The middle class didn't start to decline in October 2008. It began 20 years ago or more and over that time, I have put a lot of thought to the consequences of its loss to everyday life in the United States. So when I saw a headline in my email yesterday morning, I was eager to read America Without a Middle Class.
That it was written by Elizabeth Warren made it all the more appealing. Currently the chair of the Congressional oversight panel on the banking bailout (TARP), she has spent much of her academic career, while teaching law at prestigious universities, studying the economics of the middle class.
Who better, then, to imagine what life for the majority of Americans would be like if the upward trend in distribution of wealth and income to the top five percent continues?
Ms. Warren started out well:
“Can you imagine an America without a strong middle class? If you can, would it still be America as we know it?”
But the entire rest of the story only recounts the economic assaults on the middle class most everyone who follows the news already knows - statistics on unemployment, credit card and mortgage defaults, increases in costs of basic needs, higher taxes, growing debt just to pay for kids' college, medical bankruptcies, the impossibility of saving for retirement due to salaries remaining flat since the 1970s, contrasted with the upper class becoming rich as Croesus.
While valuable to know, those numbers don't imagine daily life for real people. Warren concludes:
“Tens of millions of once-secure middle class families now live paycheck to paycheck, watching as their debts pile up and worrying about whether a pink slip or a bad diagnosis will send them hurtling over an economic cliff. “American without a strong middle class? Unthinkable, but the once-solid foundation is shaking.”
I could easily argue that the foundation of the middle class is well past “shaking” and fast falling off the cliff. But I'm more interested right now in what happened to the imagining of life without a middle class that Warren's headline promised. Since she disappointed me, let's you and me do the imagining today. It's not hard.
The Big Picture
Already tens of millions have lost their homes to foreclosure. Those houses will be bought up, for cents on the dollar, by people who still have money – the rich ones – who will then rent them to people no longer in the middle class. Some who manage to hang on to their homes won't have money for upkeep, houses will show signs of wear and tear, neighborhoods will deteriorate.
With lack of job creation, more people will sink below middle class level. They won't be able to afford college for their children. Employers then will send more jobs overseas to countries that better educate their offspring and they will import workers from those countries on H1-B visas leaving American kids to flip burgers and deliver pizza.
Warren notes in her story that between the 1970s (when salaries began flat-lining) and 2007 (pre-financial collapse), the amount families spent on cars dropped 30 percent; clothing 32 percent; appliances 44 percent while spending on health insurance and child care services doubled.
Depending on health care reform, coverage may get cheaper, but with fewer jobs for fewer qualified candidates, spending on big-ticket items - cars, appliances, clothing, etc. - will decline further. People will eke out longer lives from their durable goods rather than purchasing the next new thing. Shabby chic will become necessity.
The Small Picture
Daily life will probably come to look more like the late 1940s and 1950s when, although the economy was booming then, it took a long time for families to gain financial traction following the Depression and World War II.
My family couldn't afford a clothes dryer until I was in high school in the mid-1950s, and I was privately furious that my younger brother got his first bicycle when he was seven, and although I had asked Santa every year, I didn't get mine until I was 11 (siblings keep track of these things). My parents were doing a bit better by the time my brother came along.
That doesn't mean we lived lavishly. Rather than extravagant vacations far away from home, we traveled to places in Oregon by car. Gasoline was cheap then but not any longer, so in what we are imaging here today, it is conceivable that “middle class” vacations will be in the backyard (of their rented houses).
Among Warren's statistics, median family income jumped 33 percent during the 1960s, but during the boom in the early years of the 21st century, it increased only 1.6 percent for the typical family and today, it's not about a salary rise, but just any kind of job at all.
So with a greater percentage of income going for necessities, there won't be much left over for the all the electronic gadgets, large and small, we've been consuming for the past decade or two. Two- and three-car families will need to cut back to one, limiting families' mobility.
It will be hard or impossible to find money for the many after-school activities that have been lavished on kids since I was young. Or even for movies, restaurant dinners and outings to theme parks. Many ordinary people have been priced out of ball games, the opera and rock concerts for years.
Millions more people than now will be just scraping by and you can see where I'm going with this: since 70 percent of the U.S. economy is consumer-driven, when people can't spend, their quality of life can only spiral downward with no end in sight.
What will Become of Us
Even an increase in the number of jobs won't make much difference unless workers are granted a larger share of profits through increased salaries which is unlikely without a sea change in the moral outlook or failing that, the self-interest of corporate executives.
And that is precisely what has always puzzled me about corporate behavior toward workers, be it low salaries or shipping off jobs to countries where they can pay employees even less: if you don't pay workers enough money to buy the widgets and services corporations sell, won't the companies eventually collapse?
A century ago Henry Ford, about whom there is much to dislike, helped create the middle class when he came up with the then-novel idea to pay his workers enough to buy his automobiles. It worked out so well for Ford's bottom line that other companies followed his lead.
One would think this principle would be pounded into the heads of all those MBAs who run the corporate world. But apparently not; employers have returned to the pre-Ford era of paying as little as they can get away with.
So it is not just the big, bad, greedy bankers who have trashed the economy. They have been aided and abetted by all employers who have spent the past 20 years cutting worker salaries to the bone which has put the U.S. on the path toward becoming a nation of serfs.
Unless corporate executives return to paying living wages, they will eventually join the rest of us at the bottom of the economic heap when their companies can no longer sell enough widgets to make a profit. Life without a middle class, it seems to me, becomes poverty for all classes. What happens after that I don't know, but it will be a disaster for generations to come.
Maybe that's why Elizabeth Warren didn't really imagine life without a middle class; its logical end is, as she wrote, unthinkable.
At The Elder Storytelling Place today, Lyn Burnstine: A Different Subject: R.I.P