by Ryan Streeter
We Americans have a habit of carving the nation into two groups to reflect concerns about inequality or social justice. We have long talked about the “have’s and have not’s.” John Edwards’ ill-fated presidential bid was predicated on “two Americas.” More recently, we have learned that America consists of the 1 percent and the 99 percent. And so on. These bifurcations are typically based on some type of material conception of justice – such as income and wealth levels.
The most important bifurcation related to the questions of American decline, however, is none of the above. Rather, it is this: children whose parents are married and educated vs. children whose parents aren’t. To virtually all social scientists’ surprise, going to college and getting a good job has made people less likely to divorce and more likely to raise children in a married household. Put crudely, those who could most afford to be single parents are choosing not to be.
Conversely, single parenting has skyrocketed among the uneducated. In the 1960s, whether you were in the upper 20 percent of the income distribution or the lower 30 percent, the odds of your having a child as a single parent were miniscule. Today, among the upper 20 percent, the unmarried childbearing rate has stayed in the single digits, but it has exploded to nearly 50 percent among the lower 30 percent. This, we’re finding out, has serious economic and social consequences.
Over the next 30 to 50 years the married-educated group will be chiefly responsible for most of America’s productivity, earnings, and as a result, revenues to the Treasury. Over the same period, the unmarried-uneducated group will be a drag on productivity and a net consumer of public services. Already, for the first time ever, the CBO reports that America’s middle income quintile consumes more in government benefits than it pays in taxes, a radical shift from just 30 years ago. This will worsen quickly in the coming decades. There are, of course, children whose parents are educated but unmarried or married but not educated, and they fall socioeconomically on all indicators somewhere between the two primary groups. But keeping our focus on the two primary groups is most important right now, as their dynamics will define the growing divide in America.
There are at least three reasons why these trends matter a great deal.
The first has to do with entrepreneurship, which we now know from a number of detailed studies creates virtually all net new jobs each year. Since the 1980s, we’ve seen a long-run, secular decline in the number of startups as a share of the economy. This in turn means that net new jobs are in large part falling each year because of a decline in entrepreneurialism (larger existing companies usually don’t create any net new jobs, since any job gains are always cancelled out by mergers, acquisitions, layoffs, and business closures). If we hope to restore healthy job growth in America, to put it simply, we need more entrepreneurs.
And this brings us back to our married-educated vs. unmarried-uneducated problem. As our economy today grows more prejudiced toward higher-level skills and talent, entrepreneurship will increasingly be unavailable to those on the lower rungs of the American ladder. Entrepreneurs have traditionally relied on personal resources, credit-worthiness, and family connections, which are all related, to get started. We know from Kauffman Foundation survey data that most entrepreneurs come from middle class or lower middle class backgrounds where education was nevertheless a priority. The social capital that a young person acquires because her parents are educated and leading professional lives converts more easily to financial capital in today’s talent-driven marketplace. Those growing up in single-parent households with less-educated parents are unlikely to join the upwardly mobile entrepreneurial class or the jobs they create.
This gets worse because of what Tyler Cowen has called “the great stagnation.” Not only are they unlikely to start a business, they won’t find as many good jobs in companies that others have started. Unlike the days of old, when an innovation resulted in hundreds of thousands of lower-skilled jobs, such as the invention of the light bulb and the creation of G.E. and related companies, today’s greatest innovations don’t result in the same levels or kind of job growth. Google will never match G.E.’s employee count. This hits lower-skilled, less socially adept individuals especially hard. There are fewer places for them to go in the economy, which is a big reason why their wages have stagnated.
The second reason these trends matter is related to the first. America’s growing unmarried-uneducated camp will create a larger pool of unproductive workers. In 2007 America’s employment-to-population ratio – that is, the percentage of working-age adults who are in the labor force – dropped below Europe’s. This rather stunning data point was driven largely by the fact that men toward the lower end of the socioeconomic spectrum had been dropping out of the full-time labor force for awhile.
This was well underway before the recession and wasn’t because of economic factors so much as another trend, which social scientist Charles Murray has aptly called “goofing off.” In the 1960s educated and uneducated men had virtually the same amount of leisure time. Then, between 1985 and 2005, leisure time among men without a high school degree increased by 8 hours per week, while dropping among men with a college degree by six hours. Time-use data show that the increased leisure time among uneducated men was spent mainly watching TV and sleeping, not in civic activities, job searches, or other active pursuits. This reflects a trend in lower-middle class America toward greater unproductivity, which in turn acts like a hostile type of compound interest over time: the more unproductive you are now, the harder it is to make up for the lost time vocationally later, leading to even costlier unproductivity. The uneducated-unmarried class in America will increasingly be net “takers” from the public purse. That the population of children in unmarried-uneducated homes is growing is a real problem for the future of America’s labor force.
Third, the net effect of the foregoing two trends suggests that America’s coming entitlement crisis will be more severe than we think, especially if meaningful reforms are put off for much longer. Because of the kinds of stagnation that Cowen has identified, we don’t see any significant wage boosters for lower-skilled workers on the near horizon. Since Medicare and Social Security are paid out of the payroll taxes on the earnings of current workers, the future looks especially grim when we consider how the earnings of the growing unmarried-uneducated class stack up against the needs of a swelling aging population. We can’t simply rely on the payroll taxes of the top 20 percent to foot the bills.
Improving our policies to recruit more entrepreneurial, job-creating immigrants will help offset the downward pull of the unmarried-uneducated portion of the U.S. population, but it will only be a cultural revolution of sorts among the latter that will set America aright again.
Ryan Streeter is a Distinguished Fellow at the Sagamore Institute, holds adjunct positions at Indiana University and the Hudson Institute, and is a Non-resident Fellow at the German Marshall Fund. His writings and work can be found at www.RyanStreeter.com.