Michael Strain is a scholar and director of economic policy studies at the American Enterprise Institute and a Bloomberg Opinion columnist. In this Conversation with Bill Kristol, Strain challenges the increasingly widespread notion that America is in decline economically — and reflects on the enduring importance of innovation and dynamism in the American economy. Highlighting measures like social mobility and increases in living standards, Strain argues that America remains robust economically even as globalization, technology, and other factors have presented and will continue to present serious challenges to the status quo. Finally, Strain points to several policy goals that promote innovation and growth — including high-skilled immigration, renewed focus on STEM, and investment in research and development — that could increase America’s economic performance.
On why negativity about household income growth is overblown
STRAIN: The negativism is wildly overblown when you look at it analytically. People are living better than they used to. If you look at household income from 1979 to the present, you see income growth for every kind of group of American households. Income is a tricky thing to measure. If you care mostly about what people earn from working, then you want to look at earnings. If you care about the total flow of financial resources into a household that they can use to spend or save, then you want to look at earnings plus other factors. It’s also difficult to make these comparisons over time because consumer prices change, so you have to control for inflation. But households have experienced income growth. Incomes have grown by at least 30 percent over that time period. And, of course, households at the top have seen significantly greater income growth in that. So we can have a debate about how to measure income. We can have a debate about whether or not the growth that we’ve seen is adequate. We can have a debate about whether or not the fact that households at the top saw a significant faster income growth than households at the bottom—whether that’s acceptable in some normative sense. But it’s just analytically incorrect to argue that there are wide swaths of American households that haven’t seen any income growth in four decades.
On the persistence of social mobility in America
STRAIN: If you look at adults who were in their 40s today, and if you look at the ones who were raised in low-income households, 80-90 percent of those adults have higher incomes than their parents did. If you look at adults today who, 40 years ago, were raised in working class households, two-thirds of them have higher incomes than their parents did when they were kids. This says to me that there’s still quite a bit of upward mobility in American life and in American society, particularly when you focus on the people who were raised in the most vulnerable circumstances, in the lowest income circumstances. Could there be more? Sure. It’s a similar story with income growth. Are incomes growing? Yes. Are they growing fast enough? That can be debated. Is there upward mobility? Yes, particularly for the lowest income people in society. Should there be more? Should it be faster? That’s a discussion we can have. But the right discussion is how to improve, not whether the American dream is dead.
On the benefits and challenges posed by technological change
STRAIN: A lot of the technological change [of recent decades] accrued to the benefit of higher-educated, higher-skilled workers. Think about in the old days, if you were an architect, you had to have a big drafting table and you did all your stuff by hand. And then all of a sudden computers come along and now you can have drafting software or you’re an engineer and your productivity increases dramatically. If you are a custodian, your productivity really hasn’t changed. If you are a clerk, or if you are a bank teller, or if you are a worker on an assembly line, your productivity has actually decreased, because technology can do your job. So for the engineer or the architect, technology helps them to do their jobs better. For the custodian—not really affected. For the clerk, bank teller, or manufacturing worker, technology actually can do the job for them. And those manufacturing workers and bank tellers were middle-skilled, middle-income workers…. And we’ve seen both a slowdown of educational attainment and an increase in technological change that benefits the top relatively more than the bottom. That’s increased that gap [between the top and bottom] relative to where it was several decades ago.
On policies that could improve innovation
STRAIN: I mean, there’s this [fatalistic] sense out there that [economic] growth is exogenous, outside the system—something that just kind of happens. And bad policy won’t slow it down and good policy won’t speed it up. [But] we know how to grow the workforce through immigration. We know that there are policies out there that can pull more people into the workforce if we choose to use them. We know that workers with more skills are more productive, and that will increase the growth rate. We know that if we want more research and development, we can subsidize that, and that should lead to more innovation. And there is some low hanging fruit that we’re not achieving: high-skilled immigration, something that there used to be a strong bipartisan consensus around. It has gotten tripped up with the politics of immigration. I don’t think there’s much doubt that if we doubled the number of green cards for STEM graduates who want to come work here, that would have an impact on entrepreneurship. It would have an impact on innovation and that would create economic growth for the overall economy.
This article has been republished from www.aei.org