Despite steady recovery, too many Americans feel like they’re on the outside looking in.
FROM POLITICO | DECEMBER 10, 2015
The American economy suffers from a split personality, and Donald Trump appears to be the chief beneficiary of this illness. A study just released by Pew shows that for the first time in decades, the middle class is no longer in the majority in the United States. Instead, the upper and lower classes are. Now the middle class—defined as people earning between two-thirds and twice the median income (from $42,000 to $126,000 a year)—constitute just under 50 percent of the earning populace. Twenty-nine percent are in the lower brackets, and 21 percent in the upper.
That goes a long way to explaining the Trump phenomenon, which is plainly a reflection of public anger and a sense that something is terribly wrong with the country. The major economic indicators don’t tell this story. The headline unemployment rate is now down to 5 percent, and last month showed signs that previously discouraged workers were re-entering the workforce. The Pew survey, however, shows that a significant minority of the country’s population is slipping out of the middle class or barely maintaining its place. While the survey also shows a significant minority of the middle class is moving into the upper-income brackets, that hardly matters if you are the one slipping down.
Hence, no matter how decent “the economy” appears to be, many disaffected voters appear to feel that they are on the outside looking in. “Their economy” does not look like “the economy.” Poll after poll indicates that the core of Trump’s support comes from people with a high school degree or less, and for most people like this, the economy is not booming; it is not decent; it is collapsing and has been steadily deteriorating for decades. Wages overall are still stagnant, as they have been for years, and many jobs are lower paying, but costs are also flat or declining, especially energy costs, which means a de facto rebate to tens of millions of households.
By contrast, for professions that require college degrees and high skill sets, wages have, if anything, been rising.
For much of the 20th century, the working class thrived. It was, for sure, a relative phenomenon. The century began with the vast dislocations to farming in the heartland that crested with the Great Depression. But the twin effects of the New Deal and World War II saw a new hope for those millions who had been cast off farms or out of factories. After the war, the millions of young and mostly white young men went to college in record numbers and saw a steady and nearly unbroken series of decades of rising wages and living standards.
Beginning in the 1980s, that ground to a halt, but not until the financial crisis of 2008-2009 did the long stagnation of that working class become glaringly apparent and widely recognized. White, blue-collar working men had been losing income and jobs for decades, beginning with the Rust Belt of the 1980s, the military and industrial drawdown in the early 1990s, and then the technology and globalization waves of the late 1990s and into the 2000s. But the Internet and telecom bubbles of the 1990s, massive government stimulus and spending after 9/11, and then the housing bubble and easy credit masked some of those trends until 2008.
It is no coincidence, therefore, that the financial crisis precipitated the rise of the tea party, a wave of populist anger, and now the Trump phenomenon and its less toxic variants. The wage gap between white noncollege educated Americans and college educated workers has always been large, but it is now approaching a chasm. The unemployment rate for high school dropouts is 7.5 percent, and for those with only a high school degree it is 5.4 percent. Those two groups comprise 45 million workers, more than a third of the workforce, according to the Bureau of Labor Statistics.
The income differential is striking. College graduate with a bachelor’s degree earn nearly twice as much as high school graduates. Even though there are wage pressures across the economic and geographic spectrum, level of education appears to be an absolute divider between those surviving or thriving and those under economic siege. Education also marks the divide between those able to make use of the technologies that are transforming work and those whose labor is threatened by those technologies. The McKinsey Global Institute estimates that 45 percent of all work could well be automated over the coming decades, and you can be sure that the jobs that disappear first are the very blue collar jobs that have already seen considerable erosion.
And while Trump supporters include a fair share of women with a high school degree or less, increasingly it is white men who are less likely to attend or graduate from college. In 1960, there were 1.6 men for every woman who graduated from college; today there are 1.35 women for every male, according to the National Bureau of Economic Research. If that is then correlated to wages, which it undoubtedly will be, working-class men are not only earning less than their fathers and grandfathers; they are soon to be earning less than their wives and girlfriends, if they have not already. Those are tectonic social and economic shifts that few are prepared for and that many, it would appear, view as profound threats.
Behavioral economists have done stellar work showing that most of us interpret whether we are doing well based on how we perceive others to be doing, not on how we are doing in absolute terms. Even though costs everywhere are falling, which means that living standards are essentially improving, the income gaps and paucity of meaningful lifelong work that factories and farms used to provide is deeply wounding a large number of Americans. And not just Americans. Similar disruptions are occurring in other countries; in France, the National Front plays on similar dislocations, and appeals to similar nationalist sentiment that blames foreign influences and weak government policies. It too is thriving, just as Trump’s message and similar themes find resonance in the United States.
These pressures far transcend the current fears about terrorism or the current economic trends. Now we can have decent GDP growth based on high efficiency and a few areas of the country such as Silicon Valley and New York thriving without any of those gains shared much by the tens of millions with only a high school degree living outside of vibrant metropolitan economic hubs. The unemployment rate can drop with millions of low-paying jobs, that barely exceed poverty wages with no security and not much in the way of benefits. In short, “the economy” can look good without millions sharing in that.
No matter what happens over the next year, therefore, the anger and rage of millions who have been left out, left behind, marginalized is not likely to be softened by an economy that may be fine overall but which does not serve those millions. Railing against far enemies and near enemies inevitably ensues, and that will not be mollified by “better than expected” employment reports, or slightly higher reported wages.
Trump and his ilk offer no real answers, only platitudes that answers will be found and condemnation of those who have failed to provide them till now. But until we all accept the permanent structural changes that have altered and continue to alter our world, we won’t understand the politics that are driving it.