This Labor Day, Better Policy for All American Workers

Dear Capitolisters,

With Labor Day right around the corner, the next few days are bound to feature even more political rhetoric about the “American worker.” I say “even more” here intentionally, as U.S. politicians have hyped “pro-worker” policies since at least the 2016 presidential election cycle. President Trump, for example, had a 2020 “Pledge to America’s Workers” that heralded past executive actions supposedly helping American workers, and President Biden has embraced similar rhetoric and policies (e.g., his “worker centric” trade policy and recent infrastructure, energy, and semiconductor laws that, he says, create jobs for American workers). And it seems like everywhere you go in Washington these days, you find some aspiring politician, bureaucrat, or wonk lamenting the supposed plight of today’s American worker and—of course—promising to fix it.

Just How Bad Do Workers Have It? 

In some important ways, the plight of the typical worker has been oversold—a product, at least in part, of the widespread market pessimism that we discussed just last week. As previous Capitolisms and my other work have detailed, for example, the latest data debunk frequent populist laments about middle class income “stagnation,” ever-increasing “inequality,” the “hollowing out” of the American middle class, and the “two-earner trap.” AEI’s Michael Strain recently updated the income data, finding even bigger gains for real wages between 1990 and 2022: 50, 48, 38, and 39 percent increases at the 10th, 20th, 30th, and 50th (median) percentiles, respectively:

Indeed, a lot of the “job-ism” in Washington these days—at least the stuff that isn’t simply wrong—seems to be stuck in a “post-Great Recession mindset,” ignoring that most economists in 2022 have been far more worried about the labor market being too hot—as indicated by record-setting job openings, the “great resignation,” quickly rising private sector wages, and omnipresent labor “shortages”—than too cold. Even now, after the Fed interest rate hikes, “recession” debates, and stock market troubles, the weak U.S. labor demand of, say, 2011 is nowhere to be found. It’s labor supply that’s the big problem.

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