The Shrinking Middle Class __ A World Without Work

Posted on February 26, 2013

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The trends in the graphs below are not healthy for any society. It is not the inequality itself that is worrisome, but the trends. Ignoring the top 1%, look closely at the differences between the top twenty percentile and the lower percentiles.

Aevrage Household income before taxes.

H/T Washington’s Blog

Inequality exist in all economic systems. But, in the US after World War II, capitalism proved beyond a doubt that it could provide the rising tide that could float the most boats.  However, the middle class has not done well in recent decades. That is especially true since the turn of this century which has seen a steady decline in the workforce participation rate. You, dear readers, know most of the numbers. During the 2012 presidential campaign, the Romney campaign and conservative bloggers were reporting the bad numbers every day. This source list sixty examples of middle class decline. I’ll share just a few:

#1 According to the U.S. Census Bureau, the middle class is taking home a smaller share of the overall income pie than has ever been recorded before.

#3 Median household income in the U.S. has fallen for four consecutive years.  Overall, it has declined by over $4000 during that time span.

#4 The U.S. economy continues to trade good paying jobs for low paying jobs. 60 percent of the jobs lost during the last recession were mid-wage jobs, but58 percent of the jobs created since then have been low wage jobs.

#5 The number of Americans living in poverty has increased by more than 15 million since the turn of the century.

#6 The number of Americans on food stamps has grown from 17 million in the year 2000 to more than 47 million today.

#13 In 1989, the debt to income ratio of the average American family was about58 percent.  Today it is up to 154 percent.

#15 While debt loads for middle class families are going up, the net worth of those same families is going down.  According to the Federal Reserve, the median net worth of families in the United States declined “from $126,400 in 2007 to $77,300 in 2010“.

#20 The unemployment rate for Americans in the 18 to 29 year-old age bracket is 11.5 percent overall.  For African-Americans in that age group, the unemployment rate is now up to 22.1 percent.  Millions of young people believe that the system has totally failed them.

#21 Families that have a head of household under the age of 30 have a poverty rate of 37 percent.

#52 Corporate profits as a percentage of GDP are at an all-time high.  Meanwhile, wages as a percentage of GDP are near an all-time low.

The GDP today is higher than it was before the 2008 recession; yet. there are between five and six million less Americans working today. Think about that. American companies are making record profits by producing and selling more goods and services with millions fewer workers. However, government’s workforce has increased; so for the overall workforce to have fallen five or six million, the reduction in the private workforce was even greater. Is it any wonder that about 50% of Americans pay no federal income tax. Included in that number are people who were in the upper percentiles of income and after retiring are no longer paying taxes. Most are people who have jobs that don;t pay enough to make them tax payers and, of course, it includes the unemployed and the welfare class.

Here are some  frightening numbers. The federal government spending accounts for 25% of GDP. But, over forty percent of the money our government spends is borrowed. That means 9% of our GDP is supported on borrowed money.

Who Do We Blame? We tend to blame progressive government policies. We know that over regulation and over taxing drives companies, and there jobs, to more business friendly countries. As a result, America’s lower class lives better than most people in this world. America’s middle class is shrinking and the lower class is growing. But, in spite of jobs exported to other countries, the world’s biggest economy is still growing at about 2% per year on average. What we rarely talk about is the advances in technology that let fewer people produce all the goods and services we demand. What’s more is that those fewer people are paying, through their taxes, for the improved living standard of America’s lower class.

What took a century to occur in America will take place in a decade or two in countries like China and India. Their growing middle classes will demand a higher standard of living, their costs to produce goods and services will rise and they will apply technology to try to stay competitive and their middle class growth will stop.

In spite of what environmental extremist say, technology will make it possible for fewer people to produce all the food and housing and potable water and other basic needs of the world’s population. What technology does not produce is enough jobs to keep people occupied. From a recent New York Times article titled A World Without Work, the author says:

Yet the decline of work isn’t actually some wild Marxist scenario. It’s a basic reality of 21st-century American life, one that predates the financial crash and promises to continue apace even as normal economic growth returns. This decline isn’t unemployment in the usual sense, where people look for work and can’t find it. It’s a kind of post-employment, in which people drop out of the work force and find ways to live, more or less permanently, without a steady job. So instead of spreading from the top down, leisure time — wanted or unwanted — is expanding from the bottom up. Long hours are increasingly the province of the rich.

So, what happens say in twenty years when 60% are not paying federal income taxes and 40% are paying for the safety net? What happens when 100 million Americans are on food stamps? What do so many people do with all that “leisure” time on their hands? Will they, as some portend, accept their dependent life and use their free time to enjoy hobbies or improving their minds? That’s not what we see in the inner-cities, is it? Will the growing non-productive class revolt against the shrinking productive class? Or, will the few of the  productive class grow tired of supporting the many of the non-productive class?

Questions worth pondering, my friends.

Well, that’s what I’m thinking. What are your thoughts?

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