Even before COVID-19 threatened lives and livelihoods, our nation faced an epidemic of fatalities from suicide and substance use. Nobel Laureate and USC Schaeffer Center Distinguished Fellow Angus Deaton and Princeton Professor Anne Case coined the term “deaths of despair” in documenting this trend.
In 2017 alone, 158,000 Americans died from drug overdoses, suicide or alcoholism. “That is the equivalent of three fully loaded Boeing 737 MAX jets falling out of the sky every day,” write Deaton and Case. Their recent book, Deaths of Despair and the Future of Capitalism, builds upon their groundbreaking work in exploring the factors driving such tragic statistics.
We interviewed Deaton when the book was released in early March, just before the coronavirus locked down society, to talk about the book and what its findings say about the American healthcare system—and where we go from here.
Death of the Working Class
After a century of longer lifespans, mortality rates for middle-aged white Americans began rising in 2000. Case and Deaton analyzed the data and uncovered a troubling phenomenon – the majority of these deaths are among working-class adults without a college degree. The impact is so extreme that life expectancy declined in 2016 and is still dropping.
Adults without a college degree face diminishing job prospects and stagnant wages. While many tie this trend to globalization and automation, Case and Deaton observe that other developed nations also “face globalization and technical change but have not seen long-term stagnation of wages nor an epidemic of deaths of despair.”
Instead, Deaton and Case see “something going on in America that is different, and that is uniquely toxic to the working class.”
Education Matters
According to Deaton and Case, median wages for male workers without a college degree have significantly declined since 1980. Meanwhile, although productivity increased by 70% between 1979 and 2018, hourly wages only grew by a meager 12%. Income inequality and lack of wage growth are forcing working-class adults into an unsustainable economic reality—and a sometimes fatal sense of hopelessness.
The authors further explain that blue-collar workers have lost the safeguards that previous generations took for granted. Union membership has plummeted, and defined pension plans are rarely available. Many businesses also outsource low-wage jobs related to such functions as maintenance or security to external companies. This practice of contracting out work not only impacts an employee’s benefits, job security, and ability to move up within the company, it even robs them of a sense of belonging to an organization. Case and Deaton say it is critical to feel like you are contributing and have worth in your job, and outsourcing has stripped this from many.
Paying for Healthcare with Jobs
According to Deaton and Case, U.S. healthcare costs—and how they are paid—are indirect yet significant factors in this despair. In most rich and educated countries, life expectancy has risen alongside healthcare expenditures over the past four decades. But, unlike other countries, the U.S. pays out increasingly more without any resulting progress in life expectancy.
Today, the U.S. spends about 18% of its gross domestic product on healthcare—more than $10,750 per person. Employers and the government are saddled with a significant portion of these costs. Nearly half of working-age Americans have health insurance through their employers. Yet while employees may think of employer contributions to insurance as “a gift,” these funds come at a cost to their wages.
“We pay for healthcare through employers, and that has done terrible things for the labor market, especially for less educated people,” Deaton says. For example, a worker without an education might expect to make about $30,000 annually, he explains. So if the employer has to pay $20,000 for a family health insurance plan or $10,000 for an individual, the expense becomes prohibitive and the jobs are quickly outsourced.
The result, Case and Deaton conclude, is a system carving up or eliminating huge sectors of the labor market that were historically available to less educated people. “When you get this huge cost, plus globalization plus automation, the class of work we used to call the blue-collar aristocracy has really been hit hard,” Deaton says.
The vast sums that are being spent on healthcare are an unsustainable drag on the economy, pushing down wages, reducing the number of good jobs, and undermining financing for education, infrastructure and the provision of public goods and services that are (or might be) provided by federal and state governments.
Angus Deaton, PhD and Anne Case, PhD
In addition, employers are more frequently relying on high-deductible health plans and other options that increase the financial pressures on the middle class, constricting an already narrow household budget.
Costs to Education, Infrastructure and Social Services
Federal and state governments also face growing burdens from healthcare costs. For example, what states pay for their share of Medicaid comes at the expense of state universities, public school systems, roads and other public goods. The Affordable Care Act tried to ease the weight—but while the law greatly expanded coverage, it did little to rein in prices.
Case and Deaton contend that, to adequately change the system, policies must include both a path toward universal coverage and a means of controlling costs.
Public outcries about drug pricing and surprise medical billing, as well as the opioid epidemic, illustrate the urgent need for reforming American healthcare, Deaton says. He sees these areas as examples of our healthcare system working against the public good—and, as in the case of legislation against surprise billing, where policymakers must take corrective action.
Progress Is Possible
Deaton and Case outline potential solutions in their book—if only the political will existed to implement them. They argue that a moderate raise in the minimum wage, strengthening corporate governance and antitrust policies, and increasing transparency around rent-seeking would all help reduce deaths of despair.
They focus particular attention on healthcare lobbying. Growing corporate power and its influence on policymaking increasingly prioritizes profits—often at the expense of the working class. “Other countries don’t have the lobbying and money in politics that we have in this country,” Deaton says. “It has to be an essential part of the conversation about how we make change if we want to make real progress.”
While Deaths of Despair and the Future of Capitalism explores policies and circumstances that are uniquely American, other countries risk making similar errors, Deaton and Case warn in their conclusion. Working to reverse the downward pressure on wages and enacting policies that encourage the distribution of income back toward labor instead of capital are critical points for all countries.
“Democracy is fully capable of serving people better than it now does,” Deaton and Case conclude. “Democracy in America is not working well, but it is far from dead, and it can work again if people push hard enough.”
