A Closer Look at Middle-Class Decline

No one can accuse the presidential campaign of ignoring American economy or the plight of middle class. Yet the scale and complexity of the problem are typically lost amid the charged back-and-forth between Obama and Romney. For first time since Great Depression, the middle-class families have been losing ground for more than a decade. They, and the poor, have struggled particularly badly since the financial crisis led to a global recession in 2008. The Idea that living standards inevitably improve from one generation to next is under threat. Many of the bedrock assumptions of American culture, about work, progress, fairness and optimism, are being shaken. Arguably no question is more central to country’s global standing than whether the economy will perform better in the future than it has in the recent past. Over the next few months on this blog, several colleagues and I will look in some detail at challenge and at possible ways forward, and we’ll encourage you to weigh in with questions, ideas and other feedback. Later in the presidential campaign, I’ll produce an article with my take, with the hope it will serve as a jumping off point to further debate. This article will be one of a handful that The Times produces on the biggest issues facing the country as it chooses its leader for the next four years. We’re calling the series the Agenda. Heading into the project, I see the economy’s problems along these broad lines: Since median inflation-adjusted family income peaked in 2000 at $64,232, it has fallen roughly 6%. You won’t find another 12-year period with an income decline since the aftermath of Depression. This unhappy phenomenon has two major sources. First, economic growth in this country has been relatively slow in recent years, which means the total bounty that the American economy produces, to be shared by all of its citizens, has not been growing very rapidly. Even before the financial crisis began in 2008, economic growth in the decade that started in 2001 was on pace to be slower than growth in any decade since World War II. Then of course came a deep recession that caused the economy to shrink. In addition to slow growth in overall size of the pie, the share that has been going to anyone but richest Americans has been declining. The top-earning 1% of households now bring home about 20% of total income, up from less than 10% 40 years ago. The top-earning 1/10,000th of households, each earning at least $7.8 million a year, many of them working in finance, bring home almost 5% of income, up from 1% 40 years ago. In the simplest terms, relatively meager gains the American economy has produced in recent years have largely flowed to a small segment of the most affluent households, leaving middle-class and poor households with slow-growing living standards. Why has economic growth slowed and income inequality soared? We invite readers to make their own case or to raise questions, possibilities. To do so, you can post a comment below or send an e-mail to agenda@nytimes.com. In the next installment, we’ll start to dig into the causes.

the Agenda: http://economix.blogs.nytimes.com/2012/07/23/a-closer-look-at-middle-class-decline/

Acerca de ignaciocovelo
Consultor Internacional

One Response to A Closer Look at Middle-Class Decline

  1. Professor Uziel Nogueira says: I want to go back 27 yrs ago when I first arrived in the US to start graduate study in economics at MSU. The foreign students were enchanted by the wealth displayed around us but puzzled by one question. Except food, almost all products for sale were foreign made, except cars. The question was how come American workers had such higher standard of living. Where did the well paid wages come from? The frequent answer (not convincing at all) was that the US became specialized in producing high value goods such as cars, airplanes, computers, machine tools, movies, etc. After graduation, I got back to the US and worked for an international organization in Washington DC until 2009.Thus, I was witness of the rise and decline of the American middle class. What did happen from 1975 to 2012? to put it bluntly, Americans became fat physically and arrogant about their own greatness. Meanwhile, the rest of the world did play catch up and is surpassing the US. Three macro factors explain the decline of the middle class. First, American based international companies started to move production and jobs overseas. Slowly first, and then in droves from the 80s on. Second, manufacturing became less labor intensive with introduction of robotics. Third, US made products lost quality and price to foreign competitors. US made cars were well built machines, however comfortable and fancy design until the 60s. Since then, US car-makers cannot produce a defect free vehicle.



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