Ross Douthat and the Great Resignation

by
Dean Baker
My articles My siteAbout meMy booksMy videos
Follow on:Twitter

from Dean Baker

The General Picture: Policy Was Structured to Redistribute Upward

I don’t agree with much about Ross Douthat’s politics, but he often makes some interesting points. He did so in his latest column on the Canadian “truckers” protest against vaccine mandates. Douthat argues that support for the protest stems from resentment by people who do various types of manual labor against the professional class. His point is that the latter have largely been setting the rules in ways that disadvantage the group of people who rely on manual labor for their living.

Unfortunately, it seems that no one other than Douthat is given the opportunity by major news outlets to argue that policy, rather than inevitable processes like globalization or technology, is responsible for the relative deterioration in the situation of people who do manual labor. To be clear, there are prominent columnists like, Paul Krugman at the NYT and E.J. Dionne at the WaPo, who argue for welfare state policies to reverse this deterioration, but you won’t see any pieces saying that the deterioration itself was the result of deliberate policy.

This absence is striking, given how the major news outlets are perfectly comfortable giving large amounts of space to pieces based on little evidence, or that sometimes even fly in the face of the evidence that does exist. The NYT gave us an example of this with the Sunday magazine’s cover piece proclaiming “The Age of Anti-Ambition.”

The substantive basis to this piece is the highest recorded quit rate since the Labor Department began its current series in December of 2000 and the drop in labor force participation since the start of the pandemic. As NYT columnist Peter Coy has pointed out, quit rates were likely much higher in the late 1940s, and comparable at many points in the 1960s and 1970s. So, there is not all that much new here.

There also is far less than meets the eye with the decline in labor force participation rates (LFPR), widely touted as “The Great Resignation.” If we look at the prime age workforce (ages 25 to 54), the drop from the pre-pandemic peak to January of 2022, is 1.4 percentage points.

But LFPRs always fall in recessions. Three and half years after the start of the 2000 recession, the prime age LFPR was down by 2.7 percentage points from its pre-recession level. The prime age LFPR was 4.1 percentage points below its pre-recession peak four years after the start of the Great Recession.

Furthermore, more than half of the drop in the LFPR is explained by the 1.8 million people who reported that they were not working or looking for a job in January directly because of COVID-19. The real surprise of the pandemic recession is how little labor force participation has fallen.

The other part of the picture, that people no longer have great career ambitions, is also not exactly new. Those of us old enough to remember the 1960s recall the slogan, “turn on, tune in, drop out.” The story that many young people, who have the option, choose not to pursue a high-prestige, high-paying career path, is not a new one.

But even “The Age of Ambition” story probably contains more validity than another frequent topic in major media publications: the robots taking all the jobs. This one was especially painful because not only was it not supported by the evidence, it was directly contradicted by the evidence.

We actually have a very good measure of how rapidly robots or anything else is taking jobs, it’s called “productivity growth.” Productivity growth measures the increase in the amount of output in an hour of work. From the standpoint of the individual worker, it doesn’t matter whether productivity growth increases because employers have figured out a magical formula that allows them to produce 20 percent more cars, restaurant meals, or haircuts with an hour of a worker’s time, or because they are now working next to a team of robots. In both cases, employers need 20 percent fewer workers to produce the same amount of output.

In the decade from the fourth quarter of 2009 to the fourth quarter of 2019 productivity growth averaged just over 1.0 percent annually. This compares to growth of more than 2.5 percent annually in the quarter century from 1947 to 1972 and almost 3.0 percent annually in the decade from the fourth quarter of 1995 to the fourth quarter of 2005.

In other words, in a period where stories in major media outlets repeatedly warned us that robots were taking all the jobs, we were actually seeing very few jobs lost to robots or any other form of productivity growth. It’s probably also worth mentioning that economists usually see productivity growth as being a great thing, since it can provide a basis for higher living standards in the form of either more goods and services, or more leisure time.

A Piece on Rigging the Market to Redistribute Upward?

I mention the pieces on workers losing ambition and robots taking all the jobs, not just to bash poor editorial choices. Rather, these are examples of cases where major media outlets have been willing to go far out on a limb to tell grand stories, even when they are not well-supported by evidence. So clearly there is a market for big arguments about the shape of the economy.

My question is why does that market literally never include a piece that says that economy was deliberately structured to benefit more highly educated workers at the expense of workers without college degrees? Why is the only place we can hear this line is the occasional comment in a Ross Douthat column?

As my regular readers know, this story is not hard to tell. We have seen many pieces on the pandemic billionaires, with Moderna alone accounting for five of them, as of last July.

This was not just a story of technology. No one at Moderna, or any other pharmaceutical company, would be getting hugely rich without government-granted patent monopolies. We all know the argument that without these government-granted monopolies we wouldn’t have the COVID-19 vaccines and other great medical breakthroughs. But this is a debatable point, since we have seen enormously important breakthroughs in research that was publicly funded and not dependent on patent monopolies.

In any case, patent monopolies are quite explicitly a government policy. They can be longer and stronger or shorter and weaker. And, they may not apply in certain areas at all. (We didn’t have patent monopolies in software until the 1990s.)

The same story applies to copyright monopolies, the cousin of patent monopolies. This is again a government policy designed to foster creative work. It is not simply an outgrowth of technology. Without government-granted patent monopolies, Bill Gates would likely still be working for a living or getting by on his Social Security check, instead of being one of the richest people in the world.

Trade Policy

It is not just intellectual property rules that have been restructured to redistribute a massive amount of income upward. Our trade policy has developed along the same lines. It has been about putting our manufacturing workers in direct competition with low-paid workers in the developing world.

This has the predicted and actual effect of lowering the pay of manufacturing workers. And, since manufacturing has historically been a source of relatively high-paying jobs for workers without college degrees, this policy has had the effect of putting downward pressure on the wages of less educated workers more generally.

Here too, there was nothing inevitable about our trade policy, which often passes as the impersonal force of “globalization.”  We could have had trade policy that was designed to put our doctors, dentists, and other highly paid professionals in direct competition with their lower paid counterparts in other countries. (We could have created rules that ensured high standards.)

This policy would have had the exact same logic as the conventional economists’ gain from trade story, although in this case the winners would be less-educated workers who would benefit from lower cost medical care, legal services, and other services provided by the most highly-educated workers, which would raise their real wages. But this path for globalization was never on the agenda, perhaps because the people designing and writing on trade policy directly benefited from the course trade policy actually took.

The General Picture: Policy Was Structured to Redistribute Upward

I have written on other ways that policy was structured to redistribute upward in Rigged [it’s free]. (I would add to the list in my book, Section 230 protection, which has allowed Mark Zuckerberg and others to get fabulously rich.) But, my point here is not to argue for my specific take on these policies.

Rather, I am just making the case that there is a plausible story that policy was designed over the last four decades to redistribute income from workers without college degrees (loosely defined as Douthat’s manual laborers) to those with college and advanced degrees (loosely defined as Douthat’s professional class). The basis for this assertion is at least as strong as the case that we are now in the middle of “The Great Resignation,” or that robots are taking all the jobs.

Yet, for some reason we never see this argument in the New York Times, New York Review of Books, New Yorker, The Atlantic, the Washington Post or other leading media outlets.  (If I missed it, please send me the link.) This matters not only for policy reasons, but also for the shape that the resentment of the losers takes.

When the people who have been on the losing end of policy for four decades only hear that their plight was the unfortunate outcome of trends in technology and globalization, when in fact it was the result of policy deliberately designed by the winners, they are likely to be angry. The direction of their anger is often ugly and irrational, such as when they lash out at racial and ethnic minorities, or blindly follow a billionaire buffoon who has barely concealed contempt for ordinary workers.

I can’t promise that being truthful about the design of policy over the last four decades will redirect populist anger in a more productive direction, but it seems worth a try. In any case, news outlets that are ostensibly committed to the truth, should feel the need to tell it here.