What Happened to Shared Prosperity
and Full Employment and How to Get
Them Back: A Seussian Perspective
Richard B. Freeman
Harvard University and National Bureau of Economic Research
The conference “Reconnecting to Work” was held on April 1–2, 2011, as the United States suffered its worst job market since the Great Depression. Reconnecting to work, indeed! With 9–10 percent unemployment and little sign of substantive job growth in the foreseeable future, American workers needed more help to find work than at any time since the 1930s. Even if job growth were to miraculously pick up, most workers would have trouble keeping their heads above water for years to come. For nearly four decades the benefits of economic growth have gone almost entirely to a small sliver of wealthy Americans. The vast bulk of workers struggled with stagnant real wages and high consumer debt to remain in the middle class. Inequality rose to levels off the map for a major advanced country and exceeded levels in most third-world countries. Contrary to what many Americans believe, social mobility in the United States was below that for most other advanced countries.1
Something or someone had taken shared prosperity and full employment from the American people. Something or someone was dismantling the road to the middle class on which the United States was built, and with it the American dream. Who or what could that be?
The first place where economists seek an answer to changes in economic outcomes is in the operation of markets. Viewing the U.S. labor market as highly competitive and responsive to market forces, some economists explain the stagnation of real wages in terms of (unmeasured) technologically driven shifts in demand for labor that favor