Confronting a Post-Middle Class America

If it seems like the middle class in America isn’t what it used to be perhaps that’s because it doesn’t exist anymore.  There is no longer a coherent block of Americans in the middle income range that shares a common culture, goals, and identity.  Whether that’s a good thing or a bad thing will depend on whether we are willing to adapt to the demands of this new reality.

That will not be easy because the middle class, for Americans, is not so much a sociological concept as a symbol of our civic religion.  We use the term as shorthand for “ordinary folk” or “us.” In our minds, “middle class” refers to people who earn a comfortable, reasonably secure living from work.  They aren’t so wealthy that their income comes from investments or so poor that they collect welfare. The middle class is America.

There may have been some reality to that myth, briefly, in the post-war doldrums.  In the 50’s, incomes for most people who worked for a living were bunched in a relatively narrow range.  The earnings of the middle class peaked in the late 50’s, when nearly 55% of the nation’s income was claimed by households in the middle cohorts.  By comparison, in 2011 the middle income cohorts earned only 45% of the nation’s income.  The middle is no longer king.

The common interests that once made middle earners a “class” were cultural, not just economic.  Many bankers, lawyers, plumbers, and factory workers lived together in cookie-cutter houses in the same neighborhoods.  Almost all of them had done mandatory service in the military. The lawyer might be marginally more likely to drive a new car, but the features of the vehicles wouldn’t have varied much.

That commonality is gone.  We can still identify a middle class of sorts by bracketing households earning around the median income.  Someone will always sit in the middle.  However, apart from income that cohort of people will share few of the other overlapping interests that define a class.  Our civilization has diverged into dozens of identifiable cohorts that cross and re-cross each other on certain criteria or at certain stages of life, but mostly they just seem to be heading in a thousand different cultural directions.

The decline of the middle class is often blamed on increasing wealth concentration among the highest earners.  There are several problems with this theory, but the focus on wealth concentration at the top hides a much more interesting phenomenon that is perhaps more important to understanding the declining power of the great American middle.  The changes in America’s income structure and class alignment may have less to do with concentration than with shearing.

A close look at the data shows that the middle earners have been split.  White collar professionals who fifty years ago earned only marginally more than their neighbors at the factory may be the largest beneficiaries of America’s shift toward global capitalism.  The widening fault line that has divided the former middle class has aligned professional workers more closely with wealthier households.

Perhaps there is no middle class in America because for a very large portion of the population, the values and goals of the middle class worked.  More people than ever before are experiencing real affluence.  Though the claim is a sort of civic heresy, the middle class may be experiencing a crisis born largely of success.

It is true that the top 5% of households have seen the greatest increase in their income share since the late 50’s.  However, the same phenomenon has led to a rising share of national incomes for roughly the top 33% (links to income tables posted below).  The upward shift in income distribution over the past fifty years has sheared away professionals and information workers, who have seen their share of national income increase along with the wealthiest households while the economic value of manual labor has sagged.

There is more to this phenomenon than just earnings.  The unemployment rate for IT workers, for example, is about 4% – beyond full employment.  In fact, unemployment for knowledge workers and professionals has hovered at about half the broader unemployment rate across most of the downturn.  Not only are knowledge workers earning more than their blue collar peers, their career arc, retirement expectations, and relative security are a world apart from traditional labor.

A very large chunk of workers have graduated into a new, more affluent way of life; leaving behind a large number of formerly middle class Americans who are seeing their lifestyles deteriorate. Knowledge workers in the top 10-33% of households may share little economically with the wealthy, but thanks to shearing, they are much more closely aligned culturally and politically with higher earners.

This economic realignment can’t be blamed on Reagan or Bush.  Every administration since Eisenhower has presided over a creeping erosion in the share of national income earned by the middle quintile.  This phenomenon is far bigger than tax policy.

A free, globalized economy rewards those who can accumulate either capital, knowledge, or both.  Progressive taxation may blunt inequality around the edges and help fund programs that expand opportunity.  However, if conceived purely as a means to halt income concentration, higher marginal rates are just boulders in the stream. The radical expansion of freedom and economic opportunity that has swept the whole planet over the past half-century has, and will continue to disproportionately reward those who can accumulate knowledge and capital no matter what we do (within reason) about tax rates.

There is little to gain from trying to cram people back into some ersatz vision of middle classness.  Our goal in coping with the end of Middle Class America is to preserve meaningful equality of opportunity in an era of vast economic and cultural dynamism. In particular, we need to find ways for those in lower income households to get a solid shot at participating in a knowledge economy.

That solid shot may depend on family stability as much as anything.  Lower earners increasingly lack the resources of all kinds needed to support career transitions, marriages, child rearing, and most of all the very long cycle of education required for access to the knowledge economy.  With that in mind, religious conservatives will have a vital role to play if they are ever half as concerned about the real economic forces that affect people’s lives as they are about sex.

Values, culture, and choices matter to success.  Likewise, the economic health of the surrounding environment influences the choices people have open to them.  Poor personal decisions contribute to poverty.  Poverty, likewise, can spread like a disease, narrowing the range of choices available to those affected by it.  This interplay between choice and environment explains why social conservatives are crucial to the future of American opportunity.

America might reach a very hopeful turning point if social conservatives ever recover an interest in economic justice, discrimination, and the circumstances affecting the less fortunate.  They hold the key to a vision of opportunity that properly balances the role of government with the freedom that accompanies individual responsibility. As terrifying as it sounds, the health of the American dream may depend in a sense, on Rick Santorum.

As we confront the demands of a post-middle class America, social conservatives are the broken bridge to a brighter future.  If prominent social conservatives ever move beyond their fear, their apocalyptic pessimism, and their creepy sexual fascinations, we might have a chance to create an economic revolution among today’s less fortunate.  A healthy social conservative movement could allow us to one day look back on the end of the middle class era not as a disaster, but as the stepping stone to something far greater than we might have imagined.

Resources:

Share of Aggregate Income, 1947-1994:  US Census

Share of Aggregate Income, 1967-2011 (Excel file):  US Census

How the tax burden has changed over time: New York Times

Analysis of tax burden among different groups: Econbrowser

Employment rates among different occupations over time: Wall Street Journal

And a teaser to a future, related discussion about population and affluence – A look at labor participation rates from Barry Ritholtz at The Big Picture.