The top populist economic critique of market economics—one that has recently gained ascendance on the political right—is that wages for the average American worker have stagnated or declined over the last several decades. Strain’s analysis finds that “typical workers” have seen an inflation-adjusted increase of 34 percent in purchasing power over the last 30 years, which he writes “is not reasonably described as stagnant growth.” He provides similar rebuttals to other populist claims about earnings for the lowest-paid Americans and supposed recent skyrocketing of income inequality. Real incomes of the bottom quintile increased 66 percent from 1990 to 2016. Meanwhile, inequality rose in earlier decades but actually decreased by 7 percent from 2007 to 2016.
The persuasiveness of these figures, of course, depends on Strain’s analysis of the underlying data. He is in something of a bind when it comes to explaining the details, as his book is meant to be a short and accessible summary and not a detailed academic treatise. He does a good job of threading this needle, though, walking readers through important aspects of his method, including correcting several decades of income data for changes in household size, accounting for tax and transfer payment changes in addition to wage and salary income, and using personal consumption expenditures (CPE) rather than the consumer price index (CPI) to adjust for inflation.
All of those detailed calculations and explanations are a credit to Strain’s erudition and expertise, but I doubt they will convince many of his antagonists, including some very prominent and influential economists. This book includes a fascinating rebuttal section, in which Strain’s arguments get critiqued, within the text of his own book, by Washington Post columnist E. J. Dionne, from the left, and Ethics and Public Policy Center Senior Fellow Henry Olsen, from the right. Dionne interestingly insists that we look back well before 1990 in making trend comparisons. It makes for a lively exchange, but ultimately Strain’s arguments are targeted far more at populist conservatives than the conventional center-left critiques that Dionne represents. Thus, it is Olsen’s response that is more telling.
Olsen’s rebuttal is less a refutation and more of a pivot. He concedes that Strain “does an excellent job of disproving the common tropes of American economic decline,” but then insists that does not mean Strain “refutes the conservative populist argument.” Olsen cites the decades-long decline of labor force participation rates for “prime-age” men (25- to 54-year olds), a topic treated at great length by other researchers, including Strain’s AEI colleague Nicholas Eberstadt in his 2016 book Men Without Work. Olsen suggests that the closing of manufacturing facilities during previous recessions left certain groups of able-bodied men permanently unemployed, “despite the overall trend of rising wages and opportunity.” Yet, this is exactly the point that Strain makes repeatedly. Despite there being subgroups of economically disadvantaged people across America and through the decades, the fundamental system is sound; we should not be “confusing pockets of real struggle in American life with the broader canvas of the American experience.”
Olsen’s rebuttal—like many other populist conservative critiques—includes many hints that the populist position has more to do with positioning, social attitudes, and other cultural anxieties rather than actual economic hardship. Olsen insists that conservative populism “has an audience” and constitutes “a viable argument,” but skirts around the question of whether its complaints are generally valid and correct. Even when it comes to the core critique at issue of whether national policymakers have somehow unfairly disadvantaged working-class men, Olsen suggests that many of the under- and unemployed men in the 21st century lack “the interpersonal skills or educational background” for today’s job market or “the intellectual capacity to succeed in higher education programs.” These things are supposed to be the fault of international trade and capital markets?
We see the populist critique coming in wide of the data even more dramatically in the high-profile comments of Sen. Marco Rubio (R–FL), whom Strain quotes in Chapter 2, “Today’s Message: The Dream Is Dead.” Strain excerpts Rubio’s December 2018 essay in The Atlantic, but the senator’s populist sentiments are probably more well-known from his November 2019 speech at the Catholic University of America in Washington, D.C. In it, Rubio says that millions of people have been “unable to find dignified work and [are] feeling forgotten, ignored, and left behind.” He describes running for president in 2016, saying that the people he talked to on the campaign trail felt “anxious, even angry at those they blamed for ignoring them, disrespecting them, and leaving them behind.” And he decries American workers losing their jobs to offshoring and being “told to go back to school, learn to code, and leave their extended family and community behind and get a job in the ‘new economy.’”
Read the full article at Cato Journal.