Opinion Columns & Blogs

Editorial: What has happened to the middle class?

Our Declaration of Independence states that “all men are created equal.” Over the years, Americans have removed many barriers to that great aspiration – with the Fourteenth Amendment, the vote for women, the civil rights acts, public education and more.

But since the late 1970s, the United States slowly has become the most unequal of the world’s developed nations in its distribution of income and wealth. Our middle class is shrinking.

A new film, “Inequality for All,” showing at Sacramento’s Tower Theater, hopes to bring attention to this. The protagonist is the passionate Robert Reich, an economics professor at the University of California, Berkeley, and a former labor secretary during the Clinton administration.

The timing certainly is right for a clear explanation of what has happened economically to the middle class in the last 30 years, and the impact it is having on our democracy. All to the good if it can begin a spirited conversation to consider remedies.

The most stark visual in the film is a suspension bridge, not unlike the Golden Gate Bridge. One tower is 1928; the other is 2007. These are the peak years of income inequality in the United States. In both cases, we had economic crashes the year after the peak – and recovery took concerted action. Change did not come alone through market forces.

The most stark fact in the film is that the typical male worker in 2010 earned $33,751; in 1978, he earned $48,302, in inflation-adjusted dollars.

This stagnation of middle class incomes, Reich points out, has been masked by families becoming two-earner households, working longer hours (300 hours a year more than Europeans), using credit cards and tapping their homes as ATM machines. But with the bursting of the housing bubble, the mask has been lifted: “All of the coping mechanisms of flat wages for 30 years are now exhausted.”

And a new report released last Tuesday by the UC Berkeley Labor Center points out more than half of fast-food workers – at places such as McDonald’s, Subway, Burger King and Wendy’s – working 40 or more hours per week are enrolled in public assistance programs to cover basic needs of food, rent and health care. That costs all of us.

Those at the top, however, have fared better. And if you think that’s all to the good, think again.

Nick Hanauer, a Seattle pillow manufacturer and venture capitalist, points out in the film that the rich can buy only so many pillows and jeans. They invest some in companies creating jobs, but a lot goes to “funds of funds” – financiers financing other financiers instead of real industries.

That helps to explain why inequality is widening even as the economy is growing.

So what is the solution? Reich believes we should emulate the United States of the three decades after World War II.

That was a time when education was a national priority, including higher education. Presidents Franklin D. Roosevelt and Harry S. Truman championed large-scale investments to assure greater access. And states contributed, too.

It was a time of investment in infrastructure, such as the interstate highway system.

And, Reich points out, it was a time when more than one-third of workers belonged to labor unions that ensured that workers got a piece of productivity gains. As companies are designed to make profits, we need some countervailing force to look after the American worker.

All this led to a cycle of economic growth, greater tax revenues, more government spending, a better educated populace – a cycle that fed on itself.

Can this generation summon the political will to advance the aspiration of the Declaration of Independence? We should not stand by as our “land of opportunity” fails to meet that promise.