A new study by the Pew Research Center spurred a rash of headlines last week about “the dying middle class.” But the word “dying” might be more appropriate if we were watching the regrettable but inevitable effects of natural forces at work. We’re not. We’re seeing the fruits of deliberate action — and sometimes of deliberate inaction — at the highest levels of power.

Where has the money gone?

Our total national wealth has continued to grow, even as incomes stagnated for most Americans. Where did the money go? The short answer: to the wealthiest among us.

Economist Emanuel Saez found that the top 1 percent of Americans captured more than half of the total income growth from 1993 to 2014, the last year covered by the Pew report. What’s more, the top 0.01 percent — some 16,500 families — were capturing more of the nation’s income than they had since the run-up to the crash of 1929 and the Great Depression.

The top 0.1 percent — just 160,000 families — owns as much wealth as 90 percent of the country as a whole, or about 145 million families. Just 536 people had a shared net worth of $2.6 trillion at the end of 2015.

Corporate profits, although they’ve taken a hit in recent months, have nevertheless grown at a healthy clip while wages lag behind. Those profits have increasingly been used to pay high executive salaries, which has led to an explosion in the gap between CEO salaries and worker pay. (Fortune 500 CEOs earned about 42 times as much on average as the typical worker in 1980. Today they earn 373 times as much.) Profit-taking in the form of dividends has increasingly taken the place of long-term investment in workers and business growth.

Millions of jobs have been sucked out of the U.S. economy by trade deals that let corporations replace American workers with low-paid, often mistreated workers in other parts of the world. Deals like the China/World Trade Association agreement shipped jobs to that nation without leveling the playing field by allowing it to keep manipulating its currency.

Wages and benefits have fallen because American union membership has declined, leaving unions without the leverage they once had to demand better deals for working people. The growth of the banking sector has taken investment away from job-producing segments of the economy. Rampant poverty and economic discrimination against people of color, in addition to being inherently evil, has robbed their economy of their productive potential.

Who’s behind it?

That’s the “what” in the question, “what’s killing the American middle class”? But the question remains, who’s doing it? The answer to that question includes corporate executives who bend the rules, and Wall Street bankers who break the rules; their lobbyists, who work to change the rules; and the politicians who change in their favor — in state houses, the halls of Congress, and in the executive and judicial branches.

Virtually all Republicans fit this description. Sadly, so do many Democrats. The rule bending takes the form of deregulation, a tolerance for ever-larger corporate mergers, an unwillingness to enforce the law against bankers, and a plethora of tax breaks for corporations and wealthy individuals. Then there are those terrible trade deals, the defunding of public institutions, the neglect of our infrastructure, and laws that make it harder for workers to collectively bargain on their own behalf.

What do we need a middle class for, anyway?

Why do we care about protecting the middle class? First and foremost, it’s a simple matter of fairness. Our national wealth, along with our democracy, has been hijacked by a small number of privileged people. That’s wrong.

We want to eliminate poverty, not allow more people to fall into it. And everybody can’t be wealthy (no matter what illusions are maintained in the popular media). A robust middle class is the ladder that leads out of poverty.

Middle-class Americans are the economy’s largest group of consumers, which makes them engines of economic growth.

The middle class also keeps the economy balanced. Without a healthy middle class income continues to accumulate at the very top, creating a kind of black hole that sucks up ever-increasing percentages of national wealth. That leads to an ever-growing drop in consumption, increased use of social services, and an unstable economy. Over time it also leads to an unstable society where the risk of social unrest, extremism, and political violence begins to grow exponentially.

Saving the middle class

If we want to reverse this trend we’ll need to attack the problem on a number of fronts. These include: increasing the minimum wage; expanding social programs; rebuilding our infrastructure; renegotiating those bad trade deals: promoting union growth; and demanding that corporations and wealthy individuals pay their fair share (while ending rewards for bad behavior).

We’ll also need to explore ways to expand the role of public ventures and communitarian institutions at all levels.

We know what, and who, is killing the middle class. It’s time to stop those forces in their tracks, take back our democracy, and create a middle class that’s more vibrant and inclusive than ever.

The Research Report from Professor Emmanuel Saez at UC Berkeley


OECD Report on Hours Worked by Country and Other Data



Income InequalityMiddle Class

Source – HuffPost: What’s Killing the American Middle Class?