Saturday, September 11, 2010

Decline of America, or Decline of the Middle Class

A couple of days ago, David Brooks offered his thoughts on the decline of the British Empire and, potentially, of the United States. Paul Krugman took a gentle poke at the column,
Reading David Brooks today, I couldn’t help thinking of Bob Solow’s old line that efforts to explain Britain’s relative decline always end up in a “blaze of amateur sociology.” That’s not an attack on David; everyone does it — although I might point out that the reason so many smart kids go into finance, not manufacturing, is that the pay is much better.
It seems fair to also note in relation to sociology (or economics, or psychology, or a lot of other 'ologies') the professional practitioners are potentially more dangerous than the amateurs. It is possible to make those fields relatively scientific, but it's difficult to see how even the best of the professional class can avoid introducing elements of subjectivity, ideology and overgeneralization. Various models or theories will work better in some contexts than in others.

In relation to the decline of the United States, Brooks offers his personal opinion, "Personally, I’m not convinced we’re in decline". It's fair to note that earlier in the editorial he argued the opposite,
This history [of Britain's decline] is relevant today because 65 percent of Americans believe their nation is now in decline, according to this week’s NBC/Wall Street Journal poll. And it is true: Today’s economic problems are structural, not cyclical. We are in the middle of yet another jobless recovery. Wages have been lagging for decades. Our labor market woes are deep and intractable.
The most charitable reading of Brooks' inconsistency is that he believes the nation as a whole can avoid decline, even as its middle class is unquestionably in decline. Such a perspective would either seem out-of-touch, a variant of "I can't understand why those factory workers don't realize that if they quit their unions, abandon job protections and take pay cuts, and they would be better off", or vested in the notion that an incredibly wealthy minority can rule over a flourishing nation of, in terms of comparative wealth and political power, serfs.

The Krugman passage quoted above partially rebuts Brooks' leading point, that "the elites. America’s brightest minds have been abandoning industry and technical enterprise in favor of more prestigious but less productive fields like law, finance, consulting and nonprofit activism." Brooks argues,
It would be embarrassing or at least countercultural for an Ivy League grad to go to Akron and work for a small manufacturing company. By contrast, in 2007, 58 percent of male Harvard1 graduates and 43 percent of female graduates went into finance and consulting.
Sure, after pursuing the most expensive academic degrees available, large numbers of students will chase the largest paychecks available. No surprise there. But my guess is that if an Akron manufacturing concern were doing well enough to pay a competitive salary, it could attract job applications from ivy league grads. I won't say that there aren't graduates who would see anything but a six figure job with a fortune 100 company as beneath them, but the larger impediment to a small company's hiring a new college graduate, even from Harvard, is that they come with an inflated sticker price and no job experience. Smaller businesses can't invest as much money in training and shaping college graduates; they often need their new hires to hit the ground running.

Brooks' larger point is misleading - many college graduates are eager to start businesses, work independently, and be masters of their own fate. Not that our society makes it easy to be an entrepreneur, or that it's easy to pick up the associated skill set in a standard college degree program.

Oddly, just after stating that too many college graduates are chasing big paychecks, Brooks holds up a quote attributed to Michelle Obama, in which she reportedly2 urged women to join helping professions, as reflecting a "shift away from commercial values". Which is it - are we shifting toward commercial values, putting salary head of everything else, or are we dropping out of the corporate world to become teachers, community organizers and social workers?

Brooks next goes off on the lower middle class:
Then there’s the middle class. The emergence of a service economy created a large population of junior and midlevel office workers. These white-collar workers absorbed their lifestyle standards from the Huxtable family of “The Cosby Show,” not the Kramden family of “The Honeymooners.” As these information workers tried to build lifestyles that fit their station, consumption and debt levels soared. The trade deficit exploded. The economy adjusted to meet their demand — underinvesting in manufacturing and tradable goods and overinvesting in retail and housing.
First, the Huxtable family was not depicted as middle class - Dad was a doctor, Mom was a lawyer, and they were affluent. There are many situation comedies which depict people living far beyond the income potential of their nominal jobs, but that's not something which which Bill Cosby can be faulted. Second, the lead male characters in "The Honeymooners" were a bus driver and a sewer worker, the sole breadwinners for their families, save for a period during which Ralph Kramden was unemployed and Alice returned to work as a secretary. The most remembered line from the show evokes domestic violence. Ralph, frustrated by his economic circumstances, was often scheming about how to make money.

More to the point, the era of the Huxtables brought us a modern equivalent of "The Honeymooners", a show called "Married With Children." If you think about it, shows like Married With Children" are far more misleading about what it takes to build a middle class lifestyle (a shoe salesman and his stay-at-home, spendthrift wife support two children in a pretty large ranch house, while paying lip service to the economics of their situation) - a successful lawyer and established doctor can easily replicate the affluence of the Huxtables, who arguably lived below their means.

There's plenty of reason to doubt Brooks' notion that it was some form of "Keeping up with the Joneses" (or Huxtables) that led to increased consumer spending and debt. You know what played a huge role in the growth of consumer debt? The broad availability of credit. Can't he imagine a Honeymooner's episode along the lines of, "A credit card arrives in the name of the Kramden's dog, the family goes on a spending spree, and is shocked to learn that they have to pay back the debt." That is the summary of an episode of "Married With Children".

As for the idea that the loss of manufacturing jobs overseas was the result of a shift in U.S. culture - that poor little manufacturers were forced to seek out less skilled, less educated workers in the developing world who would work for a fraction of the wages of their U.S. counterparts, because there weren't enough U.S. workers willing or able to perform those jobs? Come on.

Brooks carries on,
Finally, there’s the lower class. The problem here is social breakdown. Something like a quarter to a third of American children are living with one or no parents, in chaotic neighborhoods with failing schools. A gigantic slice of America’s human capital is vastly underused, and it has been that way for a generation.
First, it should be noted that Brooks paints with a very broad brush, implying that the children of divorce fall into the "lower class". The reality is that, yes, divorce can cause a newly single parent to fall below the poverty line, and can cause longer-term economic stress, but most families bounce back within a few years. Beyond that, Brooks is speaking of an underclass - and it cannot be said that his "lower classes" are a product of the past generation. I'll give Brooks credit for not falling into Bell Curve-style reasoning and excuses, but people have strugged with poverty for the whole of human history.

As an amateur sociologist, Brooks misses the boat on this one:
These office workers did not want their children regressing back to the working class, so you saw an explosion of communications majors and a shortage of high-skill technical workers. One of the perversities of this recession is that as the unemployment rate has risen, the job vacancy rate has risen, too. Manufacturing firms can’t find skilled machinists.
First, children tend to learn from and model themselves after their parents, and learn how to do certain types of work by watching their parents. Certainly, the parents of a couple of generations ago may have urged their children to get college degrees as a path to upward mobility, their children entered the white collar middle class, and their grandchildren may not be becoming machinists, but that's a progression to be expected. Further, how often does Brooks imagine parents telling their children, "Don't become an engineer - there's no money in it." One of the leading reasons why we have a surplus of communications majors is because it's a relatively easy degree to earn, whereas engineering, architecture and the hard sciences are much more demanding. There's a reason David Brooks was a history major, and I dare say it has very little to do with his desire to give himself marketable job skills.

Meanwhile, what's the lesson for machinists? Perhaps, "Move to a non-union state or at least be prepared to do a lot of business travel to Mexico... no, sorry, we've decided to outsource engineering to India and manufacturing to China." Sure, it's true that there are jobs available for experienced welders and machinists, but how does Brooks imagine that they'll develop the skills to qualify for the jobs presently available given the decline of domestic manufacturing? Brooks complains,
Narayana Kocherlakota of the Minneapolis Federal Reserve Bank calculates that if we had a normal match between the skills workers possess and the skills employers require, then the unemployment rate would be 6.5 percent, not 9.6 percent.
I think it's a truism that if every employer had a candidate perfectly matched to every job opening, unemployment would drop considerably. But the displaced workers who cannot find employment, or have to take significant income cuts to find jobs, are not without job skills - it's that the skills and experience from their prior jobs aren't necessarily relevant to the modern workplace. If you have to train or retrain workers, you incur a significant cost and delay in obtaining new, qualified workers. But I see no reason to believe Brooks' suggestion that the underlying problem is that too many college students are graduating (as did he) with degrees in the humanities.

It's of course interesting to inject a bit of history into Brooks' theory that the industrial revolution emerged, like magic, due to "cultural shifts" that caused "technicians" to take scientific knowledge and put it to practical use. It would seem reasonable to mention that the industrial revolution was spurred in no small part by the development of energy sources sufficient to run large factories and foudries. The underclass Brooks appears to believe did not exist at the time in fact provided the necessary "human capital" for the industrial revolution, often working extremely long hours in hellish conditions. Eventually the labor movement emerged and transformed the workplace, but that's not to say that industries didn't find similar sources of labor to abuse in the colonies and, ultimately, in the sweatshops of the post-colonial developing world. And during that era, Brooks believes that the elite of Britain, the heirs of the landed gentry, were studying applied science and industrial management, as opposed to hiring professionals and managers to run their enterprises?3 Not a banker or a lawyer among them?

One of the big reasons that the great-grandchildren of Britain's "empire builders" didn't follow in their great-grandparents' footsteps is that the British Empire collapsed. Secondary to that, the colonies were no longer available as a captive market that could be forced to buy Britain's exports. (Ah, the good old days, when a nation would go to war to protect the rights and profits of its drug traffickers.) And let's not forget the catastrophically expensive World War I, followed all too quickly by the necessary but also catastrophically expensive World War II. Britain's fall was hastened by the amount of wealth it poured into those wars, along with the damage to its industrial infrastructure resulting from WWII. The U.S. benefited from distance, emerging from the war with its manufacturing infrastructure intact. That advantage started to falter as Germany and Japan rebuilt their industrial infrastructure and emerged as competitors.

No matter how you look at things, Brooks should have addressed the role of outsourcing in the decline of middle class jobs in the industrial fields. Over the last generation we have not only seen the loss of huge numbers of solidly middle class manufacturing jobs, those that remain tend not to pay particularly well or offer a path of career advancement. If there's a shortage of machinists, it can reasonably be said to be the result of parents and students looking at the nation's declining industrial base and questioning whether it makes sense to pursue a job that will pay, what, about $40K in a declining market? For all of Brooks' apparent scorn at choosing service jobs such as teaching or nursing, those jobs pay as well or better and are in growing fields. Meanwhile, the mantra of the past couple of generations has been that the future lies in the domestic service sector, so it's hardly a surprise that many students have internalized that message.

There is a disconnect between the manufacturing industries and U.S. employees. While I have little doubt that a manufacturer would get a stack of résumés applying for entry level assembly line work, even at minimum wage and with a minimal benefits package most employers see the advantages of operating overseas, in nations that have weak wage, employment and environmental laws (or weak enforcement of their laws) over building a plant in the U.S. The outsourced factories typically develop products developed in the west, so some jobs remain, but unless energy prices spike and stay high we can expect that the present situation will continue. That means Brooks' "lower class" will lack entry level job opportunities, his "middle class" will attempt to maintain its lifestyle as real incomes decline, and his elite? The change he describes, in fact, appears to be no change at all.

1. How quickly Brooks leaps from "brightest minds" to "Harvard". There are a lot of bright minds who attend academic institutions that aren't as elite (or expensive) as Harvard, and Bill Gates would have more bright kids explore alternatives to a traditional college education. I suspect we can all think of mediocre minds who number among Harvard's alumni.

I'm also not clear on how having students go into fields such as "law, finance, [and] consulting" represents a "shift away from commercial values".

2. I tried to track down the actual quote and find that, although attributed to Michelle Obama at an early 2008 campaign event in Zanesville, Ohio, no official transcript appears to exist and the unofficial quote is difficult to interpret due to its unfortunate use of ellipses.

3. Brooks cites Correlli Barnett for his point that "the great-great-grandchildren of the empire builders withdrew from commerce, tried to rise above practical knowledge and had more genteel attitudes about how to live." But Barnett has made that same point about the great-grandparents.
Together with what Barnett describes as "the British distaste for a functionally coherent national system" this bias against technology led to the UK's eventual decline from the position of world leader in economics in 1870 to fifteenth place a century later.


  1. Thank you. I read Mr. Brooks odd little column hoping to come away with some understanding only to realize it all supported the status quo. I think you managed to skewer most of it very specifically.

  2. When I read how wonderful the British aristocracy was in its leadership of the nation through the industrial revolution, I can't help but think of Charge of the Light Brigade. When people gain rank or station by virtue of their parents' wealth and historic land holdings, you're going to have problems. I would love to see Brooks empirically support his belief that the very same people were the actual engineers of the industrial revolution as opposed to its financiers and factory owners.

  3. I am an engineer, and my coworkers tell their kids 'Don't be an engineer, there's no future in it.'

    And they are correct. High tech work is great if you never age (ageism is rampant among tech workers), terrific if you don't have to compete with someone from China, India or some other Asian country.

  4. The future of any job: If you don't want to be easily replaced by a lower-cost import, you can either enter a profession that is not amenable to outsourcing or you can develop and maintain a skill set that makes you invaluable as compared to lower-cost alternatives.