Oren Cass is a senior fellow at the Manhattan Institute, where his work on strengthening the labor market explores issues ranging from social safety net and environmental regulation to trade, immigration, education, and organized labor. Before joining the Manhattan Institute, Mr. Cass worked as domestic policy director for Mitt Romney’s 2012 presidential campaign, editor of the Harvard Law Review, and management consultant for Bain & Company. Last month, he published The Once and Future Worker, receiving positive reviews across the political spectrum from notable figures including David Brooks, Jason Furman, J.D. Vance, Mitt Romney, and Senator Marco Rubio.
The Politic: Do you want to give a brief overview of your new book, The Once and Future Worker? What’s the purpose of your book, why did you choose to write it now, what are its central tenets, and so on?
Oren Cass: The book is about how we approach economic policy. It tries to explain what has gone wrong in economic policy and in the American economy over the past few decades that has led us to this point where we are now. On the one hand, you’d have to say we’ve succeeded. GDP is much higher than it used to be and material living standards are much higher than they used to be. Yet, people are very unhappy in a lot of different ways, both in the subjective way that they say they’re unhappy and our politics reflect a lot of unhappiness, but also in a lot of tangible ways in terms of family and community health, and personal health. We have now had three straight years of declining life expectancy, high rates of labor-force dropout, and so forth.
One thing that I was really struck by, not by the election of Trump itself but more so by the reaction to it, was that even in the aftermath of all of the upheaval of 2016 (I think Bernie Sanders’ success in the Democratic primary has to be counted as part of that as well) the reaction from the Center-left and the Center-Right was mostly that we must have a marketing problem. People must not understand how well things are going, or else they don’t understand that these policies are the best things for them, and we’d better find new ways to brand what we’re doing and maybe implement a better safety net for people being left behind.
I thought that really missed the point of what was going on. In discrete policy areas, I had already been working for several years by then on trying to look at some of the more fundamental challenges we faced in terms of how our safety net operates, in terms of how we’ve approached globalization, in terms of how we’ve approached regulation, education, and organized labor. I thought, “It’s fine to keep working on specific policy areas, but there’s a broader thematic point here about how we approach these questions. And that point needs to be made.” So, what the book tries to do is explain this mindset that I think has represented the centrist, consensus approach for a very long time, what I call ‘economic piety.’ It’s the idea that we just have to keep growing the economic pie, and as long as the economic pie keeps growing, everyone can have more pie. And we’re going to fight about how best to grow the pie. And we’re going to fight about how best to slice the pie–how much redistribution to do on the backend. But this formula of growth and redistribution is going to be our focus.
From a consumer welfare perspective, that works great. Consumption is at an all-time high for just about everybody. But if you step back and, to take the metaphor too far, if you say, “Wait a minute. It actually matters who is baking the pie,” then the picture looks different. Just transferring resources to people isn’t what they want or need, they actually need and want to work, to be productive contributors in society, to be able to support their own families and communities. That function, on the production side, actually has a lot more to do with life-satisfaction, with family outcomes, with opportunity for kids, and ultimately, with the health of our economy. So, broadly speaking, I wanted to move the conversation in that direction, to say it’s not just enough to get growth: We actually have to care about who’s getting the growth, and then lay out some of the substantive policy implications of that.
I’ve noticed you tend to cite 1970 or 1975 for economic comparisons. Assuming I have no knowledge of history, why is 1970/1975 your benchmark?
In statistical terms, the 1970s is the benchmark that folks, across the political spectrum, use in talking about what’s happened in our economy because it was pretty clearly an inflection point. The productivity gains that we’d been getting in the 40s, 50s, and 60s started to slow at that point. That’s the point at which wage growth really starts to stall out for roughly the median and below. Just from a purely descriptive perspective, there’s a pre-1970s and post-1970s way of talking about things. I think conceptually there’s an accompanying difference in our policy-making. I would argue that, as you would expect, the shift in policy-making predates the shift in results a little bit, but that the 1960s, in particular, is really where this economy piety became the mainstream perspective.
In the book, I talk a little bit about the economic history of it and why we even started obsessing about GDP in the first place– in the context of recovering from the Great Depression and in the context of a world war where who could build the most stuff the fastest was a pretty existential question. And then that economic perspective combines with some pretty major cultural shifts in the 50s, and more so the 60s, that really changed our understanding of welfare. It became focused almost entirely on the consumer, and with that came the idea of tackling poverty through aggressive redistribution in our safety net. The War on Poverty was really the start of the modern safety net and this idea that if you transfer enough resources to those who are being left behind, that will address their needs.
Policy area after policy area saw accompanying shifts. 1970 is the start of the revolution in environmental policy, with the creation of the Environmental Protection Agency, the Clean Air Act, and then the Endangered Species Act, etcetera, and this much heavier focus on environmental protection at the expense of the industrial economy. The 60s into the 70s is when you really get the abandonment of tracking or any emphasis on vocational education in high schools and a pretty strong commitment to what has now become our college-for-all education model. 1965 is the big revolution in our immigration policy, which went from a very restrictionist immigration policy to one that was heavily oriented around families, expanding the volume of immigration and doing so without much reference to skill level. The 1970s is really when international trade began taking off. The question of cause and effect is a little more interesting on this one, but late 1960s into 1970s is when organized labor went into decline. So, across all of these areas, you see this shift in how we approached policy to being about economic piety, to being about growth and redistribution, and to not really considering labor market health or the interests of workers. I don’t think it’s a coincidence that shortly thereafter is when we headed into essentially a 40-year period of gains from the consumer perspective, but facing some real problems from the worker perspective.
You mention the necessity of including a cultural component to a redefined notion of ‘prosperity.’ What does that look like? What might it include and how might you measure it?
What I describe as an alternative to economic piety, to this focus on growth for growth’s sake and then redistribution on the backend, is the idea of ‘productive pluralism.’ As the term implies, there are two components: the productive component and the pluralism component. The productive component refers to this idea that people’s welfare as workers is actually critical to their wellbeing, and we have to be attendant to labor market conditions and whether folks, at all different points on the scale of skills and aptitudes, can still support their families and communities.
Then, the pluralism point is equally important, which is that people want and need different things in their lives. When you take the economic piety, consumption-focused view, you don’t have to care about pluralism because money is fungible. As long as people have the money, they can buy whatever they want. If you think a little more broadly about wellbeing and prosperity, then you realize that the things that are actually most important to people a lot of the time, in addition to being able to be productive contributors and self-sufficient, are being able to live where they grew up and close to their own families and being able to order their family lives as they want. For some people, that might mean having both parents out in the workforce, and for other people, it really means being able to build a family around a single-income model, and so on.
One of the things that concerns me is that we’ve gotten to this point the response to, “Gosh, a lot of people are really struggling,” is, “Well, if they both work full-time, they can make ends meet” or “Well, if they move to Houston and become welders, they can make ends meet.” That’s fine as far as it goes; for a lot of people, maybe they could make ends meet if they moved to Houston and became welders. But first of all, if everyone tried to do that, it wouldn’t work so well, and second of all, that shouldn’t be the standard, that you could make ends meet if you did the one thing that fits into what the current economy wants. So, this isn’t to say that we should embrace unconditional wish-fulfillment– what I call the ‘Astronaut-Princess Model.’ You don’t get to just invent anything you want and say, “Therefore, why can’t I do that?” But to the extent that we’ve had proven models, our presumption should be that those could continue to work. Historically, it was the case that you could build a good life, raise a family, and live in a healthy community in any geographic area, whether urban, suburban, rural, in a host of different types of careers, with one or two earners, even if you only had a high school degree. Somehow, this incredible gain in growth, technological progress, and so forth has actually equated to those things no longer being possible. I think we have to scrutinize that and say, “If our model of growth is one that’s actually cutting off a lot of options that are really important to people, then we’re not doing it right.”
In a world in which we had cared more about the sustainability and health of the labor market, how do you think the current trend of job displacement through automation would be different? What’s the counterfactual, alternative universe?
There are two questions there, one about automation and one about counterfactuals. So let me take those one at a time.
The first question, as I hear you asking it, is “What about automation? Haven’t things changed that are completely out of our control and were inevitable?” The answer to that is, “No.” Automation is something that has been with us since the Industrial Revolution and arguably before. It’s just a fancy word for finding ways to make more stuff with less labor. In that respect, it’s literally synonymous with productivity growth. It is the formula by which people become more productive over time, their wages can rise over time, and their standards of living can rise over time. We actually have the data to understand how that’s happened, and what we see is that automation has not become a sudden disruptive force. In fact, productivity growth has, across decades and even centuries of time, always run in the range of 1.5 to 2.5 percent per year. Never, through all of the incredible technological revolutions of the past, have we gotten above 2.5 percent for any extended period of time. This most recent period, say the last 15 years, is actually a period of unprecedented stagnation, of lower productivity growth. We’re actually automating less quickly than ever right now.
When you go back over time and look at what’s happened in the economy, and in the manufacturing sector in particular, the dynamic has always been one in which the introduction of new technology, new processes, more skills, and so forth has led to fewer workers being able to make more stuff. Every time you do that you could call that ‘destroying jobs’ if you want, but it’s not actually destroying jobs. It’s increasing productivity. And historically, what has happened is that output growth has run roughly in line with productivity growth. And so, in the manufacturing sector, you had a relatively constant absolute level of employment across decades and decades as both productivity growth and output growth rose. Think of it as ‘same number of people making more stuff.’
What’s happened in recent years that has led to such a steep decline in manufacturing employment is not a sudden rise in productivity, but rather that output stopped growing. We’ve shifted from a model of ‘same number of people making more stuff’ to ‘ever fewer people making the same amount of stuff.’ The departure from trend line has nothing to do with productivity. The departure from trend line is because the industrial economy and output stopped growing.
What if output had kept growing on its historical trajectory? We would actually have more manufacturing workers right now, at their higher level of productivity, than we had ten to twenty years ago.
So, two points I would make about that. One is that I find it somewhere between perplexing and amusing that the economists, who historically have been at the forefront of trying to explain to the world that automation is a good thing and has all these positive effects, have turned around and thrown the robots under the bus. Rather than acknowledging that our economic model is broken and isn’t delivering good labor market outcomes, and that there are an awful lot of policies that we’ve embraced that probably have something to do with that, they’ve turned around and said, “Don’t look at us. Look at those robots. It’s automation, and there’s nothing you can do about it.” And that’s just not true.
The second point is that we can’t lose sight of the bigger picture lesson here: robots can be workers’ best friends. We are not in a period of unprecedented automation and technology disrupting employment. We are facing exactly the opposite. It would be really unfortunate if the lesson we took away from this moment is that we should be scared of technology or we should resist technology. To the contrary, we need to be embracing technology and recognizing that if we want rising productivity and rising wages for workers, we’re going to need more automation than we’ve seen in recent years. One question is how to make that happen, but let’s stipulate that it can happen. To ensure that increasing automation is good for workers, we need to focus on structural policy questions about how the labor market operates, and we need to make sure that firms trying to introduce technology into the workplace are doing it in this country, with the workers we have, with an incentive to invest in making sure that the workers can use the technology. Again, that’s something in our control. That’s not some irresistible force out of our control.
The second question you asked, that’s a really interesting one, is what’s the counterfactual? If only Oren’s book had been written in 1975 and everyone had listened to him, what would that mean instead? What if we’d noticed in the 1980s that for all the growth we were getting, wages actually hadn’t gone up in a really long time, and we tried to take a different approach? My argument is not that we should somehow have tried to freeze time in 1975, or that that would have been possible. All sorts of things were changing, and would change, in the economy. Many of the changes have also been positive ones. To take one example, globalization and trade, in theory, can be a very good thing for the economy and a very good thing for workers. It should open up a lot of very large new markets for the things they produce. It should allow for more scale and specialization. It should allow for technological diffusion. Those are all the reason we like trade.
The question is, could we have done globalization and large increases in trade without incurring these massive trade deficits, in which we were essentially using other workers to make stuff for us, and not making more stuff for anybody else in return? I think the answer is, “Yes.” There’s nothing inherent in economic theory that says if you do globalization, it has to lead to these massive imbalances. Looking at an area like environmental regulation, I think we certainly could have made steady gains in environmental quality but done it in a way that still recognized the very important value of industrial production and made sure that we weren’t shutting down heavy industry in areas where it was especially important to the economy. I certainly think we could have had an education system that was investing more in folks not pursuing a college track, focusing on their path into the labor market.
So, if you ask, “Where would that have gotten us today?” I think the answer is that it could have gotten us to a place where less-skilled workers were still fully engaged in the economy, had seen their wages rise, and could still support their families and their communities, wherever they were living. Certainly, the kind of work they were doing, in a lot of cases, would look different. We would have seen lots of disruption from both trade and technology. But those could have been the kinds of disruptions we’d experienced, in the first half of the 20th century, that brought progress without damaging the labor market in the process.
Are there any questions you wish interviewers would ask you? Is there anything you wish you could say, some way people engage in your arguments that you think is based in a misconception, unfaithful, etcetera, what would you want to put out to the public, especially a college audience?
That’s a great question. One answer is, as your readers have probably noticed, as an interviewee I usually consider it my prerogative to take a question wherever I want. So, if I have something I want to say, I’ve probably said it.
But one topic that has come up in debates about the book, and that I would love to discuss with critics more directly, is whether talking about these things somehow opens a Pandora’s Box. Historically, folks on the Right have tried to maintain these very clean, crisp arguments: Free markets are always better, more free trade is always good, GDP growth is the best way to help workers, and ‘a rising tide lifts all boats.’ And I think the fear is that if we start to say, “Well gosh, maybe that’s not always true. Maybe we have to take a harder look at that,” then we’ve ceded all the best ground and opened the door to arguments from the Socialists, Luddites, and so forth. I understand those fears and I understand why, especially for folks who are engaged in the sound-bit world of politics, it’s concerning to suddenly find folks who you think are in your own coalition undermining arguments that you value.
The reason I think that this Pandora’s Box criticism is ultimately wrong, though, is that the clean-cut argument, as stated, has failed. The idea that free trade was going to be good for everyone was clearly not true. The idea that free markets, if you just let them do their thing, are always going to produce the best outcome for society, is clearly not true. The argument that ‘a rising tide lifts all boats,’ that as long as we focus on economic growth, everyone will always come out ahead, is not true.
We have reached a point where these failings are apparent to the people actually living in the real world. If we cling to the same arguments, I think we lose a tremendous amount of credibility and I think we are going to lose the bigger argument. And if we stay there and lose the argument, then we truly have left the door open to the Luddites and the Socialists. I think it’s actually incredibly important to take that step through the door, so-to-speak, to acknowledge where things are more complicated, to acknowledge where we need to be more nuanced, and to start building an argument that actually is correct, persuasive, and points in a direction that we think will be healthy. We don’t get to choose between clinging to the old orthodoxy and winning that way versus grappling with our challenges. The question is whether we want to cling to the old orthodoxy and lose, and deservedly lose, or grapple with our challenges. Given those choices, I think finding something that’s new and correct and resonates with people, that’s going to produce policies that actually point the country in a better direction, has to be our priority.