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10 November 2016updated 30 Jul 2021 5:58am

The invisible economic catastrophe that Donald Trump spotted

Many commentators seem to accept falling male participation in work as inevitable. 

By Torsten Bell

Election post-mortems are dangerous things. They are nearly as dangerous as elections themselves, at least for the mental wellbeing of those involved. The biggest danger follows election results that are unexpected – where immediate post-mortems suddenly involve people seeing with total clarity why the unexpected was always on the cards.

So let’s start with some humility about what we do and don’t know – particularly about an election that took place on the other side of an ocean. The reasons for the surprise election of Donald Trump are clearly complex – stretching from culture to demographics, and to his opponent’s relationship with the American people (everything is relative in life). We make no claim to comprehensive understanding of the relative weights of those issues so soon after the result – though we will look at carrying out such an analysis, just as we did for the equally unexpected Brexit vote back in June.

But what is clear is that much of the debate about the result already underway focuses on the role of economics. From a humble standpoint, what can we say to inform that debate? Many liberals have been taking comfort from the fact that a majority of poorer voters turned out for Clinton, with people being 10 per cent more likely to vote for Trump if their income is above $50,000. We might have lost, but at least this wasn’t a revolt of our core vote goes the argument. 

This is a bad argument. Yes, the rich are always more likely to vote Republican (they teach this in US politics 101 I believe), but what matters is that the move towards Trump and away from the Democrats was entirely amongst middle and low income voters. Amongst those with incomes under $30,000, for example, there was a 16 percentage point net move. Maybe it is of some comfort to Hillary Clinton supporters that this group still turned out a majority for the Democrats. But it can only be a small comfort, because the change within this group is why a Republican, rather than the first woman President, will be in the White House in two months’ time.

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So we should dismiss the argument that Trump’s appeal to low and middle income voters wasn’t central to this election result. In the same way, we should dismiss the view that this is due to some short-term economic underperformance. Indeed, the most recent income data saw strong growth for low and middle-income families. Real wages have been rising steadily in recent years, particularly since the start of 2015 with ultra-low inflation.

The economic challenges faced by middle and lower income America have much deeper routes than the financial crisis and subsequent recovery. Instead, the economic anger has more to do with two big trends over the last 40 years.

First, there is the simple fact that wages for the typical worker have not kept pace with the growth of the economy during that time – and indeed have simply flatlined for large chunks of that period. This is both about the level of pay people receive and about how fairly the boon of economic growth is shared amongst the population – fairness as well as absolute living standards is important in influencing attitudes. A version of that trend is visible in a number of developed countries, including in the UK in periods from the early 1990s. However, the sheer length and scale of it stands out in the US, where it has lasted since the end of the 1970s.

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Second, there is in some ways more fundamental trend going on, which explains the economic discontent many in the US feel. Not only are people not earning enough from work, but not enough of them are in work in first place. While most economies would love an unemployment rate of 4.9 per cent, as the US does, this disguises the fact that participation in the US is falling overall.

In the United States today, more people are neither working nor looking for work than was the case in the past. This partly reflects a failure in the US to bring women into the labour force in the way that much of Europe has done. But it is also driven by more and more men dropping out of the world of work entirely.

More worrying still, is the fact many commentators seem to accept falling male participation as some kind of inevitable force of nature, often linked to arguments about technological change. This is simply untrue. In the UK, we have seen male participation not fall, but rise, even while more women enter the labour market.

Rather than technological fatalism the US could do with a good dose of policy action. The fact that millions of Americans are neither earning a living nor seeing themselves play a part in their nation’s economic success is a catastrophe. If the US had the same employment rate as the UK today 11m more Americans would be in work, equating to the entire population of Georgia. 

It is these long term trends, not a reaction against the economy’s relatively strong recovery under President Obama, which provide the backdrop to economic discontent visible in the election of Donald Trump. They have manifested themselves in 2016, rather than earlier, because of the anti-elite energy galvanised by the financial crisis, and because this year (unlike 2012 or indeed the 2015 UK election), a credibly anti-establishment candidate was on the ballot. Of course, these economic arguments don’t come close to explaining the full reason how a man with no political experience has ended up in the White House, but it’s not a bad place to start.