The deadly labour market

Even though the American labour market is more flexible and has a higher employment rate than the Western European, on average, American workers still perform weaker. The reasons behind that are tragic social issues, such as the middle-aged Americans in their prime are far more frustrated than their European ‘counterparts’. Alcoholism, drug abuse and suicide are becoming alarmingly common among Americans. We asked Marc Chandler – economist, and lead strategist at BBH Currencies – about this complex matter.

Péter Zentai: In one of your publications was the first time I read about the phenomenon, that Janet Yellen the president of Fed also addressed as one of the most severe American social and economic tragedy that the health and mental well-being of American working population is drastically declining. Why is it such a highlighted topic for an investor and especially for a central bank president?
Marc Chandler:
Every responsibly thinking American citizen shall worry about that the addiction to opioids (drugs containing opium derivatives) is spreading among millions of working Americans – especially those in their forties and fifties. Manufacturers can sell these drugs that have been proven to damage nerves when taken regularly for cheaper and cheaper and in bigger quantities. In this regard, experts are referring to it as an opioid epidemic, and so did the president of Fed. This matter is not only a severe social but also an economic phenomenon.

How much of this challenge is political and economic?
The Brookings Institution (one of the biggest American social-political-economic research institution) published a study which says, primarily those middle-aged people turn towards opiates, who feel fallen behind and lost. Men are more affected than women. Numerous studies have shown that behind the curtains, we can find large sections of the society frustrated and their mental wellbeing deteriorating.

Might the coarsening and radicalization of the American politics be its reflection?
We do not have any research carried out on this matter; many doubt this presumption. However, we do know that the outcome of the last presidential election was thanks to the votes of those millions of Americans who are typically live in the regions of the ‘opioid epidemic’ – in other words, the classical industrial states, which have fallen behind in economic sense: Michigan, Ohio, and other Midwestern states in general.
However, we can find far more tragic matters if we dig deeper. Besides the addiction to opiates, alcoholism and suicide are becoming widespread in the Western world, primarily among Americans in their forties and fifties who feel hopelessly fallen behind. The SAD (Suicide-Alcohol-Drug) mass phenomenon is considered as a deathly epidemic in America. Studies of Brookings Institute showed that, while the number of deaths caused by alcoholism, drug abuse, and suicide attempts is decreasing or at least stagnating among women and men between fifty and fifty-four years of age in Germany, Sweden, Great Britain, Australia and Canada, it is sharply increasing in the United States.

What conclusions have you drawn from studying this phenomenon?
The chaos that we see in the American labour market, which also affects the political and social life, is also connected to the fact that every year, from the hundreds of thousands of American men, who are in their prime of their lives, but have no degree or only fundamental education, about two hundred die in alcoholism, drug overdose or commit suicide. Among women, the ‘SAD’ epidemic has only half that severe because they are less likely to commit suicide.  These rates are better among those with higher education. In terms of national economy, we can say that the average mental health of people in their 30-40-50s, who make up the bulk of the American labour market, is more unstable than in other leading Western countries. Despite the employment rate of this age range being higher and our labour market being more flexible than in Western Europe, the American middle-aged workers – especially, the men with basic education only – are more overwhelmed and frustrated. Its results have a long-term effect on the overall performance of the American economy – especially on the quality of the work done, thus the productivity of the American companies. In this regard, America gives a weaker picture in comparison with its international competitors. Researching and finding out its complex social background is absolutely crucial.