workers, and other job-destroying economic mechanisms, this graph is a tough reminder that just because things are going fairly well right now doesn’t mean our problems are solved.
But why does Summers see this happening? He has a four-pronged explanation.
Everything we hear and see regarding technology suggests the rate of job destruction will pick up. Think of the elimination of drivers, and of those who work behind cash registers. Second, the gains in average education and health of the workforce over the last 50 years are unlikely to be repeated. Third, to the extent that non-work is contagious, it is likely to grow exponentially rather than at a linear rate. Fourth, declining marriage rates are likely to raise rates of labor force withdrawal given that non-work is much more common for unmarried than married men.
Clearly, there are a lot of forces working in favor of Summer’s argument. And let’s not forget that we’re already seeing men in this age group leave the workforce at higher rates than before — so it’s not like this is some far-off fantasy. We’ve heard Donald Trump, for example, make the argument that the “real unemployment rate” is much, much higher than the official unemployment rate. What he’s getting at is the labor force participation rate, which is unusually low.
There are some demographic explanations for that. Even so, there are a lot of people who have given up looking for work or are who content sitting on the sidelines.
Changes to the economy
It’s hard to say just what in the hell is going on, but it’s pretty evident that there are some large, structural economic changes at play. Obviously, the Great Recession had a lot to do it — many of the jobs that were lost or destroyed during that period simply never came back. They were sent overseas, never to return, or were automated. And the scary thing is that we haven’t really even seen a big swing toward automation happen yet.
Given that minimum wages are on the rise, and human labor is getting more expensive, though, don’t be surprised to see that start happening on a wide scale within the next decade or so.
But there are other things at play, too. Men are staying home and playing video games, for example. You can take that as a very bad sign, or a good one — if you can afford to sit at home and play Xbox all day, why wouldn’t you?
Here’s another sobering statistic to mull over — since the late 1940s, “The proportion of men 20 and older without paid work has more than doubled, to almost 32 percent,” writes George Will in The Washington Post, citing statistics from author Nicholas Eberstadt’s book Men Without Work (the book that inspired Summers to write his blog post).
Is it too soon to freak out? Yes — we still have no idea how things are going to shake out in the long term. But knowing what’s coming, and taking stock of your individual situation and job security, is never a bad idea.