What Caused the Middle Class Decline?

The more new data that comes out, the clearer the trend is: America’s middle class is in crisis. Median wages have been flat for decade or more, even as productivity and corporate profits have soared. The quality of available jobs is declining, with a shift toward part-time and contingent work. And while the Great Recession intensified these trends and added a staggering loss of housing wealth, the problems go further back and are far more systemic.

As the trend toward inequality and polarization becomes increasingly unmistakable, the critical question becomes how we understand the way this state of affairs came to be, and thus what we can do about it.

Today in Salon, writer Edward McClelland has a powerful piece on the political decisions that led to the decline of the American middle class.  The mood is elegiac:

“I know I’m dating myself by writing this,” McClelland begins, “but I remember the middle class. I grew up in an automaking town in the 1970s, when it was still possible for a high school graduate — or even a high school dropout — to get a job on an assembly line and earn more money than a high school teacher.”

Those days are over (and the fact that the “make more money than a high school teacher” angle had a great deal to do with relatively low pay in traditionally female-dominated occupations is one piece of evidence that reviving the middle class in its precise 1970s form would be undesirable as well as impossible). In any case, what’s most interesting about McClelland’s piece is not his nostalgia but the acknowledgement of political choices that led us to the current state of middle-class decline:

The shrinking of the middle class is not a failure of capitalism. It’s a failure of government. Capitalism has been doing exactly what it was designed to do: concentrating wealth in the ownership class... That’s the natural drift of the relationship between capital and labor, and it can only be arrested by an activist government that chooses to step in as a referee.

The emphasis on government choices is important. And yet McClelland’s examples of this trend don’t simply illustrate a kind of libertarian state in which government failed to step in and lift up working people. Instead most of the examples cited – from Carter’s deregulation of key industries, to Reagan’s firing of striking air traffic controllers, to Clinton’s decision to push through a massive trade deal that protected corporate interests while destabilizing the livelihoods of both U.S. and Mexican workers – show a great deal of government intervention and activism in decisive favor of large corporations and “the ownership class” in general. In some cases, these interventions may have been undertaken with the best of intentions, to lower prices or promote growth, but they ultimately tipped the balance away from the middle class and people trying to work their way into it.

It is indeed a failure of government to protect the interests of ordinary Americans to achieve and hold onto a middle-class standard of living, but the problem is not passivity and a lack of intervention. Instead, as Representative Dan Kildee of Flint, Michigan notes at the end of the article: “It is a myth that there is any market that is not supported or affected by the structure of government in one way or another… We’re picking winners and losers right now, and we’re picking the wrong ones.” (emphasis mine)

This is important to recognize because the solutions necessary to revive and rebuild the middle class are not just choices to intervene after decades of standing by – they are also choices to stop intervening in ways that actively promote corporate interests over those of working people: to stop bailing out too big to fail banks, to stop promoting secretive trade agreements that undermine workers, to stop restricting workers’ freedom to contract in ways that undercut the ability to build power in the workplace.

Don’t get me wrong, there’s a lot of positive intervention needed too (if you’re looking for big policy ideas to build a strong and diverse middle class, Demos has got them here). But the fundamental choice isn’t one between government action or inaction: it’s the type of action we want our government to take, and who benefits.

P.S: The point that the present crisis of the middle class is largely a result of government’s consistent intervention to ensure that income flows upwards is made more effectively and at greater length by Dean Baker in his book The End of Loser Liberalism, available for free download.

P.P.S. I can’t resist mentioning my gripe with the title of McClelland’s piece “RIP, the middle class: 1946-2013.” The fatalism of declaring the middle class dead does no favors for those trying to rebuild it along improved 21st century lines.