George Packer’s meditation on Silicon Valley and the new American inequality has prompted two smart replies from quite different angles. To break things up, I’ll discuss them in two separate posts. The first, by the political theorist Samuel Goldman, accepts Packer’s basic economic narrative, which reads as follows:
The fortunes of middle-class Americans have declined while prospects for many women and minorities have risen. There’s no reason why they couldn’t have improved together—this is what appeared to be happening in the late nineteen-sixties and early seventies. Since then, many women and minorities have done better than in any previous generations, but many others in both groups have seen their lives and communities squeezed by the economic contractions of the past generation.
Before turning to Goldman’s critique of Packer, I’ll first observe that Scott Winship has carefully analyzed the claims that the fortunes of middle-class Americans have declined in a series of articles, including “Bogeyman Economics” in National Affairs and “The Affluent Economy” in Breakthrough Journal. Early last year, he observed that the shrinking of the U.S. middle class cited by Alan Krueger as an indication of decline largely reflects the fact that there is a larger number of U.S. households that have higher-than-middle-class earnings:
Krueger’s claim of a shrinking middle class relies on the same peculiar definition. Specifically, “middle class” is defined as having a household income at least half of median income but no more than 1.5 times the median. I re-ran the numbers using the same definition and data source as Krueger and found that the entire reason the middle class has “shrunk” is that more households today have incomes that put them above middle class. That’s right, the share of households with income that puts them in the middle class or higher was 76 percent in 1970 and 75 percent in 2010—two figures that are statistically indistinguishable. For that matter, I am not discovering fire here; Third Way made the same point in early 2007 (page 7). A shrinking middle class is only a problem if it reflects fewer people reaching the middle class.
This isn’t to suggest that middle-income Americans don’t face serious challenges. The main challenge, and one of the central focuses of this blog, is that the last thirty years have seen dramatic real price increases in medical care and education at the same time that various consumer goods have seen similarly dramatic real price decreases. It is not unreasonable to suggest that access to high-quality medical care and education is more important than, for example, access to high-quality televisions or even to the wealth of information that is now readily available via new low-cost communications technologies, as the former can extend healthy lifespan (though there is a case that behavior matters just as much if not more) and the latter helps build earning potential and cultivates the ability to manipulate newly-accessible information. But as Scott often argues, this meta-problem is far more pressing for Americans in low-income households than it is for Americans in middle-income households, and there is a real danger that a near-exclusive emphasis on the plight of the middle class will tend to undermine rather than strengthen the case for doing more for the very poor.
One could offer a more narrowly-tailored version of Packer’s passage that would be more compelling: specifically, the fortunes of large numbers of U.S. men have deteriorated relative to women, because high school dropout rates are higher among men than among women, college completion rates are lower, and men are far more likely to be incarcerated and, relatedly, to abuse alochol or narcotics. A more knowledge-intensive economy has tended to make the consequences of these differences more problematic for men, but of course women have been forced to bear the consequences of this decline in male economic prospects, the rising share of single mother households being only the most obvious example. Racial differences are more complex, as the demographic composition of the population has changed considerably since the 1960s and 1970s. The Hispanic slice of the U.S. population in 2013 is very different from the Hispanic slice in 1980, as immigration has meant that some non-trivial share of Hispanic 45-year-olds living in the U.S. were not living in the U.S. 33 years ago. The same is true of the Asian American population. African American women have made impressive gains over this period, but African American men have not gained much ground — and by some accounts they may have lost ground. One hypothesis as to why this might be true is that, as NYU sociologist Patrick Sharkey has argued, the effects of living in high-poverty neighborhoods are to some extent cumulative across generations, and black Americans at any given income level are likely to live in higher-poverty neighborhoods than their non-Hispanic white counterparts. We don’t have a clear sense of why women have been better able to navigate this landscape than men, but David Autor and Melanie Wasserman have recently offered some tentative thoughts as to what exactly is going on in “Wayward Sons“:
[W]e argue first that sharp declines in the earnings power of non-college males combined with gains in the economic selfsufficiency of women—rising educational attainment, a falling gender gap, and greater female control over fertility choices—have reduced the economic value of marriage for women. This has catalyzed a sharp decline in the marriage rates of non-college U.S. adults—both in absolute terms and relative to college-educated adults—a steep rise in the fraction of U.S. children born out of wedlock, and a commensurate growth in the fraction of children reared in households characterized by absent fathers.
The second part of the hypothesis posits that the increased prevalence of single-headed households and the diminished child-rearing role played by stable male parents may serve to reinforce the emerging gender gaps in education and labor force participation by negatively affecting male children in particular. Specifically, we review evidence that suggests that male children raised in single-parent households tend to fare particularly poorly, with effects apparent in almost all academic and economic outcomes. One reason why single-headedness may affect male children more and differently than female children is that the vast majority of single-headed households are female-headed households. Thus, boys raised in these households are less likely to have a positive or stable same-sex role model present. Moreover, male and female children reared in female-headed households may form divergent expectations about their own roles in adulthood—with girls anticipating assuming primary childrearing and primary incomeearning responsibilities in adulthood and boys anticipating assuming a secondary role in both domains.
To suggest that there is no reason why the economic pattern of the last three decades shouldn’t have been identical to the economic pattern of the late nineteen-sixties and early seventies strikes me as peculiar. There are a few obvious reasons why we might have seen divergence between different groups:
1. Matt Yglesias — a staunch advocate of increased immigration, including increased less-skilled immigration – has described how the rising foreign-born share of the U.S. population has contributed to the increase in measured inequality.
2. Automation and offshoring have contributed to a deterioration in the labor market position of less-skilled workers around the world. Virtually all of the market democracies, including the U.S., have reacted to this development by increasing social transfers, including wage subsidies and work supports, but some have increased transfers more than others. Redistribution at the federal level in the U.S. tends to be dominated by transfers to older Americans and tax expenditures that tend to benefit middle-income and upper-income taxpayers. Wage subsidies and work supports have increased, but not by enough to offset the deterioration in the labor market position of less-skilled U.S. workers. We might have done more on this front, but doing so would have entailed a trade-off, e.g., we might have financed more generous transfer by imposing something like a value-added tax, drawing on the lessons of the Scandinavian social market economies. Yet this might have constrained the purchasing power of middle-income Americans. Whether or not you believe this is an appropriate trade-off, it is a trade-off.
3. The transformation of U.S. family life, which appears to be closely related to the deterioration in the labor market position of less-skilled workers, has been a cumulative process. Rates of child-rearing outside of marriage increased sharply from the 1960s on. If we assume that being raised in a single parent family has consequences for one’s cognitive development and economic potential, the fact that the share of single mother families was much higher in the early 1980s than it was in the early 1950s gives us another reason why the economic fates of Americans raised at the bottom end of the household income distribution might have diverged from those raised at the top end. Problems that might have been relatively small and manageable in that era have grown much larger and much less tractable over the intervening decades.
So if anything, I’d suggest that the fact that American economic life looks really different now than it did in the late 1960s and early 1970s is overdetermined. Even under the best, most enlightened policy regime, there is a process of trial-and-error involved in meeting changed social circumstances. For example, public education spending per pupil has increased over this period, yet the student population faces a number of challenges it did not in earlier eras and the demands being placed on the public education system are commensurately much greater. That the performance of K-12 schools hasn’t deteriorated even further than it has in thus in some sense an improvement, particularly since the welcome decline in labor market discrimination against college-educated women and minorities and declining student-teacher ratios have put enormous pressure on the teacher talent pool. Of course, this semi-non-deterioration has been purchased at extraordinary expense. Were reformers wrong to press for spending more money on K-12 schools? I’m inclined to think that they were just doing their best, and they happened to hit upon a politically attractive solution (spend more, hire more).
With that long detour out of the way, Goldman maintains that Packer’s mistake is that he fails to understand the interrelationship between the politics of personal emancipation and the decline of working-class solidarity:
In our time, the stories of greater social equality and economic inequality are far from “unrelated”. Rather, social inclusion has been used to legitimize economic inequality by means of familiar arguments about meritocracy. According to this view, it’s fine that the road from Harvard Yard to Wall Street is paved with gold, so long a few representatives of every religion, color, and sexual permutation manage to complete the journey. Superficial diversity at the top thus provides an moral alibi for the gap between the one percent and the rest.
Goldman’s thesis has merit. There really has been a normative shift within elite institutions, as their stewards have concluded that representativeness is essential to their survival and flourishing. This hasn’t been a cynical shift, or rather it hasn’t mostly been a cynical shift. But because I am more inclined to believe that economic inequality isn’t an intrinsically bad thing — what really matters, in my view, is absolute well-being, and if some increase in upper-tail market inequality is compatible with or indeed facilitates a rise in absolute well-being in the bottom half, through the market-driven creation of new products and services or even through redistribution, I have no problem with it — I don’t share Goldman’s jaundiced view. That elite institutions are somewhat more inclusive strikes me as a good thing, though of course I’d rather these institutions become more meaningfully inclusive by, for example, broadening access to high-quality educational or employment opportunities.
Goldman’s broader critique of Packer is that the celebration of diversity undermines egalitarianism:
More generally, it is hard for a society characterized by ethnic and cultural pluralism to generate the solidarity required for the redistribution of wealth. People are willing, on the whole, to pay high taxes and forgo luxuries to support those they see as like themselves. They are often unwilling to do so for those who look, sound, or act very differently. In this respect, the affirmations of choice and diversity that now characterize American culture, tend to undermine appeals to collective action or shared responsibility. If we’re all equal in our right to live own lives, why should we do much to help each other?
This strikes me as very much on-target, and I confess to having mixed feelings about it. Erica Grieder’s excellent new book on Texas, Big, Hot, Cheap, and Right, observes that Texas’s public culture is open to immigration precisely because the state’s public sector is so stingy towards low-income individuals. I can imagine many different equilibria being reasonably attractive and stable — highly unequal, highly inclusive, highly diverse; highly equal, highly exclusive, highly homogeneous, etc. — and much depends on our moral and aesthetic priorities. I think of America’s polyglot cities as sites of dynamism, inequality, and diversity, and I like and identify with these spaces. But I am under no illusion that these spaces can be reconciled with social-democratic or egalitarian aspirations without making them very, very different, e.g., without pursuing a far-reaching project of cultural assimilation that would have to rest on curbing immigration in a quite dramatic way. I keep thinking that we can find some middle ground — more diverse than midcentury America, but with somewhat more solidarity than the America of the past thirty years. But there’s no guarantee that such a middle ground is available to us.