In response to Interpreting Economic Stagnation
I think we’re getting somewhere. In his most recent reply, Oren appears to have ceded my point that the right way to characterize what has happened over the years to less-educated workers is “stagnation” rather than “decline.” (I’ll add again, though, stagnation only for those with Y chromosomes.) He now argues that what actually explains the problems besetting Americans without a college degree (and their frustration with policymakers) is relative decline in comparison to college graduates. While he doesn’t use the “i” word, in essence, Oren has shifted the blame to rising inequality.
We have arrived at an answer to my original question: How can no change explain change? Oren’s response is that what has changed is that inequality has risen. Okay, but this raises a fundamental point that I hope readers take away from our exchange: If it is rising inequality that matters, then those who attribute the problems of downscale Americans to economics should explicitly make an argument about inequality and stop trying to make a case for absolute decline that is too weak to have explanatory value.
If it is relative position that matters, then one need not argue, as The Once and Future Worker does — wrongly, it turns out — that poverty has risen even as we spend hundreds of billions more on the safety net.
Similarly, acknowledging the issue is “stagnation” rather than “decline” avoids having to resort to headline claims, including those in TOFW and Oren’s first post, about men’s earnings badly falling behind family poverty thresholds. That claim is wrong in two big ways. First, it focuses on men without any post-secondary education without recognizing that that group included the bottom 74 percent of men in 1970 but only the bottom 39 percent in 2017 (based on Oren’s own data source). If Oren had compared the median man’s earnings or the 20th percentile of earnings with family poverty thresholds, he would have found that men are no less likely to be able to support a family of four. Instead, he compares a fairly disadvantaged group in 1970 to a much more disadvantaged group in 2017 and finds deterioration.
The second big problem is that while Oren characterizes his estimates as pertaining to “earnings,” they actually include all “personal income.” This isn’t a pedantic point, because the estimates include all men at least 25 years old. Retirees have little or no earnings, relying instead on retirement income. Financial advisers often recommend that people try to replace 70 to 80 percent of their pre-retirement income once they stop working. That is to say, retirees do not need as much income as working-age adults and often have less. Why is this a problem for Oren? Because as the boomers aged over time, a greater share of the “25+” population constituted retirees, which drags down personal income over time. The fact that Oren focuses on people without any college only exacerbates the issue, since older Americans today make up a disproportionate share of less-educated adults.
With more space and time, I would challenge the extent to which rising inequality can explain the problems of non-college Americans too. The timing issues I discussed in my first post — when this or that problem started worsening versus when pay growth worsened — also apply when blaming inequality. Male wage inequality between the 90th percentile and the median began rising after 1980, but inequality between the median and the 10th percentile peaked in the mid 1980s. Trends for the other problems Oren highlights start earlier or later and sometimes stabilize well before Donald Trump’s candidacy. The existing literature on income inequality’s negative effects is, in general, unpersuasive (because this question is difficult to answer convincingly).
Ultimately, data are required even to assess how the attitudes of Americans about their opportunities have changed. Here again, I view Oren as revealing a declensionist bias. In his first post, he notes, citing evidence from the Pew Research Center, that “only 37 percent of Americans believe today’s children will group up to be better off financially than their parents.” That seems bad.
If people are asked whether their own children will do better than they have, they are more optimistic. In another Pew survey, from 2016, nearly half — 46 percent — believe their children will have a higher standard of living than they do (and 56 percent think their own standard of living exceeds their parents’). You may think those numbers are too low! I do. But again, the question is whether they have fallen. They have not.
Pew reports that the 46 percent figure for 2016 was down from 49 percent in early 2008 (at the peak of the 2000s expansion) but higher than in 2010, 2011, and 2012. We can take that trend further back using the General Social Survey. When I tabulated the share of parents with children under 18 who thought their kids’ standard of living would be higher than theirs, 69 percent in 2016 agreed, compared with 65 percent in 2008, 70 percent in 2002, and 52 percent in 1994 (the earliest year available). Surveys from Cambridge Reports/Research International from 1989 to 1995 and from ABC News/Washington Post from 1981 to 1996 also suggest that public opinion on this question follows a cyclical pattern. (I cited these estimates in 2010, in response to Mother Jones’s Kevin Drum making Cass-like arguments to the contrary. These debates, sadly, never make any progress.)
Over the past 37 years, then, parents have become no more pessimistic about their children’s futures — despite rising inequality, falling male labor-force participation, greater family instability, and (later) rising deaths of “despair” and the election of Donald Trump.
Just 13 percent of 2016 parents in the GSS thought their children would do worse than them. And remember, majorities of adults think they’ve done better than their own parents.
I’ve enjoyed this conversation, and it forced me to update a number of analyses that were gathering a bit of dust. In closing, I want to reiterate that Oren has written a profoundly important book, which contains some of the most innovative conservative-minded policies to expand opportunity ever proposed. Many of them — wage subsidies at the top of that list — are great ideas regardless of whether or not one agrees with the narrative of The Once and Future Worker. It’s a book that has already stimulated important discussions among conservative wonks and policymakers, and I suspect it will for some time to come. Figuring out how to expand opportunity among non-college-educated Americans is vitally important, and the task cannot be left to liberals. We should all be grateful to Oren for elevating issues that have, for too long, been neglected on the right.