Stuck!

Income has now begun to exceed the cost-of-living increases, inflation is down to a manageable level (3%), unemployment is low (3.6%), and most Americans are economically better off than they have been in a while. Yet, the majority of Americans are telling pollsters that the economy is heading in the wrong direction, Biden’s economic turnaround is all but ignored, and there is this lingering malaise that seems impossible to reverse. Do consumers need more time to adjust to the better “new normal”? Is the political unrest and polarization the unnerving cause? Is the GOP repetition, contrary to statistical realities, of economic disaster simply being taken at face value? Or is there something more?

I am going to take a risk at positing my own theory that goes beyond all of the above. I think in “the land of opportunity,” we no longer believe that folks in the United States in general, and their and their children’s lives specifically, are going to improve their lot in life. Sure, the United States is doing better than most of the rest of the world, but there are certain rising and pervasive realities that tell us that we are stuck.

Real estate (via rents, home prices and interest rates) has been pushing housing to become one of our greatest challenges. Square footage is dropping in new construction. Young college grads are returning to the center of bigger cities, eschewing the cost of owning a car, or being forced to commute increasing distances. Homeownership? Not in the cards for most new urban workers. Add this to the pressure of remote work, where remote work is even possible.

Tuition debt is crushing, as the cost of a college education has pretty much tracked around three times the rate of inflation. Rising workers are carrying a debt burden for years, often decades, that their parents never faced. Fewer are getting married, or if they do, it is later in life with a negative pressure on having children. As a result, Americans are reproducing at well less than the rate of replacement, a big bad reality for business seeking traditional growth in the consumer base.

Yet more young people are getting post-secondary education, and those mired in the world of high school degrees or less are hitting brick walls of economic stagnation. Since so many are getting some college, that great equalizer (education) no longer results in upward mobility. The majority of students and entry-level workers no longer believes that they will earn more and have a better lifestyle than their parents. Even for those who have jobs, many are locked in work below their expectations (picture: a Starbucks barista with a master’s degree), stagnant prospects for advancement and boredom with jobs that offer little in the way of challenging variety. All this without looking at the big environmental elephant in the room: climate change which is making day-to-day living increasingly uncomfortable.

This notion of being stuck is critical to understand, just as we are in the midst of what should be a time of joy that more people are making more money. But it is the “hope and expectation” quotient that most economists simply ignore. The 20-to-1 earnings differential between big company CEOs and their average worker in 1965 has risen to over 350-to-1 in 2023. In a nation that does not tax wealth (except on death or sale), half the wealth is owned by the one-percenters, income inequality in the United States is looking more like a banana republic than the land of upward mobility, long since passed. “That could be me” has been replaced by “never me.” And without those ordinary workers, those CEOs and shareholders could never have amassed such wealth.

Cost pressures and the need to keep overpaying those at the top of the economic ladder have permeated how we hire or engage people. Gig workers are now mainstream. Writing for the July 7th for The Morning (New York Times), David Leonhardt describes what fellow journalist Noam Schreiber calls “the fracturing of work.” Like the transition to highly skilled workers making automobiles in the early 20th century to the routinized “simple individual task” reality of Henry Ford’s assembly line. In 2023, this trend manifests in many ways.

“Universities devote a smaller share of faculty slots to tenured professorships than in the past — and hire more adjunct professors who have little chance for promotion. Law firms employ relatively fewer partners and more lawyers who are paid less. And Hollywood hires fewer writers to participate in the entire production process, relegating more of them to piecemeal work.

“This trend… is a central issue in the Hollywood writers’ strike that is now 11 weeks old [as of 7/20]. As one historian explained, there is increasingly a ‘tiered work force of prestige workers and lesser workers.’… Screenwriters — who are unionized — have gone on strike in an attempt to use their collective leverage to avoid becoming Hollywood’s equivalent of adjunct professors. Until the past decade, writers not only wrote scripts but also remained on set during filming and participated in the process. They offered thoughts about costumes and props and would tweak the script as the cast acted it out.

“The producer Michael Schur has compared the job to an apprenticeship. Schur was a writer on ‘The Office,’ and the experience helped him learn how to create and run his own shows… Today, only one or two writers remain with a show through production, while others produce scripts and are then dropped from the process. ‘The making of television is very compartmentalized now,’ John Koblin, who covers the television business for The Times, told me. ‘The writers write. The actors act. The directors direct.’…

“The trend is a microcosm of larger developments. Nationwide, the pay of the bottom 90 percent of earners has trailed well behind economic growth in recent decades (as you can see in these Times charts). Most Americans have not received their share of the economy’s growing bounty, while a relatively small share have experienced very large income gains.

“That’s not shocking. As the economist Thomas Piketty has explained, inequality tends to rise in a capitalist economy, partly because the wealthy have more political power and economic leverage than the middle class and poor do. But history also shows that rising inequality is not inevitable.” The rise of unions is one backlash that helps level that playing field, but our system of leaving the wealth of the richest class untaxed moves us in the opposite direction. And more specialized education, particularly in STEM subjects, would add new worker value.

Sure, we have massive technological changes impacting the future of work – AI and plasma computing being the hottest topics these days – but we have so institutionalized protecting wealth, so increased the inflation-corrected cost, until recently so marginalized the power of unions, that we have trashed hope, positive expectations and the prospect of rising up the economic ladder and for most. Add the contracting birthrates and the downright hostility to immigration, and you get an economic structure where genuine domestic growth seems to have left the building.

I’m Peter Dekom, and while are a nation with increasing expertise in promulgating mythology and explaining dysfunction through convoluted conspiracy theories, sometimes just looking at the obvious just seems to elude most of us.