Crisis of the Middle Class: The Danger
“Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.”
From The Second Coming, William Butler Yeats
In the US, we tend to think of “resilience” as a quintessential American attribute. Of course, that’s wrong – the Chinese worker rebuilding from the earthquake’s rubble and the Pakistani peasant farmer reclaiming land ravaged by flood are every bit as resilient as the Americans recovering from Sandy and Katrina.
But there is a strand of resilience thinking that is intimately interwoven into the fabric of the American Dream: the idea that when life hands you lemons you make lemonade and sell it for a profit. This is an inherently middle-class point of view reflecting America’s origins. It embodies the idea that in America anyone can grow up to be a success. It also reflects what de Tocqueville saw as America’s unique sense of community. This middle-class point of view implicitly accepts as literal truth the Chinese ideogram for crisis – two characters, one representing danger and the other opportunity. In what follows, I’ll first look at the danger facing the American middle class (and, in fact, facing the middle classes in most developed countries), and then where opportunities might lie.
In September, George Friedman reprinted an important essay on what he called “The crisis of the middle class and American power.” His starting point was the post-World War II middle class. In the ’50s, an American family (husband, wife and two kids) at the median income level could afford a modest home and two cars – one new and one older. The family could take a driving vacation every year and still save some of what the single wage earner (almost always the husband) brought home. The family could be reasonably confident that the company the husband worked for would provide a pension that – along with their savings and Social Security – would see them comfortably through their retirement years.
Then came the soaring inflation of the ’70s and ’80s. While wages grew, they did not grow fast enough to cover the lifestyle that the American middle class had become accustomed to. Many families adapted to the changing economic scene by having the wife enter the workforce. Two wage earners could maintain something like the ’50s lifestyle in terms of material possessions. However, there were hidden costs: less time to spend with the family, less time to be involved in the community, less time to grow intellectually and spiritually.
At about the same time, large American corporations were also facing an unprecedented crisis caused by global competition. These corporations had to become more efficient or die a lingering death. This led to major re-engineering of the corporations – most importantly, their hierarchies became flatter and automation was ramped up. As a result, large numbers of middle managers and blue collar middle class workers were no longer needed. While in the ’60s, large corporations employed one in five American workers, by the ’80s this had dropped to one in ten.
In the ‘50s and ’60s, the economic contract between employer and employee implied a sort of social contract. The worker would loyally work for the company, and the company would loyally repay his loyalty by taking care of the worker and his/her family through their retirement years. By the late ‘80s, this loyalty had become a luxury large corporations believed they could no longer afford. In addition, large corporations came to believe they could no longer afford investment in the communities where they had facilities. As Robert Samuelson in “Death of the Good Corporation” sadly concluded, “We thought all companies could marry efficiency and social responsibility. We were wrong.”
The impacts on American workers of these cumulative crises were profound. “Just in time” became a concept applied to workers as well as raw materials – when needed skill sets changed, there was no longer a guarantee that existing workers would be retained and retrained in the necessary new skills. That meant that many workers would have to start over – look for new jobs, often at or near entrance pay grades – and often more than once. As a result, for many workers, upward mobility has become more difficult; median incomes are almost stagnant – the median household income in 2014 was the same as in 1996. For many displaced blue and white collar workers, the ’50s middle class lifestyle has become almost unattainable.
These crises have split the American middle class in two. One group (I’ll dub the Learners) has in fact prospered. The other group (the Non-Learners) – much larger, perhaps two-thirds of what we think of as the middle class – has floundered. As Charles Murray shows in Coming Apart (for a quick synopsis see here), this group is much less upwardly mobile, is much more isolated from family and community, and is much less trusting of government and other institutions. Their divorce rates are higher as is the number of single parent families. While teen birth rates have fallen overall, they remain stubbornly high in this group. While death rates for most Americans have fallen sharply, this group has seen slowly rising mortality rates – driven by suicide, alcoholism and drugs – especially among middle-aged (45-54) white non-Hispanics, those most likely impacted by the crisis of the middle class.
At one and the same time corporate profits (as a fraction of GDP) are at an all-time high while wages are at an all-time low. The religious bonds that have traditionally held communities together are weakening. And we are seeing a re-segregation of communities – not on the basis of race, but between the Learners and the Non-Learners. Thus, those with the resources to deal with the problem are shielded from seeing it.
Upward mobility is part of the American ethos and central to the American Dream, but the dreary statistics put me in mind of Yeats’ Second Coming. The danger clearly is that we create a permanent under-class from the unrecovere middle class – without hope, without resources, unconnected to their communities and thus not resilient. Is the situation irredeemable? I don’t think so, but we will need to more clearly understand the problem if we are to solve it. I’ll try to better define the problem, look at some surprising opportunities it provides and consider some possible solutions in the next post.