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America has long channeled the spirit of its industrious, fertile Pilgrim forebears by working long hours and having many children. Yet since 2006, the number of adult Americans who have never married has risen by more than 5 million. And since 2007, the number of employed Americans has fallen by 7 million. Is the economic slump turning America into Europe?
There are many things to love about Western Europe -- great paintings, good primary schools, excellent soup -- but consistent high unemployment and low fertility rates aren’t among them.
America’s economy has long benefitted from its well- functioning labor markets. Our high marriage and fertility rates boost demand for housing, and all its associated expenditures, and steady population growth makes it far easier to pay for social programs, such as Social Security and Medicare. A jobless, marriageless recovery is not something to celebrate.
The U.S. used to be exceptional. Five years ago, Alberto Alesina and I published the book "Fighting Poverty in the U.S. and Europe: A World of Difference," which examined why the U.S. didn’t have a European-style welfare state. The data pointed to two main reasons: America’s ethnic mix and its political institutions, which looked liberal in 1910 but seem conservative today.
Across the world, countries that are comparatively homogenous, such as Sweden, are more generous to their poor. But the U.S.’s ethnic diversity, which is wonderful in many ways, has historically been a bane to advocates of aggressive social spending. Unlike European political rules, which were often written by social democrats after revolutions or world wars had wiped out more conservative groups, the American Constitution was designed to restrict radical minority parties.
As a result, America spends relatively little on social- welfare programs. Our budget is only a reflection of our mind- set. In recent decades, 60 percent of Americans have said they believe the poor are lazy, while only 26 percent of Europeans share that view, the World Values Survey has found.
The truth is, all Americans -- rich and poor alike -- work long hours. At the start of the last decade, Americans ages 15 to 64 were working 35 percent more hours annually than the Germans, 40 percent more than the French and 50 percent more than the Italians. Much of this gap can be explained by the number of weeks in a year that Americans worked: 46. That’s five more than the average for European countries, where workers also worked two to three fewer hours per week. Much of this difference can be explained by labor rules. In France and Germany, for example, everyone has the right to more than 20 vacation days a year.
Europe also differs from the U.S. in its long-term unemployment. In 2007, only 10 percent of jobless people in the U.S. had been out of work for a year or more; in France, 40 percent had. That gap has narrowed significantly.
Now the U.S. has developed a Europe-sized problem with unemployment among young adults. From 2006 to 2010, the jobless rate for Americans ages 20 to 24 rose to 15.5 percent from 8.2 percent, and the rate for men ages 25 to 29 increased to 11.8 percent from 5 percent.
The bottom line is that in 2010 there were 7 million fewer employed Americans than in 2007. Over the same period, the number of people not working increased by 13 million. So the size of the labor force declined in a country with a growing population, which indicates large numbers of people stopped looking for work altogether.
This shift from work has wrought larger changes in the American family. From 2006 to 2010, the number of Americans older than 15 who had never married rose by 5.7 million, dwarfing the 1.7 million rise in the number of married adults. The number who were divorced or separated also went up, by 1.5 million.
More specifically, among Americans ages 25 to 29, the number of those married fell by 524,000, and the number of those who never married rose by 1.7 million. (Marriage likewise declined substantially during the early years of the Great Depression.) The decline in young marriages is also making us more like Europe, where young adults have long been more likely to marry later and -- until they do -- to live at home.
In the short run, the marriage drop means fewer households being formed -- only 378,000 from 2008 to 2010; this, in turn, keeps the housing market down. If new households were still forming at the 2005 rate of 1.3 million per year, our excess housing inventory would probably go away, and the construction industry would likely be back to normal in no time.
Housing isn’t the only problem. The current decline could lead to European-style sclerosis in unemployment over the long term. A 1999 report by Olivier Blanchard and Justin Wolfers of the National Bureau of Economic Research explained how temporary economic shocks in Europe during the 1970s and 1980s interacted with labor-market institutions, such as generous welfare states, to create permanently elevated unemployment. People couldn’t get jobs; eventually, they stayed out of the labor market altogether.
Europe’s Demographic Trap
It’s possible, in fact, that Europe’s stubborn unemployment has added to its demographic challenges. Low marriage rates typically lead to low fertility rates, which ultimately mean declining populations. Population growth is needed to finance social programs, such as Medicare and Social Security. If America’s low marriage rates lead to lower birth rates, we may have even more trouble supporting our social programs, unless immigration continues to pick up the slack.
There are ways to boost employment and household formation. We could cut the payroll tax, which hits lower-income jobs hardest. We could provide a renter’s credit, equivalent to the mortgage interest deduction, to make it easier for young adults to afford to move out of their parents’ homes. If we were feeling really radical, we could even lower the home-mortgage interest deduction for parents with adult children living at home.
Sigmund Freud defined mental health as "the ability to love and to work" and, using that definition, the 2008-09 recession seems to have aimed a torpedo at our nation’s psyche. Even as the unemployment rate declines, we need to recognize and address the deeper wounds -- a shrinking labor force and low marriage rates -- that lie within our society.