Nam Y. Huh/AP Photo
A hiring sign is shown in Wheeling, Illinois, March 19, 2023.
The Great American Quit Rate (full name: Great American Quit-Your-Stinkin’-Job-for-a-Better-One Rate) has finally subsided. While it lasted, though, it enabled the nation’s low-wage workers to make the first substantial economic gains they’ve made in 40 years. And that the GAQR existed at all was due almost entirely to President Biden’s war on poverty—a war that has gone largely unnoticed by both the public and the media.
How sizable were the gains that those low-wage workers made? According to a study by economists David Autor, Arindrajit Dube, and Annie McGrew, so many workers—predominantly young, with no more than high school educations, working overwhelmingly in low-wage service-sector jobs—quit those jobs in 2021 and 2022 for better-paying ones that this collective job switch actually reduced such indices of inequality as the gaps between college-educated and non-college workers, and that between the 90th income percentile and the 10th income percentile, by a full 25 percent. Both those gaps had been steadily widening for the past four decades. So sizable were these gains among low-wage workers that they were the only group of workers over the past two years who have seen wage increases that outpaced the rise in inflation. It was chiefly they who were doing the quitting and moving to better jobs over the past several years; better-paid workers largely stayed put.
Autor, Dube, and McGrew attribute this entirely unexpected boost to the fortunes of the working poor to the equally unexpected conditions of full employment that followed the economic collapse brought on by the COVID pandemic. It was only under those conditions that the job-quitters could feel assured that they’d find better-paying work.
At that point, the study ends, because the question of where that full employment came from is not, strictly speaking, an economic one. It’s a political question. And the answer to the whence-full-employment question is the policies that Biden and the Democratic Congress enacted soon after Biden took office. Specifically, it’s the much maligned $1.9 trillion recovery bill that Congress passed in the late winter of 2021.
In classic Keynesian fashion, that bill greatly boosted the public’s purchasing power. It delivered a cash payment to citizens, and a monthly prepayment of a Child Tax Credit to families with children, which reduced the nation’s rate of child poverty by 40 percent. It loaned or gave money to businesses to keep their doors open and their workers employed. And with so much very needed money suddenly traversing the economy, the rate of unemployment dropped quickly to historic lows (it’s currently at 3.6 percent), far faster than in the previous two sluggish recoveries. As a result, workers in jobs that were unrewarding found a host of offers from employers desperate to staff up. Autor, Dube, and McGrew document that the workers who quit their jobs didn’t just quit; they overwhelmingly found new employment that paid better.
There aren’t many instances in American history when a relief measure actually changed some of the economy’s contours.
Credit for that $1.9 trillion goes not just to Biden, of course, but also to the progressive economists he chose to advise him, very much including Jared Bernstein and Heather Boushey, both members of the president’s Council of Economic Advisers (of which Bernstein recently became chair). They had come to Biden from progressive economic think tanks that had argued strenuously during Obama’s presidency that more stimulus was required to end the Great Recession. As Biden prepared to become president, one of those think tanks, the Economic Policy Institute, assembled a host of economists, unions, and other liberal groups to make the case that recovery from the pandemic collapse required extraordinary measures that would push the economy toward full employment. Within the Biden administration and among Democrats generally, those arguments prevailed.
Media coverage of that $1.9 trillion has tended to focus on two different stories: its contribution to inflation, and the difficulty that employers experienced in holding on to their workers unless and until they raised their pay. Coverage of the effect the legislation had on the fortunes of the working poor, much less on the first diminution in economic inequality the nation has seen in 40 years, has been harder to find. Emblematic of that coverage is the attention the media has given to Larry Summers, who complained that the bill would unleash inflationary pressures. (Those pressures have largely subsided here, but are still peaking in European nations that enacted no comparable legislation, raising the distinct possibility that supply chain breakdowns, the Ukraine War, and high corporate profit margins had as much if not more to do with inflation than the Biden bill.) Not incidentally, it was Summers, as President Obama’s chief economic counselor at the start of his presidency, who slashed the opening bid on Obama’s original (and only) stimulus package in 2009 (through backroom intrigues). Having thus delayed that recovery and opposed the current one, Summers is nothing if not consistent.
General media myopia when it comes to the world of low-wage work is the chief culprit in their failure to document the positive effects of the current recovery, but there are other factors as well. For one, there aren’t many instances in American history when a relief measure actually changed some of the economy’s contours. Usually, the story has been how the absence of adequate relief measures prolonged a recession—as was certainly the case with the Summers-prolonged recovery following the 2008 financial crash, which dragged on for nearly a decade, stranding millions of millennials in economic purgatory, once the focus of both the Obama administration and Congress turned to debt reduction even as the unemployment rate still hovered near double digits.
Another reason was that Biden and congressional Democrats had additional economic priorities on which they themselves focused. These were the three industrial-policy bills that made it through Congress (funding green-energy production, semiconductors, and infrastructure) and the Build Back Better components (a permanent Child Tax Credit, affordable child care, paid sick leave, and free community college) that died at the hands of Sens. Manchin and Sinema. Each of those priorities was more distinct than the catchall stimulus that had passed at the outset of Biden’s presidency, and besides, that catchall was old news, while maneuvering around Build Back Better and the Industrial Three dominated almost all of Biden’s first two years as president.
But that temporary relief package looks to have done long-lasting good. While the quit rate has subsided, the move of low-wage workers to better-paying jobs and the wage hikes that employers in that sector have been compelled to make aren’t going away. “There are good reasons to think that at least a chunk of the changes that we’ve seen in the low-wage labor market will prove lasting,” Dube told the Times in a story that ran last Friday.
Are there political points that Biden and the Democrats can make by touting the long-lasting good that their legislation did in reducing American poverty? Sadly, probably not. It was the low-wage workforce that benefited most particularly from their policies, and that’s the part of the electorate that’s most difficult to reach with messaging (much less messaging on macroeconomic policies) and through voter mobilization campaigns. Those efforts will be made, of course, and may boost turnout here and there. In the end, however, the fact that Biden’s war on poverty was largely successful may register as a historic achievement—no small thing—but not, in itself, an electoral game changer.
