Troubled economic times breed jobs plans. In good times, no one puts forward comprehensive proposals to invigorate the economy. But we live in bad times, so we have lots of plans: Herman Cain’s fun-sounding 9-9-9 plan, Romney’s 59-point MBA-class-syllabus plan, the Huntsmanâ€’Wall Street Journal editors plan, President Obama’s “Pass This Newest Stimulus Bill!” plan, and other plans from pundits, congressional candidates, and more — all indicators of a stressed economy.
What if we could wave a wand and immediately enact the best elements of the best plans? Would America bounce back? At one level, the answer is undoubtedly “yes.” Growth-oriented tax rates, entitlement reform, regulatory relief, and real health-care reform would lead to increased investment and new jobs. At another level, though, the answer is “maybe not.”
Why? Because we seem to be going through a “crisis of aspiration” in America that was underway before the recession. This crisis has sources that are deeper than any jobs plan can address — at least in the near term.
A crisis of aspiration is not merely a crisis of ambition to pursue the American Dream, though it certainly includes that. It is also a crisis rooted in demographic realities and policy failures that make aspiring to a better life harder than it used to be, and not even worth the effort for some people. Jobs plans can help, but we need something more like a cultural renewal to reverse the trends that threaten America’s role as the world’s number-one “aspiration nation.”
How can we tell whether we are in a crisis of aspiration? Consider the following:
Job creation by new enterprises, which drive job growth in America, has been dropping over the past decade. The entrepreneurial backbone of the American economy has been weakening since before the recession. A recent Kauffman Foundation analysis shows that annual job creation by new companies has dropped by more than 45 percent since 2000. And new firms have been starting with fewer employees and staying smaller than in the past. Increasing productivity through technology has something to do with this, but it also seems clear that the environment for hiring new workers has been getting worse for a while. Policy changes can help with some of this, especially to the extent that new firms are stressed by rising health-care costs and regulatory burdens.
The rate of new-business creation in America has grown fragile. Not only are new businesses creating fewer jobs, there are fewer of them in the first place. New-firm formation started plummeting in 2006 and has fallen 27 percent since then as the recession took its toll. New businesses create most net new jobs, so we won’t return to healthy growth levels until we see a rebound in new-firm formation. Policy innovation can help here, too, but the following points are more policy-resistant.
The percentage of working-age Americans who are employed has been dropping for more than a decade. By 2007, the ratio of working-age Americans who were not gainfully employed was higher than the ratio in Europe. Europe! The ratio among Europeans has been improving steadily since the mid-1990s amidst labor-market reforms, but dropping in America since 2000. In fact, to get back to 2000 levels, we would need to gain 18 million jobs. In the 1990s we used to talk about instilling the virtue of work among welfare moms. Now more welfare moms are working, but lots of other people are not.
Young men, in particular, are less productive. For reasons no one fully understands, young men in America are about as low on ambition as they have ever been. Kay Hymowitz of the Manhattan Institute has documented a trend of prolonged adolescence among men in their 20s, marked by poorer employment prospects than women and a rapid rise in the percentage who delay marriage. Bill Bennett notes that 18- to 34-year-old men now spend more time playing video games than 12- to 17-year-olds — a sad picture of declining productivity. But the problem runs deeper. According to Ron Haskins of the Brookings Institution, the decline in the percentage of gainfully employed working-age people discussed above is driven especially by a decades-long drop in male employment. Unlike the case with welfare reform, there are fewer policy levers we can pull to alter work incentives among men.
Households aren’t forming the way they used to. Young adults are forming households at lower rates than they did a decade ago. This has observable economic consequences. Ed Glaeser of Harvard University estimates that if households were forming at their 2005 rate, the nation’s surplus housing stock would likely disappear and the housing industry would rebound. While the recession has made things worse, this trend predates the recession. Something more fundamental, even cultural, is going on.
The lower middle class is starting to look more like the welfare class. Charles Murray of the American Enterprise Institute is uncovering some of the most consequential — and disquieting — trends in America today. Upper-middle-class Americans are marrying, going to church, finishing school, and getting good jobs at nearly the same rates as they did a generation ago. Not so in the lower middle class, which has suffered steep declines in every single important indicator of socioeconomic well-being. The image of the middle class as the cauldron in which the ingredients of upward mobility are blended together is becoming a relic. Economic factors can explain some of this, but purely economic explanations are inadequate.
The picture only worsens when you consider the effects of the recession on a population saddled with household debt, which a recent study pegs at a precariously high 154 percent of the average family’s income (it was only 85 percent in the 1990s), and the diminishing returns to higher education among young workers (or work-seekers).
When you line up these trends side by side, you see a crisis of aspiration taking shape in America. Young workers are not aspiring to the lives of independence and vocational progress they once did, new enterprises are not driving the economy as they used to, the family as an object of aspiration is on the wane for many, and the middle class not only is stagnating economically but seems to be deteriorating from within.
Together, these trends translate to fewer children tomorrow, greater dysfunction in the lives of more Americans, and a general loss of the enterprising spirit and aptitude needed to make America’s future as good as its past.
It’s difficult to say how related these trends are to each other, whether something deeper ties them together, or whether they proceed from different sources. What does seem evident, though, is that the traditional pillars of upward mobility in America — family, work, and an enterprising spirit — were beginning to crack for some time before the economy tanked. The cracks didn’t happen all at the same time, or in the same way, but their parallel trajectories at least suggest a loss of confidence in the future or, at times, even a kind of nonchalance about it, among too many Americans.
The problem isn’t just that people are dispirited and not trying hard enough. It’s also that the environment in which they live and work every day is dispiriting. Our challenge now may be that these forces are mutually reinforcing: People aren’t aspiring to the American Dream the way they used to, and the American Dream is more challenging to attain than it used to be.
The best of the jobs plans on the table would surely help to some degree, but they are not enough to renew what Michael Novak has called the “spirit of democratic capitalism.” Health-care reform, regulatory relief, a less activist federal government, a more favorable tax code, and entitlement reform would all certainly get more capital off the sidelines and more entrepreneurs into the game. These reforms are necessary and urgent.
But to overcome the stagnation, cautiousness, and even apathy that are diminishing upward mobility and opportunity in America, we need more public leaders in all sectors of our society who can help reconstitute the American Dream for today’s younger generation. With a middle class increasingly characterized by broken homes and declining work engagement, it’s hard to believe we’re going to see more entrepreneurs and productive workers in the future — unless we confront this problem with a toolbox that includes more than policy.
Entrepreneurs and productive workers don’t just happen. They are made — usually upon a bedrock of social and financial capital that has family, community, and networks at its core. Creating that bedrock requires leadership and wisdom.
We need leaders at all levels who are willing to challenge our schools, civil-society organizations, higher-education institutions, and investors and businesses to do all they can to reverse our aspirational decline, just as much as we need politicians to enact the reforms needed to make aspiration worth the effort once again.
— Ryan Streeter is editor of ConservativeHomeUSA, director of fiscal and economic policy at the Sagamore Institute, and a transatlantic fellow of the German Marshall Fund.