We spend a great deal of
time trying to figure out whether to blame the rich or the poor. But as the
debate rages on endlessly, the middle just keeps getting squeezed. Which
matters for one incredibly significant reason: the middle class is the single
most important engine powering the US economic train and has been for at least
a hundred years.
There have always been
rich and there have always been poor, just like now. But there has not always
been a middle class and the sad reality is that both its growth and needs have
exceeded its capacity. And make no mistake about it: a middle class is not a
guarantee. There is absolutely no evidence
to prove it can survive for any longer than it already has.
I often argue it started
in the 80s, when Reagan’s pro-private sector policy agenda led to a fundamental
change in not just our economy, but how we thought about it. There are three
main underlying factors to this cultural shift:
- Union busting. Destroying the air traffic controllers
union was the final, definitive statement on how the public would
henceforth think about the one thing that actually helped create the
middle class, the union movement.
- Deregulation. Reagan didn’t just believe in and implement
deregulation, he instilled henceforth into the public psyche the concept
that regulation and jobs were mutually exclusive concepts.
- Trickle down. Reagan didn’t just believe in trickle-down
economics and he didn’t just promote policies to accomplish it. He did
something far more astonishing: he created a new economic “law” that said corporate
power, increases in profit, and belief that the rich get richer were
synonymous with economic prosperity for all.
It’s actually fairly
simple. In the name of private sector profits and corporate growth, government
has been saddled with the responsibility to do what the private sector once
did. And that is too large a responsibility for taxpayers to bear for several
reasons.
First, the shift in burden leads to commensurate and seemingly never ending tax hikes, which put politicians on the defensive and, in a sound bite political environment, makes intelligent policy debate on the issue entirely impossible.
First, the shift in burden leads to commensurate and seemingly never ending tax hikes, which put politicians on the defensive and, in a sound bite political environment, makes intelligent policy debate on the issue entirely impossible.
The second reason is
that middle-class-supporting programs are simply unsustainable after a
generation long era of stagnant, and often decreasing, real wages.
For the middle half of the 20th century, wages increased right alongside productivity. In the 1980’s, that all ended. We live in the most productive nation in the history of the planet, and yet our wages continue to mean less and less. Stock values increase in lockstep with exported (often quality) jobs and, their inevitable after-effect, layoffs. A successful economy simply cannot be built on principles that would allow that to happen.
That is the reality we have both created and nourished. So it may be time to face an ugly truth: wages in the United States are not going up again. First of all, there are simply not enough good paying jobs to match our population growth. Second, the only good paying jobs that remain require an advanced education.
Third, and, arguably worst of all, however, is that there aren’t even enough good paying jobs for people who actually do have an education. What that means is that graduation from a quality, four year college with a degree can often guaranty nothing. This is the first time in history that is the case.
Think about what that means for those who can’t access an education, regardless of the reason. It means they have virtually no chance to earn a family supporting wage.
For the middle half of the 20th century, wages increased right alongside productivity. In the 1980’s, that all ended. We live in the most productive nation in the history of the planet, and yet our wages continue to mean less and less. Stock values increase in lockstep with exported (often quality) jobs and, their inevitable after-effect, layoffs. A successful economy simply cannot be built on principles that would allow that to happen.
That is the reality we have both created and nourished. So it may be time to face an ugly truth: wages in the United States are not going up again. First of all, there are simply not enough good paying jobs to match our population growth. Second, the only good paying jobs that remain require an advanced education.
Third, and, arguably worst of all, however, is that there aren’t even enough good paying jobs for people who actually do have an education. What that means is that graduation from a quality, four year college with a degree can often guaranty nothing. This is the first time in history that is the case.
Think about what that means for those who can’t access an education, regardless of the reason. It means they have virtually no chance to earn a family supporting wage.
And in the end, it all
comes down to blue jeans.
There was a time when a
pair of blue jeans was relatively expensive. Most people could afford one,
maybe two pairs. Someone made a decent living making those jeans. The
goal of the buyer was to keep those jeans for as long as possible. The goal of
the manufacturer was to make the jeans last as long as possible. The goal of
technological advancement was to make the process more efficient, thus driving
down prices, while simultaneously increasing or at least maintaining the
quality.
Over time, the jeans got
more accessible. More people could afford their first pair, or maybe their
third. And one could argue that reality was starting to achieve an economic
harmony, a balance in which buyer and seller shared some basic understanding that
allowed both to flourish.
For the last thirty plus
years, however, prices have plummeted right alongside quality and any
expectation of such. It is commonplace to assume that ten pairs of jeans are
perfectly normal, and that ten new pairs next year would be just as standard a
practice; for every member of the family. But as we all know, a middle class
cannot be paid sufficient wages to support those prices, so the jobs are gone.
In other words, it was
not just the economic policies of the 80s. Those policies shaped our behaviors
and we have essentially converted ourselves into a throwaway society insanely
obsessed with low prices. Those assumptions and behaviors, I’d argue, have done
just as much to destroy our economy as any economic policy. The two realities
have fed each other, and there is no reason at all to assume we’re capable of
change.
Consider this: the slow
recovery from the Great Recession has actually seen the stock market work
itself back to health. This has occurred without the jobs and
certainly without the wages. If the stock market can soar with fewer jobs and
lower wages, what possible incentive would our market based economy have to
create jobs or increase wages? Is there any chance of either coming back,
without dramatic changes to all our basic economic principles?
So we’ll keep arguing
about taxes, trade agreements, prices, inflation, savings, the stock market,
and whether or not our educational system is failing
because it’s not creating sufficient batteries to power the low wage / low
benefit machines that power our economy. But none of that will matter in the
end. In the end, we are simply not capable of buying $100 Made in America jeans
in a ten pair per person world. Neither our behaviors nor our wages allow us to
be capable.
Until we are willing to
address that fundamental issue, the middle class will keep right on
disappearing and government will keep right on struggling in its impossible
mission to keep the crumbs afloat. Until we address this issue, we should not
only assume that 200 years of growing economic prosperity, built entirely and
quite uniquely upon a growing middle class, is no longer a guarantee, we should
start preparing for the not so pleasant economic reality most likely to replace
it.
Perhaps it’s not the
future at all. Perhaps the seeds that were planted 30+ years ago, and nourished
ever since, have already matured. Because here’s my tragic prediction: until we
fundamentally break down the behaviors and economic assumptions that have
led us here, and figure out an entirely different model, neither the wages nor
the jobs are coming back.
1 comment:
There are a number of other interesting correlations outside of policy that one might consider. Most important: World War II.
World War II was an enourmous benefit for the American middle class. With all the major economic engines besides that of the US crushed by war, the world's manufacturing needs were primarily met in the US for many decades - spawning a middle class and a rise in prosperity never before seen.
But as the world regained its ability to serve its own needs, price competition finally kicked in, giving rise to jobs departing the US. But as the US economy boomed in the US, so too did our infrastructure spending. Beginning in the 50's, the US undertook what was to become the largest public works project in the history of the world: the interstate system. And not only did we build the interstate system as originally envisioned, we dramatically expanded highways well beyond the vision and cultivated a level of expectations of new and virtually empty roads, while at the same time inculcating in the US psyche the belief that road building creates jobs.
But road building does not create jobs, it makes shipping more efficient for jobs that already exist. But when manufacturing jobs leave the country and the need for shipping declines, so too does the value of US highways. From 1970 until the time Ronald Reagan left office, there had been a steep decline in the return on investment in highway building - not that we stopped building those highways. Today, the ROI of those highways has probably dropped below leaving highway money in the private sector, and that means the money we spend tody on highways is probably killing US jobs.
How many more examples are there of inefficiency in how our government operates today? I believe it is time to refocus our nation on improving productivity in the US - not on stealing jobs from other states by building roads, killing unions, subsidizing tourism, giving tax breaks, or any of the other gimmicks that create no net benefit for the US. It is time to ask ourselves how we can at least maintain our standard of living given the fact that we can no longer count on being the main suppler to the world's needs.
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