David Brooks Secretly Wrote a Great Article About How There Really Is a Class War
David Brooks is worried that, thanks to Bernie Sanders, Democrats are embracing the language of class warfare, blaming large corporations and the rich for the troubles of middle class Americans. The New York Times columnist believes that this is not only a doomed electoral strategy, but also a fundamentally incorrect explanation of how the economy has evolved in recent decades.
“The Sanders class-war story is wrong,” Brooks declared in a column last week. “Sanders starts with a truth: Workers need more bargaining power as they negotiate wages with their employers. But then he blows this up into an all-explaining ideology: Capitalism is a system of exploitation in which capitalist power completely dominates worker power. This ideology crashes against the facts.”
One could argue that this is a slight caricature of Sanders’ views, better representative of his loudest supporters on rose Twitter than the senator’s own rhetoric, which focuses more on the dangers of “unfettered” capitalism than the sort of strict class analysis Brooks is stuffing into his mouth. But we can leave that aside, because funnily enough, almost all of the evidence that Brooks trots out suggests that there really is a class war goin’ on.
Brooks begins by demonstrating how poorly he understands the left’s actual views of the economy. After noting that pay has risen faster for low-wage workers than anyone else during the past couple of years, he wonders rhetorically: “If the bosses have the workers by the throat, how can this be happening?”
The answers to this question are fairly obvious. First, many states have hiked their minimum wages, which Brooks might recall if he bothered to read his own newspaper. Second, the economy has loosened the bosses’ grips; the U.S. is enjoying a long stretch of low-unemployment, which has finally forced businesses to raise pay in order to hire and retain their workers.
So why does Brooks think his little riddle is such a devastating rebuke to Sanders’ story about the world? He seems to have imagined a straw-man version of the left that believes it is literally impossible for the country’s Walmart associates and Taco Bell cashiers to earn a decent raise, no matter how strong the economy is. In fact, the opposite is true. Any good democratic socialist will tell you that one of the ways capital exercises power over labor is by keeping the unemployment rate high, so that workers are afraid to get too uppity. It’s a central feature of the whole class war narrative. Meanwhile, progressive economists have spent years arguing that one of the best ways to boost wages at the low-end would be to let the country reach full employment, all-but-begging the Federal Reserve not to cool things down by raising interest rates, precisely because they believed that a hot job market was the only thing that would give working class Americans leverage to demand higher pay. And, to get the tiniest bit technical about it, they’ve made a case that the jobless rate affects wage growth much more strongly for people at the bottom of the earnings pyramid than at the top, which would perfectly explain why low-wage workers have seen bigger boost lately. In short, recent history has proven the left right on this stuff, and Brooks is trotting out the very numbers that show why.
Having obliviously dunked the ball once into his own hoop, Brooks moves on to spinning out his big-think theory. “The core problem is not capitalists exploiting their workers; it’s the rise of productivity inequality,” he writes. Productivity, for reference, is the value that a worker, a company, or a whole economy manages to churn out with each hour of labor, and figures heavily into theories that suggest America’s income gap has been driven by the changing worth of education and high tech skills. Some workers — star coders, surgeons, engineers, doctors, hedge fund quants — are just a lot more productive than others, the argument goes, and so they make a lot more money than everybody else. Brooks desperately wants to prove that this is the force driving, even when his own exhibits suggest otherwise.
To start, he writes: “Wages are still generally determined by skills and productivity.” As proof, he cites a recent paper by Stanford University economist Edward Lazear. It finds that between 1989 and 2017, productivity in high-skill industries rose by 34 percent, and wages rose by 26 percent. In less-skilled industries, productivity rose by 20 percent while wages grew by just 24 percent. Here’s Lazear’s graph.
Again, Brooks is trying to prove professionals in high-tech industries are being rewarded because they produce more. But look at these numbers again. Notice anything about them? If you ask me, they show that in high-education industries, productivity is growing much faster than pay. In fact, a quick glance at the graph would lead you to think productivity is practically irrelevant to wage growth. It suggests that workers powering the most dynamic parts of our economy are not being rewarded for anywhere close to all of the value they are adding. Instead, owners and investors seem to be skimming it off.¹ Brooks has scored another clear own goal, a shattering backboard smash into the wrong basket.
Finally, the columnist moves on to the core of his argument. The most important thing to remember, he explains, is that “most of the increase in earnings inequality has happened between companies, not within them.” In other words, the pay gap isn’t increasing because CEOs and top executives are being paid vastly more compared to their underlings than in the past. It’s that employees at Google and Facebook are being paid a lot more than workers at smaller, less successful tech firms. Oddly, Brooks does not bother to cite the single most important study that has been published on this topic, which, among other things, shows that inequality has still increased significantly within large companies,² as median earnings have declined and pay packages for c-suiters have skyrocketed.
Instead, he brings up a widely read paper on the rise of so-called “superstar firms.” The study isn’t actually about earnings inequality between workers, per se. Instead, it seeks to answer a question that economists have been puzzling over for a while now: Why is it that, all over the world, the share of national income going to labor has fallen while the share going to capital — owners, investors, etc. — has risen. The authors suggest that the success of massive, extremely profitable companies like Apple and Microsoft are a key part of the story. Across industries, they find that an ever-larger portion of sales are being eaten up by these worldbeaters, which also happen to spend less of their revenues paying workers compared to the competition. Hence labor’s share of the pie has fallen. There’s a vigorous debate about why these companies are so dominant. The authors, largely a group of economists from MIT and Harvard, suggest that it’s because superstar firms are incredibly innovative and productive companies in winner-take-all industries (think Google). Other researchers have argued that we may be looking at anticompetitive, pseudo-monopolies (also, potentially, Google). But Brooks goes with the upbeat story. “Today’s successful bosses are doing what they should be doing: increasing productivity, growing their businesses and offering great service. A side effect of their efficiency is they spend a smaller share of their revenue on labor even while raising their workers’ wages. In a global information-age economy, the rewards for being best are huge.”
Notice again, though, that Brooks is breezing by the key point here: The managers of the world’s superstar companies — the most productive, profitable firms on the globe — have figured out how pay their workers a smaller share of the value they produce. This might not strike you as much of a tragedy if you think of every tech worker as a software engineer making bank in Silicon Valley. But remember that amazon employs on an army of warehouse workers who frequently injure themselves trying to work at literally inhuman speeds. Apple is notorious for paying its sprawling retail workforce poorly. Tech firms like Google, Facebook, and Twitter, also lean heavily on hoards of contractors who technically work for outside firms and treated as second class corporate citizens. They drive buses. They run cafeterias. They write code. They deal with the horrific task of content moderation. These companies have also been known to take extra-legal steps to keep their workers in check, like the Valley’s notorious no-poaching agreement.
To sum it all up, Brooks has marshaled evidence that America’s low-wage workers only get significant raises when the unemployment rate is way down; productivity is way outpacing pay in high-education industries; and the world’s most profitable companies are actually quite good at exploiting labor. Sounds like a class war to me.
¹ I don’t entirely blame Brooks, or his research assistant, for missing this point; Lazear sort of dances around it in his paper, which has some methodological issues.
² The paper defines a large company as having more than 10,000 employees. To put that in perspective, Facebook has more than 35,000 employees worldwide, Exxon has over 71,000, and Best Buy has around 125,000.
