September 17, 2024
By Brink Lindsey
Scott Winship has made a career out of challenging the conventional wisdom about U.S. economic trends as unduly pessimistic. He has argued that widely cited numbers purporting to show sharply rising inequality, a decades-long stagnation in incomes, and plummeting upward mobility are inaccurate—and that better data and methodologies paint a significantly rosier picture.
In this new essay, Winship looks at long-term trends in the U.S. labor market—and once again pokes holes in various gloomy assessments of where things stand. Here he focuses on the shifting rises and drops in male and female labor supply over the past century, showing how they largely reflect the effects of ongoing economic growth and rising affluence. He doesn’t deny the existence of problems—slow productivity growth, for instance, or the stubborn persistence of black-white achievement gaps, or the low rates of upward mobility for the poor. But overall, he concludes, “the resilience of economic declensionism too often obscures our ability to see that what may look like economic weakness often reflects strength.”
Winship’s data and analysis are always solid, and his guided tour through the ebbs and flows of U.S. labor supply is illuminating. But while I usually judge Winship the victor in his various statistical battles against pessimistic hype, I nonetheless believe that he is losing the war. The implicit premise in all Winship’s campaigns for economic data hygiene is that capitalism is performing well—and that opinions to the contrary are simply misinformed and ideologically blinkered.
But in fact, all is not well with U.S. labor markets, or capitalism more generally. Much of what ails them, though, isn’t measured in dollars and cents—and thus is invisible to an analyst focused on economic data. The failures of the U.S. labor market are primarily sociological, not economic; indeed, these failures are the result of economic success.
Capitalism’s rise to mass affluence began with deep-seated and explosive class conflict, but the emergence of the labor movement and social democracy along with the steady progress of economic growth ultimately worked to heal social divisions and blur the class distinctions between high and low. Alas, the advance from industrial economy to post-industrial information economy has opened up a new class divide, this time along educational lines. And the roughly three-quarters of Americans on the wrong side of that divide have suffered diminished status, political and civic marginalization, social segregation, and a host of ills stemming from the breakdown of vital social connections.
The origins of this social fracture lay in economic good news. Technological progress under industrial capitalism required massive inputs of unskilled physical labor—a dependence which gave rise to the original class divide. But through ongoing automation, globalization, and domestic outsourcing, the firms that operate on the technological frontier gradually shed their dependence on American muscle. From the standpoint of purely material well-being, this was cause for celebration: working conditions improved dramatically as factories emptied out and office buildings swelled.
But sociologically, this amounted to a demotion for ordinary workers. No longer were their contributions integral to technological progress. Workers were instead scattered throughout the economic hinterlands in low-profile, low-productivity jobs. Workplaces grew more segregated by income, with the highest earners increasingly isolated from everyone else.
As it became clear that the contributions made by ordinary workers to the combined social product were simply less important than they had been before—economists refer to this bloodlessly as “skill-biased technological change”—their status in society dropped accordingly. The factory worker was lionized in art, literature, and music; in the socialist movement that sought to supplant capitalism around the world, the industrial worker was the central protagonist in humanity’s world-historical drama, and capitalist societies fearful of revolution used the carrots of both money and status to keep workers loyal to the system. We see no public artwork today depicting home health aides and call-center workers in heroic poses.
The sting of demotion was worsened by the simultaneous rise of a new mass elite of highly educated managers and professionals. That elite was large enough, and “meritocratic” enough because entry was determined by scholastic record, that those who didn’t make the grade now felt like losers.
Displaced from the technological frontier and demoted in status, ordinary people were also displaced by the new professional and managerial elite in civic and political life. Private union membership collapsed, and with it, effective political representation of non-elite interests. Political parties and large mass-member civic organizations also went into decline, replaced by a profusion of professionally managed nonprofits and advocacy groups whose outside members, if they have any, participate only by writing checks. The participation and influence of ordinary people fell dramatically—and, not coincidentally, American political economy became increasingly distorted by regressive regulatory capture that shifted income and wealth up the socioeconomic scale.
The re-division of American society into high and low precipitated a stark divergence in ways of life and well-being. Residential segregation by income has worsened even as racial segregation has eased a bit. Nestled away in their gated communities, members of the elite are rich in social capital accumulated through school ties and professional associations. Meanwhile, the social capital of the old working class anchored in ethnic enclaves, unions and fraternal organizations, and the church has disintegrated. Consequently, the vital personal relationships that are at the heart of human flourishing are unraveling outside the elite. Nearly two-thirds of college graduates over 25 years old are married, compared to only about half of high school grads. Around 10 percent of births to college-grad moms occur outside of marriage; for moms with only a high school diploma, the figure has shot up to 60 percent. One in five people outside the elite now reports having no close friends, double the rate of college grads.
The polarization of American society along class lines now even extends to health and mortality. Differences in life expectancy between rich and poor dropped during much of the 20th century but are now on the rise. And as documented by economists Anne Case and Angus Deaton, all-cause mortality rates for non-college grads started moving upward in the 21st century even as they continued to decline for college graduates.
If we confine our attention to only economic data, Scott Winship’s optimism about the state of the U.S. labor market looks warranted. But broadening our gaze to look also at status, belonging, and well-being, we see that the labor market—and American society as a whole—has been sundered by a new class divide, with sharply diverging prospects for flourishing and life satisfaction on either side.
Capitalism isn’t functioning well. Unlike disparities based on race or sex, those based on class are generated by the economic system itself. They start in the economic system, but they have spread throughout American society, blighting life prospects on a massive scale. And the festering misunderstandings and resentments that they produce have now infected our politics, threatening further damage to the system.
What to do about all this is beyond the scope of this brief comment. But the first step in the right direction is recognizing the existence of the problem.
Brink Lindsey is a senior vice president at the Niskanen Center, where he plays a leading role in developing and articulating the Center’s distinctive policy vision. His recent writings can be found on Substack at “The Permanent Problem.”