PORTRAIT OF AMERICAN'S NEW
WORKING POOR
The US Middle Class: then and now
A portrait of today’s US working middle class is far different
from the middle class of 30-40 years ago of the 1970’s and 80’s. Back then the portrait of the middle class
wage earner was mostly white men holding steady permanent, many with life-time
jobs, most with access to affordable medical and health insurance, and often
with a company paid pension plan. These wage and salary earners were blue
collar and white shirt, factory and office workers.
Women were a growing part of the workforce but not yet dominate.
Women not in the workforce were stay-at-home moms enabling a solid social
base. Jobs for the youth were readily
available, providing a source of income for those continuing to college. Those who were educated were managers,
technicians, and professionals usually on the ladder for promotion or at least steady
salary increases or other job opportunities.
Most employment opportunities for a college graduate were supplied by a
major manufacturing corporation, public institutions of government and
education, or the financial sector as examples. While annual salary increases
not always met inflation it was at least a living wage and living standards
were quite affordable.
One of the indicators on middle class prosperity during the
70’s and 80’s was the affordability of cars.
Most could afford to replace their cars with a new model on average of
5-6 years. According to a recent edition
of Bloomberg-Business
Week News today there are “Roughly 100 million cars in the U.S. are between seven and 12
years old, the “sweet spot” for high-maintenance repairs,” according
to Bloomberg analyst Kevin Tynan.
Captains of industry and corporate executives were an
integral part of the community, providing leadership and sustainability. While
there were economic ups and downs, they were not so volatile to be so
catastrophic to destroy its social norms.
Good middle-class job opportunities were growing for those
without degrees. For the most part,
graduation with a high-school degree meant something then; a skilled labor
force was in demand. Many joined unions
to insure protection of wages and benefits as well as to be able to share in
the raising US economy. US GNP experienced
annual increases of 4-12% during the 80’s, today it’s a good year if GNP is 2%.
Today, the middle class is quite different and is no longer
thriving, living in a survival mode. Looking
at the 2010 Census data and the US Department of Labor, a family portrait of
the American working poor
is very diverse and difficult to pin down. Perhaps the working poor are married with the
husband or wife working well below their education and skill level, some
holding two jobs. They would be 20-44. However, those who are younger will more
than twice as likely to be categorized as working poor.
It could be a single head of household, most likely a woman,
once married but now divorced with at least one child. Or, if married, the
bread earner may not have gone on to college and perhaps a high school dropout.
But, if they had some college but then they would be carrying a student debt
load and by now may have defaulted on the loan. The single head of household
could be white but more likely from a mixed or minority ethnic background.
There are many graduates with families living with their
parents, having lost their homes in the global recession of 2007-2009, despite
the fact that there were many foreclosed or abandoned homes available for
purchase from the banks. Those heads of
households simply lost their credit worthiness and thus their borrowing
ability.
For them, employment would be several part-time jobs or full
time temporary employment or at a minimum reduced pay or hours. In other
situations many are receiving unemployment checks and food stamps, older
workers have sought early retirement. The worst case is that unemployment has
completely run out. Had they been working, most likely they would have been in
the service industry, or perhaps farming, construction, maintenance, or
extraction (oil and mining) industry.
In 2009, 5.2 million families were living below the poverty level, despite
having at least one member in the labor force for half the year or more.
Married-couple families had a lower likelihood of living below the poverty
level (10.3 percent in 2009) than did families maintained by women (25.1
percent) or by men (17.6 percent), a pattern that held regardless of which
member of the married-couple family was in the labor force.
Among families with at least one member in the labor force for half the year,
those with children had a greater likelihood of living below the poverty level
than did those without children. The proportion of families with children aged
18 years and younger that lived in poverty was 12.0 percent, in contrast to 3.1
percent for families without children.
About 26.6 percent of families maintained by a woman with children under the
age of 18 were in poverty. For families maintained by men with children, the proportion
in poverty also was relatively high: 18.2 percent. Among married-couple
families with children, the proportion classified as working poor was 7.0
percent in 2009.
Lost Wages and
Salaries
Research by the
Federal Reserve Bank of San Francisco shows how significant wage and salary
losses occurred during the great recession.
The vast majority of job losses during the recession was in middle-income
occupations, and largely replaced by low-wage jobs since 2010. For instance the
SFFed research found that mid-wage occupations, paying between $13.83 and
$21.13 per hour, made up about 60 percent of the job losses during the
recession. But those mid-wage jobs have made up just 27 percent of the jobs
gained during the recovery. By contrast, low-wage occupations paying less than
$13.83 per hour have utterly dominated the recovery, with 58 percent of the job
gains since 2010. (This data all comes from an August 2012 report from the National
Employment Law Project.)
The
SFFed study in Plumer’s article concluded: “[M]any middle-class workers have
lost their jobs and, if they have been able to secure new employment at
all, find themselves earning far lower wages post-recession,” the San Francisco
Fed notes. ”[O]n average over the next 25 years, these workers will
earn 11% less than similar workers who retained their jobs through the
recession.”
In a speech titled “The Rise
and Consequences of Inequality in the US” given in January 2012 by Alan
Krueger, Obama’s Chairman of Economic Advisors clearly shows the decline of the
middle class in America. In the below
chart 1 (Figure 6) published in his remarks shows that those Americans that
approximated the income of the middle-class fell from 50.3% in 1970 to 42.2% in
2010.
Or, to put it another way, while productivity has risen over
this period, overall middle and lower income group income has declined when
adjusted for inflation. The BLS chart #2
below published February 11, 2011 clearly shows how from the 70’s when
productivity and real hourly compensation were nearly equal and by the end of
2000 the ratio was nearly 2.5 to 1.
Banking Services for
the Middle Class
- 821,000
households opted out of the banking system from 2009 to 2011 and that the
so-called unbanked population grew to 8.2 percent of U.S. households or roughly
17 million adults are without a checking or savings account.
- Another
51 million adults have a bank account, but use pawnshops, payday lenders or
rent-to-own services. This underbanked population has grown from 18.2 percent
to 20.1 percent of households nationwide.
- One
in four households, or 28.3 percent, either had one or no bank account. A third
of these households said they do not have enough money to open and fund an
account.
- Minorities,
the unemployed, young people and lower-income households are least likely to
have accounts.
Over the years of experience agencies serving the poor have
proven that without access to
traditional banks, people are susceptible to abusive practices at non-bank
institutions and are likely to remain trapped in a vicious cycle of financial
strain.
There are several
reasons for this. One is that banks have resorted to higher fees, reportedly to
off-set the requirements of the Dodd-Frank act adopted by congress as the
result of the banks part in causing the global recession.
Another reason is
that as former middle class neighborhoods shift become poorer, banks are
closing their branches making banking even less accessible. SNL Research published in April 2012 showed this decline
nationwide.
To view the full report along with supporting graphs and charts please go to the website of the Center for Community Futures.
“How the recession turned
middle-class jobs into low-wage jobs” Washington Post, By Brad Plumer , February 28, 2013
