feb 2015

FINANCE
By Bill Johnson
AmericA ’S SHRINKING
MIDDLE CLASS
Statistics to prove the decline
America’s middle class has eroded for decades. Salaries haven’t
kept up with inflation. Families find it harder to pay the bills. Some
struggle from paycheck to paycheck.
Numerous sources document that wages have been stagnant since
the 1970s. Purchasing power has been reduced. Medical costs and
college tuition, among other things, soared higher than the inflation
rate. Many families felt they couldn’t keep up. Simultaneously,
the income of a small percentage of Americans grew dramatically,
creating an income disparity that hasn’t been seen for generations.
In his book, The Price of Civilization, economist Jeffrey Sachs
At least 49 million families are considered
“food insecure,” uncertain if they’ll
have enough food next week.
reports that in the early 1970s, the average pay for the top 100
CEOs was 40 times the pay of the average worker. By 2000, it was
1,000 times the average worker’s pay. The wealthiest one percent
of Americans has more net worth than the bottom 90 percent,
according to Sachs.
University of California Professor G. William Domhoff found that
the wealthiest one percent owned 42 percent of America’s wealth,
and the top five percent owned about 72 percent. According to the
U.S. Department of Commerce, the median household income in
2013 was about $52,000, meaning half the households earned less
than that, many a lot less.
At least 49 million families are considered “food insecure,” uncertain
if they’ll have enough food next week. Government agencies
report more than 45 million people live in poverty, including one
out of every five children in America. No security for them. No
investments.
What is poverty? To live in poverty means an income less than
$24,000 a year for a family of four, $15,000 for a couple, and
$11,000 for a single person. (Working full-time at $8 an hour, 8
hours per day, five days per week, 52 weeks per year, earns a gross
annual income of $16,640.)
Scholars attribute the shrinking middle-class to
various factors: globalization, technology that
allows jobs to be out-sourced to poor countries,
tax policy, decline of labor unions, and the power
of rich and special interests to affect public
policy and elections.
The loss of manufacturing jobs to overseas companies in a race to
find the lowest paid workers is surely a factor. (Even China is now
losing manufacturing jobs to poorer countries with even lower
wages.)
The Maine paper industry, which thrived for decades, might be a
micro-example of that.
Young people once aspired to work in the mills like their parents
and grandparents. They saw that hard work and a decent wage
allowed them to have a home and maybe a modest camp on the
lake. No more. Mills closed. Some fled south to non-union states
with lower wages. Jobs were lost to foreign competition. Most
former Maine paper workers will never again earn as much.
American factories, steel mills, and automobile plants all lost
thousands of manufacturing jobs. U.S. steel mills protest current
trade policies that allow cheaper imported steel. The Congressional
Research Service reports that at least 500,000 jobs in auto parts
and manufacturing were lost in the first nine years of this decade.
Look what’s happened to Detroit. Look at how much we buy from
China.
A generation of middle class workers spent their lives with one
company because they felt the benefits and salary were fair and
the company would take care of them. That security is gone. Few
young people expect it.
The consequence of all this is debatable, but some analysts connect
it to the majority opinion that America is on the “wrong
track.” Many middle-class Americans believe the economic deck
is stacked against the average worker who can no longer get a fair
deal in America. P
the PARKLANDER 109