Say Bye-Bye to middle class America

MIDDLE-CLASS BLUES
Maxed-Out Families and the Fading American Dream
By Perry L. Weed | November 1, 2006 (page 1/3)
Editor's note: President Bush never misses an opportunity to tout the economic growth and job gains of the last few years. The Dow may be at record highs, but there's an ugly truth behind the myth of today's economic "good times." We asked occasional contributor Perry L. Weed to tease out the real story from the current economic data. Weed is a retired Washington economist and lawyer whose thirty years in the nation's capital included Senate and House staff assignments and a position at the U.S. Department of Commerce.

The familiar rhetoric of "two Americas" is all too real if you examine changes in the U.S. economy over the past thirty years. Although the economy is 150 percent larger than it was three decades ago, an overwhelming share of increases in income and wealth has flowed to a relatively small fraction of Americans. The U.S. has become the most unequal of rich nations. The high tide of prosperity for the middle class began receding in the mid-1970s, and their economic security is now in full retreat.

Being middle class once meant working hard, getting ahead, achieving financial and retirement security and expecting one's children to do as well or even better. Now, after three decades of flat or falling real wages for most Americans, more than half of middle-income Americans think things will be worse for their children and future generations.

Average hourly wages and salaries of production and non-supervisory workers have fallen 5 percent since 1973. The Census Bureau's recent annual report showed that, adjusted for inflation, the earnings of U.S. men were lower in 2005 than in 1973. The same report, however, had very good news for the top one-fifth of American households. They received more than half the nation's income last year, with most of that concentrated in the top 5 percent.

GOOD JOBS GONEâ??The new "service sector" jobs, which for years have been replacing manufacturing jobs, pay less and offer fewer benefits. Already almost two-thirds of Americans report that they live from paycheck to paycheck. One-half say that no matter how hard they work, they cannot get ahead. Pension protection, employee health insurance and job security are eroding.

This shift toward service jobs has doubled in the last twenty-five years. Of the thirty occupations projected by the U.S. Department of Labor to see the greatest growth between now and 2014, most are in the service sector requiring only short-term on-the-job training and are categorized as either low or very low paying. Only a few are in high-tech areas and only six require as much as a bachelor's degree. These new service jobs are mostly in retail sales and customer service, and include janitors and cleaners, waiters, restaurant workers, home health aides and nursing assistants.

On the other end of the spectrum, CEOs saw a pay increase of almost 300 percent between 1990 and 2005. American executives now skim off over 10 percent of corporate gains for themselves. Recently the ratio of the pay of the chief executive of America's top corporations to that of a production worker reached an unprecedented 431 to 1, on average, an annual rate of $11.8 million to $27,460.

All the hoopla over the supposed democratization of the stock market is simply empty rhetoric. Yes, workers have been thrust into the market through 401k plans that replaced pensions; but in actuality, two-thirds of total stock market wealth is held by only 5 percent of American stockholders. And the median holding for those households that do own stock is only $24,300. So much for the "ownership society"!

THE END OF INCOME PARITYâ??After World War II, Americans produced the world's first truly middle-class nation. In the thirty years following the war, the real income of all American families, including the poor and almost poor, doubled. The nation, by every economic measure, was becoming more equal. That has all changed.

For the past thirty years, the trend toward economic inequality has rolled back the post-war progress that had moved the nation toward a more equitable distribution of income and wealth. For the least wealthy 50 percent of families, according to a 2006 Federal Reserve report, the share of total U.S. family wealth has fallen to a meager 2.5 percent. The wealthiest 10 percent hold 63 percent of family assets.

This income and wealth gap is growing with an unrestrained forceâ??and is wider than in any other advanced country. America has regressed in spirit to the Gilded Age, at the end of the nineteenth century, with its flagrant excesses. The last fifteen years alone have witnessed the most colossal amassing of huge fortunes in U.S. history. The nation now boasts more than 400 billionaires.