Friday, February 28, 2014

The Vanishing Middle Class

The middle class holds a declining share of American wealth (see chart). But left and right differ on what to do about it. New York Times house conservative Ross Douthat writes
Across the left and center-left, there’s agreement that an unequal society requires a thicker social safety net, and that as technological changes undercut low-wage work, government should help those left behind. But [liberals aren’t] clear whether this larger welfare state is supposed to promote a link between work, security and mobility, or to substitute for work’s gradual decline. [We see] a growing tendency toward both pessimism and utopianism — with doubts about the compatibility of capitalism and democracy, and skepticism about the possibility for true equality of opportunity, feeding a renewed interest in 1970s-era ideas like [guaranteed annual] income.
Douthat believes conservatives are agreed on how to help the middle class: create jobs. Libertarians who like guaranteed annual income want it only as a substitute for the welfare state, not as a new government program. And both “rugged individualist” right-wingers and “communitarian” conservatives see work as essential to dignity, mobility and social equality, and fiercely resist its decline.

Joel Kotkin, in Forbes looking at the same figures in the above chart (“the middle 60% of earners’ share of the national pie has fallen from 53% in 1970 to 45% in 2012”), points out that
the gradual descent of the middle class into proletarian status has worsened considerably over the past five years.  Not only did the income of the middle 60% of households drop between 2010 and 2012 while that of the top 20% rose, the income of the middle 60% declined by a greater percentage than the poorest quintile.   .   . In the four decades since 1971 the percentage of Americans earning between two-thirds and twice the national median income has dropped from 61% to 51% of the population.
Kotkin has little use for progressives who seek out “urban density” and “green jobs” while limiting growth in manufacturing, energy and housing.  Such efforts, he believes, will create a “permanent underclass of .   .   . part-time workers, perpetual students, and service employees living hand to mouth,” requiring taxpayers to subsidize housing, transportation, and other necessities.

Kotkin reminds us that
the Industrial Revolution saw a similar societal decline, as once independent artisans and farmers became fodder for the factory lines. Divorce and drunkenness grew as religious attendance failed. But a pattern of reform, in Britain, America and even Germany, helped restore labor’s place in the economy, and rapid growth provided the basis not only for the expansion of the middle class, but remarkably improvements in its well-being. 
Kotkin would uplift today’s middle class by encouraging construction, energy and manufacturing, by reforming taxes to fall lighter on employers and employees, heavier on those who profit from asset inflation, and by pushing practical skills training for both youth and those this “recovery” is leaving behind.

No comments: