A couple of economic mysteries marked last week’s election. First of all, the jobs numbers came in on Friday about the same way they’ve been coming in for months: good, though not great. If you think the election had a lot to do with how voters feel about the economy, then why did they hand Republicans a historic victory as the economy seems to be struggling back onto its feet?
Second, and even more mysterious: States that went Republican also passed voter initiatives that raised the minimum wage. Why would you support the minimum wage, but not the party that wants to raise it?
One answer is that economic determinism may not be as powerful as people assume. Although the economy helps to predict election outcomes, it’s not enough on its own; arguably Barack Obama in 2008 underperformed the outcome that the economy and President Bush’s approval ratings would have predicted (though still winning handily).
But I’m not sure that helps us here, because it still doesn’t explain why people would support a higher minimum wage, but not the party that wants to pass one. So let me offer an alternative suggestion: People support a higher minimum wage, but that is not their largest concern. Neither is the unemployment rate. Their biggest concern is not how high their wages are, or even whether they have a job. Rather, they are most worried about the stability of their jobs, and how much of a future their employers seem to promise.
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That has changed dramatically over the last 30 or 40 years. Layoffs used to be just that: a temporary reduction in staff to match output with falling demand. They were still an immense financial hardship.
But they were more likely to be a temporary hardship, not “the new normal.” By contrast, these days, workers are increasingly likely to be permanently separated from their employers due to structural changes in their industry. This sort of unemployment takes longer to recover from; it may mean that you never again make as much money, or enjoy the same level of work and prestige, as you once did.
The lack of a clear and stable career path is, to my mind, a worse problem than the wages paid by firms that employ large amounts of low-skilled labor. You can do anything for a short period of time, including slave away for very low wages. But for this to be true, your labors have to lead somewhere other than more slavery at very low wages. A few developments have made this seem much less likely:
▪ First, new business formation is down. This used to be a path into the middle class for hard-working people who didn’t have the time, money, or inclination to get a college degree. For various reasons, this has gotten harder to do — notably, a heavy burden of small business regulation makes the start-up process difficult for people without a college degree to navigate.
▪ Second, many markets are more competitive, thanks to technology trade, which means that you can’t count on your company to be there in 25 years. Your company can be the nicest, most socially responsible, worker-focused company in the world, but if it loses its business to lower-cost competition, you will still be out of a job. Everyone understands this at a visceral level, because everyone knows someone to whom this has happened.
▪ Third, technology, and to a lesser extent trade, have hollowed out the managerial and clerical class that used to provide upward mobility. There are fewer layers of management between unskilled workers and the top, meaning that there are fewer rungs that an entry-level worker can use to climb the ladder into something that is better paid and more enjoyable.
That anxiety is showing up in elections. Consumer confidence remains depressed, and it will not get un-depressed just by raising the hourly wage. Most people don’t want better unemployment benefits; they want to be able to stop worrying so much about losing their jobs. Nor do they want to spend the rest of their life working at McDonald’s for a better wage; they want to leave the hot kitchen for a better job. That’s still what’s missing.
This is not an argument for or against the minimum wage, by the way; it’s just an argument that even passing a higher minimum wage won’t be enough as long as people feel that their jobs could go away at any minute. Unfortunately, passing a higher minimum wage is the easy part. It’s hard to formulate a coherent policy that could protect workers from a radically shifting labor market, other than things so destructive — shut down global trade and stop disruptive technology innovation — that to name them is to reject them. But that, I think, is what workers really want from their politicians. And I suspect that until they get it, they will keep wanting to throw out the bums who can’t deliver.
Megan McArdle, author of “The Up Side of Down,” writes on economics, business and public policy.
© 2014, Bloomberg News