California’s Density Delusion

The ability for American workers to enjoy middle class lifestyles has been eroding for decades. Conventional explanations abound. American industry in the immediate aftermath of World War II was uniquely unscathed, and with a near monopoly on global manufacturing, was able to pass much of their ample profits on to workers. It wasn’t until the 1970’s that American manufacturers confronted serious foreign competition, and ever since, the competition has just gotten more intense.

By the 1990’s the electronic movement of capital along with trade agreements such as NAFTA turned national labor forces into commodities. And at the same time as American industry was going international, America’s laws were changed to favor mass immigration of unskilled workers who competed for jobs with native workers, driving down wages. These immigrants were also far more dependent on government services compared to previous generations of immigrants, putting stress on government budgets.

Export jobs. Import welfare recipients. No wonder America’s middle class is withering away. But this conventional explanation, however accurate, is only half the story. Yes, for whatever reason, average Americans work harder and earn less today than their predecessors. And the process has been relentless. Every decade since the 1950’s has seen an American workforce making less than they made during the preceding decade. But they are not just making less – things are costing more.

At first glance, this seems counterintuitive. Not everything costs more. Using the consumer price index (CPI) as a yardstick, and adjusting for performance – a modern flat […] Read More