Tough reality check for Trump's pledge of better heartland jobs, wages

[November 10, 2016]  By Howard Schneider

CHARLOTTE, North Carolina - Donald Trump's promise to revive small town America faces a tough challenge in an economy that for decades has been wired to direct income and opportunities toward urban hubs and the better educated.

Little in the president-elect's so far sketchy economic plans indicates the trend can be reversed any time soon, according to interviews with experts on income inequality and recent occupational trends.

The manufacturing jobs Trump pledges to bring back have disappeared as much because of automation as the trade deals he has promised to rewrite, and that process will only continue. A promised infrastructure revamp would boost middle wage jobs but for only as long as the programs last, economists point out.

During President Barack Obama's eight years in office incomes for the best off continued to diverge, despite nearly 10 million new jobs and recent strength in those paying middle-tier wages.

On a pre-tax basis, the share of income to the top fifth of households increased from 50.4 percent to 51.4 percent between 2008 and 2015 at the expense of all the others, according to census estimates. (Graphic:http://tmsnrt.rs/2elimH2)

Without the sort of tax and redistribution policies Republicans have traditionally opposed, Trump may struggle to make good on his promise to help those left behind in the global economy, economists who study inequality trends say.

"We have 30 to 40 years to catch up on...Lots of money has gone to the top and to change that is going to be a long and slow process," said David Madland, a senior fellow at the Center for American Progress, a think tank with close ties to Democratic nominee Hillary Clinton's campaign.

Trump campaigned promising to shake up a Washington establishment he argued was responsible for destroying middle class jobs with bad trade deals. The message hit home across rural America and mid-sized cities, where voters felt they missed out on the fruits of the seven-year economic recovery that big cities may have enjoyed.

Charlotte has been growing fast as a financial hub that attracts college educated talent from around the country, and Democratic nominee Hillary Clinton did better there than Obama did in 2012, handily beating Trump by 137,000 votes.

But in the state's textile and furniture belt just northwest from here, Trump's promise of economic renewal and anxieties of a shrinking white majority more than offset Clinton's urban victory, giving him 76 out of 100 North Carolina's counties.

The Catawaba County region, one of the nation's hardest-hit by cheap imports from China, now has a more diverse economy and even the furniture industry has begun adding jobs. But many still live in poverty and rely on disability and social services for support.

"The trade argument was as prominent as any. That is certainly the bet that the Trump campaign has made," said

John Dinan, a political scientist at Wake Forest University.

A supporter of Republican presidential nominee Donald Trump is pictured during a campaign event in Concord, North Carolina, U.S. November 3, 2016. REUTERS/Carlo Allegri

TAKING OUT OBAMACARE

Trump has not highlighted income inequality the way Clinton did, but to help low-wage industries such as textiles or offer a "new deal" for blacks, he would need to tackle the income gap.

Recent data show how hard it may be if Trump relies on economic growth alone: Despite a record jump in household income and a continued surge in middle wage jobs nationally, the effect on income inequality was "statistically insignificant" according to census estimates.

Under Obama, after tax income for the bottom fifth of households did increase by about 18 percent, or $2,200, according to a recent Council of Economic Advisers study.

But that was made possible by higher taxes on the wealthy, more benefits for the poor and, in large part, by an estimated $1,900 gain from health coverage extended under the Affordable Care Act. Trump has vowed to roll Obamacare back.
 

Instead, Trump has proposed to strike better trade deals and offered a familiar Republican recipe - tax cuts for businesses meant to spur investment and jobs. He has been ambiguous about a possible increase in the federal minimum wage typically opposed by Republicans, but advocated by many economists as a way to help the disenfranchised workers Trump focused on in his campaign.

Economists say that even if economic growth accelerates under Trump, it may not do much to counter the downward pressures on wages and middle income jobs from automation, technology and other longstanding trends.

Brookings Institution senior fellow Isabel V. Sawhill said researchers on inequality agree on one point: it is hard to move the needle.

"Even when you distribute all of the dividends from growth in a progressive fashion you don’t change things very much," Sawhill said. "You shift things at the margin."

(Correct paragraph 2 to remove extraneous word.)

(Reporting by Howard Schneider; Editing by David Chance and Tomasz Janowski)
 

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