The recent election results surprised almost everyone, except for working-age men outside the workforce. This portion of the male population, below retirement age who are neither employed, in school, nor actively looking for work, according to Nicholas Eberstadt's new book, "Men without Work: America's in Visible Crisis," has more than doubled over the last 50 years. And if current trends continue, a quarter of men between 25 and 54 will be out of work by mid-century.
There is a reasonable argument out there, as we partially saw from Donald Trump's rhetoric and supporters, that men in the U.S. workforce are far behind those in other industrialized countries, including those known for their inflated welfare systems and overly rigid labor markets.
While causes are multitude and varied (social insurance benefits, tax imposed by child support on earning income which has been recently more efficiently collected, diminution in attractive work opportunities, technology and the rise of international competition, etc.), there is no single, magic remedy – not even for Trump. However, there is one route that could be taken, embracing ideas from the left and the right, to help ease our acute unemployment crisis – and create a standard for the capitalization of human capital.
Tax policy can be adjusted to offer incentives for the private sector to increase wages and employment. The idea is simple and implementable.
Presently, the Internal Revenue Service (IRS) allows corporations to deduct accelerated depreciation on capital assets (equipment and some intangibles) while booking straight-line depreciation in their accounts. As a result, companies can decrease their tax burden while still showing higher income in their financial statements.
Unfortunately, no similar concession is provided for human capital. Therefore, the rules favoring physical capital perversely distort the allocation between physical capital and labor.