Originally published in Fusion.
Scott Winship’s “America is Still Working” takes a comprehensive look at the U.S. labor market over the last half-century and finds a cup half-full. For example, against claims that the American worker has suffered under decades of wage stagnation and under-employment, Winship marshals compelling data showing that poverty is at historic lows while earnings and job quality are at historic highs. Wage growth may have been slower for non-college educated men, but he contends this was largely driven by the stupendous growth in female labor force participation eroding the male “breadwinner” premium.
Winship further argues the trends often pointed to as signs of economic decline, from falling marriage and fertility rates to rising disability rolls, are actually the paradoxical side-effects of our increased national affluence. Rather than serve as an indictment of the “elites,” we should understand these lingering social problems as the trade-offs of genuine economic success and work to address them through targeted social policies.
The essay belongs to a growing genre of stagnation denialism, including such books as Michael Strain’s The American Dream Is Not Dead and Scott Lincicome’s Empowering the New American Worker. The premise seems to be that populism will subside if conservative policy wonks just point at enough graphs going up and to the right. In short, you may feel like the American Dream is dying, but these aren’t the data you’re looking for.
In Winship’s case, the primary tactic is to point at evidence for things getting better while crafting excuses for things getting worse, all while downplaying the potential counterfactual. Of course the average American has higher living standards today than in 1970! It would be truly shocking were that not the case. The Great Stagnation thesis, popularized by the economist Tyler Cowen, in contrast, never claimed that wage and productivity growth stopped altogether. Rather, the claim is that wage and productivity growth suffered a structural break relative to the pre-1970s trend. Had total factor productivity maintained its 2 percent annual growth rate rather than deteriorating to 1 percent or less, the median American worker today would make over six figures and the U.S. economy would be nearly 85 percent larger.
Winship acknowledges that productivity “has been stuck at too-low levels for too long,” noting that “thanks to diminished productivity growth, the workweek is essentially the same length today as 50 years ago.” But as catastrophic as this datum is for his broader case against “declensionism” (the belief that we’re locked into some form of stasis or decline), Winship barely addresses the mechanics of productivity growth at all, choosing instead to gesture at the need for vague infrastructure and education investments, paid for through cuts to social welfare transfers of course.
As it stands, the not-great but still non-zero income growth experienced by the median American household has forced Winship into his thankless role as Panglossian statistical masseuse. Think child poverty in America is unacceptably high? You forgot to impute the cash value of their Medicaid benefits.[1] Once you do that, the consumption of even the poorest child is off the charts! Think wages have stagnated? You’re using the wrong inflation adjustment. Try using the PCE or chained CPI-U and you’ll find real incomes are actually way up. Whatever the issue, Winship is here to massage the data until it reaches a happy ending.
It’s not that those methodological choices are wrong. It’s that they’re not even wrong – an example of what Oren Cass calls “statistical gnosticism.” There are many good reasons to prefer the PCE over CPI, for example, and yet if productivity growth over the last 50 years had been as strong as the preceding 50 years, the wage data would be unambiguous. No one in 1970 questioned whether their growth in living standards since 1920 was all a measurement error. Indeed, the very sensitivity of positive wage growth to such measurement choices is itself evidence of a problem!
The multi-decade stagnation in male median incomes is particularly stark. Yet Winship has an answer for that, too. Rather than look at the above chart and see a crisis, Winship simply sees the success of women’s liberation: “Men’s pay rose more than productivity did for decades during the mid-20th century, suggesting that it was due for a correction.” Note this is not settled fact but rather Winship’s own pet theory, based on the presumption that “many men were, relative to productivity levels, overpaid in the past—that they received economic rents.” The entry of women into the workforce thus eroded this rent, construed as a premium for the male breadwinner. Yet why this “correction” occurred so suddenly and persisted for forty years is left unexplained. An alternative explanation is that male wages grew faster than productivity growth in the preceding decades because of the strength of trade unions, which redistributed rents not between women and men but between capital and labor. This then suddenly reversed in the 1970s amid an energy shock, plummeting union membership, and an economic restructuring that concentrated job losses in male-dominated manufacturing sectors. But I guess as men they had it coming to them.
Regarding employment rates per se, Winship suggests there’s no clear trend. Across time, “some of us work more, others less—and sometimes the same people work more or less at different times.” While there’s some evidence for worklessness increasing, this is the price of our affluence and thus ability to afford stronger safety-nets. Nevertheless, a comparison between the actual unemployment rate and the Congressional Budget Office’s estimate of the natural rate suggests there has been excess slack in the U.S. labor market for roughly 70 percent of the quarters since 1980, as compared to a third of the quarters from 1949 to 1980. This structural bias against tight labor markets represented an enormous hidden wealth transfer from workers to employers. To avoid condemning “out of touch elites,” however, Winship chooses to shift blame away from these macroeconomic factors and towards the generosity of disability insurance. This is despite the fact that disabled employment and labor force participation soared after 2020 thanks, not to program cuts, but to fiscal and monetary policies that supported genuinely tight labor markets.
Winship’s hand-wavy dismissal of the fertility crisis isn’t much better. As he writes,
Where economic growth has had consequences we do not like—say, the weakening of marriage as an institution, the decline of fertility nearly to sub-replacement levels, or the “time crunch” associated with balancing work and family life—the answer is not to rollback living standards or reduce economic opportunity for women or men. Nor is it to blame policymakers or “late-stage capitalism.” Instead, these problems require a willingness to wrestle with the choices we have made.
In short: live with it. With birth rates now well below replacement, rates of innovation and economic growth are destined to slow as our economy turns into a giant nursing home. Eventually, full-on population collapse will kick in, handing off the Republic to the most fecund Amish community. Unfortunately, according to Winship, public policy can only nibble at the margins. Declining birth rates are one of affluence’s deep cultural trade-offs that we can’t do much about; only “wrestle with the choices we have made.” First World Problems, am I right?
For a treatise against “declensionism,” this is astonishingly pessimistic. U.S. fertility rates were above replacement as recently as 2007, while Israel has maintained a high fertility rate, including among the secular and highly educated, in spite of its affluence. So while the declines in marriage and fertility are no doubt functions of personal choice, our choices – and broader culture – are also deeply shaped by the economic and institutional structures around us. Which so-called declensionist believes our only option is to roll back living standards? We could at least afford to experiment with things like per-child tax benefits (a policy that Winship has vociferously fought against). Instead, it’s Winship’s prejudice against decline that prevents him from properly grappling with the problem.
The bigger problem with Winship’s piece, however, is the dog that didn’t bark. While superficially framed as a refutation of “declensionism,” the substance is focused on interpreting a handful of labor market indicators that, in fairness to Winship, many left-wing critics of American capitalism really do misunderstand. Yet whether or not the U.S. economy has underperformed over the last 50 years doesn’t change the fact that the economy is now booming, particularly relative to our European peers. By hook or by crook, the Great Stagnation is finally coming to an end, thanks in large part to the innovative capacity of the American tech and energy sectors.
The sources of decline that remain are primarily institutional. The U.S. federal bureaucracy has grown particularly sclerotic under the weight of decades of process accumulation and regulatory capture. This redounds on our industrial base, as seen in everything from our pitiful shipbuilding capacity to the 1970s-era environmental laws blocking the development of strategically critical mineral and energy resources. Rebuilding American manufacturing while capitalizing on the recent progress in areas like AI and biotech will thus require deep structural reforms that incumbent elites and interest groups are likely to fight back against.
The people most prepared to wage that battle, meanwhile, are often the very people most concerned about institutional decline. Piecemeal reforms to education and welfare programs aren’t going to cut it. If we wish to remedy America’s beleaguered industrial base and waning state capacity, it will not do to indulge Winship’s smug exhortations for complacency. We must take the evidence of our decline seriously, and then do whatever it takes to reverse it.
