Aug 24, 2020

Jim Tankersley on the State of the Middle Class and How to Boost Economic Growth

Continuing to break down labor force barriers for persons of color, immigrants, and women would help facilitate a middle class revival.
David Beckworth Senior Research Fellow , Jim Tankersley

Hosted by David Beckworth of the Mercatus Center, Macro Musings is a new podcast which pulls back the curtain on the important macroeconomic issues of the past, present, and future.

Jim Tankersley is a tax and economics reporter for the New York Times and has written a new book on the middle class titled, *The Riches of This Land: The Untold, True Story of the American Middle Class.* Jim joins Macro Musings to talk about this book, and the state of the middle class in the US. David and Jim also discuss the history and golden era of the middle class as well as the steps policymakers can take to ensure we return to a path of robust economic growth.

Read the full episode transcript:

Note: While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please reach out to macromusings@mercatus.gmu.edu.

David Beckworth:  Jim, welcome to the show.

Jim Tankersley:  Thank you so much for having me. It's just such a pleasure.

Beckworth:  Well, it's great to have you on. The last time we chatted, Jim, the roles were reversed, right? You were asking me questions-

Tankersley:  Right.

Beckworth:  ... and today I got to throw questions back at you because you are a reporter for The New York Times. Sometimes you call people up, like myself, and ask us for our thoughts on issues. So it's kind of nice to flip the roles here on you, Jim, put you in the hot seat.

Tankersley:  Revenge. It's great.

Beckworth:  Right. Well, I've listened to you preparing for the show on another podcast and some other articles, so I know you're used to this and you can handle this. I've read some of your accounts in the book and elsewhere how you've already been in the hot seat when you interview some people who don't take a liking to your questions. So I'm sure this will be a fun conversation today. I really enjoyed your book. My big takeaway was an optimistic one. Another big takeaway was the pie can grow if we do things right in this country. There's been some challenges, still are some challenges. But I really liked the overall optimistic view the book lays out, if you read it in its entirety. But tell me a little bit about yourself first for our listeners. I know many of our listeners know you, but tell us about what you do and where you are right now.

Tankersley:  Sure. Yeah. I cover tax and economic policy for The Times in Washington. I'm based out of the Washington bureau but, of course, have been like almost everyone else mostly working from home for the last five months. I joined The Times in 2018, no, 2017. The years now all fly by, in 2017. Before that, I had been at several other places in Washington. I've lived in Washington for much longer that I thought I would, since 2007. But I was an economics reporter at The Washington Post and briefly an editor at Vox, but I got my start in full-time economics reporting at National Journal. Basically, being an economics reporter has been my job full-time for about 10 years now.

Beckworth:  Yeah. That's a great segue into my first question surrounding your book. You tell a story in your book about an experience you had as a young person that really catalyzed this energy, this passion to be a reporter and understand the world, and particularly the demise of the middle class. So why don't you start us off by talking about this pivotal experience in your own life that really shaped the journey that you present in the book?

Tankersley:  Yeah. I was born and raised in a little town in western Oregon called McMinnville, which used to be a timber town is, I guess, the best way to put it. It's a wine town now. But when I was growing up in the '80s and '90s, still a large share of my county, Yamhill County, drew its jobs and its income from either directly or indirectly the timber industry. We had family friends who were loggers or forest managers or in one case one of my best friends from childhood, his dad drove a log truck. I watched in the '80s and '90s as the industry just melted down in Oregon.

Tankersley:  I mean there's a lot of reasons for it. There was a national recession. There were changes in forest management practice. There were the federal disputes over the spotted owl and other endangered species. But the result of it was in my high school, which was largely white, there were a lot of guys whose dads made good middle-class livings in or around the timber industry. Those guys weren't really on a college track. They were guys who sort of envisioned a middle-class life for themselves, working with their hands or their backs in a mill or in the woods.

Tankersley: Suddenly, I watched this economic ladder that they had hoped to climb kind of snap out from under them. It really, really shook me. I mean even as a middle schooler and high schooler, I remember thinking, "When's the economy going to work for these guys again? When will there be good jobs that can make use of their talents?" Because I knew I was on a different track. I went off to college. But I knew that these were skilled and talented young guys who were just talented with a different set of skills. So that kind of lit this fuel for me that would animate really my entire reporting career in large stretches. First, when will the economy start working for the guys I went to school with? And then in a much broader sense, when will the economy just start working for millions of American workers who have been left behind by the changes in the economy in recent decades?

Beckworth:  Yeah. So that was your first kind of pivotal moment, one that shaped the direction of your career. But you also mention a second one in your book when you were in Ohio, I believe around 2006. You were working for a publication called The Blade. Tell us about that experience, how that kind of moved you from just pure political coverage to thinking hard about economic questions.

Tankersley:  I moved to Ohio in 2005 to be the lead politics reporter for the main daily newspaper in Toledo, The Toledo Blade. As part of that job, which was wonderful, I got to just roam the state with candidates for statewide office. There was a governor's race and a Senate race in 2006, so I was driving all over the state watching politicians talk to crowds. I think I recount in the book that just stands very vividly in my mind was this day in one of the towns along the Ohio River that had sort of a glorious industrial past that had lost a lot of manufacturing jobs in the '90s and 2000s.

Tankersley:  I was standing on a sunny day inside a crowd waiting for this politician to start speaking. The only real question the people that day that had assembled had was when are you going to bring the good jobs back? We want the good jobs back. What are you going to do for it? As was the case with most of the speeches I heard in that cycle, the promises the politician made just did not add up to me at all, like an actual recipe for restoring economic prosperity in this town. I sort of realized that I was getting tired of writing stories over and over and over about politicians arguing over policies that weren't going to do what they said and watching the results play out again and again and again.

Tankersley:  I think that the people in the crowd were getting really tired of it too. So I set off on a different path and ended up interviewing some really great economists at the Cleveland Fed who had done a big study on where state growth in incomes come from over time and ended up writing a big series with a colleague about what happened to Ohio basically, what had happened to the Ohio economy and what did it really need to revitalize itself. That was the first really big piece of economic writing I did as a politics reporter. It changed the course of my career for the good. It really gave me some tools to start trying to answer these questions that had been nagging at me since I was, again, in school.

I sort of realized that I was getting tired of writing stories over and over and over about politicians arguing over policies that weren't going to do what they said and watching the results play out again and again and again. I think that the people in the crowd were getting really tired of it too.

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Beckworth:  Yeah. Very interesting stories. Your book is filled with them, so I encourage the listeners to go and get their own copy, but lots of interesting stories, your own stories, many other individuals you talk about in the book. We'll maybe talk about some of them as we go through our conversation today. But that was neat to see your experience so vividly tied to this book. I don't think I've had anyone else on the show who's had a book and their own personal life is so closely intertwined with the overarching question being considered in the book.

Tankersley:  Yeah. It was a deliberate choice. My colleague, Binyamin Appelbaum, who now works as an editorial writer for The Times called it a GoPro sort of narrative style.

Beckworth:  That's nice.

Tankersley:  Yeah, no. It's a great way of putting it. But I think the reason why I chose to do it is because I feel like so much of this book, to me in my mind, feels like a detective story, like I was trying to figure out the answer to a really big mystery over our economy. I felt like you needed to understand how those questions built over time and how I went about trying to find the answer. I mean I hope it's effective. I do really believe that human storytelling helps people understand complicated economic policy matters or the regressions from a research paper or whatever.

Tankersley:  I think the book is filled with economic data and with studies, but I didn't think it was going to really ... I wasn't going to be able to make the case that I want to make to people in this book about who the middle class is and where it comes from and what it needs without sort of showing it to you in the flesh, so to speak. I think that included having to show my journey, which includes some ... I mean I'm certainly not a perfect character in the book. In fact, there's a couple of times when I kind of identify myself as a villain. So I think showing your own faults and your own journey to understanding can perhaps help other people in their own journey to understanding.

Beckworth:  Yeah. Great stories and hopefully we'll get to some of the other individuals in the book as well. All right. Let's step back and maybe define what is the middle class? When people talk about it, I mean you hear people lump all kinds of different groups into it. I've seen very wealthy people say they're in the middle class, down to poor people. So help us think in a careful way, what is the middle class?

What is the Middle Class?

Tankersley:  This was a central question I knew I'd have to deal with in the book that I have been writing about in a bunch of different ways for a long time. It's true that if you look at the polling, basically everyone thinks they're middle class or working class in the United States. Almost no one thinks they're rich or that they're poor. You can define it and I have to at some points in the book use some income-based measures just to show progress or not progress. But to me, what I ended up using to define it was a board game, which is going to sound trite, but I promise has some reasoning behind it.

Tankersley:  When I was a kid we used to play this game called the Game of Life, which maybe a lot of your listeners played, where you spin and you go around the board and you basically accrue economic security. That's the point of the game. You get a job and an income and a house and a family and you save for retirement. The game ends and the person who retires with the most money wins. But the point is, along the board you're accruing this stability. I think actually that's a really nice proxy for the way Americans over a long stretch of our history have thought about what it means to be middle class.

Tankersley:  It means having the security to own a home and a car and be able to send your kids to school and to retire and to have healthcare, take care of yourself, and to give opportunity to your children to have an even better life than you gave them. I think that is the easiest way to understand what people really mean when they're saying middle class. I think it is what so many Americans aspire to. So that's the definition I end up using in the book.

Having the security to own a home and a car and be able to send your kids to school and to retire and to have healthcare, take care of yourself, and to give opportunity to your children to have an even better life than you gave them... I think that is the easiest way to understand what people really mean when they're saying middle class.

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Beckworth:  All right. Who is the middle class? You've given us a definition, anyone who gets to play the Game of Life and comes out a winner in that game. Yes, I played a lot too growing up. But who would you lump into that, I mean what groups of people?

Tankersley:  We've thought of the middle class historically in different ways. I think right now I would say that it's a lot of different kinds of workers. Obviously manufacturing in the great American mythology has been really associated with that and for good reason. Manufacturing jobs have historically in the United States paid a wage premium. But today, it obviously is largely service workers. The country, one in 10 private sector jobs are manufacturing. So the middle class includes all sorts of different types of people. It varies by where you live who can afford that or not.

Tankersley:  It's much harder to be middle class in Palo Alto where I went to college than it is to be in McMinnville where I grew up. But it is an interesting and diverse group of workers and that includes ... The other thing that I talk a lot about in the book is that it's not just white Americans. It is a group that includes Black Americans and Hispanic Americans and Asian Americans and immigrants and entrepreneurs. There's no one easy identified route into it right now.

Tankersley:  But it is definitely a function of how the economy is delivering income gains and wealth-building for people over time, that when the economy delivers a lot of that for a long period, many more people are able to climb into the middle class and afford that stability than at times where the labor market is pretty loose and income gains are not outpacing inflation and it's hard to build wealth. So that is how I think about the middle class today.

Beckworth:  Well, let's talk about a particular period, and this might help flesh out these groups. I believe you call it the Golden Era for the middle class, 1950s, next 30 years or so. During this period, there's a lot of change happening, a lot of new groups coming into the middle class, women, minorities, immigrants as well. You tell, I think, a very positive story here in that the added participants in the labor market actually made it better off for everyone. Everyone gained from them being a part of the labor force. But maybe talk us through the big changes that happened, women and immigrants. What's going on during this Golden Era?

The Golden Era of the Middle Class

Tankersley:  Yeah. This is the core argument of the book. The argument of the book is we can experience another boom of the American middle class, like we saw in the decades after World War II, because we continue to have the raw materials in our economy that created the first one. The raw materials, I argue based on a lot of economic data and research, is that the breaking down of barriers that had held back women and black men and immigrants and basically anyone who was not a white man from ascending the ladder and hitting the highest most skilled and highest-paying occupations in the economy.

The argument of the book is we can experience another boom of the American middle class, like we saw in the decades after World War II, because we continue to have the raw materials in our economy that created the first one. The raw materials, I argue based on a lot of economic data and research, is that the breaking down of barriers that had held back women and black men and immigrants and basically anyone who was not a white man from ascending the ladder and hitting the highest most skilled and highest-paying occupations in the economy.

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Tankersley:  That bursting of barriers and opening of opportunity created the growth and tight labor markets that produced an economy that pulled millions of people into the middle class. So those workers and their opportunity, they are the key. It all starts with World War II. There had been slight progress in the United States from basically the founding until World War II for groups of workers who were not white men. But for the most part, the very best jobs were still reserved for white men and there wasn't much ability for other workers to compete for it. But in the war, the war effort demanded that, for example, women in particular be conscripted into running factories and doing all these other things.

Tankersley:  They proved themselves to be incredible, productive workers. After the war, many of them left the labor force, but not all of them, and then there was this resurgence. So from 1950 to 1980, 27 million women entered the workforce, which is obviously ... It's like 150% increase, just a huge number. Meanwhile, in the campaigns for civil rights, women of all races and black men and others won the right to be doctors, to be lawyers, to do jobs that they had essentially been shut out of before. So those two forces, the flow of more women into the workforce and then the ability of women and non-white men to do higher-skilled work and more valuable work for the economy and to be paid for it accordingly, they created this boom.

Tankersley:  That's not a story that we learned growing up in my mostly white high school. We learned about civil rights mostly as a social justice story. But I think it was an incredibly important economic period in the United States. The bad news for the years after that is that the work of it was not finished. Equality of opportunity was not achieved. But the good news for us now is that we could set off another boom of ... I mean we're really talking about productivity here. We could set off another boom of productivity by reducing discrimination and allowing talented Americans to do what they're best at.

Beckworth:  Yeah. There's an interesting statistic you put in the book that said two-fifths of per capita GDP growth, so per person economic growth in the US, since the 1960s came from tapping these additional people, bringing them into the labor force, women, minorities, immigrants. That's pretty astounding. What's the story there? Kind of map it out for us. How did adding all these new people increase per capita, per person output? Again, that speaks to productivity. What's the story behind it?

Economic Growth: The Labor Force Story

Tankersley:  It's from a study from two economists at Stanford and two at Chicago. What they looked at was allocation of talent. That's the very dry title of the paper, *Allocation of Talent: Talent in US Economic Growth.* What they start with is what I think is a basically undeniable position, which is in an economy with a distribution of people along gender and racial lines, if you have one group massively disproportionately represented in high-skill occupations, that probably reflects an inefficient distribution of workers in jobs, which is a long and fancy way of saying there was a lot of discrimination.

Tankersley:  It was putting people who should have been, who were talented enough to be rocket scientists, were sweeping the floors of the lab. Now, there's certainly a ton of value in being a custodial worker in a research lab. But from a productivity standpoint, you in an economy want the people who would be rocket scientists to be actually doing rocket science. If you are discriminating against them, you are inefficiently out gaining talent.

Tankersley:  So they studied the flow of what happened when these occupational barriers started to fall and women, to the larger degree, but also black men when they broke down those barriers and started to achieve access to doing, again, what they were best at, to maximize their talents both from an educational standpoint, to pursue equal education opportunities and then from an actual doing high-skilled jobs standpoint, the rewards were enormous. Again, think about it. If you have a baseball team where every single person who is pitching is a direct descendant of the coach, then that's probably not ... And then the rest of the neighborhood kids are kind of left to do everything else.

Tankersley:  Well, you're probably not putting your best pitchers on the mound every day. But again, we're still not to perfect distribution, but civil rights made it a lot better. It made the team better. And then this is the last part, which I think is the most hopeful part of the whole story is the better allocation of talent just made the economy work better. That productivity increase created sustained economic growth at times of sustained low unemployment which, as you know, is the recipe for sustained income gains. So those income gains then pulled everybody up, even white guys who were the ones who had a monopoly on certain jobs. In the aggregate, they did great in the postwar era. So I think it's a case where making sure people are in the right positions truly makes the entire ... It grows the pie and makes the entire economy work better.

The better allocation of talent just made the economy work better. That productivity increase created sustained economic growth at times of sustained low unemployment which, as you know, is the recipe for sustained income gains. So those income gains then pulled everybody up.

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Beckworth:  Now, that was one of the great points of this book, that the growth after 1950 wasn't just each person that's added gets a similar share. It's every person's share is getting larger. Per person pay you take home is getting bigger and one of the reasons is because you are introducing all these people. The way I like to think about it, Jim, is you're going to need so many people, maybe a million people for every Einstein to be born. Distribution of talent, there's only going to be so many Einsteins. You got to have as many people in that pool to get these talented people to come out.

Beckworth:  We were locking out a large number of them, women. I mean there's all these great stories about the women who did the math for the space shuttle, but it was limited in opportunity. Also, the civil rights movement opened up a big portion of talented people. So to me, it's a compelling story that by adding all these people in, you're adding variety. You're adding idea generation. You're adding different talents that enhance not just the level of growth, but the per person amount of growth, and that's productivity. That was a very interesting story. I think one, like you said, one we haven't heard a lot about.

Tankersley:  Well, it's because I think, David, we've been really trapped in this country for a while now in this cycle of arguing over distribution of the pie or the idea that if we just make the pie bigger it'll lift everybody up. But I think I'm trying to square the circle by saying there are particular conditions in which the pie grows faster and everybody's share gets bigger. We know, at least from history, what helped to create those the last time. It doesn't fit neatly on partisan lines. It's certainly not a full supply-side story.

Tankersley:  I've certainly taken some real flak from people on the left who say this story is not fully accounting for what they want to do with redistribution and in particular with the rise of inequality at the very, very top. But I think the argument I'm making is that a more efficient allocation of talent will actually produce more efficient both distribution of resources and a more efficient growth of the total amount of resources which, yeah, like you were you saying, is a really optimistic way of looking at it. But I'm, despite being a horribly cynical reporter, I am an optimistic person. I do believe that it's possible.

Beckworth:  Yeah. I mean I think another example of this today would be look at the immigrants. I mean immigrants bring in a lot of new ideas, fresh perspectives. Look at the industries that we really see thriving in the US. It's like Silicon Valley, lots of immigrants there. Look at the executives, the engineers out there. I mean these foreigners are bringing all their human capital, all their creativity to the US. We should be opening with welcome arms, immigrants. Even lower-educated immigrants, they themselves are contributors.

Beckworth:  There's been a lot of discussion around this since the last election. I think you mentioned this in your book, but the literature shows even those who don't come in with a lot of education, I mean second generation, they still contribute on balance to society. If nothing else, they're adding to the pool of potential people who will create the next Einstein. I mean Einstein himself was an immigrant. So I think this message is particularly poignant right now when we've had some pushback on immigration in the US.

Tankersley:  Yeah. Obviously, I think that immigration is the flashpoint and it's the thing of all these where, again, I have certainly heard from a lot of people who have read excerpts of the book who have said, "You are totally wrong about immigrants. What went right for the economy in the postwar era is we didn't have a lot of immigrants." First off, there's actually pretty good research that says that that probably held us back. If we'd had even more immigration, we could have had an even bigger boom in that time. But second off, I mean I think we had a huge surge of women into the workforce, which is more workers competing for jobs. What it did was create more jobs. I mean, there is not a fixed amount of employment in the United States.

Beckworth:  Exactly.

Tankersley:  To be fair, I mean the total amount of employment is more… it's not just a function of how many workers there are. It also is a function of where capital is deployed and how much automation there is. These are complicated things. But there's a ton of really good research on the links between immigrants and entrepreneurship and innovation. It all points towards the idea that areas of America that have more, in particular, high-skilled but like you were saying, even just immigrants, period, do better in the long run at least, but often in the short run.

But there's a ton of really good research on the links between immigrants and entrepreneurship and innovation. It all points towards the idea that areas of America that have more, in particular, high-skilled but...even just immigrants, period, do better in the long run at least, but often in the short run.

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Tankersley:  It is a difficult thing to talk about politically because I think it's tied into racial and cultural questions for a lot of people. I've certainly had conversations and written stories about workers who have lost a particular job to an immigrant. But I think that people lose jobs for lots of reasons, to computers, to outsourcing, to immigrants. But the question is what is the likelihood of the economy to create an even better job for you after that? I think the research is super clear that we have a much better chance of that with higher levels of immigration than the people who want to restrict it would allow.

Beckworth:  Yeah. I think much of the angst about immigration will be tied to what we're going to talk about next, some of the challenges in the middle class. But before we go on, just one last point. If you look at fertility rates in the United States, they're going down, down, down. Either we got to have more babies, Jim, you and I got to have bigger families or we need to have more immigrants if we want to continue to see this economy grow, fund other programs that we like. They are vital to our future, not just idea generation, but physical bodies here producing things for us in the future.

Tankersley:  Yeah. They're sources of workforce. Look at the workforce challenges of a country like Japan. You look at the difference for the United States, in part, over the long run is going to be immigration. We don't have those fertility rates to keep up with the trends in GDP growth that I think we all want to see. I think I mentioned in the book that it's essentially impossible to achieve the growth rates that Donald Trump promised over the long-term without just a lot more workers. The only real way you could get them is to have more immigrants.

Tankersley:  Yeah. I think it's a really important point. Immigrants, they generate economic activity alongside innovation and entrepreneurship. So these are all good reasons for it. I mean, again, I don't want to downplay the cultural anxieties that a lot of people I've talked to feel about it. But I think that is kind of wrapped up in the economic anxieties also of the economy and in the stories that people have been told. I think it has been very, very easy throughout American history for powerful, let's be honest, powerful white men to tell stories to workers to say, "Hey, you are in competition, white workers, with black workers or immigrant workers or women. Your success depends on them being oppressed or shut out entirely." The fundamental argument of the book is that that is not true. That's a lie that's been sold to the working class and that, in fact, workers rise and fall together and that they need each other.

Beckworth:  Yeah. We had Noah Smith on the show a while back and we talked about different waves of anti-immigration. This is nothing really new. But it comes and goes in waves. I do think it's closely tied to economic outcomes. You're definitely more sensitive to these issues if you have lost your job. So it's important we get the economy right and I think some of these issues take care of themselves, at least to some degree. Well, let's move on and talk about the state of the middle class. You mentioned the Golden Era. Now, would you put some dates on the Golden Era. I said 1960s. Where would you say that the Golden Era ended, approximately what time?

I think it has been very, very easy throughout American history for powerful, let's be honest, powerful white men to tell stories to workers to say, "Hey, you are in competition, white workers, with black workers or immigrant workers or women. Your success depends on them being oppressed or shut out entirely." The fundamental argument of the book is that that is not true. That's a lie that's been sold to the working class and that, in fact, workers rise and fall together and that they need each other.

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The State of the Middle Class

Tankersley:  I think you can't put a total endpoint on it. I think I would probably say late '70s, certainly over by the '80s. That's consistent with what we sort of see from worker wage growth and income growth. The '80s were I mean obviously the stagflation parts of the late '70s and then in the '80s and the recessions. I mean that's when you really start to see essentially the composition of the economy start to change out from under workers, which is a part of this story, for sure, and then also the outcomes for workers really start to change.

Beckworth:  Yeah. There's a big debate over the statistics on this. Maybe you could summarize it for us and tell us why you think that the middle class has been suffering. Where do you come down on the evidence? Because I know people will take two sides of this. But I will just say this upfront, the fact that Donald Trump was elected and that Bernie Sanders was popular speaks to some things going on out there, right?

Tankersley:  Yeah.

Beckworth:  That by itself is kind of prima facie evidence that there's angst. They touched a nerve. But what is the evidence that you looked at, that economists looked at that leads you to believe that something has in fact happened?

Tankersley:  I'm going to try to be as fair as I can or even as generous as I can to some very smart economists, like Mike Strain or my friend Scott Winship, and their arguments, which is if you look at adjusting for household size and adjusting for using a different inflation adjustment than the CPI and a few other things, you can make a case that American workers' incomes have gone up since 1979. Also, you can cut the numbers entirely the other direction and make a case that basically from 1979 to about 2016 we saw no income growth at all for a typical American worker, again, just based on the adjustments you make.

Tankersley:  I mean I have written a lot about these and I am sympathetic to inflation adjustments. I also would note that for most of that time, and I believe I have not rerun this stat in the last six months, but I believe it's essentially all a function ... Any income gains that have come for American households since 1980 have been a function of working more hours. When you adjust for that, they all go away, even no matter what inflation adjustment you use. So that's one thing.

Tankersley:  The second thing is, and this is where I really think it speaks to your Bernie Sanders, Donald Trump appeal, the American economy by no one's definition, not even the most optimistic economist about the middle class, by no one's definition has the American economy delivered to the expectations of American workers. I think the easiest way to look at that is to compare it to the late '90s. The late '90s are the last time we have had a sustained burst of, "Oh wow. That's really great income growth for the middle class." In the 21st century, we have not had that.

Tankersley:  Even the gains that Donald Trump loves to brag about I mean are essentially replacement level for a 21st century president who had not just inherited a recession. They are largely indistinguishable from Bush's second term and Obama's second term. If you compare the actual income gains that American workers had from 2000 to 2018 and then you plot that against, well, what would have happened if the median income had been growing just at the same rate it was growing in the back half of the '90s, you end up 50% lower than that counterfactual.

Tankersley:  If we had just kept having the good years of the late '90s, everybody would be earning 50% more. I think that makes a really compelling case that the median ... We'd have a lot more people in the middle class. That's just a lot more money and wealth. It's a much bigger pie for everybody. I think that instead what you have is people feeling frustrated, people feeling like the economy hasn't met their expectations. And then in particular, after the 2008 financial crisis, you had this particular thing that happened with working-class white voters, just their economic optimism cratered.

Tankersley:  That wasn't actually true of working-class Latino or black voters. They maintained their optimism even though they were battered by the recession also. But working-class white voters essentially I did a bunch of interviews and have a lot of polling on this, they essentially had felt like they had achieved their American dream, a house on the lake or a pickup in the driveway. They felt like it got taken from them and it just crushed them, economically, optimistically. I think that's a huge part of the political change that we've seen since 2008 and the rise of populism on the left and the right and, particularly, the rise of Trump.

Beckworth:  Yeah. A couple of thoughts on that. First, right before this pandemic hit us, we were getting close to full employment. We were getting close to maybe something that if it had been allowed to run, maybe we could have replicated the late '90s. It would have been interesting to have seen at least what would have happened as more and more people got pulled into the labor force. For example, I know you guys ran this in The New York Times, the story about all the people coming off of disability rolls as the economy continued to plug on.

Beckworth:  The recovery was anemic. I was very disappointed. But the fact is it lasted so long that people on the margins of society were being pulled in. It just would have been neat to have seen us finish this race and seeing what a difference that could have made. The other thing, going to this polling data, I had a guest on here and maybe you've chatted with him yourself. But Jeffry Frieden from Harvard, political scientist, he had a lot of studies. But one that really resonated with me is he and some coauthors, they looked at counties I believe that were in the 1970s disproportionately heavy in manufacturing jobs as a percent of the economy.

Beckworth:  They looked at that and they saw, number one, that those counties saw the biggest decline in manufacturing since then. Secondly, those particular counties that lost all those manufacturing jobs were more likely to vote for Trump. Look at the change from Romney to Trump. They see this explains a lot of it. This isn't the only story. There's many other things going on here. But people losing their jobs over a long, long period of time, not just the ... The Great Recession was definitely consequential, as you point out. It was kind of like got your wind knocked out of you, for sure.

Beckworth:  There's these communities, let's put it that way, that have been hammered for a long time and it's more than just globalization. Globalization's part of it, but it goes back to the '70s. You mentioned in your book, it goes back to the '50s really. Automation's been taking a piece of their livelihood away. You have several great stories in your book. Maybe we can turn to some of the stories and then maybe use those to flesh out what explains this. Why is it that the middle class hasn't kept up with expectation, even if some measures of real income have grown? Yeah, we'd rather be alive today than in the 1970s. But expectations haven't been met. So Jim, why don't we turn to Ed Green? He's one of the individuals whose lives you portray in this book. Tell us how he kind of is an individual who can flesh out these statistics for us with his own experience.

Ed Green and the Real Income Expectations Story

Tankersley:  Ed Green is one of the most extraordinary people I've ever met in my career as a reporter or really in my life and just one of the kindest also, which makes him a great character for a book. I met him in 2013 on the last day of the Minor League Baseball season in Winston-Salem, North Carolina. He was the lead custodian basically for the single A baseball team there, the Winston-Salem Dash. It was a day he was being honored as Employee of the Year for the team. It was his second job of the day. He had gotten up that day like he did every morning and gone and laid tar on the highway for the state of North Carolina.

Tankersley:  And then at the end of the day, he'd come and he'd sweep and mop and empty trash at the ballpark. I wrote about him for The Washington Post where I was working at the time, and I've just stayed in touch with him then. I've met his family and learned a lot more about their history. What made Ed extraordinary at the time was that he had to leave a middle-class job in New York City where he worked, to move back to his mother's childhood home in Winston-Salem to care for her while she was dying of cancer. And then he went looking for a middle-class job in western North Carolina at a time when so many great middle-class jobs were vanishing right in that region, textile jobs, in particular, part of the China shock.

Tankersley:  So there just weren't the jobs that paid available to him, he didn't have a college degree, that were available in New York. So he wanted a middle-class life for his family and in particular for his children who he wanted to be able to go to college. He just started working two jobs and that is just a thing that he has done. That in many ways, back to that statistic I was telling you about additional hours work explaining income gains, Ed illustrated that really nicely. He was working more just to keep up with where he had been and where the economy might have put him if the good jobs had stuck around.

Tankersley:  I learned over time, Ed's family is kind of a perfect example of the rise of the black middle class in Queens. His mother was a daughter of people who worked in RJ Reynolds factory in Winston-Salem. She moved north, married a man also named Ed Green, and they raised their family in Queens. They always worked really hard, but they had middle-class jobs that would not have been available to black Americans even a decade or two before this happened. Ed was born in 1960. All of a sudden, here he is living that dream life growing up, emblematic of the rise of the American middle class.

Tankersley:  And then he's also there when that middle class kind of turns against workers like him. So just over time, talking to him now, he has cut back to a job in and a half because he's getting older and his wife had health problems that he had to help with. But he's still doing that. He put his kids through college and he hopes to someday himself when he retires, go back and finish college on his own. But he's just this representative character of the way that the American economy, as I put in the book, kind of paraphrasing what a lot of politicians say. Ed is one of those workers who works hard and plays by the rules, but the rules of the economy changed and left workers like him behind.

He's just this representative character of the way that the American economy, as I put in the book, kind of paraphrasing what a lot of politicians say. Ed is one of those workers who works hard and plays by the rules, but the rules of the economy changed and left workers like him behind.

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Beckworth:  Yeah. So he was a fascinating character. He used to drive buses in New York, is that right?

Tankersley:  Yeah.

Beckworth:  So that was a nice middle-class job. If he could have stayed there, in fact, and maybe finished out that way, but he had to move. Down in the South, he had to take multiple jobs. You mentioned a whole laundry list of them. That poor guy probably didn't sleep much doing all that work, but he was a great father, great supporter. But he had a hard time staying in the middle class. What's the story behind this? He's one example. What factors do you attribute to this change?

Tankersley:  Well, we've seen a lot of change in the American economy over time. I think the easiest way to think of it is is that we have had displacement of good jobs. That's undeniable. North Carolina used to have a lot of really good-paying manufacturing jobs that it doesn't have anymore. They've been automated or outsourced. That's not actually that new in American history. There's been big stretches of mass job destruction in our economy over the centuries. What's different this time is that the economy has not sprung up new better-paying jobs to replace them.

Tankersley:  Think about the transition from farm to factory when agricultural technology meant that we needed many fewer workers to work in the fields. A lot of those workers ended up in factory jobs, which while really difficult and often very dangerous, paid actually better than the farming jobs. We just haven't seen that this time around. It's the new jobs that haven't appeared that is so much the, I think, driver of the anxieties of American workers now. I think there's a lot of reasons for that. It's also true that there's a real difference of being tossed out of a job in an economy where the labor market is tight and incomes are rising.

Tankersley:  You're probably going to end up in something that at least pays you pretty well. Whereas, for a lot of the last few decades, we have not experienced that tightness. We have not been at full employment. So workers like Ed end up sweeping up concourses or working security or working behind the counter at a liquor store, which is what he does now as his second job, and not getting paid nearly as much as they would have in ... He had expected to find a manufacturing job in North Carolina and they just weren't there anymore. So I think, again, this is back to the productivity story.

Tankersley:  But I think a big part of what America is missing right now are the creation of new better-paying jobs from entrepreneurs who figure out ways to put the vast untapped skills of our workforce to use along with, of course, better skill attainment. I certainly think that David Autor's research on skills is important and it's an important part of the book. But this all intersects also with race and gender in America. We see that even if Ed's children have college degrees, they are still not earning what a typical white young person with a college degree would earn and that, I think, reflects these continued systemic impediments in the economy.

Structural Changes in Employment

Beckworth:  Yeah. Let me throw two comments at you and let you respond. Let me put it this way. How do I view what's going on? I like what you mentioned earlier and it's in your book that in some ways what we've seen is not all that different than moving in the late 1800s from an agricultural-based economy to an industrial one. You're right. They end up with better jobs, higher-paying jobs, migration from the countryside to the cities. But there was also a lot of unrest during that time. William Jennings Bryan, he was a famous politician during that time who fought for the farmers, for the workers on the land.

Beckworth:  It was some political upheaval. There's always going to be painful transition. I think you can tell an important structural story that's going on right now that probably would go on no matter what politicians did. Recently had Scott Lincicome on the show and he has a paper looking at the China shock. There's a lot of follow-up research that's been done. But my takeaway, if I could summarize his review of all the work on this China shock, is that this probably would have happened at some point. The transitions were already going on, the automation.

Beckworth:  The China shock probably just hastened probably an inevitable trend that was already there. So the question becomes why have some communities handled it better than others? But first, let me go back to the structural question. You mentioned David Autor's work. I find it really fascinating. He talked about the hollowing out of the middle class. All the jobs that seems to be going on are that high end, the creative class, the knowledge workers and the low end where it's easy to get a job, but it's also low pay. You take David Autor's work about the hollowing out and match it with Enrico Mariotto's *The New Economic Geography,* all these best-paying jobs are in the city and leaves people behind. I mean anything you want to add to that? I mean it seems like there's a structural change going on that kind of would have happened anyway or am I being too-

Tankersley:  No. No, no, no, no. In fact, I would say that one reason why, to your first question, one reason why some communities have not adapted well to this is because they keep being told by the people who run their states or who are running for federal office that, no, they can restore an old economy. I just don't see any evidence of that happening. I think it is true we could create many more manufacturing jobs in the United States. I think that that would be a wonderful thing if we did. But they will not be the same jobs that went away. They'll require different things.

Tankersley:  We could do more to help workers succeed and thrive in those jobs. But I think so long as we have a nostalgic trap of thinking we're going to just wait around for the really good jobs to come swing back around to us, boy, I think that that holds entire communities back and I write about one of them in the book, Downey, California with its experience kind of waiting and waiting and waiting for something to come along to replace the space manufacturing jobs that they had had.

But I think so long as we have a nostalgic trap of thinking we're going to just wait around for the really good jobs to come swing back around to us, I think that that holds entire communities back.

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Tankersley:  But I think to the broader point, it's true that these are trends that are happening over time toward polarization. The way the economy has worked right now is to sort of push some people up and some people down. I think there are, again, real disparities in who gets pushed up and who gets pushed down. But I also think there's just a really big opportunity in the skills that are being lost from what I call devalued workers, people who used to be able to put their skills to use producing $20 an hour of value and now produce eight. I think that there has to be a way to tap into their skills for really productive use.

Tankersley:  Actually I think this is a failure of American innovation. We have not really rewarded people who want to think about, well, what's a great way to use middle-skilled labor and can we create great value for the country out of it and solve big human problems? I am hopeful that we can if we get capital in the hands of the right people.

Beckworth:  Yeah, absolutely. When I think about these challenges, for me, again, on one hand, some of these changes are inevitable. Maybe there was some bad policy choices along the way that exacerbated them. But the key in a capitalistic society is to make the economy resilient to these changes. We want to make, at least in my view, labor markets as resilient as possible so that if someone does lose their job in one industry they can go find one in another one. They can move quickly.

Beckworth:  Part of the big takeaway from the David Autor's work on the China shock is not so much that there was a shock, but that these certain communities could not respond to them effectively. They were stuck, like you said, in time. Capitalism's dynamic. You either get left behind or you move forward with it. Some communities did. You look at some of the hot issues right now. I know you've covered them with your work. But to me, there are some big issues that are, I think, playing a role. I'm curious to hear what you think in terms of their importance.

Beckworth:  But there's been a decline in interstate labor mobility, so people aren't moving as much. You look at things such as zoning laws and NIMBYism. People don't want to offer added housing supply in the most productive cities where people could find work, occupational licensing, non-compete clauses, a lot of the state and local restrictions that make it hard for people to pack up and move from one place where they don't have a job to another that they do. I wonder, in your view, how consequential are policies like that? Could they have made a big difference in this challenge we face?

The Government’s Role: Migration and Employment

Tankersley:  I think they're very consequential. Actually, I think you may have ticked through many of the ones that I mentioned in the book as obvious. I think you can come at this problem from a variety of ways. There are certainly ways in which I think more government intervention might be helpful here, but I think there are also ways in which pulling back on government intervention would be a key to letting people thrive and flourish. You just mentioned a bunch of them. I think occupational licensing and zoning laws, I think we have to make it easier and more affordable for people to live in the places where productivity seems clustered right now.

There are certainly ways in which I think more government intervention might be helpful here, but I think there are also ways in which pulling back on government intervention would be a key to letting people thrive and flourish.

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Tankersley:  Now, I also will say I think that it would be a mistake to write off the areas where there are not as many good jobs, where they feel like they're moving backwards economically because it's just ... What we're seeing is people have lots of good reasons that are not economic that also tie them to places. I mean some of them are sort of shadow economic. If you're living near your parents, that's a positive for most people for lots of reasons, but one reason is that they might watch your kids during the day for free while you, if you've got very young kids, while you go to work. That's a huge economic benefit and a disincentive for you to move elsewhere.

Tankersley:  But it's also just a huge benefit to be able to have lunch every week with the guys you ran cross country with or whatever. I think that that is a thing that in all of our sort of wonk debates in Washington, we sort of miss, that there are good reasons why people stay attached to the small towns, in particular, that they grew up in. So I think we should have more efforts to do smart ... There's so many bad ways in which government has tried to do place-based policies. Most of it is just sort of wasting money trying to attract individual companies.

Tankersley:  But I think there is a good emerging, interesting vein of research on how to actually revitalize local economies. Tim Bartik has very interesting stuff. Back to one of the things you were talking about earlier, I think there's a real role for immigrants here. We have seen highly-skilled immigrants revitalize communities that were struggling. That is a challenge for those communities culturally sometimes, but not always. If you're not the sort of place that young college-educated, native-born Americans are naturally drawn to moving, which is something I hear all the time from local leaders, "Our kids go off to college and they don't come back and no other kids move here." Well, there are people who are very highly-educated and entrepreneurial and might want to live in your area. I think that is a real ... It's a thing that I lay out in the book as a real possibility for how to revitalize those places.

Beckworth:  Yeah. Lots of interesting proposals about moving forward. One other thing, Jim, I was thinking about as I read your book. It took me back to Tyler Cowen's book, *The Complacent Class.* I had him on the podcast. Full disclosure, he's also my boss. But his book, *The Complacent Class* is subtitled *The Self-Defeating Quest for the American Dream.* One of the takeaways, at least what I got out of it, is that as we've become more fluent in pursuing the American dream, we've also become more risk-averse in the United States.

Beckworth:  For example, could we ever build the Hoover Dam again? Well, maybe, but it'd take a lot, lot longer because of labor, environmental regulations, because we're just very, very cautious. We don't want anyone to get hurt, destroy the environment. So we're not as bold and as ambitious. I mean by contrast, look at China. They built that hospital for the COVID cases in a couple weeks, this massive complex. We could never probably do that in the United States. I wonder if you think to any extent the fact that we have maybe grown at least somewhat risk-averse ... I mean there's definitely pockets of entrepreneurialism in Silicon Valley, the drillers up in North Dakota. But I sense at least there's a growing level of risk-aversion that might be holding us back from trying something bold and new. I wonder if you have any thoughts on that?

The Role of Risk in Economic Growth

Tankersley:  I like Tyler a lot. So I'm going to only lightly and politely disagree with him on this. I do think there is a real risk-aversion in parts of the American economy, particularly when it comes to who gets capital. I mean I just think the fact that 84% of American venture capital is distributed to male-only founding teams in 2018. That’s path dependence. That does not reflect-

Beckworth:  Interesting.

Tankersley:  I think that's risk-aversion. We're going to go with guys who look like the guy who have pitched on us. Juul got a huge amount of venture capital because it looked like something that people knew had made money in the past. I think that's a part of risk-aversion we don't think or talk about enough. I will say, on the flip side though, because I am feeling optimistic in spite of how horrible everything is right now, I have been impressed by some really entrepreneurial shifts in the economy that have happened over the last five months.

Tankersley:  There are entire small businesses in my neighborhood, and I'm sure in yours, that have remade themselves in how they deliver goods and services to their customers through the necessity of social distancing. I find that to be really encouraging. They are struggling to hang on, but they have found really innovative ways. It's sometimes, by the way, coupled with deregulation. It turns out that we're not killing society by letting restaurants deliver hard alcohol to you, which is something that has been prohibited by laws in a lot of places but now is a way in which restaurants can keep making some money and do it in some innovative new ways.

Tankersley:  So I think there is innovation to be set off in America and I am a little more optimistic, I think, than Tyler. I've read and like *The Great Stagnation,* but I think that there is a real possibility that what we see as stagnation is, in fact, the rotten fruits of denying opportunity to the people who would actually aggressively, interestingly, and in some very high-risk ways try to solve bigger and more important social problems, whether it's healthcare delivery or de-carbonization or clean water or just a bunch of different things that are possible. I think that if we get more capital and opportunity in the hands of people who haven't had it, let them take a shot. I bet they have ideas and are willing to take risks that others have not, the sort of complacent, incumbent, white guys in boardrooms. So that is my agree and disagree with Tyler.

I think that there is a real possibility that what we see as stagnation is, in fact, the rotten fruits of denying opportunity to the people who would actually aggressively, interestingly, and in some very high-risk ways try to solve bigger and more important social problems... I think that if we get more capital and opportunity in the hands of people who haven't had it, let them take a shot.

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Beckworth:  That's great. You make me thinking of COVID might be the shock we all needed. Now, I don't wish COVID upon anybody. But this may be the shock that really shakes things up. It has already. You mentioned your examples of restaurants, but even the ability for medical professionals to move across state lines without proper licensing. I mean little-

Tankersley:  Oh yeah, absolutely.

Beckworth:  It could be a huge opening to more labor market flexibility, more innovation.

Tankersley:  Yeah, no. Actually, that is one of the things I tossed into the book at the very end was that was just starting to happen. Again, these are the sort of things that after the crisis is over we're going to need to reexamine and say, "Why were these restrictions there in the first place? Were they holding back the economy from doing better?"

Beckworth:  Yeah. Okay. Well, we're nearing the end of our show, but I wanted to step back and kind of take a big global perspective on this question. Your book is very optimistic for the middle class moving forward. That's what I liked about it. But it's also honest in dealing with some of the challenges. One of the things we know has been happening around the world is globalization's been great for all the people in poverty who have been lifted out. You always hear kind of as a joke, but there's some truth to it, what's been the best anti-poverty program? The answer's China, a billion people lifted out of poverty.

Beckworth:  There's been work done. I'm thinking of one study in particular from Brookings that argued I think 2018, 2019, that by that point over half of humanity had entered the middle class by that point. They go through a reasonable list of criteria. I won't get into it for the sake of time. But there has been all this progress, I guess, from a global perspective, taking all of humanity in account in terms of lifting more into humanity where we've seen some struggles here in the US with the middle class falling behind. I wonder if there's a way to tie this all together. Do you have any idea where your book fits into this broader narrative?

The Global Middle Class Narrative

Tankersley:  Yeah. I think we should celebrate the strides that the world has made in lifting people out of poverty in recent decades. It's just an unquestionable good. But I think that in that rush, the benefits of that have rebounded to American consumers broadly. But there have been costs and they have been borne narrowly. For the workers who lost their jobs, what we have essentially offered them is a trade. You get cheaper products and more access to a wide variety of produce in the grocery store and a more powerful computer in your pocket in the form of a phone than your family could have possibly afforded in the 1980s.

Tankersley:  But the trade-off is that you're not going to have as much economic security as you did before. It's going to be harder for you to own a home and a car and to send your kids to college and have healthcare. You're going to have less wealth and retirement than your parents' generation. I think that is we did not ... Every politician I've ever heard who is an advocate of free trade has always said, "Of course we need to figure out how to make sure to soften the blow on the people who bear the costs here." I just don't think we've done a good job of that at all.

Every politician I've ever heard who is an advocate of free trade has always said, "Of course we need to figure out how to make sure to soften the blow on the people who bear the costs here." I just don't think we've done a good job of that at all.

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Tankersley:  So you get a situation where people resent globalization because they don't feel like ... They see those costs and that is what sticks with them, for good reason. They've been real costs. But it's harder to tell a story to American consumers like, "Don't you feel great about how much less poverty there is around the world," if you're not also telling them, "And don't worry. We're going to figure out how to make sure that the benefits that that has also brought to the United States,” are repurposed in some ways to make sure that you are not uniquely or narrowly bearing the costs of that transition.

Beckworth:  Well, fair enough. We are at the end of the show and I'll remind our listeners that Jim's book is titled *The Riches of This Land: The Untold True Story of America's Middle Class.* Get a copy while you can. It's hot stuff there. Jim, thank you so much for coming on the show.

Tankersley:  Thank you so much. I've been looking forward to this for weeks, so I'm so excited. Thank you so much for having me.

Beckworth: Alright, take care.

Photo by Ina Fassbender via Getty Images

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