In the 1960s, American workers constituted a labor aristocracy on a global scale. The United States led all other countries in global manufacturing. Productivity levels and thus wages were higher in the US than in other leading economies. Even without a high school degree, male workers could make a middle-class income in an auto or steel plant. Income inequality was at an historic low after half a century of decline and social mobility was high. Roughly one in three workers was a union member.
How things have changed. Consider, for instance, the automobile industry. As the chart below illustrates, US auto production dwarfed that of any other country in the 1950s and 1960s. Today, however, US-based auto production remains about where it was six decades ago while production elsewhere around the globe has skyrocketed. China now produces twice as many vehicles as the United States. It is similar in other industries.
Once lucrative manufacturing jobs have disappeared not only due to the shift of production overseas but also due to automation and rising worker productivity.
Yet since the 1970s, productivity gains have been captured not by American workers, but by the owners of capital.
Real wages and income have therefore stagnated for most workers.
This is especially true for men. While female income has continued to rise – thus gradually reducing the gender pay gap – average male earnings have actually declined over the past half century.
Changes in the fortunes of men and women are also evident in trends in labor force participation. Fewer men are entering the workforce while the opposite is true for women.
Meanwhile, virtually all of the income gains of recent decades have gone to those at the top of the income distribution, thus widening the inequality gap and reducing social mobility.
The chart below shows that the income of males without college degrees has fallen sharply over the past quarter century while the biggest winners have been women with a bachelor’s degree or higher.
The current level of income inequality rivals that of the 1920s and far exceeds the relatively equitable distribution of the middle of the 20th century.
The declining share of income that goes to the middle class has been closely correlated with a declining union membership rate.
In a sign of growing social distress, the death rate among middle-aged white males in the US has risen over the past decade, in contrast with the usual pattern of falling death rates (see red line in chart below).
All of these trends help us understand the success of Donald Trump. Trump draws his strongest support among middle-aged white males who are less affluent and less educated – precisely those Americans who have suffered a loss of relative economic and social status over the past half century. This same demographic group was, relatively speaking, prospering in the 1950s and 1960s. But the manufacturing jobs that supported this prosperity have either moved overseas (Chinese imports alone may have cost 2.4 million American jobs between 1999 and 2011) or been eliminated through productivity-enhancing technological change. The latter trend might have led to rising incomes for those who managed to maintain jobs in the manufacturing sector, except that the returns to capital have risen sharply relative to the returns to labor. At the bottom of the income distribution, an influx of low-skilled immigrants over the past several decades combined with the failure of minimum wage rates to keep up with inflation have depressed wages for the least educated. What few gains workers have been able to eek out have gone mostly to women, who have joined the workforce in higher numbers while also managing modest improvements in compensation (though the gender wage gap nonetheless persists). Globalization has also allowed capital to seek out cheaper labor and higher returns in developing regions, thus undermining the bargaining position of North American and European workers. As a result, private sector unions have practically disappeared in the US. Without unions to provide some direction for working class discontent, a populist figure such as Donald Trump can harness this anger by bashing immigrants and imports.
On a global scale, the following chart situates the American working class within the global income distribution. The income of those at the top – the owners of capital – has grown rapidly as globalization has provided capital with access to cheap labor outside of Europe and North America. Incomes have also grown rapidly in emerging economies – such as China – where previously impoverished workers have gained access to the kind of factory jobs that Americans enjoyed in decades past. The group that has experienced no gains are the workers of North America and Europe. While this group remains well off in both absolute and relative terms, it has fallen behind, over time, in comparison with the highly educated global elite and the rising working class of the developing world.
The brand of populism and nativism that Trump offers working class American males provides no real solutions to the downward mobility that this group has experienced. But until mainstream politicians and parties address the real grievances of American workers, one can expect more disruptive politics.