The Greater Recession: The Real Reason Americans Feel So Squeezed

„Let's review what we know. From 1950 to 1970, earnings rose 25 percent each decade. From 1970 to 2010, real GDP doubled while real earnings fell by 28 percent. Two labor trends helped to offset this reversal. First, and very happily, women stormed into the workforce and supported their families with income. Second, and less joyously, everybody worked much harder. The typical two-parent family worked 26 percent more hours in 2010 than in 1975 but the middle class still feels incredibly squeezed.

The theory of this essay is not that productivity is bad, but that a great divergence between the productivity of different industries is making our work cheaper while it makes our necessities more expensive. As Tyler Cowen, the author of The Great Stagnation, put it: »In most typical household budgets, housing, education, and health care are very important. Higher prices in those areas, above what productivity gains can justify, are driving much of the progress slowdown.« That's the productivity divergence. That's why you feel squeezed.

If you're looking for somebody to blame, blame everybody. Blame the corporations who turned jobs over to machines and foreigners. Blame investors who reinforced the culture of productivity by rewarding companies for good quarterly earnings. Blame consumers who bought more of the cheaper stuff. Blame the culture of productivity.

But also, blame the culture of un-productivity. Blame doctors for too many treatments, and university presidents for too many new buildings, and city planners for strict zoning laws, and government for subsidizing industries and obscuring incentives to be more efficient.”