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  • Writer's pictureOren Levin-Waldman

The Roots of Polarization lie in the Economy

The U.S. has long been divided along ideological lines. Republicans and conservatives are to be found disproportionately in what are referred to as red states while Democrats and liberals are in what are referred to as blue states. The nation has been even more polarized since the 2016 election, and the 2020 election promises to be no less polarizing. This polarization, however, is rooted in major economic transformations that have been taking place in the global economy.

What, then, does this mean? Data from the Current Population Survey (CPS) shows that workers in blue states are more likely to have advanced degrees and be working in the professional and managerial sectors. They have fewer workers whose highest grade is only a High School diploma. Meanwhile, red states have fewer workers with advanced degrees, and more workers whose highest level of educational attainment is a High School diploma or only some college. Moreover, they are more likely to have higher a percentage of workers in what we could classify as more skilled blue-collar occupations.

Although manufacturing in the U.S. has declined considerably over the last several decades, there is still more manufacturing in red states. And while mining constitutes a very small percentage of the labor market, it is in some cases twice as much in red states. Already, one can begin to the see the divide going into an election. In a red state fracking is a matter of jobs while in blue states it is an issue of the environment. One might expect heightened anxiety over the economy in those states where there is more manufacturing and mining, especially when blue state politicians talk of the need for these workers to get used to doing something else, because they will be pursuing progressive policies that will eliminate their jobs.

Of course we should be concerned about the environment, but those in blue states appear to be tone deaf to legitimate worker anxieties in red states. After all, they won’t be affected. In our polarized nation we already have a tale of two economies where median wages are higher in blue states than they are in red states. Ironically, red states are more likely to have higher levels of inequality.

Let’s consider that in 2016 for those employed workers working full-time between the ages of 18 to 65, wage inequality in blue states was 15 percent on the top-to-bottom quintile ratio while it was 13.2 percent in red states, a difference of 13.6 percent. Because there is a less of a middle class in blue states there is greater wage dispersion. But these same workers are in families where total family income inequality was 39.9 percent in blue states and 48.1 percent in red states, a difference of 20.6 percent. This may in part be attributable to red states having fewer social supports and subsidies for those at the bottom of the distribution.

If what is replacing the manufacturing base in accordance with Schumpeter’s theory of “creative destruction” is high tech, this sector is not as likely to be found in red states. Would workers in red states be more concerned about immigration if they perceived it to be a threat to their jobs? It may be recalled that part of the narrative following the 2016 election was that Donald Trump won because he played on nativist sentiments in the heartland. His talk of a wall and the need to keep illegal immigrants out was nothing less than an appeal to racist sentiment.

The narrative, however, is a bit too simplistic, as are most with a particular agenda. The Census Bureau has a variable for Hispanic Origin, for which the largest category is Mexican. There is a also a Citizenship variable, of which one of the main categories is Non-Citizen. Mexican, then, might be viewed as a proxy, albeit an imperfect one, for illegal immigration. And yet, there is a distinction to be made between Mexicans and Non-Citizens.

Non-Citizens may be here legally, or those who are here illegally actually came here legally on either work or student visas and overstayed them. Even those who are here legally could be on an H-1B visa, in which case their presence may upset even highly skilled workers if they are perceived to be taking jobs away from skilled American workers at lower pay, thereby suppressing wages.

The data for 2016 shows the Mexican variable to be not statistically significant, although the number of Mexicans was greater in blue states than in red states. What did increase in red states was the percentage of non-citizens, but non-citizens are still less likely to be found in red states than in blue states.

Still, if we look at these variable in terms of higher levels than in the U.S. as a whole we find that states with higher levels of inequality are more likely to be red. Moreover, blue states are less likely to have higher levels of inequality than the U.S. as a whole. This is interesting because during the 2016 election inequality wasn’t a stated issue, but it is certainly a consequence of changing economies.

Nevertheless, more Mexicans has a strongly negative effect. That is, states with more Mexicans than the U.S. as a whole were unlikely to be red states. But more non-citizens does have a strong positive effect for being a red state. This may be suggestive that American workers are concerned about losing their jobs to those with H-1B visas or that a higher presence of unskilled workers, even if here legally, will effectively suppress wages at the bottom. Remember, this might be more of a concern in red states because fewer workers relative to those in blue states, would be skilled, or at least sufficiently skilled to work in high tech, management, and/or the professions.

Rising inequality does have the potential to result in a revolution because of the increased social strife, but it can lead the masses to choose more authoritarian governing structures, or it could result in disaffected voters choosing candidates who in their appearance as strongmen, it is believed, will be able to deliver to them what others have not. At a minimum, it appears to lead to greater polarization in the political sphere. The results of the 2016 election suggest the loss of manufacturing and occupations that employed middle class workers may have been responsible for states flipping from blue to red.

But this polarization is also evident in different levels of educational attainment. States that flipped were not states where there were larger percentages than the U.S. as a whole of workers with advanced education, if those with graduate and/or professional degrees can be said to speak to skills levels. Rather, they are less likely to be found in red states generally and in those states that flipped red, particularly in 2016. Rising inequality, of course, isn’t responsible for the changing base of the economy. Rather the changing base of the economy is reflected in rising income inequality.

Already it is becoming clear that the roots of polarization reside in the economy. Indirectly, increased inequality may have had something to do with greater polarization. We can speculate that if states flipped red because of changes in their respective labor markets, which may have been a source of anxiety for voters in those states. The political class representing blue states has not been speaking to the concerns of red state workers. And yet, when the same politicians deflect from these concerns by appealing to identity politics, they either fail to comprehend the importance of labor markets, or worse they reveal how much they really don’t care how much the typical worker has been displaced due to globalization.

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