Konczal and Winship are having an exchange on wages and the well-being of the middle class. Konczal offers skepticism regarding Winship’s suggestion that stagnation is a highly misleading characterization of the post-1973 era, and Winship offers a very persuasive reply.
Though Winship is particularly strong on the role of debt, I’d like to highlight the following:
OK, Mike’s next objection is that the increase in income that I documented is due to households working more hours—in particular, wives. But here’s the thing—part of the reason that male compensation has “stagnated” (in quotes because I don’t believe that’s true) is due to the increase in work among women (increased supply of labor leads to lower wages). We don’t know what the counterfactual would have been had women not increased their hours.
The entry of women into the paid workforce — driven by the outsourcing of household labor, the advent of labor-saving machinery, etc. — has been described as a massive influx of “invisible immigrants.” The fact that male compensation hasn’t decreased is an impressive testament to the power of innovation-driven growth.
This is yet another reminded of the power of confirmation bias and the usefulness of the counterfactual. In his earlier post, Winship wrote,
It is certainly true that wage growth has been slower since 1973 than in the two previous decades. But that isn’t a realistic bar to use. The U.S. was the only major economy left standing after World War II, and there was little foreign competition putting downward pressure on manufacturing wages and jobs. The period between WWII and 1973 was anomalous—it could not have been expected to have lasted.
One common assumption on the left is that Reagan era policies destroyed a mixed economy growth model that was working very well for the middle class. The trouble is that we have no reliable way to benchmark the counterfactual world in which marginal tax rates remained very high, large swathes of the economy remained heavily regulated, and, on the cultural front, women failed to enter the workforce in large numbers. We have good reason to believe that the economic performance would not have matched that of the 1945-1973 era due to the international environment that Winship describes, and indeed that economic performance would likely have been far worse than in our own world. But again, there are no truly conclusive answers in this terrain. We’d better get used to it.