June 2015 Newsletter: The Dangers of a Weak Middle Class

Inequality for All is the title of a documentary film from Robert Reich, the secretary of labor under President Bill Clinton. Reich emphasizes the importance of investing in people to compete in the new global economy.

The middle class is vital to the success of the U.S. economy and is responsible for 70% of spending. Spending is the driving force of our consumer-based economy. However, over the past 40 years, the middle class has been declining.

This newsletter will discuss the dangers of a weak middle class.

Declining Wages and Globalization

The decline in median wages started in 1978. There was a decline in purchasing power, and then wages became flat for most people—even though some people were doing extraordinarily well. A reason why wages became flat was due to globalization.

Globalization resulted in the consumer getting products cheaper, corporations showing a higher profit while keeping pay down, and CEOs paying themselves large multiples of what their workers were making. Around this time, unions (organized associations of works formed to protect and further their rights and interests) started to decline rapidly. Workers no longer had a voice to defend their wages and benefits.

Meanwhile, companies showed an increased profit when they pushed wages and benefits down. The view was that companies are designed not to generate good jobs, but to make profits. More and more American jobs were outsourced overseas through the 1980s and beyond.

The question then became, “Who looks out for the American worker?”

What Happened as a Result of Declining Wages?

Three things started to happen due to declining wages in the 1970s.

1. Women started to go into the workforce. This is reflected in the Dolly Parton Movie Nine to Five produced in 1980 about women in the workforce.
2. Americans worked longer hours. Overtime, second jobs, and more billable hours became common. We now work approximately 300 more hours than Europeans.
3. Americans started to go into debt, which was easy due to housing prices. People were using their homes as collateral, which kept the middle class going until the housing market burst in 2008.

Why Does This Matter?

Over the last three decades, nothing has changed in terms of inequality—the growing gap between the working class, middle class, and the rich has become much worse. Inequality is a danger to the economy and democracy. With so much wealth concentrated at the top, money begins to control politics. Lobbyists are winning the elections, and why do they spend so much? POLITICAL ACCESS!

The ultimate guardians were the Supreme Court. Still, with rulings such as Citizens United (where the court determined that corporations are people and can spend unlimited amounts of money on elections), corporations have the power to control our elected politicians and our government.

David Reich emphasizes that we are losing equal opportunity in America—the moral foundation in which our democracy is built. The American worker has little to no voice in political decisions and corporations buy access to elected officials with the goal of increasing profit, not better the lives of the American worker.

When the middle class is weak, the economy as a whole is weak. Middle class spending drives the economy. (A concept known as trickle-down economics claims spending at the top trickles down to the workers at the bottom, but time has proven does not work!)

“We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both,” said Louis D. Brandeis, Associate Justice of the U.S. Supreme Court from 1916 to 1939.