Friday, March 4, 2016

NE: One more time - it really is the economy, stupid!

You've probably seen the chart. In the years following WW II, wages tracked productivity exactly. But starting in 1973, productivity continued to increase linearly but wages stopped growing and the curve flattened out. The net result is that now the American worker's increasing productivity is no longer rewarded by a proportionately increased wage. This is most certainly one of the drivers of the appeals of Trumpism and Sanders' economic populism. (There is a difference, of course. Trump channels the economic frustration but misdirects it.)

Here are snippets from an editorial from the Detroit Free Press editorial page editor.

While net productivity (a measure of how much work is required to produce an output of goods) has jumped 72% since the 1970s, median hourly wages have grown just 9.2%, adjusting for inflation.

In practical terms, this is the data powering the growth of the working poor and the incredible burdens of maintaining middle-class life. Stories of people working 40 hours a week but not earning above the poverty level, or working two or three jobs to keep their houses or pay their debts.

And in 2016, I think the frustration behind the disruption on both sides of the political spectrum is powered by those numbers more than any others.

It is the economy. But more precisely it is the disconnect between your work and your rewards.

People believe they work too hard and too long, but don’t earn enough to maintain a middle-class lifestyle or move ahead. They fear their kids won’t do better than they did — and might be buried under mounds of college debt if they try. And they worry about things like retirement, what would happen if they got sick, or how they’ll survive the next economic downturn.

The candidates for the presidency differ in who they blame for damage done to the middle class.

Trump’s message is, at its core, quite similar to Sanders’. But his narrative supposes that the most vulnerable Americans, specifically immigrants, pose the greatest threat to middle America’s economic security. His proposed wall across the Mexican border, his targeting of Muslim immigrants and odd, almost Tourette's-like slurs against Americans of many backgrounds — they’re all a form of scapegoating intended to give the frustrated a simple rubric for understanding why America isn’t “great” anymore.

Trump is also, of course, tapping into a dangerous strain of cultural frustration that the Republican Party has sowed, quite cynically, for decades. His campaign weds the economic troubles many Americans face with fears about demographic and societal changes. He promises that stopping those cultural changes will produce better economic outcomes for the middle class.

Economic inequality is a problem for our society that will endure beyond this election. What we do or don't do about it will shape America for years to come.

Whoever winds up in the White House will need to contend with the real sources of economic frustration — things like our trade deficits, under-investment in education and the knowledge economy, and a tax code that encourages short-term rather than long-term thinking — for years beyond this election. That, or we’ll all watch the fabric of hope and opportunity that undergirds middle-class life in this country continue to tear apart.

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