The Paycheck Paradox: What’s Missing When We Talk About the Economy

When politicians herald wage increases and harp on gas prices, they forget how Americans see themselves.

President Joe Biden delivers remarks on the November jobs report in the White House on Dec. 3, 2021. Photo: Anna Moneymaker/Getty Images

On Friday, a familiar pattern played out: The Labor Department released a very, very good jobs report, and the media continued hyping what a lousy economy President Joe Biden is overseeing. As the economy added 210,000 jobs, the unemployment rate fell nearly half a percentage point — down to 4.2 percent, a full point lower than the Congressional Budget Office projected a year ago. Wages were up nearly 5 percent year over year, with bigger gains most concentrated among the working class. Hourly wages for restaurant workers, for instance, were up more than 13 percent. This comes on top of the child tax credit and other subsidies in the American Rescue Plan, which, along with former President Donald Trump’s stimulus checks, have left people’s savings accounts fatter than they’ve been in a generation. It has practically never been easier to find a job; wages and hours are growing steadily; and people have more money in the bank.

Yet surveys show that the American people by huge margins say they don’t like the direction of the economy. So how can we explain this apparent paradox? Why do people keep saying that the economy sucks even as wages are rising and unemployment is falling?

It would be tempting to suggest that the answer lies in the fact that since the late 1970s, we went some 40 years without any real wage growth, and if wages had kept up with productivity, people would be making a lot more than they are now. That’s certainly enough to make people sour on the economy generally, but it doesn’t explain why they’re more sour now than at many other times over the last 40 years. What the paradox reveals is that our political system misunderstands how people identify themselves in relation to the economy. The American people — and importantly, American voters — think of themselves as consumers rather than workers.

For workers, the economy is going well. But for consumers, not so much. If people are asked how the economy is doing, the question they’re answering is: How well is it serving you?

If you order something on Amazon, is it in stock and showing up at your door the next day at the price you’re used to? Can you get a cheap Uber quickly? Are gas and grocery prices up? When people walk into a restaurant and one of the sections is closed because they’re short-staffed, that’s the kind of thing people mean when they say that the economy is going badly. It’s not serving them the way that they’re used to.

The transformation of the American people from workers to consumers goes back a long way, but it picked up its real strength right after World War II. During the war, workers had either left their jobs to serve overseas or were working long hours at home for much less pay than they could command in order to support the war effort. “Together we can do it!” blared one typical General Motors poster, showing two fists next to each other, one labeled “labor” and the other “management.” The poster commanded “Keep ’em firing!” above images of a tank and a fighter plane that needed the factory’s supplies of ammunition.


A General Motors war production propaganda poster from 1942.

Illustration: General Motors Company

When the war ended, the pot boiled over, and workers demanded to be compensated for their sacrifices. They had been essential to the war effort, and now they wanted to be treated like it.

The great post-war strike wave of 1945 and 1946 saw millions of workers walk off the job, like nothing that had ever been seen in the U.S. Instead of sitting down with labor and constructing a new post-war social contract, corporate America organized against the workers and strikes, fighting them at every step and winning many of the contests. Voters handed Congress to the GOP for the first time in 18 years, and Republicans used the opportunity to pass the Taft-Hartley Act, which sharply limited union activities and helped destroy the labor movement. Instead of letting workers take control of their own destinies, American policymakers bought off the new veterans and the rising middle class — the white element of it, anyway — with a GI bill, the construction of endless suburbs and highways, and the advent of mass consumer society.

So this was the deal: The bosses would fully control the workplace, and you’d be miserable at your job, but you’d have a decent amount of security, and your paycheck could buy you a house with a yard and the endless stream of gadgets that this new economy would produce. You had no autonomy at work, but you did at home, and so the way you spent your money, not the way you earned it, became the way you identified yourself. You were a consumer, not a worker.

It’s as consumers that we make political judgments.

Fifty years later, after the 9/11 attacks, President George W. Bush urged us all to do our true patriotic duty.

“One of the great goals of this nation’s war is to restore public confidence in the airline industry,” he said in the weeks following September 11. “Get on board. Do your business around the country. Fly and enjoy America’s great destination spots. Get down to Disney World in Florida.”

And if we didn’t storm the aisles of Walmart on Black Friday, Bush warned, the terrorists would win. “We cannot let the terrorists achieve the objective of frightening our nation to the point where we don’t conduct business — where people don’t shop.”

And so we are both consumers and workers, but the pride we take is in our consumption. That’s where we believe we have autonomy. It’s as consumers that we make political judgments.

Democrats are frustrated that they’re not getting credit for rising wages and people’s fatter bank accounts, but they’re missing the psychological piece of this. If you’re in a union and it fights for and wins a raise, then you’re going to recognize that the union deserves credit for that. You and your colleagues fought for better wages, and you won. If there are politicians who supported you and helped enforce labor laws along the way, you share some credit with those politicians.

But if you’re not in a union, and your boss gives you a raise so that you won’t quit, why would you give the Democrats credit? From your perspective, you did that. You’ve been working hard, and you deserved that raise. And you’re right — but you were working hard in previous years too, and you didn’t get as much back then. The difference was full employment, which is a function of policy, but workers seldom connect their raises to those types of attenuated policy decisions.

They do, however, connect prices to policy. They deserved their raise, but higher gas prices and grocery bills? That’s something that somebody else is doing to them, and the easiest one to punish is the party in power.

Join The Conversation