Is America’s Welfare State Stifling the Economy?

Feb. 5, 2018
by Bob Adelmann

There were two numbers buried in Friday’s jobs report from the BLS that portend difficulty for the economy: The number unemployed remains at 6.7 million, and the labor participation rate remains stuck at 62.7 percent. In September 2015 that latter number was 62.4. In 2000 it was 67.3 percent.

How is that possible? With the unfettering of the economy through deregulation and now the recapture and reinvestment of tax dollars that were previously being directed to Washington, just about every economic indicator is green. Why aren’t these millions reentering the workforce?

There’s good news and bad news. Some of those people are leaving the workforce and retiring. Their savings, pension, profit-sharing and 401(k) plans are reflecting the performance of the stock market and consequently are allowing them to recalibrate their retirement plans: they’re retiring sooner than later.

Some of the younger cohort – age 25-54 – is going back to school to learn the skills they need for the new economy.

But others are content just to stay right where they are: out of work and happy to remain so. Part of the reason is that they don’t feel well and are taking massive doses of prescription drugs, contributing to what is now called the “opioid crisis.” An economist from Princeton was among the first to discover the link between prescription drug usage and labor force participation. Alan Krueger updated his work for Brookings last fall and suggested that the increase “in opioid prescriptions from 1999 to 2015 could account for about 20 percent of the observed decline in men’s labor force participation … and 25 percent of the observed decline in women’s labor force participation.”

That’s one in every five, if Krueger is anywhere right. But what about the rest of those millions? Why aren’t they out seeking work in the best economy the country has seen in years?

Jack Salmon, a Washington-based economist specializing in this topic, wrote this in The Hill:

Among men of prime working age (25-54), nearly all of the decline in labor force participation is attributable to a rise in the number who say they do not want a job.

Furthermore, one in three of these prime age dropouts can be accounted for by an increase in [the number of] men who claim to be either sick or disabled.

Salmon then checked the history of beneficiaries milking the disability program of Social Security – called SSDI, for Social Security Disability Insurance – and found this:

The Social Security Disability Insurance (SSDI) program has seen a drastic increase in beneficiaries in recent years, with less than 2 million beneficiaries claiming SSDI in 1970 and more than 10 million beneficiaries in 2015.

One could write volumes on how the welfare state stifles incentive, robs workers of their dignity and turns them into dependents of The State. He could go to the Holy Scriptures and quote chapter and verse about the need God has built into each human soul to work: to support himself and his family and to provide for those who can’t. He could speak of the wholesale emasculation of millions of men who, thanks to that regular welfare check from SSDI, whether qualified for it or not, are now sitting at home playing video games and giving up on life.

Suffice to say, many of those 6.7 millions sitting on the sidelines during one of the greatest economic revivals in human history are missing out, not only on life, but in participating in it. Not only are they putting limits on themselves but on America’s economy as well.



The Wall Street Journal: U.S. Gained 200,000 Jobs in January as Wages Picked Up THE EMPLOYMENT SITUATION -- JANUARY 2018

Fortune: January’s Jobs Report Was Great – Except for One Number 9 takeaways from the January jobs report

The Hill: Walk it off: Reform disability payments to grow the economy  How the opioid epidemic has affected the U.S. labor force, county-by-county

Add new comment

Plain text


McAlvany Weekly Commentary provides investors with valuable monetary, economic, geo-political and financial information that cannot be found on Wall Street. Your host David McAlvany presents a solid strategy of wealth preservation for your financial and retirement assets while living in an unstable economy.

Through its client focused, customized approach, MWM is committed to providing independent, well-researched, objective advice, and investment professionalism. At MWM, our client commitment is to preserve capital, manage risk, and grow your assets in an ever-changing global environment.

At International Collectors Associates (ICA), we specialize in the sale of bullion, semi-rare U.S. and European gold coins and secure offshore storage in Switzerland for your precious metals. Our highly trained and experienced advisors strive to help you in customizing solid strategies of wealth preservation for your financial and retirement assets.

McAlvany Financial Group

The McAlvany Financial Group has a contrarian, in-depth approach to its analysis, allowing the company to avoid decisions based on emotion, and thus combine maximum risk mitigation with consistent real growth for its clients’ investments. Integrity, attentiveness, and longevity have characterized the company’s client relationships since 1972.