How Much Does It Suck to Live in Modern America?

By Robert Verbruggen

Thursday, February 27, 2020

Last week brought us an argument over the work of Oren Cass, the conservative think-tanker who thinks the economy is squeezing families far more than it did in decades past. This week brings us The American Dream Is Not Dead (But Populism Could Kill It), a very brief book making essentially the opposite case, by Michael Strain of the American Enterprise Institute. It’s a much-needed look at everything that’s going right in this country.

This debate is fundamentally one of glass-half-empty, glass-half-full. America faces some problems no one can deny: Strain spends some time discussing how suicides are rising, how the opioid epidemic claims tens of thousands of lives each year, how prime-age men are slowly leaving the labor force, how some towns have been harmed by automation and globalization, how productivity growth has been mediocre, etc. But then he explains how strong the economy is overall, how well-being has dramatically improved for the typical person, and how people born poor in America still have a chance to make it to the middle and upper classes. The central message is that we should fix what has actually gone wrong, not overthrow the entire American system on the thought that everything has.

The strength of the economy is hard to deny. Overall unemployment is below 4 percent. Fewer than 1 percent of workers have been unemployed for 27 weeks or longer. And wages have gone up continuously for several decades.

Yes, wages are up, not stagnant, in Strain’s estimation — and he walks readers through the many methodological choices researchers have to make when measuring such a thing. Should you focus on the median worker? The mean wage? Hourly or weekly wages? The average wage for a “nonsupervisory or production” worker, excluding managers? How to adjust for inflation? And how long of a time period should you worry about?

Strain’s ultimate approach is to look at the hourly numbers for production and nonsupervisory workers, and to adjust for inflation using the “personal consumption expenditure” deflator. By this measure, wages (whether looked at through the mean, median, specific percentiles, etc.) have been rising at a decent clip since the 1990s. Strain admits the trend looked a lot worse in the 1970s and 1980s, but points out that even 1990 was 30 years ago already — meaning that if you go back much further, you’ll be talking about an era when hardly any of today’s workers were even in the labor force. It’s not of any obvious relevance what wages were doing 40 or 50 years ago.

To see the difference all this makes, take a gander at this chart — in which I’ve recreated Strain’s Figure 7, the profile of which is used on the cover of the book (though he gives his data in 2019 rather than 2012 dollars). Pay special attention to how the trend looks after 1990.

And then compare it with this one, which uses a different inflation adjustment, measures median weekly earnings for full-time wage and salary workers, and separates men from women:

The trend line is still promising for women, but not so much for men.

I agree with Strain that his inflation adjustment is better (see some gory details about the differences here). But I also think that, in a book about populism, he could have spent more time looking at the sex differences in both the level and the trend of earnings — with men still making more than women, but women gaining more than men. Male wages have become a fixation for right-wing populists ranging from Tucker Carlson to Oren Cass to Marco Rubio, while folks on the other side of the aisle are far more concerned about the fact that there’s still a sex gap in earnings at all. The one thing both sides can agree on is that the government needs to focus on boosting the labor-market performance of one sex in particular. This book has little to say about whether either side has a legitimate gripe, though Strain does express some sympathy for the relatively small group of “male workers who never finished high school.”

Strain also surveys the quality-of-life improvements that everyone knows about but few really, truly appreciate. Medical care has improved drastically, air and car travel are safer, work weeks are shorter, technology is far better. For all the whining that people do today, I doubt many would take an offer to be born 30 years earlier instead.

Another key element of The American Dream Is Not Dead is a complicated analysis of intergenerational income mobility, which might be the thing most commonly meant by the “American Dream”: Strain runs the numbers to see how often kids do better than their parents did. His results are unsurprising — there is a correlation between parent and child outcomes, which you would expect given that kids get both their genes and much of their social capital from their parents. But the link is far from perfect. If someone’s parents were in the bottom 20 percent when they (the parents) were in their 40s, there’s a 64 percent chance the child will not be in that same lower quintile at the same stage of life, including a 7 percent chance he’ll be in the top 20 percent. Further, nearly three-quarters of kids outearn their parents in absolute terms.

There are nits to pick with this analysis. For example, Strain adjusts incomes to account for household size, meaning, bizarrely, that one can achieve more “upward mobility” by having fewer kids, and that declining fertility over time is seen as kids’ systematically outperforming their parents. (It makes sense to adjust for household size when measuring poverty, because it’s more expensive to feed four mouths than it is to feed three. But if two brothers grow up in the same house and end up earning the same amount of money as adults, it’s absurd to say they have different levels of upward mobility if one chooses to have kids while the other opts for fancy cars.) Nonetheless, Strain’s work here is a handy demonstration that the “socioeconomic status” of one’s birth is not one’s destiny.

And I have one criticism of the book more broadly: There isn’t a whole lot here about how “populism could kill” the American Dream. Strain has his own free-market-leaning policy prescriptions and conveys a distaste for protectionism, Medicare for All, and a $15 minimum wage, but he never really proves the claim that’s made in the book’s subtitle — though I suppose one can’t ask too much of a document that barely breaks 150 pages, including the endnotes and two responses from critics (Henry Olsen from the right and E. J. Dionne from the left).

People often fall into a belief that life was somehow better in the past. In The American Dream Is Not Dead, Michael Strain shows it wasn’t, while not denying that the U.S. faces real challenges even in our prosperous age. It’s a good gift for that pessimistic reactionary down the street.