Highlights
A recent essay in The New York Times by American Compass’ Oren Cass repeats the standard progressive playbook of stagnant wages and calls for populist policies to supposedly address it. Cass relies on methodologically flawed analysis to assert the myth that worker pay has stagnated. These methodological flaws have been identified by researchers and have gone uncorrected by Cass in service to his agenda.
In substance and rhetoric, Cass’s “new conservative economics” is very much in the vein of “old progressive economics.” In 2013, President Obama declared income inequality the “defining issue of our time.” This declaration came on the heels of his reelection after defeating Mitt Romney in the 2012 election. The Obama campaign effectively cast Romney as an wealthy elitist, re-running the progressive playbook, exploiting perceptions of income inequality for political gain. The New York Times recently gave Oren Cass of American Compass over 3,000 words to retread these tired arguments in service of a remarkably similar policy agenda.
One of the most reliable arguments from the political left has been and remains that the American economy has broken faith with the American workers for the last several decades and that a suite of progressive policy solutions can restore working peoples’ fair shake. The line of argument begins with the assertion that worker pay has decoupled from economic growth, and that growth has flowed to the near-exclusive benefit of the wealthy. That this period aligns with the Reagan and Bush tenures is hardly a happy coincidence for progressives. A 2014 piece from the leftist Economic Policy Institute is instructive. It walks readers through various observations of lagging worker pay and growing inequality, before advocating for a progressive economic policy agenda anchored by higher minimum wages, more unionization, and higher taxes and regulations on the financial services industry.
Ten years on, a similar argument has been redeployed in service of the same agenda. Only the messenger is different this time. The upshot of Mr. Cass’s essay is that “elites” have failed the American worker, and among the many consequences of this betrayal, is flagging worker pay and heightened inequality. The antidote prescribed in the New York Times is no more original than before: higher minimum wages, more unionization, and higher taxes and regulations on the financial services industry.
At the heart of this argument is a belief that “wages for the typical worker have stagnated for decades.” An infamous chart trafficked by the Economic Policy Institute and American Compass plots stagnant worker compensation against growing productivity. Economic theory holds that over time, worker pay tracks productivity growth. Productivity is output per unit of time. In a “just” economy, this relationship should hold. To cast the economy as unjust – the first stop on the populist train – this linkage must be destroyed. Populist and progressive researchers have, it would seem, done just that.
The only problem is that they’re dead wrong. As previous research by the American Action Forum has shown, the Economic Policy Institute committed a series of measurement errors in analyzing the relationship between productivity and compensation. When correctly measured, the linkage between productivity and compensation closely tracks, as theory predicts.
A decade after Mitt Romney’s defeat, and under the guise of “new conservative economics,” Mr. Cass has rediscovered these measurement errors and committed new ones to advocate for progressive policies. American Compass has asserted that worker pay has only increased 1 percent over the last 50 years. As ably demonstrated in a recent paper by AEI’s Scott Winship, median worker pay has far from stagnated. Properly measured, pay has increased 33 times as fast as Compass claims. To paint such a dismal picture for worker pay, American Compass, statistically speaking, compares apples to orange orangutans.
First, Compass relies on a measure of productivity to a dissimilar group of workers. Second, Compass ignores non-wage compensation, such as health insurance. Third, American Compass fails to account for depreciation in its chosen measure of productivity. And fourth, American compass uses two different measures of inflation that artificially reduces real pay growth relative to productivity.
It clearly takes some work to make it look like American workers have gotten a bad deal from the American economy and need rescuing.
The standard progressive agenda of bemoaning elites and fabricating a depiction of an unjust economy has been repackaged as “new conservative economics.” But despite that shiny new wrapper, the new agenda is the same as the old, and it relies on the same manipulations and policy solutions as ever.