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The political pendulum will swing back

Stagnant wages and income are nothing new. Real median household income grew at only 0.5% per year from 1984 to 2015. Therefore if stagnant incomes were to be a cause of political instability, it would already have happened.

Instead, stagnant incomes have exacerbated political polarization, as voters punish incumbent parties for the perceived inability of government to ameliorate the conditions leading to income stagnation. This in part explains the victory of the Democratic presidential candidate in 2008 and of the Republican presidential candidate in 2016.

However, the sources of political discontent go beyond slow growth of wages and incomes. The crux of the problem is the decline in living standards and job security for those who formerly held good, stable, union jobs paying medical benefits and providing defined-benefit pension plans. As plants and mines have closed, these sources of stable income have disappeared, leading to profound unhappiness as current low-income unstable jobs lacking previous benefits are compared to the much better employment conditions of the past.

Bottom line: Since Trump has no plausible solutions to revive the lost jobs, the political pendulum may swing back in the opposite direction in 2018 and 2020.

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