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The high price of wage suppression: Michael Lind on why we need a high-wage, low-welfare system

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Podcast & Video

This episode of Hub Dialogues features host Sean Speer in conversation with the influential author and thinker Michael Lind, about his provocative new book, Hell to Pay: How the Suppression of Wages Is Destroying America.

You can listen to this episode of Hub Dialogues on Acast, Amazon, Apple, Google, and Spotify. The episodes are generously supported by The Ira Gluskin And Maxine Granovsky Gluskin Charitable Foundation and The Linda Frum & Howard Sokolowski Charitable Foundation.

SEAN SPEER: Welcome to Hub Dialogues. I’m your host, Sean Speer, editor-at-large at The Hub. I’m honoured to be joined today by Michael Lind, a columnist for Tablet, professor of practice at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin, and an influential author, thinker, and commentator. His latest book is called Hell to Pay: How the Suppression of Wages is Destroying America. I’m grateful to speak with him about the book, including the political economy consequences of what he calls a “low wage, high welfare model,” as well as some of his broader thinking about economic development, geopolitics, and the role for markets and the state. I should say that Michael’s thinking and writing have had a considerable influence on me in recent years, even in those rare instances where I don’t necessarily agree. Michael, thanks for joining us at Hub Dialogues, and congratulations on the book.

MICHAEL LIND: Well, thank you.

SEAN SPEER: The majority of workers used to be concentrated in the middle of the skills and, in turn, income distribution. Today, in Canada, the U.S., and most other Western countries, we’ve ended up with what’s been called an “hourglass economy,” with most of the growth at the top and the bottom of the skills distribution. Why did we all end up with job polarization? Was it something structural in the labour market? Was it a matter of public policy? Maybe to put it more directly, was it, Michael, in your view, something inevitable or indeed the result of choices?

MICHAEL LIND: Well, I’d reject that characterization, Sean. In terms of skills, the neoliberal explanation of wage differentials has to do with skills, or as is sometimes called human capital. And what you’ve seen is, in manufacturing, for example, wages have gone down compared to what they were in the middle of the 20th century. And there’s an attempt to describe this in terms of lower skills. In fact, all of the workers in every occupation that I know of, and I know the U.S. best, but similarly Canada and other countries, they have the skills that are necessary for their jobs. The Bureau of Labour Statistics agency of the U.S. government says that of the top 10 most numerous jobs in terms of absolute job creation, only two of them require a bachelor’s degree. General managers of stores and registered nurses, all of the rest—home health aids, movers, retail clerks—require nothing but high school plus a little on-the-job training.

So the story that incomes reflect skills has been an alibi that businesses used, that employers have used, while they’ve been crushing the actual source of worker incomes, which is worker bargaining power. And I’ll just give you an example. See, in the 1920s, American automobile workers had terrible, terrible wages. They worked six, seven-day weeks, eight, nine, 10, 12 hours a day for poverty wages. They lived in squalor. By the 1950s, they were prosperous middle-class workers. Their skills did not change. The skills of an automobile network worker in 1955 were not that different from one in 1925. Well, what happened? They had unions. They were unionized; they were collective bargaining. And the unions had the power to compel employers to pay workers more, even though the workers not only were doing the same kind of work, but they were doing less work because now the workers had paid vacations and they had holidays off and they had weekends.

The American labour movement sometimes runs an ad saying, “We’re the people who brought you the weekend.” Right? So this goes to the heart of my argument in Hell to Pay, that is the way we’ve talked about wages as a function of skills leads to the erroneous conclusion, I argue, that if you want people to be paid more, they should be more educated. And therefore, since people with college diplomas tend to be paid more than people without college diplomas, if you give everybody a college diploma, they’ll make higher wages. But the fact is we need more janitors than we need corporate lawyers; there are more job openings for them. Just according to the U.S. government statistics, a janitor with an MBA or a Ph.D. is going to make exactly the same amount as a janitor with a high school diploma because the janitor’s wages are set by bargaining power.

SEAN SPEER: Let’s stay on this topic, Michael. I’m always struck that certain occupations, say for instance, long-term care workers, seem, as you say, to be both in high demand and yet tend to earn lower wages. Why don’t you talk more about the explanation behind that dichotomy? Is it a case of markets malfunctioning? Is it gender discrimination, a reflection of worker productivity, or, as you say, something else?

MICHAEL LIND: So there are two ways that workers can get bargaining power. One is through tight labour markets, where you have too many employers bidding for too few workers, and that creates a seller’s market in labour. For the workers, that’s the sweet spot. The employers always want a buyer’s market in labour in which too many workers are competing for a small number of jobs, and they can drive down wages as far as possible because of the competition among the workers against each other. So there are two ways to overcome this, and the two are necessarily complementary, I’d argue.

One is the workers not competing with each other in a race to the bottom on wages but pooling their labour. And this means collective bargaining of some sort, doesn’t mean familiar forms of unionization. There were guilds before there were modern unions. There’s national bargaining. There’s enterprise bargaining. We can get into details later. But if workers bargain as a unit with employers, then they can thwart this divide and rule race to the bottom strategy of employers.

The other thing that is increasingly important in Western countries, including Canada, is immigration. If employers can import what Karl Marx called a “reserve army of labour,” if you can increase the number of people competing for jobs, then even where you have very high demand, which would let workers bargain for higher wages in a tight labour market, in a loose labour market, then they lose their bargaining power. And the loose labour market, immigration is one cause; it’s not the only one.

You see employer lobbies trying to push parents of young children, particularly mothers of young children, into the workforce as much as possible. And they do this in this benevolent-sounding way that, “Oh, if we have daycare, then you can go back to work after you’ve been with the kid for six weeks.” But why are employers pushing this? It’s because it creates a loose labour market.

A lot of entitlement reform, interestingly enough, is not so much about saving government money, but it’s about if you cut entitlements so that—for example, in the U.S., if you cut social security and people have to work until they’re 65, 67, 70, ordinarily, then you’ve flooded the labour market with a lot of old people. So employers have figured this out. I mean, there’s a reason why employer lobbies in Washington, D.C., and other capitals, people in that business make a lot of money. They’re smart. And a strategy underlies a lot of seemingly unrelated things. And that strategy is the desire to weaken the bargaining power of workers to demand higher wages.

SEAN SPEER: I would just say in parentheses, Michael, your observations about childcare and daycare will resonate a lot for our Canadian listeners. The Trudeau government here has launched a large-scale national childcare program, and the principle line of argument is about maximizing female labour force participation, in effect in terms of boosting economic activity. Even though there is evidence that the model on which the national scheme is built in the province of Quebec shows relatively poor performance for the children themselves. So, we seem to be choosing to trade off outcomes for children in the name, as you say, of trying to boost the labour supply.

In that vein, should we think about immigration, particularly low-skilled immigration, as a market intervention in favour of employers at the expense of workers?

MICHAEL LIND: Low-skilled immigration that comes about as a result of government policy—it became policy to not enforce immigration laws in the United States and other countries—is an in-kind subsidy to low-wage employers. It is no different in kind than the government supplying employers’ businesses with subsidized electricity or subsidized real estate or giving them free inputs that they need in their factories. So the question that people have to ask is: ff wages are recurrent costs for employers, just like paying rent, real estate costs, water, electricity, insurance, so why should the government subsidize this particular cost of employers’ labour to prevent the employers from having to raise wages?

And in Canada, as I’m sure in the U.S., the establishment has two completely contradictory stories. Story A is that immigrants do not compete with any native workers. They only do jobs that the natives won’t do. And then story B is, without immigration, then prices will go up, and we’ll have inflation. Well, why will prices go up? Prices will go up because workers, both native and immigrant, who’re already here, can demand higher wages in the absence of that immigration. So on the right hand, it admits what the left hand denies: that immigration is used as a wage suppression technique in the U.S. and in many other similar countries.

SEAN SPEER: Next question’s a bit of an oddball one, but I’ve wanted to ask it to you for some time. Nicholas Eberstadt’s work on male underemployment has highlighted the decline in labour demand from military service. Does that line of argument resonate with you at all, Michael? How much do you think the shift from a labour-heavy national defence to a technology-heavy one influences your analysis? Did, in hindsight, large militaries, even in Canada, in the middle of the 20th century pull a lot of lower- to mid-skill workers up the skills distribution?

MICHAEL LIND: Well, in terms of the overall share of employment, it wasn’t that great in peacetime. I think it had great socializing effects and educational effects in the case of the G.I. Bill. I think the decline of mass conscription probably has indirectly contributed to the disempowerment of the working class, which I talk about in my new book Hell to Pay but also in my previous book, The New Class War, because the mass membership organizations that created countervailing power for working class people that existed in Western democracies in the middle of the 20th-century, where local political parties were genuinely responsive to local people, they weren’t just labels bought by billionaires. Congregations—religion was a much bigger force in politics and public policy, including the civil rights revolution in the U.S., than it is today. And probably most important of all, organized labour, but also organized veterans organizations like the American Legion and its equivalence in other countries, these had political force.

And to the extent that you get the decline of conscription, then that form of working-class organization, the Veterans Associations, is going to diminish. That was a powerful appeal. For much of American history, that is a lot of benefits were conditioned on military service, from civil war pensions to the G.I. Bill and various other special benefits. And when very few people serve except for specialists and contractors, then this idea is that in return for service you get benefits. And that’s just true in Canada and true in Britain as well. That is, the fact that you had mass military service allowed people to say, “Okay, after the war, we want mass health care and we want mass housing, and we want these other perks of citizenship, we’ve earned it.”

SEAN SPEER: I should say that your critique of the Earned Income Tax Credit in particular and wage subsidies in general left me, as something of a pro-work conservative, feeling a bit destabilized. Can you talk a bit about your framing of the low-wage, high-welfare model and its implications?

MICHAEL LIND: Yeah, as a Texan, this strikes close to home because, apart from Senator Russell Long of Louisiana, the great champion of the Earned Income Tax Credit was Senator Lloyd Bentsen. Whom I knew when I was a kid, he gave my family a ride on the train and under the Capitol to the Senate. So, nice guy. But I argue it was pushed by these southern Democrats in the 1970s when it was created because it is an inter-regional transfer of taxpayer money from taxpayers in the North and Midwest and the West Coast to low-wage businesses, which remain concentrated in the states of the foreign confederacy.

So let me back up and explain what the Earned Income Tax Credit is. It is a wage subsidy so that if you work a poverty wage job, a job that pays too little for one person to live on, much less to the person who has one kid, say, then the government will top up your wage by sending you, in this case, a cheque every year. It’s very inefficient. Many people don’t get it. But it could be even if it were done more efficiently, like every two weeks. So you basically have two people paying you, there’s Uncle Sam in the United States, and then there’s your employer.

So why is this bad? Well, it permits employers to pay poverty wages that their workers cannot live on, and the employers know it, and they take advantage of it. And as a general rule, if the taxpayers subsidize an activity, your goal is to have more of that activity. And economists who have looked into this, there are studies suggesting that the Earned Income Tax Credit has led to the creation of more low-wage jobs than would’ve existed in its absence. You even had a few years ago, Walmart was embarrassed because it was paying poverty wages to some of its so-called greeters in its box stores.

And for a while, Walmart was giving its underpaid employees guides to applying for food stamps and for Medicaid and for means-tested welfare benefits. So they clearly knew that, in effect, they were being subsidized by the welfare state. So what I suggest in my book, Hell to Pay, is that whether it’s a wage subsidy, a cash transfer, or an in-kind benefit of food stamps or housing vouchers or whatever, the question that we as citizens and taxpayers have to ask is, does this welfare program increase the bargaining power of workers or does it decrease it? And the Earned Income Tax Credit destroys the bargaining power of workers because what it does is it says, “Well, the government will keep you from starving, but only after you’ve accepted a job that does not pay you enough not to starve by the wage itself.”

So you have millions and millions of Americans, and they’re in a few sectors, they’re just in these kind of third-world sectors in our economy in terms of economics: retail, warehouses, very, very poorly paid jobs. And you have millions of Americans trapped in this cycle where, in order to get means-tested welfare benefits, they have to take poverty-wage jobs, but in order to be taking poverty-wage jobs, they can never earn enough money to get off of the means-tested benefits. So it creates almost a caste system where most workers are not dependent on the welfare state, but we have tens of millions of workers who live in a different economy, and they are trapped in this double employer system almost, where the government shares the responsibility to pay them with their poverty-wage employers.

SEAN SPEER: I should just say, Michael, those insights are a reflection of your unique and interesting voice in our public policy debates. Canadian listeners will know that we have our own version of EITC, now called the Canada Workers Benefit. And it’s one of the few things that’s the subject of political consensus in Canada; all of the major parties are not only in favour of the CWB but in favour of boosting it higher, as we’ve seen it in recent—

MICHAEL LIND: Oh, no, Sean, that is true in the United States as well. So I’m a very lonely voice on those subjects. I’ve been making some converts, but the liberals like it because it is not in the form of an appropriation; it’s done through the Internal Revenue Service. So it’s a hidden welfare program, and they like that so that there’s not a big voter backlash against it if Congress is actually spending the money directly. The conservatives like it because the base of the Republican Party in the U.S. is small businesses, which are just against higher working bargaining power for the most part of any firm, but their workers, and they’re being subsidized by the governments. What’s not to like? You pay your people a poverty wages and then the government lets them survive so they come into work the next day.

So there’s a consensus, but it is falsely advertised. For example, the United States has said that the EITC makes work pay. It does not make work pay; it makes the taxpayers subsidize low-wage employers whose own work is not high enough. The work does not pay if the work is defined as the wage that you receive from your employer.

SEAN SPEER: I’ll move on in a second, but it’s just worth emphasizing another similarity, Michael, is that the CWB in Canada is also delivered through the tax system. And there’s plenty of evidence that one of the consequences is that it goes underutilized even by eligible recipients. There’s been research carried out in recent years that shows that billions of dollars are going unaccounted for in terms of people taking up the benefits that, for better for worse, that they’re entitled to—

MICHAEL LIND: Do you think that’s an accident? I don’t. I think it’s designed to make it difficult for poor workers to actually fill out the paperwork and then get the cheque from the Internal Revenue Service at the end of the year. Look, there’s a role for cash transfers in a modern welfare state. Social security, the equivalents in Canada are cash transfers to the retired people who cannot work, the unemployed. These are all cash transfers, that’s fine. I think we need more cash transfers for family leave and parental leave and parental caregiving. The best way to do cash transfers in a modern democracy is through the social insurance system, which is run through—in the U.S., it’s the Social Security Administration. It would be the equivalent in Canada. And running it through your internal revenue service or its equivalent is crazy. Makes no sense. The tax collection agency should not be administering welfare estate programs.

SEAN SPEER: If the tight labour markets that we’re projected to sustain in the coming years ought to be pro-worker, what should be done, Michael, to permit the supply-demand disequilibrium to put upward pressure on wages? What impediments, in other words, need to be removed so that the market can properly function? Or is that the wrong way to think about it?

MICHAEL LIND: Well, I think you have to decide what kind of society you want. And that’s why I draw a contrast in my book Hell to Pay between a high-wage, low-welfare system, and a low-wage, high-welfare system. And by high wage, low welfare, I mean one in which if you work 40 hours a week, or maybe 50 years from now, 30 hours a week, you don’t have to apply to the government for means-tested welfare benefits. Now you have wages. Some of your wages are subtracted from your paycheque to pay for social insurance. And so when you’re unemployed when you’re retired, you have cash coming in. But these are universal programs. And therefore, you can have a relatively small residual means-tested welfare state for people who, for no fault of their own, cannot work in any capacity during their adult lives.

The system that we have—the low-wage, high-welfare state—I don’t mean generous in the United States. Welfare is not high by Canadian standards, much less by Nordic, Scandinavian standards. By high, I mean, it’s a high percentage of a poor worker’s income. And in my book Hell to Pay, I document in one case in New York where, basically, a hypothetical low-income worker would get a half of his or her income from cash payments, the EITC, and welfare and only half from the employer wage. That’s what I mean by low-wage side welfare. It’s the individual’s income. And we’ve had a fascinating natural experiment during the New Deal era in the United States from the 1930s up until the seventies and eighties; we really did approximate a high-wage, low-welfare state. And then, during the so-called neoliberal era from the eighties to the present, we’ve done the reverse.

We’ve had a low-wage, high-welfare state where the idea is let employers drive down wages by any means necessary, offshoring, in some cases immigration in others, crushing unions, outsourcing tasks to low-paid contractors. There are all kinds of devious things that I go into, devious strategies by employers to minimize wages. All perfectly legal in the U.S. and similar countries. And then you’ll just send a bill to the taxpayer if people can’t survive. And I think it’s an unsustainable system. It’s kind of a Ponzi scheme, and it explains a lot of the anger and alienation of people whose, through this previous system, their parents get more educated than they were. If you think they were less educated, they have fewer skills. But because it was a different system, they had living wages and they had decent social insurance intentions in many cases. And this is not part of the system now.

And therefore, lots of younger people either become completely disenchanted with politics, they think it’s unresponsive, or they turn to demagogue, which I use in the technical sense, not the pejorative sense. But a demagogue is an outsider, a tribune of the people who taps into popular anger. And Bernie Sanders is one on the Left. Donald Trump—he’s able at being a demagogue. He’s not able at being an executive or a manager, or a policymaker, but a very able demagogue. And my concern is that if we don’t rebuild a living wage, high-social insurance system, with a low-welfare state, then we’re just going to get endless cycles of an out-of-touch establishment and populous rebellions led by demagogues of the Left or the Right or of the centre.

SEAN SPEER: Let’s broaden the conversation a bit, if that’s okay. You’ve written about the history and outcomes associated with what you’ve come to call “national developmentalism.” What is it? How does it differ from the prevailing intellectual consensus? And is it possible, Michael, for national developmentalism to persist after an economy is “developed”?

MICHAEL LIND: Two very good questions. So I’ll answer the first. Developmentalism is the view that the government, private enterprise, public enterprise, and nonprofits are all on the same team, and the state, the government is the coach of the team. And they’re trying to win, and they’re competing, for the most part with other governments, with other societies. And it can be a peaceful competition for global market share, or it can be military competition. But they’re working together and for worker versions, labour as part of the team of this natural developmental team with the government as the coach, brokering them and helping them and urging them on, and being their partner in classical liberalism, free market economics; the government is merely a neutral referee. The government’s an umpire and doesn’t really care which team wins, doesn’t care whether one’s firm defeats another.

In the more extreme versions of liberalism, the government doesn’t even take sides between its own niche citizens and foreign citizens, right? It’s just letting the market work. And if our team loses, those are the rules of the game, right? It’s the rule-governed global order. “Well, they won, we’ve lost. China wins. Okay. So be it. That’s the rules.” Through most of history, states were not liberal; they were developmental. And in fact, really before the 19th century, all large organizations are government contractors or government monopolies. The British East and West India Company, bridges, toll roads—they were monopolies chartered by the government. They’re more like public utilities. It’s only in the 19th century that you’d get modern corporate capitalists where government gives licensing corporations, which have been giving them pretty much a free hand to make money and to do things, subject to various civil rights and environmental and labour laws.

So this idea that there was this free market past and then in the 20th century, a bunch of statists came along, it’s completely the reverse of history. So one way to think about corporations is that they are privatized versions of the state monopolies of the past, right? So in the old days, it’s true in the United States, it’s true in Canada, in the 19th century, if you wanted to start a corporation, you had to get a legislative charter from the government, whether it was the British royal government or the state legislature in the United States. And it told you, “You can only run this corporation to operate this particular toll bridge, and you can’t do anything else.” And it is utterly rigidly controlled. It’s called regulation by statute. This became an impediment to the development of modern industrial capitalism.

And so a beginning in Britain, and then in the U.S. and in other English-speaking countries, incorporation laws liberalized. So, like right now, Sean, if you and I want incorporate a company in Delaware, we can just do it online at the Secretary of State in Delaware when you just create the a corporation. We don’t have to make any money forever; for years, we can lose money forever. And it’s a corporation. Obviously, there are certain regulations we have to follow, but this is more flexible. And to my mind, this is one of the great inventions of history. Corporations also benefited from getting limited liability, which is a government prerogative. Because before the 19th century, only the king had limited liability in the king’s chartered monopolies.

Limited liability means, if I invest in your corporation and you go bankrupt, the creditors cannot sue me personally for all my assets. The creditors can only go after the assets of the corporation, not the assets of the shareholders. And this is another great intervention in the market, it made possible giant manufacturing corporations and giant railroad corporations, which are good. One of the previous books that I’ve written is Big Is Beautiful: Debunking the Myth of Small Business with the economist Robert D. Atkinson.

SEAN SPEER: A Canadian, by the way.

MICHAEL LIND: One of your fellow Canadians. Industrial capitalism depends on people being able to invest in giant enterprises without fearing they’ll be bankrupted by litigation as shareholders. But my point is that the pre-market vision, the libertarians who defend the liberal vision, they don’t even understand the corporation because, without limited liability, the biggest corporations would be like mom-and-pop stores, right? There would be no large enterprises. So that limited liability is a government intervention in the market. And the other government intervention in the market that libertarians can’t deal with is intellectual trafficking rights. A copyright is a government-imposed monopoly. If you patent something and then I steal it and start selling it, I can be arrested because I’m impinging on your artificial government-enforced monopoly.

So artificial government, intellectual property monopolies, and limited liability are, from a libertarian perspective, radically unjustified interventions in free markets and the ability of people to buy and sell as they choose. But without these government interventions of the developmental state, we would have no large corporations, no space industry, no electronics, no computers—nothing. So there’s a revival of interest now, usually under the term of industrial policy, but it’s really the developmental state model that is—for libertarians and classical liberals, countries do not compete. For people living in the real world, as of course, they compete. Of course they compete; they’ve always competed. Countries are worried about their relative wealth and their relative power, not just their absolute prosperity and absolute security.

So if you’re the Netherlands and you’re engaged in this competition with Britain, the fact that Britain is getting bigger and bigger and richer and richer in the 17th century, well, a richer ally, that’s fine maybe, or if you’re Canada versus the U.S., you’re not competing as a great power. But as long as we have a world without a world government and great powers, the great powers are going to look at each other’s potential military power, even if they’re all friendly terms right now, even if both sides are democracies, because that potential economic power can be converted into military power. So developmentalism, there’s always the thought at the back of the developmental policymaker’s brain that, “What if we go to war with this country? We can’t be too dependent on them; we need to make sure we have what it takes to defend ourselves if it not to prevail.

SEAN SPEER: On a related question, you’ve written extensively about the erosion of manufacturing in Western economies like the U.S. and Canada and argued that public policy should tilt in favour of boosting domestic manufacturing as a matter of economics and geopolitics. Help our listeners understand your argument. What makes manufacturing unique and, in turn, important in your mind?

MICHAEL LIND: Well, manufacturing is important because there are two sectors of the economy according to conventional economists. This is not a radical theory by any means. There’s the traded sector and the non-traded sector. The traded sector consists of things you can put on a ship and ship to other countries and sell there. It includes some services, but most trade is in goods. It’s not in international services at present. Non-traded sector services are produced and consumed in the same location, more or less. So I’ll give you an example. Suppose you have a Canadian city and it has two industries: there’s the hair salon industry and there is the automobile muffler industry. The automobile company in this Canadian city makes mufflers, which are then sold to the five or six global automobile companies: German, Japanese, Korean, and American.

And they go into these cars. The muffler maker doesn’t care what car it ends up in. They’re just part of the supply chain. So what that means is this Canadian town has money pouring into it every time—because there are billions of potential automobile drivers and purchasers. So there is this growing, growing, growing middle class in Asia, in Africa, in Latin America. They’re buying cars, and some of that money rains down on this town in Canada. And now some of it goes out to investors and shareholders, but some of it spills over and leaks out into the town. Now, let’s look at the town’s other industry, the hair salons. The market is limited by the number of people who are within driving distance or transit distance of the barbershop or the hair salon. As it’s inherently fixed, it’s not going to grow in the future.

So therefore, most economic development agencies, and again, this is standard practice, if there are towns or counties or villages or states or countries, what you want to do is you want to create, or if you can, lure traded sector firms, which have markets beyond your immediate territory that can siphon money from this national or regional or global demand. So even in the absence of national security considerations, it’s very important to have a traded sector where you can export things that are bought by people outside of your immediate area.

SEAN SPEER: You’ve been so generous with your time, Michael. I just have a few more questions I hope to put to you. Let me take up a subject you raised earlier, which is the trend towards over-credentialization. You’ve written about that subject as well as the rise of woke corporate culture. How much are the two interrelated? That is to say, what do you think about the argument that so much of corporate wokeism is really a jobs program for an overeducated cohort?

MICHAEL LIND: Oh, I agree entirely. I think there are too many people with too many college degrees competing for too few jobs that actually require college degrees. The Federal Reserve of New York estimated that about a third of Americans with bachelor’s degrees are working in jobs that only require a high school education. So there’s this desperate, desperate competition. And so one way to absorb these people, this overeducated proletariat, essentially, if you want to put it that way, is to create make-work jobs. And a lot of the proliferation of DEI jobs at universities, HR positions, and so on, a lot of it is simple make-work for otherwise unemployable people, given the degrees they have. But there’s a more sinister aspect to it. It’s also a means to promotion, right? So in the Soviet Union, every leader of the KGB up until, I think, Andropov rose by overthrowing and executing his predecessor.

I think we’re seeing this now in journalism and in academics, where if you’re a junior staffer at a media company and you can do in your boss for not using the right circumlocution, saying Latinx, or for saying—I read recently that somebody was fired when two of female colleagues walked in the office and he said, “Good morning ladies.” And he was fired, right? So think of the opportunities for promotion that this opens up by denouncing your colleagues and your supervisors. So it’s a truly toxic thing. It’s poisonous, and it leads to a lot of polarization, and it leads to unhappiness because most of the people—by the way, I’m no longer at the University of Texas; I retired recently, but I was teaching at the Lyndon B. Johnson School of Public Affairs until recently. And I’ve taught at Johns Hopkins and other schools.

Ninety percent, maybe more, of students go to college because they want to make more money, not because they love getting a business degree or a communications degree, or liberal arts degree, or whatever. If they could make enough money to support themselves, have a family, have a small starter home after they graduated from 12 years of education, then I think the demand for college diplomas on the part of students would drop. And as far as employers, a lot of research shows that employers have been using diplomas as a very lazy kind of screening device, right? So one research experiment showed that employers were saying for new hires, they were requiring college diplomas to do work that was already being done in their firm by people who did not have college diplomas. So it’s just a screening device. It shows that this person is able to show up relatively disciplined, can finish tasks, but that’s about it. That’s what it shows the employer.

SEAN SPEER: Just in parentheses, Michael, I’ve participated in research projects here in Canada that finds that more than half of those employed in so-called working-class jobs have some level of post-secondary credential.

MICHAEL LIND: Well, we’re creeping up on 40 percent, at least. Going to university, a lot of people drop out. It’s about 40 percent in Western Europe now. In my view, it should probably be about 10 percent or 15 percent at the most. And the other thing you can do is, as a result of credential inflation, the BA becomes the new high school diploma. So then the master’s degree, or the MBA, becomes the new bachelor’s degree. And as I point out in my book Hell to Pay, this means a lot of people are postponing adult work and family formation until their 30s or even their 40s sometimes. And this has all kinds of knock-on effects that are bad for society.

SEAN SPEER: You mentioned earlier, Michael, that there is renewed interest in national developmentalism, industrial policy, and many of the issues that you’ve championed over the years in something of the wilderness. Yet the translation of those ideas in intellectual circles into public policy has moved somewhat slower. Why do you think the popularity of, say, Trump hasn’t translated more into actual policy outcomes?

MICHAEL LIND: Well, I think Trump has had a profound influence of foreign policy because he ended his stalemate that governed our policy towards China for 20 years, where the business and banking community neutralized the concerns of the national security and the military. And so there was this kind of stalemate; you had Pentagon on the one side saying, “China’s a threat.” And you had Wall Street and multinational corporations saying, “No, no, no, we’re going to invest in our cheap labour in China and then export the products back to the U.S.” There’s now a growing consensus, both Democrats and Republicans, that we’re in a trade war, and under Trump, the Democrats said, “Oh, it’s Trump’s trade war.” But Biden has continued many of Trump’s tariffs. And if anything, Biden’s trade war against China is more sophisticated and thoughtful and nuanced than Trump’s was.

In domestic policy, you do not get a consensus on what industrial policy should be. So you see, the Left and the Right tend to fall back into their comfort zones. So now the Left’s organizing principle is climate change; everything has to be related to climate change, childcare—you name it, any policy has to become a climate change policy. So for them, industrial policy is, “Okay, well, we’ll subsidize renewable energy.” That’s not industrial policy. Industrial policy is creating the ability to manufacture things. And if you can manufacture windmills, you can manufacture refrigerators, you can manufacture cars, and things like that. But the Left is very much, “Well, we’re just going to have industrial policy for windmills and batteries.”

The Right is still in this Reagan Cold War era thinking of, “Oh, well, China’s a threat, so we’ll build this enormous navy and we’ll dare them to take us on in the South China Sea, right? And we’ll have a nuclear arms race.”

So this is all up in the air, right? Industrial policy is no longer a taboo phrase, as it was up until a few years ago. After the earlier debate, the 90s and the 80s, I was part of it, and our side lost; our industrial policy side lost for a quarter of a century. So it’s been rehabilitated, but whether it can be implemented in a sensible way in the United States remains to be seen.

SEAN SPEER: A penultimate question. A big idea that runs throughout the book and our conversation today is about restoring the capacity for collective bargaining in our labour markets. That could presume a reinvigoration of trade unions. Do you see that happening? And if not, how should labour unions be reconceptualizing themselves to remain relevant in today’s economy?

MICHAEL LIND: Well, the countries that have successful trade union movements have sectoral bargaining at the national or regional level, where all of the employers in an industry negotiate with the representatives of all of the workers in that industry. And in some countries, like France, most of the workers are not unionized. The union membership in the private sector in France is as small as it is in the United States, about 6 perfent in the U.S., but they’re covered by these sector-wide agreements. The United States’ system of private sector bargaining is because of a design flaw that was built into it. Employer hostility helped to kill it off, but it was probably doomed from the beginning because it’s based on enterprise bargaining. What that means is, if you have a national corporation like Amazon or Starbucks, you can’t unionize the whole company at once. You can only unionize one coffee shop at a time for Starbucks or one Amazon warehouse at a time, which is just impossible.

And this design defect of our enterprise bargaining system was not evident in the late 1940s and ’50s because you had the big three automobile companies and you had a few steel companies. So it didn’t really matter. But when you have these widely dispersed industries, then the only way to have collective bargaining is to do it all at once, and you can do it through national sectoral bargaining. Another method is wage boards, where the governor or the mayor appoints—you may have these in Canada; they’re in most English-speaking countries. There are versions of this from a century ago. The mayor or the governor appoints a representative of the employers of labour and maybe of consumers and government in an area like fast food, and they just set the wages and benefits without meeting to unionize people.

So I think our image of unionization where people join the local federation, the local chapter, then they picket, then they unionize the Amazon warehouse. And what these organizers have been doing is quite heroic; I admire them. But they’re going to lose. It’s just not going to work. It’s just too difficult to unionize one store or one establishment at a time. So then the question is, “Okay, you and whose army? Why would anybody in the elite support this?” And this gets back to developmentalism because, by historical accident in the United States, the U.S. had a developmental state between Lincoln and the Civil War and Franklin Roosevelt and the New Deal shrinks what was the best of the world, mostly in the Northeast and the Midwest. And you had industrialization that came after the industries were already built.

What I argue in Hell to Pay is that in a new developmental state in the United States and a similar countries, we need sector policies, where from the beginning, these are simultaneous, right? You’re promoting, let’s say, the robotics industry or the drone industry, but at the same time, you’re allowing organized labour somehow to be a partner in this. So it’s a partnership not only of the government and of employers in that sector but also of the employees. Now, you can have a successful industrial policy with government business partnerships at the expense of labour. It’s true in many authoritarian states. It was true in South Korea under the military dictatorship before the ’80s. It was true in Japan, with its company unions. But my view is if you want a mass middle class, the only real mass middle classes we’ve had have been in Western countries that had mass unionization in the middle of the 20th century. And if we want to have a mass middle class, there are not that many ways to do it.

SEAN SPEER: Final question: do you think at this stage, Michael, the Left or the Right is better placed to make progress on the issues that you raise in the new book?

MICHAEL LIND: Well, most proposals I’ve made are standard labour-Left proposals. What has happened, as I detail in my previous book, The New Class War, is that the base of the Left is no longer the working class. It’s now college-educated graduates and professionals and managers. And to the extent they have allies among working-class people, it’s among racial and ethnic minorities that they appeal to on a cross-class, pan-ethnic, or pan-racial basis, which is true in the U.S., true in Canada, true in Western Europe.

So by default, the Right, particularly the populist Right, is inheriting a lot of workers who used to be social Democrats in Europe, communists sometimes in France and Italy and Germany. In the United States, a lot of Roosevelt Democrats are now the base of the Republican Party. But in the Republican Party and a lot of parties to the right of the Republicans in the U.S. It’s true of the Tories in Britain. There’s just a gap. The leadership is still in this world of 50 years ago, when it was the party of the bourgeoisie when the Right was represented by the bankers and the capitalists and the CEOs, and now it’s got a working-class constituency, and there’s just a gap between the leadership and the mass.

This creates, by the way, an arbitrage opportunity for clever people like Donald Trump or Nigel Farage, the promoter of Brexit, in Britain. And you have Canadian equivalents, I’m sure. So at this point, who knows? I think it’s more likely that the working-class-based Right will move to the Left on economics than it is that the professional-class Left will move to the Right on cultural issues. But I may be mistaken.

SEAN SPEER: Well, however that political contest plays out, the participants would be wise to read Hell to Pay, how the suppression of wages is destroying America. Michael Lind, thank you so much for joining us at Hub Dialogues.

MICHAEL LIND: Thank you, Sean.

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