Last year I had an interesting conversation with someone I’ll call the Washington Insider. She asked me why my structural-demographic model predicted rising instability in the USA, probably peaking with a major outbreak of political violence in the 2020s. I started giving the explanation based on the three main forces: popular immiseration, intra-elite competition, and state fragility. But I didn’t get far because she asked me, what immiseration? What are you talking about? We’ve never lived better than today. Global poverty is declining, child mortality is declining, violence is declining. We have access to the level of technology that is miraculous compared to what previous generations had. Just look at the massive data gathered together by Max Rosen, or read Steven Pinker’s books to be impressed with how good things are.
There are three biases that help sustain this rosy view. First, the focus on global issues. But the decrease of poverty in China (which is what drives declining global poverty, because Chinese population is so huge), or the drop in child mortality in Africa, is irrelevant to the working America. People everywhere compare themselves not to some distant places, but to the standard of living they experienced in their parents home. And the majority of American population sees that in many important ways they are worse off than their parents (as we will see below).
Second, the Washington Insider talks to other members of the 1 percent, and to some in the top 10 percent. The top-income segments of the American population have done fabulously in the last decades, thank you very much.
Third, many economic statistics have to be taken with a grain of salt. Government agencies are often under substantial political pressure to put a positive spin on the statistics they publish. Many economists work hard to please the economic elites and other powers-that-be, because that’s how you get ahead in that profession. Fortunately, there are enough “heterodox” economists who provide us with alternative views. This all doesn’t mean that statistics are worse than “damn lies”; on the contrary, one cannot make sense about where we are headed without statistics. The point here is that one needs to understand why different statistics may give us different answers.
So what has been happening with the well-being of common, non-elite Americans? In my work I use three broad measures of well-being: economic, biological (health), and social.
The most common statistics one sees about economic well-being is the trend in per-capita household incomes. This is not a particularly good way to measure economic well-being for two reasons. First, as households became smaller (because Americans have fewer children), the same wage of the primary breadwinner gets divided by a fewer heads, and that yields an illusion of things getting better. Second, as a result of massive entry of women into the labor force, the typical household today has two bread-winners, compared to a single-wage household of fifty years ago. Furthermore, many households today have even more than two wage-earners, because adult children don’t move away. As a result of both of these factors, the time trajectory of household income yields an overly optimistic view of how well Americans are doing economically.
The best way to see the state of working America is to focus on typical wages of non-elite workers (which means excluding CEOs, high earning corporate lawyers, top athletes, and rock stars ). Here’s what real (adjusted for inflation) wages of two typical non-elite groups tell us:
The pattern is unmistakable: rapid, almost linear growth to the late 1970s, stagnation and decline (especially for unskilled labor) thereafter. Here’s a more detailed breakdown of men’s wages since 1979, broken down by wage percentile (10th is the poorest, 95th is the richest):
Source: State of Working America
Why did this happen? I answer this question in a series of posts, Why Real Wages Stopped Growing (see it in Popular Blogs and Series). The TL;DR answer is that it was a combination of immigration, loss of manufacturing jobs overseas, massive entry of women into the labor force (thus, this factor both inflated household income and, perversely, depressed wages for men), and changing attitudes towards labor. A model incorporating these influences does a pretty decent job of capturing both the turning point of the 1970s and fluctuations afterwards:
Source: Ages of Discord
One potential problem with this statistic, real wages, is that one needs to adjust nominal wages for inflation, and a lot of trickery can happen at that stage. This is a big topic (perhaps for a future post). In my work I have sidestepped this issue by focusing on the relative wage, which is the nominal wage divided by GDP per capita, also expressed in nominal dollars. Here what this statistic tells us about the state of working America for the whole history of the US:
Source: Ages of Discord Relative wage has been declining since the 1960s.
Another important indicator is availability of jobs. The jobless rate published by government agencies is not a very useful statistic, because it tells us about short-term fluctuations, and excludes people who gave up on the job market. A better measure is the labor participation curve, especially for men:
Dividing men by educational attainment is a way to check that declining labor participation rate is indeed due to decreasing demand for labor (because high school drop-outs have fewer job prospects than college-educated men). The trend is uniformly down, but it is worst for less-educated men.
An amusing way to spin this bad news was pointed out by one commenter on my previous post. An NBER article by Mark Aguiar and Erik Hurst, “Measuring Trends in Leisure”, optimistically concluded that between 1965 and 2003 “leisure for men increased by 6-8 hours per week” and that “this increase in leisure corresponds to roughly an additional 5 to 10 weeks of vacation per year.” A closer reading of the article, however, shows that this “leisure increase” was driven by a decline in “market work hours”. In other words, all those extra 10 percent of men with higher school or less, who dropped out of the work force since 1970, are simply enjoying their “vacations.”
Economic measures of well-being only tell a part of the story. One of the most shocking, to me, developments was that the immiseration since 1970 has affected biological measures of well-being”. Here’s a graph of trends in average stature (height):
Source: Ages of Discord
Panel (a) shows that average stature of native-born Americans grew rapidly until the 1970s, and then stagnated. A real shocker is that for some segments of the population (Black women) it actually declined in absolute terms. Panel (b) shows that there is a clear relationship between economic and biological measures of well-being (it’s further explained in Ages of Discord).
For another health measure, life expectancy, we have a similar situation. Overall, America is losing ground in relative terms (for example, in comparison to robustly growing life expectancies in Western Europe). For some segments of the population the decrease is in absolute terms. Here’s a particularly revealing look at the data:
The correlation between red counties and those who voted for Trump in 2016 is rather obvious.
There has been a lot of discussion recently of factors that may be responsible for declining health of common Americans. I won’t go into it, for lack of space, but here’s one component:
Finally, a good indicator for social well-being is the proportion of Americans married; or, alternatively, the age at which they marry:
Source: Ages of Discord
There is a long-term increase in the age of marriage driven by modernization (top panel), so we are interested in fluctuations around the trend (bottom panel). During the periods of increasing well-being (for example, between 1900 and 1960), average age of marriage tends to drop. Immiseration causes it to rise. In fact, an increasing proportion of people doesn’t marry at all. Many of them stay with their parents, and their earnings help to inflate household income statistics.
We know from the work of Jonathan Haidt and others that one of the most powerful factors explaining personal well-being is social embeddedness. Having a spouse is one of the most fundamental ways of being embedded. But a variety of other indicators, collected by Robert Putnam, shows that Americans are becoming increasingly less connected (I’ve written about it in another post).
In short: a variety of indicators show that well-being of common American has been declining in the last four decades. The technical term for this in the structural-demographic theory is immiseration.
22.VIII.2017: Added the chart on men’s wages since 1979 broken down by wage percentile.