5 reasons to worry regardless who wins

November 5, 2012: 10:58 AM ET

An economy on four years of life-support has left a growing portion of the American labor market tired and anxious, seemingly sapped of initiative, embracing a new normal of limited horizons.

By Nina Easton, senior editor-at-large

FORTUNE -- In this uncertain presidential race, we can be certain that Tuesday night's victor will be proclaiming his own version of "Happy days are here again." But after the champagne and balloons and displays of unbridled confidence comes a harsh dose of reality: A troubled American workforce could be standing in the way of those happy days.

Any chief executive stepping into a turn-around situation intuitively knows that your best (or worst) asset is the quality of people at your disposal. The man sitting in the Oval Office on January 23 will be able to deploy the most innovative -- and, by most standards, productive -- workforce in the world.

But there's a darkening side to that picture: An economy on four years of life-support has left a growing portion of the American labor market tired and anxious, seemingly sapped of initiative, embracing a new normal of limited horizons. Resigned to getting by rather than getting ahead.

Culture matters. No President can help the nation regain its footing in a fiercely competitive global economy without a workforce that's firing on all cylinders.

MORE: Don't blame the 1% for America's pay gap

Here are five reasons to worry:

No. 1: Historically high rates of long-term unemployment threaten to leave millions of discouraged men and women permanently jobless. The longer you are out of work, the harder it is to find a job. Economists call it this hysteresis. We'll just call it the "Scarlet U" that unemployed job candidates wear when potential employers size them up -- rightly or wrongly -- as carriers of rusted skills and slack work habits.

Last March, Fed chief Ben Bernanke went public with his fear that people who are out of work for months and years see their "skills and labor-force attachment atrophy further, possibly converting a cyclical problem into a structural one." Stubbornly high numbers could make that fear a reality.

Five million Americans, 40% of the jobless, have been out of work more than six months, a number little changed in Friday's jobs report. A Pew fiscal analysis from earlier this year found that nearly 30% had been without a job for at least a year; at 13.3 million, that's more than the population of Oregon. And of those men and women, 1.8 million haven't gone to work for two years or more, according to the Bureau of Labor Statistics.

No. 2 For a growing part of our population, work -- going to work or even looking for a job -- has ceased to be a way of life. The labor rate participation has dropped to the lowest rate since 1981, the depth of the last recession. The trend is especially alarming for men: Demographer Nicholas Eberstadt has calculated that 27% of working-age men are no longer part of the labor force. You can argue with his assertion that "a large part of the jobs problem is not wanting a job" -- and many will.

But the trend is a troubling one, and as Eberstadt notes in his new book A Nation of Takers, it both predates the Great Recession and transcends race. Prime working-age men were dropping out of the workforce even before the 2008 financial crash, leaving the U.S. behind Europe (even Greece) in the percent of men in their 30s holding a job, or looking for one. The U.S., he says, is experiencing a "historically unprecedented exit from gainful work for adult men."

MORE: A radical tax plan the left and right can agree on

No. 3: More people are opting for a government check than a job—care of the $130 billion federal disability insurance fund. A program meant to support people who can't work because of a chronic illness or disability now sends checks to more than 5% of working age-adults. That's 8.6 million (along with 2 million dependents). About half enter the system with hard-to-prove medical conditions like mood disorders and chronic pain,

Americans, aided by shameless law firms broadcasting their help, are applying for disability at historically high rates. "When jobs are plentiful people choose to work" and "when they're scarce, disability insurance looks more appealing," the Congressional Budget Office notes.

And unlike unemployment insurance—which runs out--disability is permanent welfare; only a small percent of recipients ever leave. It's like "Hotel California" -- such a lovely place except you can never leave. Critics decry the explosion in disability claims as a dead-beat drag on taxpayers. But the more insidious fallout is that millions of potential American workers are consigned to lives of dependency and poverty--and deprived of the mobility that a job ladder promises.

No. 4: Of course, the first step toward getting ahead is getting educated. In today's economy, a college degree carries a salary premium –and a measure of job protection. (Unemployment rates are lower among the college-educated, and especially among those with advanced degrees).

But U.S. workers are losing the global education race. Among OECD countries—our industrialized competitors—the U.S. ranks in the middle on college education rates. We used to be on top. And our high school graduation rates are far worse. With 70% of high school students collecting a diploma, the U.S. ranks 22 out of 27 countries, according to the latest OECD data. And that's before we get to the conversation about how our students lack the math and science skills a 21st century economy requires.

MORE: America's new work ethic?

No. 5: If you think the U.S. has moved past a culture of easy-money debt, think again: Young people coming out of college and into the workforce are saddled with a $1 trillion in loans, much of which they can't afford to pay back. About a third of students carrying those loans are college drop-outs.

Like the spread of subprime mortgages, this is government-induced cheap money offered to borrowers of limited means -- with tuition rates, like home prices, skyrocketing alongside. No wonder many economists are predicting a student-loan bubble about to burst, with default rates surging.

The problematic state of America's workforce isn't a subject conducive to campaign bullet points or 60-second attack ads. But when all that ends this week, it's time to turn to the hard business at hand. And, like any turn-around operation, this is a job that starts with leadership—from the top.

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