(Bloomberg Opinion) -- There is consensus among populists on the left and the right that typical workers and households had it better decades ago.
Senator Bernie Sanders, the candidate to beat for the Democratic presidential nomination, has said that Americans are “overworked, yet our standard of living has fallen.” He went further: “For many, the American dream has become a nightmare.”
And Senator Josh Hawley, a Missouri Republican and rising conservative populist star, directed his Twitter followers last week to a report “to understand the pressure felt by the American middle.”
That report was written by Oren Cass, executive director of American Compass. Cass argues that “family finances are coming under increasingly untenable pressure.” To demonstrate that, he claims that in 1985 the typical male worker could cover his family’s housing, health care, transportation and education expenses on 30 weeks of salary. But in 2018, his salary for the entire year would fall short. The chart summarizing Cass’s finding was described this week by the Washington Post as “the best explanation of middle-class finances you will ever see.”
Unfortunately, his chart and analysis have several serious flaws. Here are just a few.
To demonstrate that a typical male worker couldn’t cover these costs, Cass includes the charges for the annual cost of employer-provided health insurance for a family. In 2018, this was $19,616. But he does not include employer contributions to premiums in his measure of worker income. Similarly, Cass charges the worker the cost (measured by the sticker price) of college tuition, but does not include financial aid as part of the family’s income.
He focuses on these items, whose costs have grown considerably over the past three decades, but ignores the many goods and services that have not seen large increases, like clothing, telecommunications services and energy. And he seems to have some fundamental misunderstandings about how official statistics measure price inflation.
Cass’s argument is not new. Conservative populists commonly argue that typical male workers today have great difficulty supporting their families, whereas in the past they could do so much more easily. Is that true?
Data from the Bureau of Labor Statistics show that from 1990 to 2019 the median male worker’s wages grew by 23%. The bottom 10% of male workers saw their wages increase by 36% over this period. Male workers in the 20th percentile — those who earn more than the bottom 19% but less than the top 80% — had 30% wage growth.
All these figures are adjusted for inflation. That is, they account for increases in the prices of housing, health care, education and transportation — Cass’s four categories — but also for the prices of many other goods and services.
The upshot: It is hard to argue that price increases are overwhelming the wage gains of male workers.
I focus on male workers because they are the focus of the populist critique of capitalism. Household income presents both a fuller and more upbeat picture of how American families are faring. According to the nonpartisan Congressional Budget Office, after accounting for inflation, federal taxes and government transfer payments, the median U.S. household enjoyed a 44% increase in income from 1990 to 2016, the most recent year for which data are available. Households in the bottom 20% saw their income increase by two-thirds over this period.
Health care and education are salient expenses in large part because their prices have gone up. If their prices had been flat for three decades, while the price of televisions and food skyrocketed, we might all be bemoaning how expensive leisure activities and proper meals have become.
An unfortunate undercurrent in this discussion is the implication that women’s participation in the labor force has been a disappointing social development, hurting families and reducing marriage rates. And there is also the claim that many women are working because it takes two incomes to finance a middle-class life. This is Cass’s conclusion.
But this likely gets the causation backward. Take education as an example. Lots of factors affect its price. One is higher incomes. As a society gets richer, its willingness to spend on these services increases. And as the demand for education services goes up, driven by higher incomes, so does its price. (Indeed, Cass’s chart shows what single- and dual-earner households choose to buy, and compares it with what one male earner makes.) And we have already seen that male workers have experienced significant wage gains.
Some public opinion surveys do show that mothers work more than their self-reported preference. But it is hard to know what to make of those results. Which is a better indicator of their underlying preferences: the women’s answers to the survey, or the choices they make? The economist in me answers the latter.
It is perfectly possible to finance a middle-class life on one income. According to an analysis by the Institute for Family Studies, 26% of married mothers with minor children whose husbands earn between $75,000 and $99,000 are out of the labor force, as are 31% of mothers with husbands who earn between $100,000 and $249,000.
This suggests that dual-earner households aren’t caught in a trap of rising prices. Instead, they are making choices that they think are best for their families.
None of this is to deny that public policy needs to do a better job addressing the costs of raising a family, including health care, college educations and child care. The financial stress and pressure many households feel is real — it certainly is in my own family.
But that stress does not mean that life was better decades ago. Instead, it speaks to our aspirations for ourselves and our children.
Populism, which wallows in nostalgia for an imaginary past, takes those aspirations and turns them into anxieties. Stoking those anxieties — as populist politicians do — may serve a political purpose, but it does nothing productive to address the problems that do exist. A better response would be to channel the concern many people have for their future into the hard work of crafting legislation that can command enough bipartisan support to become law.
But that would require compromise — something else sadly absent from the current political moment.
To contact the editor responsible for this story: Katy Roberts at kroberts29@bloomberg.net
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It).”
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