Labour market Four decades of discontent Trumps a strong 2015 for US jobs and pay in the race to the White House 9 November 2016 by Torsten Bell Torsten Bell Election post-mortems are dangerous things. Nearly as dangerous as elections themselves for the mental well-being of those involved. The biggest danger follows election results that few predicted – 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 a well sized 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. 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 focuses on the role of economics in giving the world a Trump presidency. 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, with a huge 16 percentage point net move for instance amongst those with incomes under $30,000. This change is a key reason why a Republican, rather than the first woman President, will be in the White House in two months’ time. Just as we dismiss the argument that Trump didn’t connect with lower income voters, we should also dismiss argument that this is due to some short term economic under performance. Indeed the most recent income data saw strong growth for low and middle earners, and 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 the recovery from it. Instead the economic anger has more to do with the experience of the last 40 years of two big trends. First, 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 flat lined 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 drive our attitudes. A version of that trend is visible in a number of developed countries, including in the UK in periods from the early 1990s, but the sheer length and scale of it stands out in the US having lasted since the end of the 1970s. As well as the more regularly discussed problem of stagnant pay – there is a second and in some ways more fundamental trend going on that explains the economic discontent many in the US feel. Not only are people not earning enough, 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, there is a far deeper and worrying labour market trend – falling participation in the US. In America today many 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 has been done in much of Europe, but it is driven by more and more men dropping out of the world of work entirely. Almost as worrying as the trend itself is that much of the debate in the US on falling male participation seems to accept it as some kind of inevitable force of nature – often linked to arguments about technological change. This is simply untrue – indeed in the UK we have seen rising not falling participation, with male activity rates holding up while more women enter the labour market. Rather than technological fatalism the US could do with a good dose of action to address the catastrophe of millions of Americans neither earning a living nor seeing themselves playing a part of the economic success of their nation. This isn’t a marginal point – if the US had the same employment rate as the UK today 11 million more Americans would be in work, equating to the entire population of Georgia. It is these long term trends, not a reaction against what in relative terms is a strong economic performance under President Obama, that are the backdrop to economic discontent visible in the election of Donald Trump. Of course it doesn’t come close to explaining entirely how a man with no political experience has ended up in the White House, but it’s not a bad place to start.