November 08, 2022
At this point, a large majority of non-college educated whites (especially white men) are willing to follow Donald Trump off any cliff. They have open contempt for more educated people (a.k.a. the “elites”) and their institutions, such as universities, mainstream media outlets, and science.
There is no justification for the racism, anti-Semitism, homophobia and other forms of bigotry that Trump has cultivated since he entered politics. But there is a reason why it suddenly has so much appeal, and it’s not just that a Black guy (who many of them voted for) became president. I will again make the case here.
Let’s Imagine a World Where the More Educated Screwed the Less-Educated
We know the data on what has happened to income distribution over the last four decades. To take a simple point of reference, in debates on the minimum wage we often talk about how if it had kept pace with inflation since its peak real value in 1968, the national minimum wage would be over $12 an hour at present, compared to its current $7.25.
However, in the three decades prior to 1968 the minimum wage did not just keep pace with inflation, it rose in step with productivity. That meant that the lowest paid workers shared in the gains of economic growth. If the minimum wage had continued to keep pace with productivity growth, it would be almost $26 an hour in 2022.
That’s worth thinking about for a minute. Imagine the lowest paid workers, the people cleaning toilets in office buildings or bussing dishes in restaurants, earned $52,000 a year if they worked a full-time job for the whole year. A two minimum wage earner couple would be pulling down $104,000 a year. That’s a very different world than the one we have.
The minimum wage story is just part of a larger picture where the wages of more educated workers have diverged sharply from the wages of less-educated workers. Workers with college, and especially advanced degrees, have seen wage gains that have largely kept pace with productivity growth.
For men with just a high school degree, real wages fell by 7.0 percent in the 42 years from 1979 to 2021, a period in which productivity increased by roughly 80 percent. By contrast, the real wages of men with college degrees rose by more than 34 percent, while the pay of men with advanced degrees rose by more than 60 percent. For women with just high school degrees real hourly wages rose by 14 percent over this period, compared to gains of 51 percent for women with college degrees and 55 percent for women with advanced degrees.
Just to be clear, there is no reason to feel sorry for men in this story. In 2021, the pay of women with just a high school degree was only 63 percent of the pay with men with high school degrees. The pay for women with college degrees was 68 percent of the pay of men with college degrees. They have seen faster wage growth, but still have a long way to go to achieve equality with men.
These facts about income trends are not really in dispute. These statistics were calculated by the Economic Policy Institute using data from the Bureau of Labor Statistics, but many other economists have come up with the same basic story.
Okay, so the less-educated segment of the workforce clearly has done poorly in the last four decades, even as economic growth has been reasonably healthy. And, just to be clear, this is not a small group of people who have been left behind. Only around 40 percent of the workforce has a college degree, or more, so the left behinds are the majority of the workforce. (The pay of people with associate degrees, or some other post-secondary education, but not a college degree, has largely tracked that of those with just a high school degree.) This means a large majority of the population has grounds to be unhappy about their economic circumstances in recent decades.
Given this reality, suppose that the poor prospects for non-college educated workers was the result of deliberate policies pushed by the people who control debates on economic policy, as in people with college and advanced degrees. The people who are best positioned to steer economic policy consciously structured it in ways to benefit people like themselves and to screw workers with less education. Would that give the losers in this picture reason to be angry?
Now, suppose also that the people who rigged the system to favor themselves at the expense of the less-educated also lied about the fact they rigged it, and ridiculed the less-educated for not being able to compete in the modern economy. Furthermore, since the winners staff all the major media outlets, they insisted that only the false story, of losers being unable to compete, ever got mentioned in discussions of economic policy.
The less-educated might actually have something to be upset about in this story. And, that would be true even if some of the winners were good liberals who were prepared to pay somewhat higher taxes to provide help to the losers in the form of better health care, low cost or free college, and higher Social Security benefits.
This is basically the story of US politics in the era of Trump. The economic losers hate the winners and distrust the institutions they populate: the media, universities, government agencies. There is a rational basis for distrust. The winners really did screw them and they have concocted nonsense stories to conceal that fact. Of course, that doesn’t mean that every university professor or librarian was in on the scheme, but as a class these people have in fact put in place economic structures that redistribute from the less-educated to those with college and advanced degrees.
How the Working-Class Was Screwed
I won’t go into great detail on the policies that led to the massive upward redistribution of the last four decades. I’ll just highlight some of the more obvious ones. Regular BTP readers know the story, but those who are interested can read Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer (it’s free) or see the video series I did with the Institute for New Economic Thinking.
To start with the most obvious way that policy was designed to screw ordinary workers is that we quite explicitly worked to remove barriers to imports of manufactured goods from the developing world. This was intended to make it as easy as possible for US corporations to seek out the lowest cost labor anywhere in the world. This cost the country millions of manufacturing jobs, which had the effect of pushing down the pay of the manufacturing jobs that remained. It also reduced the pay of non-college educated workers more generally, since manufacturing had historically been a source of relatively high-paying jobs for workers without college degrees. As a result of the removal of trade barriers in manufacturing, the unionization rate in manufacturing is now almost the same as in the private sector as a whole and the manufacturing pay premium has largely disappeared.
Note that this is not an issue of “free trade.” We did not look to remove the barriers that protect doctors and other highly paid professionals from international competition. As a result, our doctors not only get paid hugely more than their counterparts in the developing world, they get paid roughly twice as much as their counterparts in Canada, Germany, and other wealthy countries. If we reduced the pay of our doctors to the pay level they get in other wealthy countries, we would save roughly $100 billon a year, a bit less than $1,000 per year per family.
So, the folks designing policy were not interested in free trade. They were interested in structuring trade deals in ways that redistributed income from less educated workers to more highly educated workers and corporations.
The second big policy tool in this upward redistribution is government-granted patent and copyright monopolies. We made these monopolies longer and stronger over the past four decades and also worked hard to impose them on other countries around the world.
The result has been much higher prices for drugs and medical equipment, software and many other items. The higher prices ($400 billion a year in the case of prescription drugs alone) have made a small number of people, such as Bill Gates and the Moderna billionaires, very rich, while shifting a huge amount of income from everyone else to the more educated workers in a position to benefit from these monopolies.
To be clear, it is desirable to have a policy to support innovation and creative work, but we could have structured the mechanisms for these purposes a thousand different ways. We chose to structure the mechanisms in a way that redistributes a massive amount of income upward. And, to make matters worse, virtually all polite discussion of the topic ignores the fact that government-granted patent and copyright monopolies are policy choices, and instead says that the resulting upward redistribution was just “technology.”
To take one other major category, we have structured our financial system in a way that allows it to be an enormous drag on the productive economy and major source of inequality. An efficient financial system is a small one. We want to devote as few resources as possible to running the financial system. Instead, it has exploded relative to the size of the economy over the last four decades. It has also allowed many people to become enormously wealthy running hedges funds, private equity funds, or trading at major banks.
This is also hardly a free market. The financial sector would be much smaller if trades of stocks and other financial assets were subject to a sales tax, just like sales of TVs and clothes. Private equity funds would lose much of their money if it was more difficult for them to prey on public sector pension funds.
And, to take the most dramatic example of the non-free market basis of financial sector fortunes, the political establishment moved heaven and earth to get a massive bailout of the sector back in 2008, when greed and stupidity threatened to send most of the country’s major banks into bankruptcy. Rather than letting the market work its magic, we got a full court press from major media outlets insisting that the failure to rescue the banks would give us a Second Great Depression.
No one ever bothered to explain how that would work. We got out of the first Great Depression by spending lots of money on World War II. It’s not clear why we couldn’t have spent a lot of money the day after all the Wall Street banks went under to get the economy back on its feet, but the Second Great Depression story did the job, and Wall Street banks were all saved.
The list of policies that redistribute upward is of course much longer. We have a totally corrupt corporate governance structure that allows even mediocre CEOs to get tens of millions a year in their paychecks. Second and third tier execs get correspondingly outrageous paychecks.
We have allowed labor management law to be hugely twisted to favor management. Current practices make it extremely difficult to form a union. There is even a court case now being contested that would allow companies to sue unions that strike for damages.
The basic story is that the upward redistribution of the last four decades has nothing to do with a free market, it was the result of a large number of policy choices. In public debates, there is a widespread pretense that this upward redistribution was just the result of leaving things to the market, but that’s a lie, and the losers in this story have every right in the world to be angry about it.
Why Do the Democrats Get Blamed?
It would be entirely accurate to point out that on the key policy choices noted above, Republicans have not been any better, and are quite often worse. They have always been happy to give more money to the financial industry, the pharmaceutical industry, and other beneficiaries of upward redistribution. So why do working class voters, and especially working-class white voters, blame the Democrats?
Here I am largely speculating, but I would give two reasons. First, the Democrats have been associated with some of the most visible measures in this upward redistribution. It was Bill Clinton that pushed NAFTA through Congress and then got China into the WTO. While it’s true that these measures had more support in Congress from Republicans than Democrats, it is not surprising that people would associate the policies with the president who pushed them.
The second reason is simply that the beneficiaries of these policies are disproportionately Democrats. When people look at professionals in the media, universities, and the government, they see people who are overwhelmingly Democrats. The people who benefit from these policies and then directly spread the nonsense that the upward redistribution was just the natural workings of the market are overwhelmingly associated with the Democratic Party.
This can work to effectively discredit both the Democratic Party and these institutions. The Republicans may not offer a positive economic agenda, but they offer a vehicle for the resentment of working-class voters. They can blame Blacks, immigrants, LGBTQ people, and their elite friends for the troubles facing working class voters.
Can the Democrats Change Course?
That is obviously a long story, which I won’t try to answer here, but I will make a simple point. For some reason whites without college degrees hate Democrats, while whites with college degrees tend to vote Democratic, by at least small margins. It is possible that it is something that people learn in school that causes them to be so much more sympathetic to Democrats, but it may also reflect their much greater economic opportunities.
If that is the case, it is not necessarily specific policies that Democrats offer that cause people to become Democrats if they graduate college, but rather a change in their outlook on the world. This could mean that if we actually implemented policies that drastically improved the economic prospects of people without college degrees, we would see a much larger share of this group prepared to vote Democratic and support the policies currently being pushed by the Democratic Party.
I’ll be the first to admit that this view is very speculative. I certainly wouldn’t guarantee that if we succeeded in reversing the policies that have led to the upward redistribution of the last four decades that we would see a large uptick in white working-class support for Democrats. But, regardless of the political effect, we should seek to reverse these policies because it is the right thing to do.
 This adjusts for differences in price indices and the coverage of the output deflator and Consumer Price Index.