Middle Class Under Fire

Experts discuss causes, solutions of the vanishing middle class

Feb 23, 2011 at 2:06 pm

Whether you’re looking at economic indicators, stagnant wages, the persistently high unemployment rate or the continued outsourcing of jobs overseas, it’s hard to quibble that America’s middle class has hit rough times.

“It’s no longer an exaggeration to say that middle-class Americans are an endangered species,” columnist Arianna Huffington said recently.

Local experts weighed in on the topic during a panel discussion Feb. 15 at an Avondale church. The event, “The Vanishing Middle Class in Cincinnati: Myth or Reality?”, was sponsored by the Woman’s City Club, a longtime civic organization.

George Vredeveld, director of the University of Cincinnati’s Economics Center for Education and Research, believes the question hinges on first defining exactly what the middle class is and who belongs to it. After researching the issue for about six weeks, Vredeveld said he still doesn’t have a definitive answer.

“The only thing I discovered is that the middle class is somewhere between the upper and lower class,” he says. Using research from the U.S. Census Bureau, though, Vredeveld noted the median household income in the United States is $50,000.

Also, Vredeveld quoted Jared Bernstein, economic policy advisor to Vice President Joe Biden and the Obama administration’s executive director of the middle-class task force, who said, “The vice president often describes the ‘middle class’ as any family that can’t afford to miss more than two or three paychecks without financial difficulty.”

Although worker productivity has continually risen since the mid-1970s, wages haven’t kept pace, added Daisy Quarm, an associate professor of sociology at UC. According to the Economic Policy Institute, productivity has been on the rise since 1975, and has been ever since.

“But the people in the middle, the workers, at 80 to 90 percent, are not benefitting very much from that increased productively,” she said.

The difference between then and now is that when productivity was growing in the 1970s, so was the median income. Although that means fewer jobs and more disadvantages for workers in the manufacturing sectors, it can also be a positive factor when goods are produced at competitive prices, Vredeveld said.

According to a study conducted from 1967 to 2009, the Census Bureau found that out of the five income quintiles, the bottom four quintiles aren’t improving their position relative to income distribution. In other words, they’re getting less of the economic pie.

“Every single one of them, over this long period, is losing in terms of how much of the total income they’re getting,” Quarm said. “The one quintile that does improve over that period is the highest quintile.”

That quintile reaps two-thirds of the benefits, she added: “You may think things have always been going on like that, the rich getting richer, but it hasn’t. In fact, between World War II and the early 1970s, there was a period of growing equality.”

The public largely believes the changes are due to two factors that are out of its control: economic globalization and technological advancements. But that’s not entirely accurate, Quarm said.

“These factors alone cannot account for the change,” she said. “My evidence is, if globalization and/or technology were the total cause of the increase of inequality of income wealth in the U.S., then we would expect the same pattern in other industrialized countries, and we don’t (see that). Compared to other industrialized countries, the U.S. has one of the most unequal distributions of income in the world.”

Vredeveld differs in his outlook. He stated, “The vanishing middle class and income distribution are two different things, but others will disagree.”

There is, however, some good news.

The increase in inequality primarily is the result of specific government actions, panelists said. That means people have the ability to change those actions and reverse the situation, if they choose.

Fine-tuning his earlier statement, Vredeveld added, “The easiest way that government policy can make a difference is in income distribution, temporarily, and in job creation. Both are incredibly important when it comes to the economic welfare.”

Other changes in government actions that have affected income and wealth inequality are the decline of minimum wage, the explosion of executive pay, the decline in unionization and taxing wages, not wealth.

“The government has increased taxes on wages but not on wealth,” Quarm said. “They’ve increased Social Security tax, reduced inheritance tax and reduced capital gains. We’ve had big cuts that have disproportionally benefited the rich.”

Each of these these factors are determined by politicians which, in turn, are decided by citizens’ decisions at the ballot box.

Another panelist, Terry Grundy, community impact director at United Way of Greater Cincinnati and adjunct associate professor of community planning at the University of Cincinnati, believes we have the ability to make positive economic change in our city.

“I’m not an economist, I’m not a sociologist, so I can’t tell you in economic terms if the middle class is being squeezed hard or not,” Grundy said. “But I can tell you one thing, the middle class is vanishing from the city of Cincinnati.”

Since the 1950s, the city of Cincinnati’s population has been getting smaller and poorer, which isn’t sustainable. “This is the ‘Detroit-izing’ of cities,” he added.

The largest percent of the city’s population don’t have a choice to live where they want because they cannot afford it. In order to solve this, Cincinnati’s rebirth lies in attracting new demographics.

Underscoring his point, Grundy said, “Ward, June, Wally and Beaver have left and they’re not coming back.”

Among the demographics that Cincinnati needs to attract so it can jumpstart the economy are empty nesters, young professionals and new Americans. Also, the city is in high-demand for a group dubbed “the Bohemian cluster,” which Grundy said includes artists, gays, lesbians and the multiply-pierced.

“The question to these urbanist matters are, are we going to succeed in attracting those demographics in this city and hold the ones that we have? If not, last one to leave turn out the lights,” Grundy said. “This is an argument of who should be taking care of these problems and the burden of maintaining people in Cincinnati.”