Saturday, February 23, 2008

It's STILL the Economy, Stupid: Middle Class Dream Slipping Away

Here's a scary stat. Only 1 in 4 people in working families have a good job -- one that pays at least $17 an hour, and comes equipped with employer-sponsored health insurance and a pension.

No wonder at least 48 million Americans in working families lack the where-with-all needed to do a chin-up to the middle class. This dismal but not surprising news comes from a new report, released Thursday (2/21) by the Center for Economic and Policy Research.

So let's break this down a little further. A total of 48 million -- that works out to about one in five working Americans struggling to make ends meet on incomes that are below a basic, minimum middle class budget for their community. And a full-time job at $17 bucks an hour adds up to an annual income of just over $35k. No one's living high on the hog on that paycheck -- and they aren't likely to be buying homes, paying for college, or saving for retirement either.

Movin' On Up: Reforming America's Social Contract to Provide a Bridge to the Middle Class, takes a look at recent research by CEPR in various sectors -- such as job quality, economic security, and unionization -- then outlines a set of nationwide policy reforms that would make it possible for more struggling families to live the middle class dream. Here's the gist of the report's recommendations:

  • Labor market standards and institutions must be strengthened
  • Access to post-secondary education and training must be expanded
  • The system of public and private health care benefits must be reformed

And, here's another "newsflash" that most working Americans could tell any government bureaucrat willing to listen: the country's current poverty standards do not accurately reflect the number of working families who are holding on to the middle class by their fingernails, or who cannot maintain a middle class lifestyle at all. Gee, ya' think? But of course, the government will disavow the military-industrial complex before they actually recalculate the poverty guidelines to mesh with the economic realities of everyday life. Even though, according to the report (and trust me, the good folks at CEPR are not the first to show such findings), almost half of all working families living below a middle class standard of living actually have incomes that put them above the official federal poverty line. This is not hard when the poverty threshold for a family of four is set at the unbelievable, wholly unrealistic level of $21,200.

CEPR rightly concludes that steps must be taken to bring some balance back to the economy and ensure everyone can take part in our nation's economic prosperity. Said co-author Shawn Fremstad:

"Tremendous increases in economic growth and workers' education levels over the last few decades should have moved millions of Americans into the middle class, but didn't because of policy choices that increased inequality. We must update America's social contract to make sure that the economy is working for all Americans."

The CEPR report dovetails quite well with an insightful New York Times op-ed by former labor secretary Robert Reich. He believes, like many of us, that we are sliding headlong into a recession -- hair-splitting terms like "stagflation" aside.
"The underlying problem has been building for decades. America’s median hourly wage is barely higher than it was 35 years ago, adjusted for inflation. The income of a man in his 30s is now 12 percent below that of a man his age three decades ago. Most of what’s been earned in America since then has gone to the richest 5 percent."

"Yet the rich devote a smaller percentage of their earnings to buying things than the rest of us because, after all, they’re rich. They already have most of what they want. Instead of buying, and thus stimulating the American economy, the rich are more likely to invest their earnings... The problem has been masked for years as middle- and lower-income Americans found ways to live beyond their paychecks... We’re finally reaping the whirlwind of widening inequality and ever more concentrated wealth. The only way to keep the economy going over the long run is to increase the wages of the bottom two-thirds of Americans."

And Reich has a similar formula to address this growing income inequality: better schools (including pre-K), stronger unions and government protections, and wage replacement programs like the Earned Income Tax Credit that allow poorer people to keep more of their income. One thing's for sure: we need to begin to look at these problems systematically, and come up with a nexus of solutions. For the first time ever, we have a generation of adults (Generation NEXT) who believe they will fare worse than their parents. That is the saddest commentary of all, and may turn into a self-fulfilling prophecy if we don't act collectively to address it. This next President, whoever they are, had better be the "Economy President."

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