Stemming Middle-Class Decline

The Challenges to Economic Development

Nancey Green Leigh

• Editorial: Routledge
• Año: 2017
• ISBN:
  9781351488105
• Edición: 1
• Categoría: Social Sciences
• Categoría: Sociology

Are Americans as well-off as they used to be? The answer affects everything from product markets and housing sales to social tranquility and presidential (and local) elections. This volume examines what is happening to the American middle class. In a detailed and comprehensive analysis, Nancey Green Leigh tracks changes in the pattern of income distribution over a twenty-year period. While earnings have increased, there is a widening gap between what middle-level earnings can purchase and the cost of a middle standard of living.Due to the fact that this decline has not been experienced equally in all regions, separate analyses are reported for urban and rural locations, major census regions, and the largest states. To identify which workers have been most affected, Leigh compares earning trends by race, gender, educational level, industry of employment, part- or full-time status, and fringe benefit recipiency. Rejecting short-term and demographic explanations, Leigh links the decline of the middle class to economic change and industrial restructuring.Leigh concludes her work by examining planning and policy prescriptions to improve the prospects of members - and aspiring members - of the middle economic class. She documents the decreasing ability of middle-level earners to purchase a middle standard of living and attributes the decline in part to failures in planning. Failures of planning, she observes, have contributed to the growing divergence between middle-level earnings and the middle standard of living. Stemming Middle-Class Decline provides comprehensive data and trends on workers, communities, regions, and the nation that all policymakers and government officials should read and examine with care.

1

Are Americans as Well-Off as We Used to Be?

Introduction

When the title question of this chapter is posed, we are asking: Do as many Americans today have a chance to attain the American dream as they did in the past? Attainment of the American dream is largely equated with achieving middle-class status. The 1980s saw the beginning of a debate over whether the American middle class was shrinking, with concern deriving from the importance attached to this segment for both the economy and society as a whole. The middle class is seen, in many ways, to represent the backbone of the U.S. economy and American society, with its values and life-style determining the outcome of our social and political systems. Much of the mass market is structured to satisfy the demands of the middle-class consumer, and the middle-class standard of living is a benchmark by which economic progress is measured. A position in the middle class is generally considered the goal of members of the lower class and of many who aspire to assist the lower class. Decline in the size of the middle class, therefore, has been equated with an erosion of the very foundations of America’s society and economy.

Making sense of all the analyses that have been completed on changes in the size of the middle group of Americans is complicated by the fact that a consistent definition of what the middle of the income distribution is has not been used. The analyses have tended to make or infer a correlation between income or earnings segments and social classes. Indeed, the motivation behind many analyses of trends in the middle segment of the income or earnings distribution derives from the desire to say something about what is happening to a broadly construed middle class, but in reality, income class and social class are not that well correlated. Coleman (1983), in his article synthesizing several decades of research into social class, gives three reasons for this lack of correlation. First, social class is derived more from occupational differentiation than from income:

Twentieth century America may illustrate this proposition to an extreme degree: blue-collar workers can outearn both white-collar workers and salaried professionals, yet they still do not rise above either in social status. To put this in the vernacular, the blue-collar workers “have more money than class,” the white-collar workers “more class than money.”

Second, income has historically varied systematically with one’s place in the age distribution and has largely been correlated with work experience. The earnings of younger workers are usually well below the average for the social class they are assigned to based on their family and educational backgrounds as well as occupation.

The third reason that income and social class are not well correlated occurs because of family variations in the number as well as gender of earners. Over the last twenty-five years, household incomes well below and above the traditional range associated with a particular class have had to be incorporated within the range. This has been due, for instance, to such phenomena as middle-class women becoming simultaneously divorced heads of households and low-income earners and middle-class women who are married entering, in increasing numbers, into the labor force and adding a second income to the household. These changes, combined with increases in the number of singles, retirees, and elderly widowed, all contribute to the reduced correlation between income and social class.

While there is no set definition of the middle class—although it is a label that many members of upper- and lower-income groups apply to themselves — the importance of the middle class in the economic, social, and political spheres of American society is undisputed; any significant change in the size of the middle class is likely to alter the paths these spheres travel, often requiring more than minor adjustments along the way. Drawing broad conclusions about the fate of the middle class on the basis of changes in income distribution, however, must be regarded suspiciously for two reasons. First, as noted, the middle economic and social classes are not all that well correlated. Second, and critical to the intent of this book, even if we choose to focus on the more quantifiable aspect of the subject—that is, the middle economic class—we cannot assume that middle earning or income levels automatically correlate with middle standards of living. Indeed, we will show in this book that there has been a widening gap between what middle-level earnings can purchase and what a middle standard of living costs.

Because the motivation for this book was the desire to understand an important component of the changing prospects for economic development, our focus is on the middle economic class and not the social class. While broad conclusions about the middle social class will not be drawn, other important social issues will be addressed through an examination of change in the size and composition of the middle segment of the earnings distribution. For example, are there changing prospects for upward mobility for those in the lower segment? In what way is the changing labor force participation of women reflected in changes in the composition of the middle earner group?

This book’s focus on the middle segment of the income distribution is a variation in the study of income inequality. A declining middle implies that one or both of the tails of the income distribution is growing, thus increasing inequality. Analyzing the impacts of changes in the middle segment of the income distribution is not meaningful without relating the changes to concurrent changes in the upper and lower segments of the distribution. In focusing on the middle of the income distribution, therefore, issues of overall income inequality continue to be addressed.

While the debate over the disappearing middle class is a variation on the age-old income inequality issue, it is a significant one. Although the body of research on the question of the disappearing middle class has expanded continuously, the debate has not been resolved. Given the wide range of approaches taken by those analyzing the issue, this would seem inevitable, but a large part of the reason for the lack of resolution must also be attributed to the politically charged nature of any findings; the decline of the middle class had been a major theme in the last two presidential campaigns.

From the beginning of the debate, political analysts have discussed the potential impacts of a declining middle class on the nation. In one analysis, Thurow (1984) reminded us that Karl Marx did not foresee the rise of the middle class and thus predicted that capitalism would generate a bipolar income distribution. The lower class was supposed to revolt against this distribution and establish communism; however, the middle class that developed has an interest in preserving capitalism —its source of bread and butter. At the same time, this middle class has “voted to alleviate the worst excesses of capitalism with social welfare programs” (Thurow 1984). The implication is that without the middle class, and the hope it offers to the poor, Marx’s predictions of communism and revolution could come to pass.

Ehrenreich (1986) referred to Marx’s prediction as well, writing that although “it would be easy to conclude that the Marxist vision at last fits America’s future . . . America is unique in ways that still make any prediction foolhardy.” She claimed not only that class consciousness was lacking in America but also that there did not exist the political leadership necessary to articulate “both the distress of the have-nots and the malaise in the middle.” While Ehrenreich’s observations still seemed pertinent for former President George H. Bush’s 1988 presidential campaign, by the 1992 campaign, Democrat Bill Clinton was successful enough in reaching the lower and middle economic classes with his focus on industrial malaise, displaced workers, deteriorating educational systems, a stressed healthcare system, and an uncertain economic future to defeat the Republican incumbent.

Returning to the debate over a shrinking middle economic class, it should first be noted that which kind of income and what income range should be used to define the middle class are critical questions not easy to resolve. Using household or family income enables one to look at the total income picture. If the main research concern is with impacts on the standard of living, then household or family income—which includes earned and unearned income—may appear to be the most appropriate variable for analysis. However, it is important to understand how the pattern of earned income within households is changing in relationship to the household’s ability to consume a middle standard of living. For example, does it now take two earners in a household to purchase the middle standard where previously it took only one?

If the primary concern is with the effect of the declining middle class on employment and earning opportunities, then individual earnings is the appropriate variable to analyze. Understanding the underlying causes of changes in household income distributions requires an equal understanding of what is happening to the individual earnings distribution. While it would be ideal to examine both, such a task is formidable. The two distributions continue to be strongly related but in a more differentiated manner than in the past. At one time, the individual male’s earnings were predominantly synonymous with household income. Today, the two-earner household increasingly makes up the family income unit while, at the same time, there are growing numbers of single-earner, single-occupant households.

There has been less agreement over whether the middle of the family or household income distribution has been declining since the late 1960s as compared to the individual earnings distribution. Still, even if the middle segment of the household income distribution was shown not to be declining, it would be important to understand the ways in which the profile of middle-income households may be changing as a result of overall economic transformation. For instance, does it take more than one earner in a household to achieve a middle-class income and life-style? If so, is this because the middle of the earnings distribution is dropping or because real earnings and income overall have declined or because of both? Can we say we have made economic progress or even maintained the same standard of living overall if it takes two earners to maintain a middle-income household where one could do so previously? What about the additional resources that must be consumed by the second worker in order to work? Does it not imply a less efficient use of resources if more must be consumed in order to generate the same level of income?

With the increase in female labor force participation of the last twenty-five years, the earning of wages has become an activity engaging a greater proportion of the adult population than at any other time in the United States’ economic history. For those engaged in full-time work, earnings constitute all but 2% to 3% of their total income. Thus, earnings are nearly synonymous with total income for the active participants in the economy.

This book will describe the changing middle economic class from the perspective of individual earnings, showing how the middle segment of the earnings distribution decreased over a twenty-year period between 1967 and 1987. We will show that the shifting middle ground has created problems in geographical regions associated with economic growth as well as in those associated with economic decline. We will discuss which earners—in terms of part-and full-time employment status, race, gender, education level, industry of employment, and regional location—have been affected by the economic restructuring that occurred between 1967 and 1987. The period of this book’s analysis—beginning in the latter part of the postwar boom, passing through the 1973 turning point in the economy, and continuing to 1987—has predictive value. The economy underwent profound structural change during this period, setting in motion earnings and cost-of-living trends whose paths are unlikely to alter significantly in the near future without substantial new policy direction and planning activity.

This book seeks to make a contribution to our understanding of the changed economic development context of the United States and to help identify what areas of policy require the greatest attention. Its focus is on individual earnings, the ability of middle earnings to purchase a middle standard of living, and what this means for economic development planning. While a changing market basket over the last twenty-five years makes it difficult to measure the middle-class standard of living, one feature of the basket can be selected as a constant index of middle-class economic status: home ownership. We will describe the declining ability of the aspiring middle class to purchase a home with middle-level earnings; in addition, this book considers fringe benefit recipiency because access to healthcare and provision for retirement are two additional and measurable marks of middle-class economic status.

The nation is not, to use the classic regional science terminology, a homogeneous plain. To offer insight for regional economic development planning, this book explores regional variations in the pattern of the declining middle economic class by the categories of urban and rural; by the four major U.S. Census Bureau regions— Midwest, North, South, and West—and by the largest state in each of the four census regions—Illinois, New York, Texas, and California, respectively.

The decline in the middle segment of the earnings distribution has not been experienced equally by all workers and we will discuss which subgroups of the labor force are most at risk of losing or never attaining middle-class economic status. A significant point to be raised is that the historical notion of a broad middle class supported by a family wage may never have reflected reality. At the beginning of our period of analysis—1967—more than half of all full-time middle earners did not earn enough to provide a family with a middle standard of living. The subsequent increase in female-headed households, dual-earner families, and single-person households means that the “Ozzie and Harriet” model, which reflected an ideal and media image rather than the majority’s reality in 1967, needs to be retired while topics such as support for working families with dependents and affordable single-earner housing must be given more attention by planners and policymakers.

The decline of the middle class, which occurred during a period of industrial restructuring, appears to be a long-term trend. This problem is more than just a temporary phenomenon associated with a disproportionate share of the labor force being baby boomers in the early phase of their earning life cycle; thus, that group’s aging cannot be expected to result in significant changes in the earnings distribution and in the ability of earnings to purchase the middle standard of living. Further, the problem cannot be solved with comparable worth policies because it results from more than just an increasing percentage of white women in the labor force.

The best explanation for the industrial restructuring that characterized the 1967 to 1987 period and beyond points to increased international manufacturing competition, which resulted in an industry profit squeeze that ultimately forced upon workers wage and benefit cuts, changes in hiring practices, and weakened unions. Restoring well-paying, or union, jobs with more comprehensive fringe benefits is an obvious remedy from the point of view of current and aspiring members of the middle class. However, such a “solution” does not take into account the reasons for industrial restructuring that began when U.S. manufacturers lost ground to international competitors. By the same token, the most commonly proposed national “economic development” solutions—taxation and transfer policies—simply are not adequate to solve the problem, as will become clear when we examine the more complex causes of the restructuring.

What is needed is more public-sector planning. The problems presented by strong international competition and subsequent industrial restructuring in the United States have been treated primarily as private-sector issues, on an ad hoc basis, and with a short-term perspective. Public planning activities throughout the postwar period have tended to be local rather than national and have primarily influenced the middle standard of living rather than the middle earnings position. There has been little systematic focus on the plight of the middle class or on related issues, such as jobs/housing imbalances, the need for worker training, or policies to support working families. In contrast, America’s chief international competitors have developed national industrial policies through the cooperation of industry and government or of labor, industry, and government. By refusing to do likewise, the United States puts its industry at a competitive disadvantage and its citizens at risk of a declining standard of living.

Furthermore, a broader historical perspective shows that local-level public planning and what limited national-level planning there was helped create the situation that led to pricing the middle standard of living out of the reach of middle earners. The failure of planners to acknowledge how the national highway system made possible suburban development and how the long-run consequences of local zoning ordinances led to suburban development standards that increasingly only upper-income households can afford means that planners also failed to do their part to help bridge the gap between middle earnings and a middle standard of living. This local planning in a vacuum has had significant negative effects on the ability of the nation’s citizens to attain and maintain a middle standard of living.

The Organization of This Book

The remaining six chapters of this book are organized as follows. Chapter 2 examines what happened to middle-level earners at the national level between 1967 and 1987. It provides an overview of the changing earnings distribution for the beginning and ending points of the twenty-year research period and profiles earners by part- and full-time employment status, gender, race, educational attainment, and levels of fringe benefit recipiency.

Chapter 3 examines the middle standard of living, discusses problems of measuring changes in the standard of living over time, and explores two approaches to measuring such changes.

Chapter 4 investigates why industrial restructuring is more compelling than demographic restructuring as an explanation for changes in middle-level earnings and in making a prognosis for the employed’s ability to purchase a middle standard of living. An overview of the industrial structure that employs earners is presented, and the twenty-year period of analysis is divided into three periods, 1967 to 1973, 1973 to 1979, and 1979 to 1987. Particular attention is paid to pre-1973 and post-1973 trends because it has been since 1973 that declines in real incomes have been observed. The earnings distributions of a broad nine-sector industrial classification system are examined for the three intervening time periods. In addition, the earnings distributions of two separate, but not mutually exclusive, industrial classifications—high technology and defense and trade-impacted industries—are examined.

Chapter 5 and 6 are regional analyses of the c...

Índice

• Cover Page
• Title Page
• Copyright Page
• Contents
• Tables
• Figures
• Acknowledgments
• 1 Are Americans as Well-Off as We Used to Be?
• 2 What Is Happening to Middle-Level Earners?
• 3 The Middle Standard of Living
• 4 Industrial Restructuring’s Influence on the Distribution of Earnings
• 5 The Rural and Urban Distinction in Industrial Restructuring
• 6 The Regional Implications of Industrial Restructuring
• 7 Changing Earnings Distributions and Opportunities for Middle-Glass Living
• Notes
• References