The Five Trends Behind Trump's Triumph

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Contentious, fractious, and indecent are the common adjectives that defined the 2016 Presidential Election. On November 8th, 2016, the campaign culminated in the unprecedented election of Republican nominee Donald J. Trump as the 45th President of the United States. The Democratic presidential nominee, Hillary Rodham Clinton, led in all polls and won the popular vote (48.2% to Trump's 46.1%), but lost the electoral college battle by 306 to 232. Rather than supporting or critiquing Trump's ascension, let us explore the key trends in the U.S. economy that explain Trump's victory.

Despite lower population density, per-capita Electoral College representation from the industrial Midwest states outweighs corresponding representation from coastal states. This Electoral College imbalance became an overwhelming advantage for Trump amongst the white, male, and blue-collar/limited education workers (Lai et al.). Trump was also able to make unexpected gains with minorities (Lai et al.), leading to victories in states that previously voted for President Obama (such as Iowa, Wisconsin, Ohio, Pennsylvania, and Florida) (Buchanan et al.). Multiple economic factors, such as rising unemployment, diminishing labor force participation, inequality in income distribution, falling wages, and the flight of manufacturing plants created a perfect recipe of discontent.

There are five key economic and social trends occurring in the United States over the past few decades that explain Trump's victory. These five key trends are derived from the research conducted by Federal Reserve Bank of St. Louis (https://fred.stlouisfed.org/).

Trend 1: Unemployment Rate based on Education Level and Gender

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According to the article "Free Lunch: It's still the economy, stupid" by Martin Sandbu, the people who voted for Trump have unstable, low skill, and disposable jobs. Trump's campaign promise to bring back lower skilled jobs earned him their vote, and ultimately the presidency. As shown in Trend 1 graph, unemployment rate is highest for those with less than high school diplomas and lowest for those with college degrees. The unemployment rate for White Men is in the middle of this range and is similar to those with high school diplomas. Hence, over the last few decades, for White Men sandwiched in an unemployable hierarchy, the baseline of a high school degree is no longer an assurance of employment.

Trend 2: Civilian Labor Force Participation Rate by Race

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The unemployment rate by itself can be misleading if the labor force participation rate, defined as percentage of the population that is working or seeking work, is not taken into account. Unemployment might come down just because of lower labor force participation. According to Sandbu's article, the racist and nativist attitudes of many of Trump's white supporters were motivated by economic frustrations amplified with lowering labor force participation. As Trend 2 graph shows, the labor force participation by Whites has been consistently collapsing since 1995, while there is an uptick for Hispanics (and its recent decline is less acute than Whites). Trump's promise to "build a wall and keep Mexicans out" resonated with many White voters who feel threatened by the prospect of "continuing to lose their jobs to Hispanics." At the same time, the rapid reduction in the Asian and Black labor force participation rate might explain Trump's unexpected vote gain amongst these groups.

Trend 3: GINI Index for the United States

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According to a briefing paper ("Understanding the Historic Divergence Between Productivity and a Typical Worker's Pay") by the Economic Policy Institute (EPI), there has been a major disconnect between productivity (+1.33% per year) and wages (+0.22% per year) from 1973 onwards (Bivens). As shown in Trend 3 graph, the GINI Index, a measure of the distribution of income in an economy where "0" represents perfect equality and "100" represents perfect inequality, has jumped since 1994, with a peak before the 2008 recession and another spike just before the 2016 Election. Even if employment rates have improved, income inequality for productive workers has created angst in the labor pool by reducing the standards of living.

Trend 4: Change in Median Nominal Wages for Full Time Workers based on Education

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While there is increasing income inequality, wealth creation from increasing productivity is not getting to workers with limited education, but is instead lining the pockets of executives, i.e. the "top 1%" (Bivens). Trump's approach of painting Clinton's campaign as elitist, aligned with the "top 1%" who capture 85.1% of total income growth in the U.S. (Sommeiller), was instrumental in swaying his support base. Trend 4 graph exhibits the concentration of this inequality amongst the lower educated population. From 2014 onwards, just preceding the elections, the median nominal wages for those who possess a bachelor's degree or higher has increased dramatically, while the median nominal wages for high school graduates has decreased quite a bit, giving "anti-elitist" ammunition to Trump's campaign.

Trend 5: Gap Between Output and Compensation based on Geography

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The decline of manufacturing in the Rust Belt "industrial heartland" of America clearly led to Trump's advantage there. Trend 5 graph illustrates the gap between labor productivity and wages in the manufacturing sector. Since the 2008 recession period that resulted in the flight of manufacturing jobs, the Rust Belt states of Ohio, Pennsylvania, Michigan, Indiana, and Illinois have seen a dramatic reduction in real compensation, despite increasing real output. Trump's promise to restore factories, rebuild infrastructure, dismantle globalization treaties, and bring back manufacturing jobs translated into votes ("Public Policy").

Most of the nation is still upset over the caustic campaign and election outcome, and there were many last-ditch efforts from Democrats and Independents to keep Trump out of the White House. However, the country has spoken, and has elected Donald J. Trump to be our 45th President. Perhaps an election like this one will spur change in the nation's electoral process, which has been widely criticized for producing this undesirable outcome. But for now, get used to the phrase "President Trump."

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Works Cited:

Bivens, Josh, and Lawrence Mishel. "Understanding the Historic Divergence Between Productivity and a Typical Worker's Pay." Economic Policy Institute, 2 Sept. 2015, www.epi.org/publication/understanding-the-historic-divergence-between-productivity-and-a-typical-workers-pay-why-it-matters-and-why-its-real/#epi-toc-9. Accessed 4 Dec. 2016.

Buchanan, Larry, et al. "How Trump Reshaped the Election Map." The New York Times, 9 Nov. 2016, www.nytimes.com/interactive/2016/11/08/us/elections/how-trump-pushed-the-election-map-to-the-right.html. Accessed 4 Dec. 2016.

Lai, K.K. Rebecca, et al. "How Trump Won the Election According to Exit Polls." The New York Times, 8 Nov. 2016, www.nytimes.com/interactive/2016/11/08/us/elections/exit-poll-analysis.html?_r=0. Accessed 4 Dec. 2016.

"Public Policy: Can Trump - or Anyone - Bring Back American Manufacturing?" Wharton School of Business, 30 Nov. 2016, knowledge.wharton.upenn.edu/article/can-trump-anyone-bring-back-american-manufacturing/. Accessed 4 Dec. 2016.

Sandbu, Martin. "Free Lunch: It's still the economy, stupid." Financial Times, 11 Nov. 2016, www.ft.com/content/b9daf79e-a7f9-11e6-8898-79a99e2a4de6. Accessed 4 Dec. 2016.

Sommeiller, Estelle, et al. "Income inequality in the U.S. by state, metropolitan area, and county." Economic Policy Institute, 16 June 2016, www.epi.org/publication/income-inequality-in-the-us/. Accessed 4 Dec. 2016.