The essential middle class

Posted 8/21/12

Among the lessons that political science students once learned in Poli-Sci 101 was that a broad middle class underpins both the success and the strength of a democracy and helps support a vibrant …

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The essential middle class

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Among the lessons that political science students once learned in Poli-Sci 101 was that a broad middle class underpins both the success and the strength of a democracy and helps support a vibrant economy. With its extensive, wide-ranging middle class, the United States was held up as the perfect model for peace and prosperity. Other nations that lacked this solid middle class—those that had a cluster of wealthy, ruling elites at the top and legions of the poor at the bottom—were cited as countries that invited social and civil unrest; often they were ruled by authoritarian governments that imposed stability through whatever means deemed necessary.

Today, it’s not much of a secret that America’s middle class is shrinking, and citizens with middle-class hopes and dreams are feeling the pressure. Fully 42% of all middle-class adults say they are financially worse off than they were before ravages of the Great Recession. Today, the share of Americans who identify themselves as middle class has never been lower, down from 53% in 2008 to just 44% in 2013.

In truth, the erosion of middle class incomes began long before the recession. In 1971, according to the Pew Research Center, 61% of all adults lived in middle-income households. By 2011, this share had fallen to 51%, while the lower- and upper-income sectors grew. During this period, middle-income households saw their share of total U.S household income fall 17%, while income rose 17% for upper income households. The median household worth, which was $73,000 in 1983, was just $57,000 last year.

How did we get here?

Lack of middle income jobs & stagnant wages

Economists point to the effects of globalization and free-trade agreements for lack of middle-income jobs, which have increasingly been automated (thanks to computers), or have been outsourced (even professional jobs like programming, engineering and other high-skilled jobs have been shipped overseas).

Meantime, the growth of low-skill jobs dominates, with job creation heavily concentrated at bottom wages. Even last week’s encouraging jobs report is good news only if one looks at employment numbers and ignores the low earning power of those jobs.

“The percentage of increase in salary growth for the median worker has been nearly flat for decades; from 1979 to 2012 salary growth has been just 5%” (www.pewsocialtrends.org/files/2012/08/pew-social-trends-lost-decade-of-the-middle-class.pdf).

Lack of purchasing power

Despite stagnant growth of income for decades, the middle class kept up its living standard for many years by borrowing, amassing huge consumer debt. But when the Great Recession crippled the economy, even that option collapsed. Unable to afford more borrowing, consumers have little choice but to cut purchasing. Even now, years after the recession technically ended, many economists believe the recovery has been so anemic because the middle class now lacks the purchasing power to keep the economy growing by creating enough well paying jobs. What economic growth we have seen has being driven by the top 20% of the population—the earners who have not been left behind in terms of wages and salaries, those who own real estate, stocks and bonds, etc. Yet alone, without a flourishing middle class, the wealthy cannot spend enough to put the country as a whole back on the path to prosperity. The top 20% are driving an increase of 17% in consumption, while the bottom 80% are responsible for just 1% of consumption growth. Demand for consumer products remains suppressed and the economy stagnates.

Economic trends have social consequences

Has the time not come for all who aspire to middle-class lives to ask this question? Why are American businesses that need masses of solid middle class consumers not generating solid middle-class jobs, the kinds of jobs that keep the economy running? Why have people’s livelihoods been shipped overseas or given over to computers and robots? We believe that American citizens have a right to demand good jobs here at home and the dignity that comes from work. Middle-skilled, middle-wage jobs once created the world’s wealthiest middle class, resulting in peace and prosperity. If America continues to allow the demise of the middle class, it will be at its own peril and perhaps at the risk of social and civil unrest, as is seen in innumerable other countries when economies fail to support the aspirations of the populace.

Fortunately American citizens have the perfect tools to support the rebuilding of the middle class, though unfortunately too few use these tools. One is the vote. Another is the power of free speech. A third is the time-honored tradition of peaceful protest to demand change. Until the middle class stands up and demands economic and social justice and an end to the corrupting influence of money in the halls of government, we believe little is likely to change.

The gift of democracy is not unconditional. It must be nurtured and protected, and it must be exercised. Courage—the resolve to speak truth to those who hold power—and an active citizenry are what will be required if the once politically powerful middle class hopes to take back its country in the name of true democracy.

[Editor’s note: All data cited here comes from the Pew Research Center.]

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