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Risky Business

01 May 2007 11:28 am

The hot book of last year among populist-leaning liberals was Jacob Hacker's The Great Risk Shift, which argued that income volatility has gone way, way up for most middle-class Americans in the long era of GOP dominance. A lot of smart people I know were skeptical about his claim, and now there's some pretty comprehensive data from the Congressional Budget Office report suggesting that individual income volatility hasn't gone up since the 1970s.

Hacker defends his argument here; Tyler Cowen isn't impressed by Hacker's defense, to say the least. What's interesting to me, though, is that Hacker's argument now rests on the contention that even if individual income hasn't become more volatile, family income has, and family income is what we should care about. That's a perfectly plausible point of view: Given the changes in family structure over the last thirty years, you would expect greater volatility, some of it from benign factors (the income swing that comes when a woman eaves and then re-enters the workforce, say) and some of it from darker trends, like rising illegitimacy and the growing divorce divide. And you'd expect working-class Americans, in particular, to be hardest hit by this family-related volatility, since they have much higher rates of divorce and single parenthood than the well-off and well-educated.

But the subtitle of Hacker's book, you'll note, isn't "How The Sexual Revolution Created Higher Levels of Risk For American Families and What To Do About It." It's "The Assault on American Jobs, Families, Health Care, and Retirement - And How You Can Fight Back." In other words, he's taking data that would seem to support the socially conservative contention that changing family structure has had a lot of negative externalities for vulnerable Americans, and using it to claim that 1) Republicans have shredded the safety net and 2) we need a much, much stronger one than what we currently have. The first point is at best debatable - if our safety net is shredded, then why aren't individuals experiencing more income volatility too? - and the second point just amounts to the rather predictable liberal claim that a bigger welfare state is the answer to increasing family breakdown.

I'm skating rather quickly over a very complex terrain, admittedly, and I should also note that I actually agree with a few of Hacker's policy prescriptions, if memory serves (I don't have the book in front of me). I just think that he's taking a narrative that, if true, provides a lot of grist for social conservatives and claiming, somewhat simplistically, that it vindicates a rather conventional liberal worldview.

Comments (12)

I don't think that's a sign of intellectual dishonesty on Hacker's part, though. It's just that he, like most liberals (full disclosure: me included), a) doesn't want to roll back the sexual revolution in any significant way and b) has no idea how to go about doing so.

What's being lost in this discussion is that the focus of Hacker's book was not exclusively on the increase in income volatility, but also on the way that economic changes have made it more difficult for families to cope with income volatility (e.g. rising personal debt, inflation in housing expenses, the demise of corporate pensions, savings being swallowed up by end-of-life health expenses, the rising costs of education and increased need for adult education, etc.) That's not to say that these data don't strike a blow against Hacker's thesis, but he didn't hang his hat on a single metric.

I've read enough of your work to have a general idea where you stand on cultural issues, Ross, but I'm interested to know how far you want to take this discussion about the "negative externalities" of changing family structure. After all, another thing that economic data clearly show is that individual incomes have generally stagnated in recent years, while household incomes have risen largely due to the increasing number of women in the workforce. Does it really advance the conservative agenda to emphasize that our economic success derives from mothers who work outside the home?

And how much longer can our economy support these trends without creating a need for three-income families? Polygamy isn't terribly popular with either liberals or conservatives.

The data regarding income volatility do not support the conservative contention that changes in family structure have negative economic consequences without the further assumption that a society built on denying women participation in public life, and whose social and economic infrastructure operate by taking advantage of the family structures they presuppose, is the right kind of society. If it is, then the fact that changes in family structures create instability in that society are bad - but if it is not, that is, if a society that assumes that women will have careers and interests outside of caring for other family members is a better kind of society, then the instability for a repressive society caused by women pursuing their own careers and interests is just more evidence that that society should be changed.

In short, Hacker (apparently) has pointed out a problem, but the fact that he believes that problem calls for a liberal solution is no less "supported by" the data proving that there is a problem than is the assumption that the best solution would be a reactionary one. The problem (income volatility) is what it is - the practical question is how to move forward to reduce that problem. Whether we decide that means supporting women's freedom and providing for families at risk, or suppressing women for the sake of their families, is not determined by the mere fact that there is a problem.

I think Hacker is just assuming it's not possible to return to a more 'socially conservative' family structure (if that's what you want to call preventing half the population from having economic or political power and making their own occupational choices). There's simply no realistic way to achieve it even if it weren't a deeply unjust goal.

How much of this is due to many dual-income households' choice to scale their consumption & lifestyle to match their dual incomes? Instead of restraining themselves to a one-income lifestyle (in terms of the type of house to buy, car to drive, parties to throw their kids, etc.), so then the "need" for a second spouse to work is not necessarily driven by the expenses of running the household (whether they are fixed or discretionary).

In other words, what has happened to living within one's means - is it a case of the "system" crashing down on them or making imprudent choices?

MPS--let's assume you're right, for the sake of argument--what on earth should be our response to this, if any? Love it or hate it, when it comes to dual-income households, the genie is out of the bottle.

Dan - I agree, what CAN be done (policy-wise)? Perhaps curtailing cheap/easy credit (which is already happening, at least in the housing market)?

I think the unwise financial habits of many Americans is a symptom of a "have it all" (and "have it all NOW") perspective. And it's not just a dual-income phenomenon. I've seen families on one income, well into 6 figures, maximize their consumption based on that, and then lament things like "we have $50,000 in credit card debt" or "we can't afford a third child".

[Hacker is] taking data that would seem to support the socially conservative contention that changing family structure has had a lot of negative externalities for vulnerable Americans, and using it to claim that 1) Republicans have shredded the safety net and 2) we need a much, much stronger one than what we currently have.

Why is it socially conservative to note that changes in family structure have had a lot of negative externalities for vulnerable Americans? Such observations are in the realm of facts. Reasonable people might disagree about the causes for these changes, and about what is to be done, but those are different questions.

Why is there no middle ground between an Islamicist or similar society where women are not allowed outside the home without a veil and a society where virtually every woman of working age works outside the home? Especially in the computer age, a homemaker can make an economic contribution by computer even as she (or he in a few cases) concentrates on home and children. The traditional American model based on Biblical principles long resulted in women controlling slightly more than half the wealth (as distinct from income) and has never cloistered women. Under the Shah of Iran, women were permitted professional careers also. Some liberal posters are guilty of the logical fallacy of the excluded middle.

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