A few articles ago, I wrote a pre election update, where I alluded to the market pricing in a Trump win. That can be viewed here. Today this became a reality. We have Donald Trump, potentially a racist, sexist, bigot, as head of the biggest and most powerful country in the western world, and I feel that this wasn’t really a surprise.
Disenfranchisement is a word, which throughout history, has resulted in radical behaviours and choices being made. Whether you look at workers who looked up to Ned Ludd during the 18th and 19th century, the French sans cullotte & Robespierre during the French Revolution, part of the reason as to why Hitler came to power, even the UK miners during the 80s, economic disenfranchisement has always led to anger and radical behaviour. Let’s put this election into context because I feel that there has been a lot of misunderstanding as to why people have voted for Trump.
The following chart shows the labour participation rate for all people over the age of 16 in the US:
Note the period between 1990 – 2008. We had a range of a 1% change in the labour participation rate throughout the whole of this 18 year period, 1990 saw a recession where GDP fell by 1.4%, 2000-2001 where GDP fell 0.3% and of course the Great Recession where GDP fell 5%. Since the 2008 crisis, labour participation has fallen by almost 5%. This means that as a metric, almost 5% of people have taken themselves completely out of the US labour force. This is not the same as being unemployed, and would give rise to why unemployment is so low (and is the statistic that everyone looks at when looking at the health of the labour economy which I think is myopic).
The reasons for this decline are due to manufacturing based being moved out of the US, or closing down completely, while the majority of those taking themselves out of the labour force are low skilled workers. Now, obviously you have baby boomers retiring which adds to this, but that is not the main reason as to why it has fallen, as quoted by many. You also have subdued wage growth with the lowest 10th percentile of low skilled workers seeing only a ‘0.13 percentage point increase with every $0.50 increase in hourly earnings‘. I have spoken on automation at varying degrees and to be fair to Obama, the trend for labour participation, especially amongst lower skilled workers, is down, but that isn’t the point. These people aren’t going to care about that. They are going to want to ask why they are on social security payments for eight years, having to go and collect food stamps weekly. Trump appeals to them due to being a businessman and seemingly want to shake things up (however simplistic this may seem).
Quite a sad caveat of this is the amount of working age men who are on long term pain killer prescriptions. 43.5% of men not in labour participation had taken pain killer medication the day before surveyed. This is over double those of employed men. The stat among women is not as great, but employed women are on long term pain killer medication at a greater proportion when employed, lesser so when not in the labour force. Staggeringly, 2/3 were complaining of emotional pain, depression or tiredness.
6% of prime age working men, therefore, believe that they are too ill to be able to work. Since 1968, that figure has quadrupled, where the rate was 1.8%:
The trend for women is different. We have seen a social change where women have dropped out of housework and entered the labour force which has masked the rise in women reporting being ill or disabled and taking themselves out of the labour force:
I don’t feel that this provides a full picture though. Let’s look at more monetary based reasons.
In 2014, 47% of US households surveyed said that they couldn’t afford an emergency expense of $400. A third of 36-51 year olds said the same. Stress related to financial worries accounted for 64% of stress related illnesses in 2014, coming above health problems, family issues and work issues. Clearly the two are linked and would also lead to a marginalised working and middle class. Increasingly, college educated people can be accounted for within this marginalisation, as automation increasingly decreases human capital compensation, as well as the actual requirement for human capital. I spoke about this major problem with regards to the US student loans market here.
What I am alluding to here is that it is not simply low skilled workers who are being affected. College grads are as well. If we use college grads as a bastardised proxy for the middle class, this shows that increasingly, the middle class is being pushed down into lower and lower incomes – the job market just isn’t there for them. Funnily enough though, this proved to be a plus for Clinton and not Trump, but the real swing here was students with ‘some’ college or an associate degree.
The New York Times
In other words, those who have either not completed college or are still in college increased their vote by 10% in favour of Trump. Potentially the burden of having to pay back a student loan but not having the job prospects due to not completing University or still being at University weighed a lot on their voting strategy. This is another marginalised group of people.
Looking more politically, Trump ended up taking 5% of voters who would usually have voted Democrat:
This is more opinion based, but I feel that this was due to her weakness as a candidate through the Wikileaks emails and her potential corrupt nature. The difference on this voter swing was 1% in favour of Trump with Clinton attracting 4% of the Republican vote.
This chart shows voter sentiment towards the state of the economy today. 78% of those surveyed who answered that the economy is worse today were Republican voters, polarised against 72% of Democrats who said the economy was better today.
Add in feelings toward the federal government and we get an overwhelming dislike of Obama’s government amongst Republican voters – no surprise there. What is strange though is that 45% of people who answered that they were dissatisfied were Democrats.
Potential reasons external to employment could be due to the Affordable Care Act (or not so affordable). Aka Obamacare, health insurance premiums have risen by almost 25% since the start, but more importantly, they have risen higher than wages:
What’s more, a survey conducted by the NY Fed found that 20.9% of manufacturing firms in New York State said that they were employing fewer workers because of the Act, while almost 17% in the services sector said the same. A 10% increase in healthcare costs for 2017 are estimated. The key phrase here is ‘manufacturing sector’ – again we come back to those disenfranchised voters who are seeing no relief on either job prospects or wages.
This chart proves it:
Trump had an 11 percentage point voter increase over Hillary in two wage demographics where the Democrats should have won.
I took a look at voter demographics sorted by race, but there is no change. It seems that the white non college educated voters turned out. The college graduate voters seemed to feel disgusted with both candidates, since it was their lowest turnout ever. What we have to take from this however, is that you cannot just say that everyone is racist because they voted for Trump. Yes there are bigoted views, yes there are racists and yes Trump is deplorable and I would have voted for Harambe as well. But it is ignorant and lunacy to totally ignore the reasons as to why radical candidates are selected. It occurs over and over again when an entire group of people feel disenfranchised, and even worse when this group is uneducated and feel pretty hopeless. In addition, when this seeps through into classes above, such as the middle class, it is no longer conducive to argue that everyone is a racist, not that it was conducive in the beginning.
In addition, I feel that Hillary failed here by actions she has committed over the course of her career. I do not believe that someone proven to be so constitutionally toxic and with such power via the Clinton Foundation and in congress, should be allowed to push for Bills and make foreign policy decisions when she clearly has vested interests. Having said that, Trump shouldn’t have either. 2020 Kanye for prez.