In the handlers, as he spent cities. Good evening everybody will get started welcome to the American Enterprise institute. And director of social cultural and constitutional studies. Ai. It is my great pleasure tonight talking you to discussion of important new book by my good friend and colleague, michael read michael is the director of economic studies. Ai is a widely published scholar labor economic Public Finance and many other areas in his new book is an exceptionally clear and broad overview of the state of an American Economic life. The actual conditions we face, the trends, over recent decades and others relate to some of the dark stories that we hear in our politics about the conditions that americans are experiencing also where profits are. Any sort of saved things that are much better than the mode of our politics and the critics of the market economy would sometimes suggest that we do face risks in the navy that mood and those critics, are the among the most important of those risks. It is a controversial piece an essay as a conservative i am resistant to be turned up until everything is fine. But it is very powerfully argue of pieces and as youll see in here tonight, very thoroughly supported thesis in the book. Joining us to respond to my arguments, is richard recent one of the smartest social analyst and policy thinkers in washington. Richard is the whitehead chair is senior fellow in economics study the Brookings Institution is director of the initiative on the future of the middle class and the the author of many important articles in a number of important books including the most recently dream borders and how the market middle class is letting everyone else in the dust and why that is a problem and what to do about it. Our format is going to be very simple. Mike will offer us an overview of the argument of the book and richard both overt response and i will moderate a brief conversation between the two of them and then we will draw you into the conversation with some q a so that was welcome michael. [applause]. Thank you all so much for coming this a very generous introduction. Mike the title of the book contains the argument i am making wishes the American Dream and is not dead. In the subtitle makes a secondary argument which is the populism so it is actually, an excellent, theres really no reason for any of you treated anything on the inside of it. The American Dream is not dead. What do we mean by the American Dream. Lets just start from the top. There many definitions and many Different Things to many different people the freedom, choose how to live your life, to have a good life in a meaningful work and family and Strong Community can promote retirement and own a home con ownership is a big part of the American Dream in the popular imagination. I would argue that a key part of the dream is based on economic success no matter what kind of specific flavor of the American Dream youre most interested in, and the mentor your particular definition is an think everybodys definition involves a large economic component loosely defined. The idea that your kids, will grow up to be better off than you, and the idea that you can do better your self through hard work and that you can see your economic outcome advance. And then the idea that theres a rags to riches component. Also a strong idea that the idea that you can be poor and grow to be present in sort of thing and this is the kind of part of the American Dream that a focus on in this book. The economic influence because it think it is so central to everybodys, shared understanding of this important motivating national contacts. Some additional conversation assumes that the American Dream is dead. President trump with his usual violence and said that the market dream is dead. This was of course the same during the primaries of the 2016 cycle. And after he was elected, his inaugural address. And how terrible everything is pretty hes changing that in the last two months which is good but this is sort of been the defining characteristic of his presidency. So they tell the story about his family. That about house how his family came to america and did not have a lot of education and how this success across generations. He told the story back when he was running for president in 2016 as an example of the American Dream being alive. In the past few years he says the same stories with the same set of facts except the incident to argue that path is no longer possible. The American Dream has disappeared. Elisabeth warren, the rich get richer. In the game is rigged. It bernie sanders, for many of the marketing has become a nightmare. Josh, 70 percent of americans have not seen an increase in 30 years. And since the American Economy is a billionaire investor. In the American Dream is lost. Referring to the dark age we are living through the says that the American Dream is going. My point is that this is bipartisan. Its something you hear from elected officials from both parties. In viciousness you hear from Public Opinion leaders and from public election rules. This can do this. My point is it is misplaced and michael is not to be a contrarian printed markets have High Expectations for their economic outcome and their wage growth and for the success their children will have is a good thing. And i get does face serious economic challenges and i spent a chapter in this book discussing something i think is most serious. Also social challenges. Im not trying to diminish or sugarcoat or to ignore any of the real problems these days. And soon i am trying to be accurate and im trying to be accurate about the broad picture. Of the american experience. How American Life is experienced by typical people by most people, in those circumstances. I think that we are focusing so much of the pockets of real struggle that we are confusing those pockets of struggle for the common experience facing people. I think the American People comparing that their experiences is the same as the experience of people in places that who are really suffering and struggling. I dont want to deny that suffering for the struggle. I do want to say that those are atypical situations. And at the common experiences that much more positive than the narrative suggested. So simple assertions, the economy is delivering for market workers. Over the past three decades, the quality of life has improved significantly over the past several decades. Middle income jobs have been hollowed out. And they create and destroys. We hear a lot about the destruction and creative destruction. And if you look, you see a new metal may be starting to form where the old middle has been eroded. Americas characterized by a poor economical ability. I made a couple of other assertions as well. The American Dream matters and we need to make sure we secure the dream for the next generation. So very briefly. I will stand up here for about 20 minutes that i will give richard and the opportunity to respond. Some not able to cover all of that. But i will do the best i can. I thought it would be better to have some real disagreements. So the economy is delivering for workers. Weekly earnings for in the bottom 10 percent is one over one third faster than the growth of the medium over the last several years. An employment rate for workers is further below the longterm average and the income for College Roger is currently. And going faster than overall average wages since last february. The argument is that the gains from the hot economy were only during and having the people of the top of the game is rigged against workers who were not at the very top. That is just not supported by the data. Right now currently the recovery is managing a reaching wide arts of the labor market. My second argument, wages have not been standing for decades. This is a graph of wages. This is a graph of the wages of nonsupervisory workers. These are production workers in manufacturing, construction workers and nonsupervisory workers and services. These include this group of workers includes about 80 percent of all workers. About four in five workers pretty can think of these folks as workers, not managers. How i have done is swap the average wage for workers in that group, and adjusted for inflation. And i want to make some observations. What you see is that through the 1960s and going into the 1970s, there was rapid and sustained wage growth for this group of workers. Then went to see, is from the mid 1970s to the 1990s, this group of workers did not do so well. Any seat stagnant and declining wages. Since the early to mid 1990s, ic wages going up. I dont see wages being stagnant. Either times where they were growing but on the whole of your choices to characterize this and stagnant or as increasing, i think it is quite clear that over the last three decades, the most accurate way to characterize this is that wages have been increasing. Lets look at this. It is common to go back to 1973. In one of the things i want to do in this book is to argue that a comparison between 1973 in the year 2020, is too long of a window to make comparisons about it. But it is, to go back to 1973. Wages have grown 23 percent since 1973 and i would not call that stagnant or spectacular. But it certainly would not call it stagnant. I would argue that we should not compare to 1973. This debate, here in washington often gets hung up on what price index to use. To adjust for inflation. I want to say, that what we really should debating is the starting year. We should spend less time debating the price index and more time debating the actual. That we are making the comparison over. So why do the default and star in 1973 or 1979 when you see that there is this 30 year period where wages have been going up. I argued to start in 1990. When politicians argue wages have beens decade stagnant they refer to their wages so wages of people are currently working. 1973 was 47 years ago. The purpose of the policy debate, mra sent year, hear this is more relevant to people are walking, seems a pretty straightforward. 1990 was a Business Cycle peak. The summer of 1990 is close to a structural break in the series. Seems to occur about the midnineties. What, i mean, by that is if you start in 1973, we are doing is youre comparing and inviting the period of stagnation and decline to period of growth. And thats me seems to be statistically and advisable. I think instead calculate growth over the period where wages are going and calculate stagnation or print where wages are stagnating and out illness. The two if youre trying to get a handle on what wages are doing. 1990 was rough for 30 years ago pretty her love talk about several decades. This seems like a reasonable length of time to go back. It is harder to adjust for inflation the further back in time you go. One of the ways we can sidestep all of these debates about which to go is just not try to go back all those years. If you go back ten years on the price index increase a lot more strongly than if you go by. If you about 20, theyre more strongly than if you go back 30. When wait not to get narrowed down the price in this debate is to focus on a shorter time. My main point is that even if you do want to go back to the 70s, it is really not a complete picture to argue that wages have been stagnant. Instead, i think you can characterize the two different periods so if you want to go back to the 70s fine, we should be saying is that wages stagnated throughout the 70s and throughout the 80s and into the 1990s and then since the early 90s, wages have been crying. Seems to me to be much more than a complete characterization of the behavior of wages. So 33 percent growth, over the last 30 years. It is improperly described as stagnant. Slow growth and top 1 percent. It is a significant increase in purchasing power. We should not be content with it. Not stagnant, but not fast enough, and lets acknowledge that it is different than it what is happening at the top. But is more wrong than right to describe this as stagnant. Instead of one third increases of purchasing power is significant. This is a graph that adjust for wages and you see that the closer you get to the present, the more the pricing and you another argument putting back so far. What a persons also going, medium wages and by 24 percent. Wages for the 10 percent and one by about one third. Twenty percentile by about one third and wages for the 30th percentile has grown roughly brothers will reduce you can argue medium wages have gone up by a quarter in the working class and low income grown by a third. Again, not stagnation. Three different measures of income if you look at the post tax and post transfer and cancel you see that that has none of my 44 percent median household, market is none of my 21 percent. If you look in the bottom 20 percent music that the transference has gone up by two thirds and marketed him has gone up by 44 percent and again, not stagnant. Lower in the top 1 percent, yes but not stagnant. If you look at the income series and you look at a Standard Measure of inequality, what you see is a significant increase in quality in the 1980s and 1990s printed and then since the Great Recession, when concerned about inequality exploded, you actually see a 7 percent decline in this measure of inequality using the transfer incomes and he look at marketing incomes amusing increase of about 2 percent. This is another example of how the narrative about American Workers has not kept up with the data. Wages were stagnant in the 1970s and 1980s. Has not been true for three decades inequality was going rapidly in the 80s 90s for the past decade is been going growing much less rapidly. This is more straightforward measure. The ratio with the earnings from the 90th percentile. Another measures as well. You see these also have not showing any Significant Growth in inequality over that. Enter people care about inequality. Covered this very briefly. This chart here shows, concerned about inequality, grafton again factual inequality. Some Public Perception about whether or not the rich are getting richer versus actual behavior of the coefficient. In fact the correlation is negative. If you look at this graph, this is concerned about inequality and wage growth. And you see, that wages are growing throughout the 1990s and concerned about inequality is going down. So combine all of those three facts together. Measured inequality is going up, concerned about inequality is going down. Wages are going up. This estimate is about people care about how they are doing they care about the actual behavior of the rich poor gap. My third big point. Life is better decades ago. I like to show the scruff. It is a graph of air conditioning. A very important to me. Personally. And you see, Significant Growth in the share homes with air conditioning on this. And perhaps more seriously, have been significant advances in medical care printed and in transportation. The idea life would somehow better pretty 40 years ago, even for the White Working Class, really borders on the observed it and you actually take argument seriously, it is impossible to imagine as many people of anybody would actually go back in time 40 years ago. No matter what their Current Situation is now. Middleclass jobs. This is a chart that shows the hollowing out of the shelf distribution. Uc employment losses in the middle. Production workers and clerical workers, these are the jobs with a lot of political failures during the trump era. And you see an increase in most of the lowwage jobs along with increases in higher jobs. In this event of course a considerable economic dislocation and considerable suffering the lives of many people. A collision between expectations and reality where expectations were not filled. And is a very serious reality of americans economic and social life. It was the numbers on it, if you look at low middle and high occupations amusing that those constituted 31 and 3 percent of total employment, roughly equal spread. And he looked from 1970 to the present, you see the middle occupations only constitute for about 23 percent of total unemployment. That is a significant decline. But what happened to these workers. A whole lot of them ended up moving into higher income bracket. So you see in the start of the redlines show that the share households making between 500k, passes on down considerably. Theyve been replaced with households that are earning more than 100k. Theyve not been replaced with households earning less than 35k. So this is a distraction. In some positives. I will skip over this in the second time. And if you focus, if on the production jobs in the construction jobs in the clerical jobs, and getting all of the Political Tension from edc their declining. That is the blue line but if you look, you see theres actually Significant Growth in the types of middle school and middle wage jobs. These are healthcare support occupations. Transportation occupations education and training occupations. Personal care and services. This because theres a lot of growth in the chef occupational category. Apparently we want more chefs. I have a list. I was lying. Head cooks and Food Service Managers are right there at the bottom. The moral of the story is it creates distress but also creates and we hear a lot about the distraction but not a lot about the creativity so what is happening in those middleaged occupations, its what happens at the dynamic capitalist economy where Technology Comes along and replaces some workers replaces some tasks. That creates new opportunities workers need to take advantage of those opportunities. Public policy needs to assist workers in doing so. But the moaning, economic change and attempting to stop it i