JPMorgan CEO Jamie Dimon thinks the United States is “truly an exceptional” country, but as he writes in his latest letter to shareholders, “it is clear something is wrong — and it’s holding us back.”
“Our economy has been growing much more slowly in the last decade or two than in the 50 years before then,” Dimon writes.
“From 1948 to 2000, real per capita GDP grew 2.3%; from 2000 to 2016, it grew 1%. Had it grown at 2.3% instead of 1% in those 17 years, our GDP per capita would be 24%, or more than $12,500 per person higher than it is. U.S. productivity growth tells much the same story.”
“Our nation’s lower growth has been accompanied by — and may be one of the reasons why — real median household incomes in 2015 were actually 2.5% lower than they were in 1999,” Dimon adds.
“In addition, the percentage of middle class households has actually shrunk over time. In 1971, 61% of households were considered middle class, but that percentage was only 50% in 2015.”
Dimon also cites the trillions spent on foreign wars, the hundreds of billions of dollars in student debt accrued by Americans in the last several years, rising healthcare costs, and a rise in felony convictions as factors holding back the economy.
The core of Dimon’s downbeat assessment of why the U.S. economy is being held back by largely self-inflicted means comes down to five points:
1. Labor force participation is too low
2. Education is leaving too many workers behind
3. Infrastructure investment is lacking
4. Corporate taxes are driving investment overseas
5. Regulations are holding back the private sector
The final three points are the kinds of complaints one expects from a business leader when assessing what ails the U.S. economy. Regulations and taxes are the kinds of perpetual nags that the corporate sector is likely never to be at ease with.
Dimon’s first point, however, is something that has become a larger concern among economists and business leaders in the last several years.
In this, Dimon highlights the so-called “missing men” of the U.S. economy, or the prime working age American men who are simply not in the labor force.
Donald Trump’s election as president is often attributed, in part, to rising “economic anxieties” among some Americans. Flat-lining household incomes and a drop in labor force participation are clear signs of something amiss among those who should be enjoying the prosperity of living in the world’s largest economy.
“If you examine the data more closely and focus just on labor force participation for one key segment; i.e., men ages 25-54, you’ll see that we have a serious problem,” Dimon writes.
“The chart below shows that in America, the participation rate for that cohort of men has gone from 96% in 1968 to a little over 88% today. This is way below labor force participation in almost every other developed nation.”
“If the work participation rate for this group went back to just 93% — the current average for the other developed nations — 10 million more people would be working in the United States.
“Some other highly disturbing facts include: Fifty-seven percent of these non-working males are on disability, and fully 71% of today’s youth (ages 17–24) are ineligible for the military due to a lack of proper education (basic reading or writing skills) or health issues (often obesity or diabetes).”
As for what can be done about these drags on the economy, Dimon offers not direct prescriptions but something like a roadmap for how these solutions might be reached.
“Our problems are significant, and they are not the singular purview of either political party,” Dimon writes.
“We need coherent, consistent, comprehensive and coordinated policies that help fix these problems. The solutions are not binary — they are not either/or, and they are not about Democrats or Republicans. They are about facts, analysis, ideas and best practices (including what we can learn from others around the world).”
And ultimately, it is the leaders of the business and political world who must act first.
“It is understandable why so many are angry at the leaders of America’s institutions,” Dimon writes, “including businesses, schools and governments — they are right to expect us to do a better job. Collectively, we are the ones responsible.”