Pinched (5 page)

Just as the housing bubble papered over the troubles of the middle class, it also hid, for a time, the declining prospects of many men. According to the Harvard economist Lawrence Katz, since the mid-1980s, the labor market has been placing a higher premium on creative, analytic, and interpersonal skills, and the wages of men without a college degree have been under particular pressure. And for whatever reason, in the lower tiers of the economy, men have had trouble finding and keeping work in the service sector. “And I think this downturn exacerbates” these problems, Katz told me. For a time, construction provided an outlet for the young men who would have gone into manufacturing a generation ago. By the middle of the aughts, manufacturing was hiring “very few” people in their twenties. Yet men without higher education “didn’t do as badly as you might have expected, on long-run trends, because of the housing bubble and construction boom.” It’s hard to imagine that happening again. “We’re not going to have the same sort of housing boom. It’s just not going to be like 2002 through 2006.… There are long-run issues.”

Women’s growing success in the classroom and workforce is of course a cause for celebration. But the failure of many men to adapt to a postindustrial economy is worrying. The economy appears to be evolving in a way that is ill-suited to many men—at least outside the economy’s upper echelons. Men’s struggles are hardly evident in Silicon Valley or on Wall Street. But they’re hard to miss in foundering blue-collar and low-end service communities across the country. In these less affluent places, gender roles, family dynamics, and community character are changing rapidly in the wake of the crash. And almost no one seems happy about it.

A
S TRADE AND
technology have re-sorted Americans economically, a geographic self-sorting has followed—and it is this sorting, along with its consequences, that the Great Recession has illuminated most starkly. In 2006,
the urban theorist Richard Florida wrote that Americans were in the midst of a great migration—one perhaps as important economically and culturally as the westward march of pioneers in the early nineteenth century or the surge of immigrants and farmers into growing industrial cities toward that century’s end. Society’s meritocratic winners—including its billionaires and multimillionaires, but also much of the professional class—were physically separating themselves from the rest of the country. A “mass relocation of highly skilled, highly educated, and highly paid Americans to a relatively small number of metropolitan regions” was under way, and with it “a corresponding exodus of the traditional lower and middle classes from these same places. Such geographic sorting of people by economic potential, on this scale,” Florida wrote, was “unprecedented.”

In 1970, college graduates were dispersed relatively evenly throughout the United States. Eleven percent of the national population over the age of twenty-five held a bachelor’s degree, and that figure stood at between 9 and 13 percent in half of the country’s 318 metropolitan regions. Vastly more people hold a college degree now,
but a relatively small number of places have captured a disproportionate amount of the growth. In San Francisco and Washington, DC, for instance, about half of all residents had at least a bachelor’s degree in 2004; in Cleveland and Detroit, just 14 and 11 percent did, respectively. That same year, more than 20 percent of Seattle’s residents had an advanced degree, versus 2 percent in Newark, New Jersey.
A 2010 Brookings Institution report, “The State of Metropolitan America,” concluded that during the past decade, the gaps in both income and education between America’s top metro regions and those at the bottom had widened. “Gains in the ‘war for talent’ among U.S. metro areas are accruing disproportionately to already better-educated places,” it said.

According to a preliminary examination of census data by the urban analyst Aaron Renn,
roughly as many college graduates moved to Manhattan in the aughts as there are residents of Chattanooga, Tennessee. In 2009, every one of the ten U.S. counties with the most growth in college graduates per square mile were in or around New York City, San Francisco, Boston, or Washington, DC. In most of these counties, the inflow of college graduates and people with graduate degrees was substantially higher than the counties’ total population growth: people with less education were on their way out.

Powerful economic forces have driven the country’s best-educated and most-skilled people toward one another. The Nobel Prize–winning economist Robert Lucas argued that economic growth is propelled, first and foremost, by spillovers in knowledge resulting from the clustering of people rich in human capital. Physical proximity, and the constant networking it allows, enables smart, talented people to generate ideas faster, hone them more sharply, and turn them into products or services more quickly than they otherwise could. From 1975 through 2001, patent production in San Francisco, Seattle, Atlanta, Austin, and Portland, Oregon, grew by more than three times the national average, and skilled workers in these and other highly educated cities saw their incomes rise rapidly. In
the 1990s, the ten metro areas with the most-educated residents saw personal incomes grow at nearly double the pace of the ten least-educated metro areas. Increasingly, in order to realize their full economic value, well-educated workers have needed to live in one of a handful of places. At the same time, because
routine
work can now be done from anywhere (or by machines), the physical presence of a nonprofessional middle class in these cities has become far less important to the growth and sustainability of their economies.

As high-income, high-potential workers have flooded dynamic cities and regions—dubbed “
superstar cities” by the economist Joseph Gyourko—they have bid up housing prices and other costs, driving out the middle and lower classes. Some high-school graduates, and even college graduates from nonselective schools, have settled in the sprawling exurbs of these regions. Before the crash, more still had lit out for the suburbs of low-cost, fast-growing Sun Belt cities like Phoenix, Las Vegas, and Orlando. Meanwhile, Rust Belt cities like Buffalo and Youngstown, Ohio, have been slowly drained of their most talented young people, who’ve left for greener pastures.

The housing bust has revealed that many of these new middle-class magnets may have more in common with the cities of the Rust Belt than with city-regions like Boston or Austin or Minneapolis. Housing was the source of their growth, and also their primary product. With the construction boom over, many former boomtowns have few large, highly productive industries to sustain them, and a comparatively narrow base of human capital.
In a Brookings Institution ranking of one hundred major American metro areas by the prevalence of college graduates in 2009, Phoenix ranked 66th, sandwiched between Akron and Cleveland. Tampa, Cape Coral, and Las Vegas were 84th, 85th, and 91st, respectively, in and among places like Dayton, Memphis, and Toledo. Little wonder, then, that some of the highest and most persistent unemployment rates in the country are to be found in these former boomtowns, along with long-struggling Rust Belt cities like Detroit. And little wonder that the
most highly educated cities are showing signs of resiliency, despite experiencing much shallower losses in jobs and wealth to begin with.

T
ECTONIC SHIFTS IN
the economy shake the culture as well. By temporarily accelerating some of those shifts, the recession has made them and their cultural consequences plainer, and given us a preview of what’s in store for America in the coming decades—at least absent efforts to change the economic and social course the country now finds itself on. The fortunes of the rich are diverging from those of other Americans, as are the fortunes of Manhattan from those of Tampa. In less privileged parts of the country, a predominantly male underclass is forming, and that, in turn, is changing marriage, family, and community life in ways altogether foreign to the affluent nuclear families and young single professionals in and around Boston or Washington, DC.

These varied experiences may partly explain the ambivalence with which some policy makers, themselves members of the meritocratic elite, have responded to high unemployment and economic distress. And they clearly have fueled the rising popular discontent that can be seen in public discourse and at the ballot box. In the Great Depression, iconic images of bankers selling apples on street corners helped build a sense that everyone was suffering together. Patently, that is not the case today.

A
S OF THIS WRITING, IT’S BEEN ABOUT THREE YEARS SINCE THE
financial markets crashed, and closer to four since the Great Recession officially began. More than two years have passed since President Barack Obama detected “glimmers of hope across the economy.”

As noted earlier, at the current pace of the recovery, many more years will go by before unemployment rates again touch 5 percent, before most Americans pay down their debts, before housing values find their bottom and rise substantially again. Such a long recovery is not fated—technological breakthroughs, world events, and, not least, our own actions will all influence its pace. But it is possible that the economy won’t be truly vibrant again for a long time.

Long, deep slumps are foreign to many Americans alive today, but of course they are not unknown in the nation’s history. The final two decades of the nineteenth century saw steady deflation, hard times for typical workers, and great tumult.
The Great Depression
and
the 1930s
are now nearly synonymous. Most recently, from 1972 through the early 1980s, the United States endured economic stagnation, wage erosion, and a series of painful economic shocks; in some respects, the weakness lingered until the mid-1990s. If we align Wall Street’s 2008 crash with the signal shocks of those periods—the panic of 1893, the crash of 1929, the oil shock of 1973—then we’d be sitting today in 1896 or 1932 or 1976.

The longer society stews in a deep slump, the more it is altered.
Changes to community character, generational ambition, and social harmony that are nearly imperceptible early in a downturn become suddenly overwhelming later. What follows is a pocket history of these three long downturns, with a focus on the enduring marks they left on America. Each delineates a major turn in the country’s economic, political, and cultural history. And each holds lessons for us in the present day.

The last quarter of the nineteenth century was a period that in many ways recalls our own—a time of technological revolution, rapid global integration, vast economic change, rising inequality, market crashes, and long spells of disappointment and anxiety for many Americans. A series of financial panics rocked the country, culminating in the panic of 1893, a run on banks that crippled the financial system and ushered in a depression more severe than any the United States had yet seen.

From the 1870s through the turn of the century, “
the public features of economic stagnation became more recognizable with each passing decade,” wrote Alexander Keyssar in
Out of Work: The First Century of Unemployment in Massachusetts
. “Noisy plants grew silent for days, weeks, or months at a time. Adult men congregated on streets where adult men had been seen only on Sundays and after dusk.… Rumors of jobs brought hundreds of workers to the gates of individual factories. During the final decades of the nineteenth century, the recurrence of such scenes was for many Americans a source of anxiety and apocalyptic visions.”

Dramatic changes swept the country throughout this period. The railroad, telegraph, and transoceanic steamer converted local and regional markets into national and global ones, exposing farmers and tradesmen to new competition. Likewise, transformational new industrial technologies—among them, the move from “batch” to
“flow” processes in the making of many commercial and industrial goods—rewarded scale, punished small workshops, and left many workers with obsolete skills and careers.

Deflation was a fixture of the period; prices fell by nearly 40 percent between 1870 and the mid-1890s. As a result, debtors struggled terribly. Farmers, who typically carried debt from season to season, saw the price they could get for their crops fall year after year, a result of the opening of vast new swaths of land for cultivation. In many cities, meanwhile,
the availability of jobs oscillated wildly. National unemployment rose above 16 percent in the depressions of 1873–77 and 1893–97.

The economy as a whole was by no means stagnant during the final decades of the nineteenth century. Fueled by new technologies, trade, and masses of immigrants to man new factories, it grew extremely quickly, and great fortunes were amassed by a new class of rising industrialists, whose ostentatious displays of wealth inspired Mark Twain to caustically name the period the Gilded Age.

But particularly after 1880, most people didn’t share in this prosperity. Income inequality was likely higher near the end of the nineteenth century than at any other time in American history. In 1896, the social scientist
Charles Spaur estimated that the richest 1 percent of the American population held more than half the nation’s wealth; the poorest 44 percent, on the other hand, held 1.2 percent. According to the economic historian Benjamin Friedman, in 1895
perhaps half of America’s families were making less than they had made in 1880, fifteen years earlier.

Unemployment became a widespread social problem for the first time during this period. Previously, most Americans had lived on farms. Paid work had come and gone, but home industry—farming, canning, clothes making, and so on—had made the notion of unemployment largely foreign. In the mid-nineteenth century, even the textile mills of New England had been staffed largely by young unmarried women, many of whom lived on local farms—not by a permanent labor force. But by the 1870s, these women had been
supplanted by a permanent force of factory workers. As industry rose in scope and scale, cities grew larger and denser, and farm plots were squeezed out. Residents came to depend exclusively on wages to buy food and pay the rent. “For workers,” Keyssar wrote, “the sting of joblessness became sharper and more penetrating. For middle-class critics, observers, and reformers, the phenomenon became more visible.”