Critics often blame today’s socialist surge on millennials’ laziness. More charitably, some note that left-wing professors dominate college campuses. One free-market economist has a different explanation. Edward Glaeser, a Harvard professor and Manhattan Institute senior fellow, believes the problem lies more in economics than culture or education.
Mr. Glaeser, 52, argues that young people have radicalized politically because “there are a number of ways in which the modern American economy isn’t working all that well for them.” Many public policies make it harder to get a job, save money or find an affordable home, leaving young idealists thinking, “Why not try socialism?” But that cure would merely worsen the disease.
Mr. Glaeser decries policies that constrain the job market and increase the cost of living compared with what the economy would produce if left alone. “In many cases,” he says, “there seems to be a sense in which insiders have managed to stack the deck against outsiders.” People who have secured a foothold in one way or another—homeowners, union laborers, retirees—have advocated policies that make it harder for “newcomers,” including immigrants and young people, to advance.
Consider the housing market. “In the 1960s and earlier,” Mr. Glaeser says, “America basically had a property-rights regime that meant that anyone who had a plot of land could pretty much put up anything reasonable on that plot of land.” Since then, cities and towns have circumscribed the areas where homes can be built, capped numbers of units, and imposed strict requirements on developers—all of which raise prices. “So there’s this intergenerational redistribution that’s occurred by restricting housing supply.”
People who bought homes while the rules were lenient, or who are wealthy enough to have bought lately, have seen their values soar. Meanwhile, “younger people just don’t have housing wealth.” By 2013, a 35- to 44-year-old person at the 75th percentile had less than half as much home equity (adjusted for inflation) as his counterpart did 30 years earlier.
Prices are especially inflated in high-income metropolises such as New York and the San Francisco Bay Area. As a result, many highly educated millennials forgo future earnings and settle in less expensive places like Salt Lake City, Boise, Idaho, and Nashville, Tenn. “We have people who are moving to areas primarily because of housing being inexpensive rather than because it’s particularly productive,” Mr. Glaeser says. Those who lack college degrees can’t afford to live close to the well-paid service jobs in major cities. “Prior to 1980, poor people moved to high-wage areas,” he says. Today, “we have a trickle.”
The shift of income toward those Mr. Glaeser calls the “entrenched” is most explicit in entitlement programs. “The original Medicare design is relatively mild,” he says. A comparatively young age distribution and a limited range of treatments made the plan feasible when it began in 1966. “But basically the system is set up so that no matter what medical treatment can be created, they pretty much all get to be paid for.” The program now exceeds 3% of gross domestic product. Young people “see many of these benefits, including Social Security” as “going to older rich people.” They’re funded by payroll taxes, which snag a disproportionate share of low-earners’ paychecks.
Taxpayers also pony up ever more to fund the retirements of government employees. “Some of the most egregious things at the urban level are the public pension plans,” Mr. Glaeser says. “This is a system that stacks compensation very strongly toward the end of life with very long, very generous pensions.” Public liabilities have swelled since 1960 as government hiring outpaced population growth, and state and local pensions now claim about 1.5% of GDP each year. Each payment to a former bus driver or teacher might come at the expense of a young family’s savings or a small-business owner’s investment in new jobs.
How did the land of opportunity become overgrown with policies that keep newcomers from moving up? Mr. Glaeser cites a theory developed by the economist Mancur Olson, author of “The Rise and Decline of Nations” (1982). “Olson had this vision of how economies rise and fall,” Mr. Glaeser says. “A successful, stable economy acquires these interest groups, which essentially block change, which protect their interests, and which make it impossible to do anything new.”
Olson demonstrated this trend with case studies of advanced societies in varied regions and eras. For example, “Japan under the Tokugawa shogunate, where all of these local guilds had conspired to reduce trade. Or ungovernable England during the 1970s before Thatcher, when labor unions made it impossible to change anything.”
America isn’t like that—or so Mr. Glaeser thought: “I remember reading Olson in either the late 1980s or early 1990s and thinking, ‘Well, that’s interesting, but it doesn’t sound like America. We’re a vibrant, open society.’ ” But Mr. Glaeser’s later research changed his mind: “When I came back to thinking about this 30 years later, Olson seemed more like a visionary.” As America and its population have aged, voters have gradually embraced policies that benefit the relatively well-off while sapping overall growth.
The young, being both poor and inexperienced, have always been fonder than their elders of overt redistribution. But in the baby boomers’ youth during the Cold War, “socialism was off the table, because it was associated with an evil empire that we opposed.” The poverty and brutality of Soviet Russia also proved the system impractical. “For those with no memory of the Cold War,” Mr. Glaeser says, “the stigma is absent.” That now includes everyone under 30.
Yet Mr. Glaeser cites polling that suggests most young people’s vision of socialism might be better described as “hyperredistribution.” They don’t seek state control of the means of production, but punishing taxes on the rich to fund programs like free college for all. “They say, ‘Well, there are a whole bunch of projects—a whole bunch of government spending that helps old people. I want mine. If we’re going to spend a huge amount on Medicare, why aren’t we spending a whole lot on education for me?’ ”
I think that pointing the finger at Baby Boomers for the trend towards more regulation, for increases in zoning regulations, and for various social programs is misdirected fire. Two of the three largest redistributionist programs were created by the Greatest Generation abetted by the Silent Generation, Medicare and Medicaid. The other, Social Security was a whole generation older. Much of the Silent Generation hadn’t been born when it was created and the Baby Boomers weren’t even a gleam in anyone’s eye. The only major social program which you might attribute to the Baby Boomers is the Affordable Care Act and it by design is self-financing. Whether that’s how it turns out is another story and it was created by the Silent Generation abetted by Baby Boomers and Gen Xers. I’ll post on the increase in zoning regulations in a later post. Suffice it to say for now that they’ve been around for a very long time and the Baby Boomers are not particularly culpable for them.
But I think there’s a kernel of truth in what’s being said. Millennials face far greater headwinds than Baby Boomers did. I would attribute most of that to globalization considered broadly but increased regulations and out-of-control benefits programs play a role as well.
Wait until the young figure out that “the rich” don’t have enough money to pay for all of the programs they’re espousing—Green New Deal, publicly funded higher education, M4A, federally funded daycare, etc.—and they’ll end up paying for them.