The disappearing middle class and the changing nature of work

This is the second of a series on the influence of capitalism on our daily lives and that of others

The disappearing middle class has become a widely accepted axiom today. A few dissenting voices can be heard, but the majority continue to speak about a disappearing or vanishing middle class. What is clear is that the disparity between the very rich and the very poor is steadily increasing, while the middle class is being squeezed out of existence.

These few illustrative facts are from the US, although other countries can produce similar figures showing the increasing disparity between the rich and the poor and the growing disappearance of the middle class:

--In the US during 2010, 37 percent of all income gains went to the top 0.01 percent of all income earners, 56 percent of all income gains went to the rest of the top 1 percent, while only 7 percent of all income gains went to the bottom 99 percent.

--The wealthiest 1 percent of all Americans own more wealth than the bottom 95 percent combined owns. According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million together. The poorest 50 percent of all Americans collectively own just 2.5 % of all the wealth in the US.

--According to the Economic Policy Institute, between 1979 and 2007 income growth for the top 1 percent of all US income earners was an astounding 390 percent. For the bottom 90 percent, income growth was only 5 percent over that same time period.

--In 2010, 2.6 million more Americans descended into poverty. That was the largest increase that was seen since the US government began keeping statistics on this in 1959. In the year 2000, 11.3% of all Americans were living in poverty. Today, 15.1 % of all Americans are living in poverty.

--In November 2008, 30.8 million Americans were on food stamps. Today, more than 46 million Americans are on food stamps. One out of every six Americans is now enrolled in at least one government anti-poverty program. And federal housing assistance increased by a whopping 42 percent between 2006 and 2010.

--According to Heidi Shierholz, an economist with the Economic Policy Institute, about 53 percent of all income went to the middle class in the 1970s, but today only about 46 percent of all income does.

--In 1970, 65 percent of all Americans lived in “middle class neighborhoods”. By 2007, only 44 percent of all Americans lived in “middle class neighborhoods.” Yet, according to a CBS poll in 2007, 90 percent of all Americans consider themselves middle class.

--According to a recent report produced by Pew Charitable Trusts, approximately one out of every three Americans that grew up in a middle class household has slipped down the income ladder.

Where are the middle class going? These figures suggest that many are becoming poorer and thus dropping into the poor class. A few, however, are moving up into the rich class, a fact that is often cited by some who question the disappearance of the middle class.

There are many definitions of precisely who is middle class, which is probably the main reason why there is so much disagreement about the disappearance of the middle class. 

The simplest definition is to include those who fall in the middle third of the income distribution. In Canada, that is a broad category, with incomes ranging from $35,000 to $90,000. In the US, which uses a different standard, a household making between $24,376 to $73,129 per year would be considered middle class.

Still another way to define the middle class is in terms of household income within 50 percent of the median, as is illustrated in the following chart. But notice how this group is steadily getting smaller every decade.

Why is middle class being systematically wiped out in the US and other countries?  There are many answers. Some are political, some are economic, and some are technological.

In the US today, big businesses and wealthy individuals fund the campaigns of politicians, and in turn these politicians pass laws which rig the game in their favor. It is a symbiotic relationship which is bad for America. The same situation prevails in other countries.

Many jobs are disappearing today. Some for economic reasons, because it is cheaper to produce goods overseas than it is in the US or Canada, as was evident in the previous post dealing with garments made by workers in Bangladesh who are operating in substandard working conditions. Outsourcing is commonplace today in nearly every industry, including the service industries. We call this globalization.

Technology plays perhaps the most significant role in the disappearance of jobs. Many jobs are no longer as important as they once were or can be performed more cheaply through outsourcing or by robots. The car industry uses robots extensively in the manufacturing process.

The middle class is disappearing in part because many traditional middle-class skills are becoming obsolete. Routine clerical work and many other kinds of work can now be done by computers and robots. Algorithms and machines are replacing customer service agents and even grocery checkout clerks.

At the low end of the spectrum, the jobs that are left are those that computers and robots cannot do yet, such as janitorial work. While at the high end of the spectrum, the jobs that are left are again those that computers cannot do yet, such as law, medicine and management.  But the jobs of those in between are threatened. The list is almost endless, and it is growing by the day.

Paralegals, who do routine research for lawyers, are already being replaced by computers. This is just one example. And as technology advances, even more people in the middle of the spectrum are going to be elbowed out of the workforce.

Not only are jobs disappearing, those who do have jobs have to work harder for what they get. Families have to work long hours to maintain a middle-class existence.

An article in Macleans, a Canadian news magazine, the number of two-income families has soared to well over 70 per cent, from just 30 per cent in the 1970s. That means in most households, both parents need a job to pay the mortgage. The result is that they are logging twice the work hours to maintain a standard of living that was easily affordable on a single income a few decades ago.

In addition, having two working parents often necessitates extra costs like child care, which can run upwards of $10,000 a year per child, and a second car to commute to two jobs. At the end of the day, even double incomes are not the panacea they once were.

The article continues by pointing out that the middle-class squeeze has been happening for decades, but it was hidden from view and papered over by a buoyant economy. As long as unemployment was low and credit was easy, middle income earners could fool themselves into thinking that they were making progress.

But now the economy is in a recession that continues to persist. Economists say the middle class might not rebound when the recession is over. In the early ’80s and ’90s, both the real incomes of the middle class declined and the share of middle-class incomes declined. But when those recessions ended, the job losses were largely recouped. This time around, however, not only are the jobs disappearing, but the plants that supported them are closing too.

Even education is no longer the panacea that it once was. It has become unaffordable for many students. Twenty years ago, according to Macleans, going to university for a year would have cost roughly $5,000 (with tuition and living expenses). Today, it is upwards of $12,000. Meanwhile, financial aid for students is getting increasingly scarce. The cut-off level for university loans and bursaries is now well below what people would consider to be a middle-income income.

For those unlucky enough to fall from the comfort of the middle class, getting back in is now harder than ever. Troubling signs are beginning to emerge that there is less mobility between the working poor and the middle class than there used to be, so once you are out, it could be for life.

If the slogan of the Occupy movement, "We are the 99 %," is ever to be more than just that, the growing disparity between the very rich and the very poor needs to be addressed meaningfully. If more and more people, for whatever reason, are driven into poverty, then this must become a concern for all of us, and not only for those who are directly affected. Because sooner or later, nearly everyone will be affected.

As a society, we are going to have to rethink the nature of work. The disappearing middle class provides us with not only the chance but also the moral obligation to do so. In an era when jobs are disappearing every day, we must ask ourselves, are jobs a right and not just a privilege?

I am only raising this issue. I certainly don't have the answers, but I do hope that together we can begin this discussion. It is important.

This series deals with the influence of capitalism, thus at some point we must include a discussion of possible alternatives. That is quite an agenda, but that should not deter us. Our future is at stake.