The Complacent Class: The Self-Defeating Quest for the American Dream by Tyler Cowen describes some of the same behavior as The Redistribution Recession, but explains these behavioral changes as a massive cultural shift rather than as simple responses to changed incentives. Could this be an example of the fundamental attribution error? First, let’s look at what Cowen says…
These days Americans are less likely to switch jobs, less likely to move around the country, and, on a given day, less likely to go outside the house at all. For instance, the interstate migration rate has fallen 51 percent below its 1948 to 1971 average and has been falling steadily since the mid-1980s. There has been a decline in the number of start-ups, as a percentage of business activity, since the 1990s.
Economists see migration as a kind of investment. You give up something in the short run, namely the home, job, friends, and conveniences, in the hope of achieving something different and better somewhere else.
In the latter half of the nineteenth century, the residents of the United States were more geographically mobile than even those of Great Britain, which at the time was considered a very mobile society due to its political unification and relatively free labor markets. Cross-country moves were made by almost two-thirds of American men older than thirty years, whereas only a quarter of British men did the same.
Or, if we look at the rate of moving between counties within a state, it fell 31 percent. The rate of moving within a county fell 38 percent. Those are pretty steep drops for a country that has not changed its fundamental economic or political systems.
[I wish that an editor had removed every occurrence of the qualifier “pretty” from this book!]
For the most part, this decline in mobility is not fundamentally about changing demographics. Long-distance moves have declined considerably for all age groups, for homeowners and renters, and also for dual-income couples, so neither aging nor the difficulty of relocating a two-earner couple explain America’s recent lack of motion, even if those factors are driving the behavior of some specific individuals.
African Americans today have become especially immobile, and to an unprecedented degree. If we look at data on the last generation, 76 percent of African American mothers gave birth in the same state that their mothers did, whereas for white women that same figure was 65 percent, circa 2010. Using the Panel Study of Income Dynamics, the best database of its kind, it is possible to trace a subset of 4,800 African American families from a cohort born between 1952 and 1982. If we consider the progression from youth to adulthood, 69 percent of that cohort remained in the same county, 82 percent remained in the same state, and 90 percent remained in the same region of the country. A generation earlier, the comparable numbers were 50, 65, and 74 percent, all lower. Adjusting for income, homeownership, and other demographic characteristics does not fundamentally eliminate this mobility gap. African Americans have gone from being an especially mobile group to an especially rooted one.
the two groups whose job mobility has dropped the most are the young workers and the less-educated workers, and thus those groups are more vulnerable and more exposed to the likelihood of a protracted spell of unemployment. Men have lost more job mobility than women have, and that too has hurt their labor market performance, especially in response to the Great Recession. Switching jobs is often one of the best ways to get a promotion or a wage boost, and if people are less likely to switch jobs, it will be that much harder for them to get ahead. Lower geographic mobility and lower or stagnant income mobility are two sides of the same broader problem, namely, excess stasis in general, at a fundamental cultural level.23 And here is a striking way to think about some of the underlying cultural shifts, given that mobility is often down the most for the less-skilled workers. In such a setting, poverty and low incomes have flipped from being reasons to move to reasons not to move, a fundamental change from earlier American attitudes. The older notion of moving to a city, by train or bus, and staying in a flophouse, or with relatives, until one finds a decent job is harder to pull off these days.
Maybe we shouldn’t be admitting male immigrants and should be trying to perfect a technology so that mostly female babies are born:
America is creating start-ups at lower rates each decade, and a smaller percentage of those start-ups is rising to prominence, as we see in more detail in chapter 4. We’re not even managing peaceful disruptions, much less violent ones, at our earlier rates. The big losers from a lot of these trends are the unskilled men, including those with the less peaceful or more violent inclinations. The contemporary world, for all of its virtues—indeed because of those virtues—is not very well built for some chunk of males. Current service jobs, coddled class time and homework-intensive schooling, a “feminized” culture allergic to many forms of conflict, postfeminist gender relations, and egalitarian semicosmopolitanism just don’t sit well with many men, most of all those who have no real chance of joining the privileged class. Whether or not it is politically correct to admit it, I believe a lot of men have tendencies toward the brutish, but in today’s America, those tendencies are suppressed.
Female median wages have been rising pretty consistently, along with female education, but the male median wage, at least as it is measured and adjusted for inflation, was higher back in 1969 than it is today.
A lot of men did better psychologically and maybe also economically in a world where America had a greater number of tough manufacturing jobs. These men thrived under brutish conditions, including a military draft to crack some of their heads into line. Those problems of permitting and also constraining masculinity are too-often forgotten, and our neglect of those issues will help ensure that today’s complacency cannot last.
Maybe it is because we’ve all found our dream jobs?
One big reason for the decline in residential moving stems from a decline in job switching. If people are less likely to change jobs, they are also, for obvious reasons, less likely to move. And if we look at job reallocation rates—a rough measure of turnover in the labor market—they have fallen more than a quarter since 1990.
To give this some concrete numbers, in 1998, 44 percent of workers had five or more years on the job, but as of 2014, this number had increased to 51 percent. The percentage of workers with less than one year on the job had fallen from 28 to 21 percent.
But Mexicans still move…
Americans are outsourcing their mobility and capacity for economic adjustment. When there is mobility in the American labor market, it comes disproportionately from Mexicans and Mexican Americans. When a negative economic shock hits some city or region in the United States, the natural response is for some labor to leave that region and move elsewhere. Of course, not everyone needs to abandon the area, but some people should want to move on. Yet, if most Americans are less mobile than before, who is going to pick up and leave? More and more we see that mobility coming from Mexicans living in America, especially those who are relatively recent arrivals. Mexican-born Mexicans are less likely to have strong regional roots in America, and furthermore a nationwide network of Mexicans—often from the same state or region of Mexico—can help with relocation.
Our money doesn’t take chances anymore either…
The Federal Reserve Bank of Richmond has estimated that 61 percent of all private-sector financial liabilities are guaranteed by the federal government, either explicitly or implicitly. As recently as 1999, this figure was below 50 percent.
To look at one simple measure of both social and economic stasis, the rate at which business start-ups are forming has been declining since the 1980s. By one estimate, start-ups were 12 to 13 percent of the firms in the economy in the 1980s, but today they are only about 7 to 8 percent. That’s right; for all the talk about Silicon Valley, we are less a start-up nation than before. By the way, this overall decline in start-up frequency is true for virtually every sector and every American city, and that includes San Francisco and even the legendary tech sector. In absolute terms, the number of new tech firms (younger than five years) peaked just after 2000, and in percentage terms, new firms in the tech sector have been declining since the 1980s.
Not only are there fewer start-ups, but a smaller percentage of them are succeeding. That means young firms are a smaller part of the overall market and so American corporations are increasing in average age, just as the American people are. In the late 1980s, 18.9 percent of the employment in the American economy was at firms five years or younger. This average had fallen to 13.5 percent right before the Great Recession; in numerical terms, that is a 29 percent decline over only seventeen years, a significant and rapid drop. New firms are also down as a share of total firms and also as a share of job creation, again since the 1980s.
Time for analysis.
Cowen is a smart person so I will assume that all of his data are correct.
The tendency to stay put seems to be strongest among those with low income. But these are exactly the people who qualify for subsidized (or free) public housing, food stamps, and Medicaid or subsidized Obamacare insurance. They might get heating oil assistance or TANF-style cash payments (see Massachusetts bureaucracy gets 1 in 13 households to come in and beg). There might be a 10-year waiting list for public housing in the desired destination city. Until then, the person who had been living in a great apartment might receive nothing. Why would a person want to invest 10+ years in getting reestablished on all of these disparate state-administered welfare programs?
Cowen compares mobility before and after 1971 and says that there was a big reduction especially in the 1980s. As it happens, the 1970s were when most states adopted no-fault divorce and the percentage of children being reared by two biological parents plummeted (as noted in this chapter, from 73 percent of kids in 1960 to 46 percent today). Why might this be significant? Consider first child support and alimony. Millions of Americans collect money under court orders (see “Litigation, Alimony, and Child Support in the U.S. Economy” for the scale). They might be concerned that if they move away from the court system that put them into the check-of-the-month club it will be harder to collect or reduced in the new state’s court system gains jurisdiction. The parent who wins a custody lawsuit may yet need permission of a judge to move out of state with the kids (see “Relocation and Venue Litigation”). The biological parent who loses a custody lawsuit can move, but it may mean never seeing the former children again. The new partner of a divorced American may be similarly discouraged from moving. It is a lot easier for an intact family of four to pick up and move to the other coast than it is for someone who is an every-other-weekend parent, the stepparent of a child with a 50/50 schedule, and vicariously collecting child support.
What about corporate welfare? If you’re a small company no state is going to build you a free factory and pay your workers for a couple of years in exchange for you agreeing to set up shop. Thus the existence of corporate welfare should discourage startup formation and reduce the chance that a new company will be successful.
Regulation can be a disguised form of corporate welfare. It might hurt big companies but it will kill small ones that might have been competitors. Hiring a full-time person to read and understand regulations is a more bearable cost when spread over a 1,000-person company compared to a 25-person company.
Why haven’t Mexicans been affected? If they’re not citizens or Green Card holders their access to welfare programs is limited and their only alternative is to move to where the jobs are. Mexicans and Mexican-Americans are less likely than white Americans to sue each other for divorce (chart).
Readers: What do you think? Research psychologists say that Americans are uniquely prone to the fundamental attribution error. Can we not explain most of the above as a rational intelligent response to a changed environment?