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Whatever happened to the middle class?

Whatever happened to America’s Middle Class? Today and tomorrow, the New York Analysis of Policy & Government reviews the most important data and research on this bedrock portion of the U.S. population. 

There is one issue that most Democrats and Republicans, progressives and conservatives actually agree on: America’s middle class is dwindling.  In both numbers as a percent of the population and in income, those at the center of the economy in earnings are becoming an endangered species. A review of several key reports is revealing.

As the New York Analysis of Policy & Government has previously reported, a significant source of middle income employment has been considerably reduced since President Clinton normalized trade relations with Beijing. Combined with America’s corporate tax rates (highest among any of the U.S.’s developed trading partners) and a refusal by both parties to adequately address issues such as the importation of goods manufactured overseas by slave or dramatically underpaid labor and with considerably less regulation than found domestically, the exodus of jobs has been rampant.

While the Obama Administration notes that some jobs have been created to replace those lost during the Great Recession, the reality is that these replacement jobs are largely very-low paying positions, many of them taken by immigrants, legal and illegal.

Writing in the Wall Street Journal, William Galston notes that “Over the next decade, the service sector will provide 95% of all the new jobs.  Manufacturing, which shed more than two million jobs between 2004 and 2014, will shrink by an additional 800,000, to only 7% of the workforce.  Of the 15 occupations with the most project job growth, only four ask for a bachelors degree, eight require no formal education credentials; nine offer median annual wages under $30,000…For middle income families…[net wealth has stagnated] from $96,000 in 1983, $98,000 in 2013…”

The latest report to join the ever-increasing number of worrisome analyses about the middle class comes from the Pew Research Center. Rakesh Kochhar and Richard Fry note that:

“Americans in middle-income households have lost significant ground since 1970, according to a new Pew Research Center analysis of government data. The middle class has long been the country’s economic majority, but our new analysis finds that’s no longer true. Meanwhile, the middle class has fallen further behind upper-income households financially, which now hold a larger share of aggregate household income than ever before in the 44-year period examined.”
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Pew summarizes its report in five points:

1.Middle-income Americans are no longer the nation’s economic majority. In early 2015, there were 120.8 million adults in middle-income households, matched in number by the 121.3 million adults who were in lower- and upper-income households combined. This is the culmination of a long slide in which the share of adults in middle-income households has fallen from 61% in 1971 to 50% in 2015.

  1. The decline in the middle represents both economic progress and polarization. The shift shows progress in the sense that a larger share of Americans now live in upper-income households. Fully 21% of American adults in 2015 were upper income, compared with 14% in 1971, a 7-percentage-point increase. The increase in the share of upper-income adults was greater than the change in the opposite direction. Some 29% of U.S. adults were low income in 2015, compared with 25% in 1971. But the data also show increasing economic polarization: As the distribution of adults thins in the middle, it is bulking up most at the extreme ends of the income distribution, the lowest and highest tiers.
  2. 3. Over the long haul, America’s middle-income households have seen their income grow.From 1970 to 2014, these households’ median income increased from $54,682 to $73,392 (in 2014 dollars), a gain of 34%. Lower-income household incomes have grown, too, but not as much: 28% over the same 44-year period. Upper-income household incomes have grown most, up 47% over this period. However, the nation’s economic progress over the past several decades masks financial setbacks since 2000.Because of the recession in 2001 and the Great Recession of 2007-09, overall household incomes fell from 2000 to 2014. The greatest loss was felt by lower-income households, whose median income fell 9% over this period; the median for middle-income households fell 4%, and that for upper-income households fell 3%.
  3. The shareof U.S. aggregate household income held by middle-income households has plunged,from 62% in 1970 to 43% in 2014. Meanwhile, the share held by upper-income households increased from 29% to 49%. This shift is driven both by the growing size of the upper-income tier and more rapid gains in income at the top. There is also a growing disparity in the median wealth (assets minus debts) of these income tiers. Upper-income families, who had three times as much wealth as middle-income families in 1983, more than doubled the wealth gap to seven times as much in 2013.
  4. Over the years, certaindemographic groups have fared better than others in moving up the economic ladder. Since 1971, older Americans (ages 65 and older) and African Americans have made notable progressin moving up the income tiers. But overall, both groups are still overrepresented in the lower-income tier. Married adults also made significant progress over this 44-year period, and women overall made greater economic gains than men.

“Americans without a college degree stand out as experiencing a substantial loss in economic status since 1971, as do young adults ages 18 to 29. Hispanics overall are also more likely to be in lower-income households than in 1971, a change driven by the increasing share of immigrants in the Hispanic population in the past four decades.”

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America’s suffering and neglected middle class

The bad news for America’s middle class continues, as the real unemployment rate (the Bureau of Labor Statistics (BLS)  U6 number) remains high at 10.5%, with long-term unemployment representing between a quarter and a third of all those without jobs.  For those with jobs, salaries have not improved in relation to inflation rates.

While more federal dollars went to the poor, and the wealthy benefited from President Obama’s policies, (The Federal Reserve notes that during the Obama Administration, only the wealthiest 10% saw their median income rise during the 2010-2013 period) the middle class has suffered.

According to the Federal Reserve  “Families in the middle to upper middle parts (between the 40th and 90th percentiles) of the income distribution saw little change in average real incomes between 2010 and 2013 and thus have failed to recover the losses experienced between 2007 and 2010.  Only families at the very top of the income distribution saw widespread income gains between 2010 and 2013, although mean and median incomes were still below 2007 levels.

“Consistent with income trends and differential holdings of housing and corporate equities, families at the bottom of the income distribution saw continued substantial declines in real net worth between 2010 and 2013, while those in the top half saw, on average, modest gains. ‰ Ownership rates of housing and businesses fell substantially between 2010 and 2013. ‰ Retirement plan participation in 2013 continued on the downward trajectory observed between the 2007 and 2010 surveys for families in the bottom half of the income distribution. Participation rebounded slightly for upper-middle income families, but it did not move back to the levels observed in 2007.”

The National Employment Law Project notes that “Since employment hit bottom in February 2010 Employment growth during the early recovery was heavily concentrated in lower-wage industries and occupations…We find that low-wage job creation was not simply a characteristic of the first phase of the recovery, but rather a pattern that has persisted for more than four years now. Deep into the recovery, job growth is still heavily concentrated in lower-wage industries. As a result of unbalanced employment growth, the types of jobs available to unemployed workers, new labor market entrants, and individuals looking to move up the career ladder are distinctly different today than they were prior to the recession.

“There continues to be an imbalance between the industries where the recession’s job losses occurred and the industries experiencing the greatest growth four years into the recovery. Lower-wage industries accounted for 22 percent of job losses during the recession, but 44 percent of employment growth over the past four years. Today, lower-wage industries employ 1.85 million more workers than at the start of the recession. Mid-wage industries accounted for 37 percent of job losses, but 26 percent of recent employment growth. There are now 958,000 fewer jobs in mid-wage industries than at the start of the recession. Higher-wage industries accounted 41 percent of job losses, but 30 percent of recent employment growth. There are now 976,000 fewer jobs in higher-wage industries than at the start of the recession. Private sector employment growth over the current recovery is stronger than it was following the 2001 recession, but job growth is more concentrated in lower-wage industries.”

A Townhall review of the ongoing plight of the middle class states:  “… middle class Americans are the backbone of the country; yet their interests always seem to take a backseat to those of the wealthy, the poor and the naked self-interest of BOTH political parties. There’s nothing wrong with giving the poor a hand-up or making sure that the rich are treated fairly, but looking after the interests of America’s middle class should be priority #1 for both parties. Instead of treating the interests of the middle class as a star for both parties to follow to take this country into the future, they’ve been getting screwed over. How?

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“Soaring College Prices: Even though median household income has declined ACROSS THE BOARD for Americans in all income groups since 2000, the price of a college education rose at 7.45% per year from 1978 to 2011…

“Trade policies:  a lot of jobs that had to be done locally have moved overseas…as a nation that has embraced free trade policies, we’ve been far too reluctant to throw our weight around to ensure that markets are opened to American products… We don’t make radios and TVs here anymore. No cell phones are made here. Over 42,000 factories have closed since 2001. The villain isn’t free trade so much as politicians who aren’t willing to DEMAND that other countries give our businesses staffed by middle class workers the same opportunity to sell our products overseas as we give other nations.

“Immigration and Illegal Immigration: Illegal immigration mainly hurts poor Americans … However, there are also middle class Americans losing jobs and seeing their wages driven down because they have to compete with foreigners who don’t have the same expenses they do because they’re above the law…Government data show that since 2000 all of the net gain in the number of working-age (16 to 65) people holding a job has gone to immigrants (legal and illegal). This is remarkable given that native-born Americans accounted for two-thirds of the growth in the total working-age population. Though there has been some recovery from the Great Recession, there were still fewer working-age natives holding a job in the first quarter of 2014 than in 2000, while the number of immigrants with a job was 5.7 million above the 2000 level.

“The Debt: … The more money the Fed prints, the more inflation we’re going to ultimately have. The more inflation we have, the less the money that middle class Americans have saved over a lifetime is going to be worth.”

A CNN Money study confirms this. “Workers are taking home their smallest slice of U.S. income on record…That means the richest 1% of American families have captured 95% of the income gains in the recovery, according to economists at the forefront of income inequality research, Thomas Piketty and Emmanuel Saez. The job market still faces a gaping hole… The poverty rate has barely budged during Obama’s presidency, marking the first time it has remained at or above 15% for three consecutive years since 1965….Record number of Americans are on food stamps. Amid the recession, the food stamp rolls surged, and as of 2013, 48 million Americans were receiving the benefits — the highest number since the program began in 1969…The manufacturing revival was a mirage:  manufacturers … are operating with a U.S. workforce that’s a small fraction of the size it was two decades ago.”

The programs and benefits provided to the poor continue to be favored by politicians who see them as an effective method to secure their loyalty in upcoming elections. The wealthy use influence, connections, and contributions to enhance their position. The middle class, the backbone of the nation, continues to suffer.

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The Beleaguered Middle Class

According to a recent Pew Research Center report federal data indicates that the typical wealth of middle-income families was basically unchanged in 2013, remaining at about $96,500.

Combined with Pew’s 2012 study,  in which 85% of self-described middle-class adults said it was more difficult than it was a decade ago for middle-class people to maintain their standard of living, it is clear that middle income Americans continue to face tough times. “Their downbeat,” notes Pew, “comes at the end of a decade in which, for the first time since the end of World War II, mean family incomes declined for Americans in all income tiers. But the middle-income tier—defined as all adults whose annual household income is two-thirds to double the national median —is the only one that also shrunk in size, a trend that has continued over the past four decades.”

It is not coincidental that throughout the past half-century, $22 trillion dollars (not including Social Security or Medicaid) have been taken out of the U.S. economy in the form of taxes for an unsuccessful War on Poverty. That’s more than three times the cost of all U.S. military wars since the American Revolution, according to the Heritage Foundation.
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WallStreetCheat.com  notes “The struggles of the middle class have been well documented and oft-reported. Faced with a tough economy — including hard fights for jobs, adequate pay, and adjustments to compensate for the Affordable Care Act — members of what is supposed to be America’s backbone are finding that the post-recession world is more difficult than many imagined…Jobs that were lost to the recession have returned, but are paying a fraction of what they were previously. Essentially, everyone has had to make sacrifices to return the country to economic prosperity. But the sacrifices have been levied on those in the working class almost exclusively.”

By de-emphasizing free enterprise growth in favor of government programs, the means with which generations of Americans from the earliest days of the nation’s history until the middle of the twentieth century pulled their way out of poverty and into the middle class was handicapped.

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The Election is Over; Now its time to address America’s Crises

The 2014 elections are finally over, and the work of actually resolving America’s many crises must begin.

There is a temptation for the public, the pundits and the politicians alike to say that the nation’s enormous challenges can’t be resolved before the 2016 presidential election, and to accept only minor revisions to the strategies that have resulted in the country’ diminished fortunes over the past several years. But the dire impact of erroneous policies is so significant that delay is unacceptable. Congress must act rapidly, and the President must find the courage and honesty to change course.

The essential linchpin of the American economy is a healthy middle class. A combination of the expiration of the Bush tax cuts, the increased costs to businesses and consumers alike of Obamacare, heightened fuel prices, and the loss of steady jobs has wreaked havoc with this vital group.

Before the next federal budget is passed, action must be taken to lower taxes on middle income families.  Similarly, the various regulations, including Obamacare mandates that have discouraged businesses from growing and expanding their employment rolls must be repealed. This should also include reducing America’s absurdly high corporate tax rate, which encourages businesses to leave the U.S. and take jobs with them.

The U.S. balance of trade continues to see far too many dollars going overseas. It is time to keep those funds at home, where they can be used to spark the domestic economy.  The most rapid way of doing that is making the nation truly energy independent. Lands under federal control must finally be opened for energy exploitation. Also, attempts to limit other energy sources, including coal, must stop. This will also have two other beneficial effects: it will lower the cost of energy, reducing may other consumer and business expenses, and will also limit the enormous funds Russia and ISIS take in from energy sales that are funneled to their militaries.

It is also time to review American trade policies.  Unfair advantages have been given to foreign competitors, who, not subject to a variety of rigorous federal rules, can manufacture far more cheaply than U.S. companies. Goods imported from abroad for sale in the U.S. should be subjected to similar mandates,or be subjected to fees that level the playing field. Further, nations that restrict imports from America should have reciprocal limitations placed on their exports.
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The most imminent threat, one that has reached a level that constitutes a clear, present and immediate danger to the safety of all Americans, is the dramatic deterioration of America’s defense posture during the past several years. The U.S. military had already been slashed to the bone, best symbolized by the Navy’s reduction from 600 ships to 284. Under the severe cuts of the past several years, America has seen force drops reducing our services to levels not seen since before the First World War.  Under current plans, even North Korea will have a larger army than ours. These reductions have taken place at the same time that Russia, China, North Korea, and Iran have dramatically built up both the size and sophistication of their forces.

Further, in an era when nuclear proliferation is a disturbing reality, and when regimes such as Iran and North Korea are on the verge of having both nuclear weapons and the ICBMs with which to use them to attack America, it is irresponsible to not deploy a comprehensive anti-missile policy.

These threats must be addressed in the next federal budget.

The Legislative Branch must reassert its role as a check on the Executive Branch far more vigorously. During the era of the Obama Presidency, federal agencies such as the IRS, the Federal Communications Commission, the Environmental Protection Agency, the Department of Education, and most ominously the Department of Justice have all been used for partisan political gain.  This must cease, and it is within the authority and capability of the newly elected Congress to viably and rapidly address that threat to the American Constitution.

These are crises whose solutions cannot be postponed.

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Labor Day: Betrayal of a Legacy

Happy Labor Day!

The American labor movement played a vital role in establishing the nation’s middle class. But have large labor unions turned this once vital movement into something more harmful than helpful to U.S. workers?

The first hint that big labor unions are no longer the friend of working men and women comes from the concept of forced dues paying.  When individuals must be forced to fork over dues, it generally means that the accomplishments of the organizational leadership are too inadequate to inspire loyalty.  Recently, one of the most prominent union states, Michigan, adopted a right-to-work law, which prohibits this practice.

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In a development that even some of the most prominent of the early heroes of the labor movement never favored,  many if not most government workers are now largely unionized.  That gives excessive influence to institutions that are not part of the constitutional system of government.

the extraordinary power government unions play in elections is harmful.

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American Middle Class: An Endangered Species

For over half a century, the American middle class has been the bulwark of prosperity and stability not only in the Unites States, but throughout the planet as well.  It is an entity that has become increasingly endangered over the past five years.

When Mr. Obama took office, the real median household income was $53,760.  It has since dropped to $53,385.

Middle income families are under siege from rising prices for the staples of life, including food, energy, shelter and medical care, needs which must be paid for with declining income and despite high taxes. They are also facing assaults on the non- materialistic front as well.

Key examples:

Red meat, pork, fruit and dairy prices have increased substantially from last year. Center cuts of beef with bones have jumped 18.9%, pork chops 18.8%, and numerous other pork choices by a startling 23.4%.  Bacon is up 14.5%. Romaine lettuce has risen 25.7%.  Dairy prices have jumped an average of 4.7%.

Increased prices for homes and rates for mortgages, as well as higher rental charges, have produced a significant squeeze to families, who also must contend with student debt reflecting the enormous and unjustified cost increases in college tuition over the past two decades.

A Forbes magazine study notes that “Health insurance premiums are showing the sharpest increases perhaps ever… The average increases are in excess of 11% in the small group market and 12% in the individual market. Some state show increases 10 to 50 times that amount. The analysts conclude that the ‘increases are largely due to changes under the ACA [Obamacare.]”

Gas prices constitute a major challenge for American families, jumping from an average of 2.42 in 2009 to 3.52 currently.  Despite high energy costs throughout the nation, the White House continues to roadblock the exploitation of energy resources on federal lands.

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The dwindling American middle class has lost its distinction of being the world’s most affluent, according to a New York Times report. One statistic hasn’t changed, however; despite the vast sums spent both on Mr. Obama’s “stimulus” and his mammoth increases in welfare-type programs, the Washington Times notes that the  poverty rate has remained at 15% for three consecutive years.  According to the Russell Sage Foundation  the median wealth of American households has dropped from $87,992 in 2003 to $56,335 in 2013.

These problems didn’t arise by accident. Although a portion of the increases in food may be attributable to weather fluctuations, (another portion is attributable to increasingly inane EPA policies) poor policy choices must bear the burden of the blame.

The White House has steadfastly refused to allow access to the riches of oil and gas on its vast land holdings, resulting in higher energy prices and fewer jobs.

America has the world’s highest corporate tax rate, deeply affecting employment. The increase in welfare-type benefits, especially those which can be accessed by relatively young, healthy individuals, has reduced the labor force participation to its lowest point in 36 years and has placed an enormous burden on working, middle income families who now pay taxes which are mostly spent on entitlement programs.

High taxes and EPA regulations combined with reduced financial support for the military has slashed many middle-class industrial jobs.

The bad news isn’t only on the economic front.  Middle-class values have been consistently mocked by academia, Hollywood, and the progressives.  The very concept of family self-sufficiency has been replaced with the leftist mantra of “it takes a village to raise a child.”

The stability and patriotism of middle class families is the bedrock upon which rests American success.  Its diminishment will indeed, in President Obama’s words, “profoundly transform” the nation, and not for the better.