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Danger: Falling Middle Class |
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Jack Cafferty at CNN this week asked viewers one of his seemingly routine questions. But the responses to: “How has definition of ‘middle-class American’ changed?” reveal a cataclysmic shift in our nation’s economic identity.
Gary from El Centro, Calif., summed up the vast majority of the nearly 200 responses when he replied:
You should ask this question of the three or four people in the country still remaining in the middle class.
The comments reflect more than the run-of-the-mill griping about taxes or middle-aged discontent. They demonstrate a visceral understanding of the deep forces underlying the dramatic change that in recent decades has eroded the solid financial footing of America’s working families—America’s middle class.
In short, the American public knows what most lawmakers in Washington and policymakers around the country have yet to figure out: The nation is losing its middle-class backbone and bifurcating into a have/have not country.
As Karen from Idaho Falls writes on Cafferty’s site:
In my world, there is no middle class–only the very rich, the rich, the poor, and the very poor. Most of us are hanging on to being “poor” by our fingernails and hoping that we won’t join the ever growing “very poor” class. Somewhere along the line, “middle class” disappeared.
The not-so-Great Recession is just the latest and loudest part of the long decline of the middle class. From the end of World War II to the early 1970s, wages grew along with productivity. But since then, wages have been stagnant or declining—while productivity skyrocketed. The decline in a family’s earning power was offset by the entrance of vast numbers of women in the labor market—and then by wage-earners holding multiple jobs. By the late 1990s, debt—from second mortgages or credit cards—kept the middle class afloat. And now what is revealed is a middle class held together by nothing more than string.
One of the most consequential but least recognized aspects of the current economic disaster is the growing length of time workers are without jobs. In December, the average jobless worker had been unemployed for 29.1 weeks. In contrast, when the recession began in 2007, the average unemployed person had been out of work for 16.5 weeks.
At Economix blog, Catherine Rampell points out in an tellingly titled post, “A Growing Underclass,” that the longer unemployed workers stay out of work, the less likely they may be to find work.
First, their skills may deteriorate or become obsolete—especially if they are in a dynamically changing industry like high technology.
Second, the stigma—both internal and external—of their unemployment grows. Studies have linked job loss to declines in self-worth and self-esteem, meaning these people will probably make less compelling job candidates.
So, even if there were jobs available—there are now more than six unemployed workers for every one job—getting one becomes harder and harder the longer you’re out of work. Jobs are so few, in fact, even a weekly columnist at Forbes had this to say:
For many, many Americans there are no jobs and few prospects. For them the Great Recession is not a cute aphorism but a major cataclysm.
Long-term joblessness is one more nail in the middle class coffin. As Working-Class Perspectives describes it:
Unlike in past business cycles, the middle class has not been able to recover so far, despite increases in productivity and stock prices. In “America Without a Middle Class,” Elizabeth Warren documents how the de facto unemployment rate, credit debt, “underwater” mortgages, increased use of food stamps, personal bankruptcies, and the loss of pensions and health care have all dramatically increased. Middle-class households have depleted their savings and are increasingly accruing debt to pay for college, health care, and other expenses.
Some experts believe that the decline in jobs will only continue. For example, Alexandra Levit predicts significant losses in a number of key industries between 2008 and 2018: semiconductor manufacturing (33.7 percent), apparel manufacturing (57 percent), newspaper publishers (24.8 percent)….Corporations are moving many of these jobs offshore or replacing them with technology rather than paying middle-class wages and benefits. The economists are right that new jobs are being created in place of these. But as Jack Metzgar discussed last week, most of the new jobs offer even lower wages and benefits and require less education.
Jobs are offshored while the jobs that remain in the United States are low-wage, with little affordable health care or retirement options. Meanwhile, the smooth of face and soft of hand financial wizards who turn their noses up at the industrial manufacturing sector fail to realize that when the United States loses its ability to make things, it also loses the research and development power that fueled the nation to greatness. And it loses something a lot more. Louis Uchitelle interviews Sen. Sherrod Brown (D-Ohio) about the humiliation of building a new World Trade Center with no glass made in the United States:
“Imagine China,” he said in an interview, “building a huge structure intended to be an important national symbol and importing glass from the United States to build it. There is no way the Chinese would do that.”
And a low-wage job nation fuels income inequality. This from a stunning report by economist John Schmit at the Center for Economic and Policy Research:
From a peak just before the 1929 stock market crash through the early 1950s, wage and income inequality, broadly measured, were declining. From the early 1950s through the late 1970s, inequality was flat, or even falling slightly. Since the late 1970s, however, inequality has skyrocketed, climbing back to levels last seen in the 1920s. In 1979, for example, the top one percent of all U.S. taxpayers received about 8 percent of national income; by 2007, the top one percent received over 18 percent. If we include income from capital gains in the calculation, the increase in inequality is even sharper, with the top one percent capturing 10 percent of all income in 1979, but over 23 percent in 2007.
Back at Cafferty’s site, Chad from Los Angeles knows why:
The middle class has turned into the “peasant class.” We have been taken over by a few wealthy people who control our politicians and government. We have become an Aristocracy. Except the ones in control are not royalty, they are businessmen hiding behind a cloak of deception that is Corporate America.
In the short term, critical steps must be taken for immediate relief. The first is getting the Senate to extend unemployment insurance (UI) for the long-term unemployed. As usual, the House already has acted, extending UI in December, while senators dither. (Click here to tell your lawmakers it’s time to act.) Extending UI is part of the jobs initiative the AFL-CIO is pushing for immediate relief for jobless workers.
But before the current crisis fades, the nation must begin to reverse the more than 40-year trend in which the gap widens between rich and poor and the middle class falls out of the bottom.
Silas from Boston—a city not unfamiliar with fomenting revolutions—offers an intriguing insight:
We’ve allowed the “upper” class to become too big to fail. As a result, the middle class is an endangered species which has to bail out the class that got us into this mess to begin with. This is how the French Revolution started.
This is a cross-post from the Firedoglake blog.
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It seems to me that the rise of the middle class in America coincided with the rise of unions, and that the decline in unions is the cause or primary factor in the decline of the middle class. I would be interested in knowing if there is any research that has been done which supports or disputes this hypothesis.
The beginning of the end for the middle class can be traced directly back to the beginning of the rise of the salaries and perks of CEOs. It has become increasingly difficult (and in some cases impossible) over the years for companies to continue to provide decent wages and benefits for their ‘workers’ while at the same time keeping up with the outrageous demands of the ’suits’. I’ll use Montgomery Ward as one example. Once they began to overpay their ’suits’ they found themselves cutting back of ‘workers’. Not long before this well established company finally closed their doors I used to say it was impossible to buy anything from them. Why? Because you couldn’t find a clerk! A store can have all the great merchandise in the world but if there’s no one there to ‘ring up’ the transactions sales are going to suffer. I’ve seen the same scenario in Macy’s, Sears, Penneys, etc. The CEOs are raking in the big bucks but there’s no customer service. If these stores are to survive perhaps they should just install check out lines like the discount merchants!
When I began working for the ‘telephone company’ our CEO made about ten times per year what I did. By the time I retired some thirty years later the CEO was making about five hundred times per year what I did. The disappearance of the middle class in this country is no big mystery. It’s being brought about by greed! And if things don’t change soon I fear the once great and powerful USA will become just another third world country!
What does it mean to be middle class? Many of my fellow co-workers adamantly claim to be middle class and I ask, are they? I asked one fellow, when was the last time you ate in a real restaurant where you made reservations, had your own waiter and table with silver, crystal and linen? Not Ponderosa or Applebees! - Oh, maybe never.
How many times did you attend professional sporting events and go to concerts last year? - But you are middle class?
When was the last time you took the family and flew to a vacation destination? - But you are middle class?
How many new suits are in your closet? - What? Only one you wear to two places, funerals and weddings. But you ARE middle class?
Investment advisors tell us to say 10% of our salary for an emergency fund. Save 10% of our income in our 401K, 403B. They tell us to invest in 429 college plans for our children and set up a trust for our estate. After saving the maximum in your 401K, 403B then they recommend annuities. How are you doing? Oh, your are middle class aren’t you?
When was the last time you bought a brand new car and could comfortably afford the monthly payment and meet all your other financial obligations?
The powers that be are not going to voluntarily give you anything without some old fashioned arm twisting. The Employee Free Choice Act is the ONLY piece of legislation that will keep this country from turning into a third world nation. If an employer can enjoy 500 times earnings I don’t see what’s wrong with you keeping a roof over your families heads.
I often think of the Christmas classic film, It’s a Wonderful Life with Jimmy Stewart. As he fights Potter during the depression and the people are forced to rent from him and live in squalor, Jimmy Stewart asks,” Is it too much to ask to own a car and the roof over your head?”
Welcome to Potterville!
We need investors to understand the pay structure of Administration in companies, and refuse to buy stock, to force the stock market to give maximum return to the Stock holders, not the CEO’s. Government control is not the way to control this, that only leads to more Socialism. Investors must review company data, before buying even one share. I believe the pay of all administrators should be disclosed to all interested investors each year, payouts for Golden Parachutes should be public record. Much of the earned value of the company is bled off before dividends are disclosed. Stop this
There may be some truth for many organized workers, that unions promoted higher wages and benefits, and thus moved those workers in manufacturing and heavy industry into “middle-class” income levels. But this is no longer the case, for several reasons.
Globalization has wiped out millions of U.S. jobs. Manufacturing industries shut down, unable to compete against super-exploited overseas labor. The cry for “jobs, jobs, jobs” being repeated endlessly does not address this economic fact of life. Under capitalism, jobs creation is merely the end result of a process in which a “business plan” assures maximum profit to the owner first. The jobs created under the “business plan” must have minimal wages, minimal benefits, and minimal number of workers in order to maximize the profit to the owners.
The slogan “BUY AMERICAN” is really a slogan to maximize profit to the owners of an unprofitable business, which is unable to compete in the world marketplace, and thus demands subsidies, tax relief, etc. This may result in a few workers employed in barely “living wage” jobs. But in the long term, with the collapsed economy, with government funded social programs gutted.
Capitalists tried to find more profitable ways to invest that minimized expensive “labor intensive” industry and caused the “financialization” of capital, by investing in speculative housing bubbles, “dot com” bubbles, volatile stock market, games, etc.
As far as working people are concerned, the capitalist economic model is unable to provide jobs, unable to tax the wealthy sufficiently to maintain essential social services, etc. Capitalists prefer to make vast fortunes investing in war, “homeland security”, to bribe politicians for tax benefits, and to continue the unregulated corruption of wall street, etc.
Today, with the steady decline in membership and thus power of the trade union movement. It seems that the organized labor movement, is no longer capable of protecting organized workers from the rapacious demands of corporations wanting to shut-down organized work places. The union “leaders” have too long been the “business partners” to carry out destruction of their own locals, to retain their own salaries and remaining benefits for the remaining union bureaucracy.
Here is a case in point. (Note: there is a video on-line that shows what happened at the meeting described.) Go to the link below for the full story
and the link to the YouTube video.
http://www.wsws.org/articles/2010/feb2010/numm-f06.shtml
Anger toward UAW erupts at California auto workers meeting
By Tom Eley
6 February 2010
Anger among workers at the New United Motor Manufacturing Inc. (NUMMI) plant in Fremont, California, toward the United Auto Workers (UAW) exploded at a January 24 meeting discussing the imminent closure of the facility. Nearly 5,000 workers will lose their jobs when the plant, formerly a joint venture of General Motors and Toyota, closes on March 31. Four hundred or so workers were present at the meeting
Several attendees captured the eruption on video, which began during comments by UAW Local 2244 Bargaining Chairman Javier Contreras. Contreras was booed, jeered, and interrupted as he attempted to present details of the severance package. At one point an outraged older worker demanded to know “where the hell” the union official had been for the last six months. Contreras burst out, “Shut the f— up, you motherf——!” At that point, furious workers rushed to the front of the room. Contreras and other local UAW personnel were defended by a few union officials. Local union leaders pleaded for calm and called in the police in a bid to control the workers.
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Click on “captured the eruption on video”……in the second paragraph of the WSWS story at the WSWS site.
or go to this link to see video:
http://www.youtube.com/watch?v=9nSBEZ1lAIY&NR=1