Free-market capitalism has brought progress throughout history. It has lifted millions of people out of poverty around the world. But it is not working for less educated Americans today. While those with four-year college degrees have prospered over the last half-century, those without have seen their wages fall, their communities and marriages weakened and their labor markets turn against them, and worst of all, they have experienced an epidemic of what we christened deaths of despair, from suicide, drug overdose and alcoholic liver disease and cirrhosis. In 2018, more than 158,000 Americans died from these causes, up from 65,000 in 1995, with increases that are similar for men and women.
Free-market capitalism has brought progress throughout history. It has lifted millions of people out of poverty around the world. But it is not working for less educated Americans today.
Life expectancy at birth, often a good measure of social progress, saw a remarkable increase in the 20th century. But from 2013 to 2017, life expectancy fell for white Americans, and from 2014 to 2017, it fell for all Americans, a setback that had not been seen since the influenza pandemic a century earlier. We do not know how many deaths there will be from the coronavirus, but it is possible that life expectancy will fall again from 2019 to 2020.
In our book, we document many worrying trends for less educated whites. They have been reporting marked increases in pain, both physical and mental, as well as increased difficulties socializing and in carrying out the normal activities of life. Their marriage rates have fallen, while out-of-wedlock childbearing has increased dramatically. Couples serially cohabit, in fragile and often temporary relationships, so that many of their children are living with adults who are not their birth parents, and many middle-age men find themselves estranged from their children, who are living with other men. Church attendance is falling along with union membership; both are (or were) pillars of community. Behind this social decay lies a slow and prolonged decline in earnings and job opportunities for less educated men.
Our calculations show that wages for men without college degrees are lower now than they were half a century ago. In good economic times, wages rise, but when the economy falters, wages resume their decline and never return to their previous peak. Employment follows the same pattern. The fraction of the population in work rises with the economy, then falls back as people lose their jobs, with each peak and trough lower than the previous ones.
When they lose their jobs, people look around for other work, and many find it, though often not in jobs as good as the ones they lost. Few corporations still hire their own cleaning staffs, food service workers, drivers or security people. Instead, they outsource or turn to gig workers, saving themselves money but destroying the career jobs that could be sources of meaning and hope for the future. Some workers choose not to take the outsourced jobs and stay out of the labor force, and the fraction of men in employment has trended down for decades. For many years, the labor force participation of women without college degrees rose, but it stopped rising after 2000 and has been on the same downward ratchet since then.
Why are these terrible things happening? The familiar forces of globalization and technical change are part of the story. Factories have moved out of the country, and goods that used to be made at home are being imported from China or Mexico. Manufacturing makes as much or more stuff than before, but with many fewer workers. Yet these forces are not peculiar to the United States; German, French and British workers also have to deal with robots and with foreign competition. Less skilled workers are having a tough time in all wealthy countries, and in many they are making poor or no progress in earnings. But only the U.S. has seen more than a half-century of wage decline for its less educated workers, and only the U.S. is showing the huge epidemic of deaths of despair.
American health care is different from health care in other countries. Pharma companies were permitted to flood the market with opioids, targeted to areas of industrial decline and despair, and to become immensely wealthy through addiction and death; they bear much of the responsibility for the epidemic of deaths of despair. No other country allowed this to happen.
Beyond that, American health care is immensely expensive, consuming several percentage points more of gross domestic product than in Switzerland, the second most expensive country in the developed world. That excess is equivalent to a tribute of more than $8,000 paid by each household to the industry, 50 percent more than the total cost of the military. Much of this is paid by employers; in 2019, the average family policy cost close to $21,000, and the average single policy cost $7,200 . This has to be paid by companies out of their wage costs, which is close to impossible for low-skilled workers. So companies shed these jobs to outsourcers or do without altogether. State governments have no control over their rapidly rising Medicaid obligations and have cut their funding for — and raised tuition at — state colleges and universities, which have in the past been a source of hope and upward mobility for less privileged Americans.
Our story is about the working class in general, but at least until 2013, deaths of despair were mostly among whites. Yet our story is remarkably similar to the story of joblessness, family disintegration and addiction among African Americans in the 1970s. Capitalism in America is turning against its least educated workers, and African Americans were first in line.
The astronomical costs of health care are draining jobs, hope and opportunity from working-class Americans. We are in favor of free-market capitalism, but economists have known for half a century that free markets cannot deliver health care, and American health care is more like a predatory conspiracy aided and abetted by government. It is no accident that the industry has five lobbyists in Washington for every member of Congress. How health care performs in dealing with the coronavirus will certainly affect whether this situation is allowed to continue.