Magazine article New Internationalist

Death of the Middle Class: The Ideal That Once Defined How Americans Lived and Dreamed Has Gone

Magazine article New Internationalist

Death of the Middle Class: The Ideal That Once Defined How Americans Lived and Dreamed Has Gone

Article excerpt

WILLIAM J MCDONOUGH, the President of the Federal Reserve Bank of New York, watches his words as closely as a Savile Row tailor watches his stitches, and with good reason. Any mis - statement on his part, or even an intentional but slight deviation from the previous official line, can send the financial markets into a multi - billion - dollar tizzy.

McDonough shuns press conferences, but in November 1994 he invited 35 academics, executives and journalists to a day - long conference at the New York Fed's headquarters in lower Manhattan. When they had assembled, some from as far away as Los Angeles and London, he addressed them as follows: 'I am very pleased that all of you are here today to discuss what I feel is a critical issue facing our country. The issue is, of course, the growing disparity in wages earned by different segments of our labor force. It is deeply troubling that during the 1980s the real wages of low - skilled workers in the United States have fallen sharply, both in absolute terms and relative to the wages of highly - skilled workers. These dramatic wage developments raise profound questions for the United States, issues of equity and social cohesion, issues that affect the very temperament of the country.'

For a pillar of capitalism like McDonough to express concern about low wages is surprising. For him to then question, as he did, whether America 'will be able to go forward together as a unified society' is virtually unprecedented.

Until recently, it was an empirical law of American economics that the majority of citizens, including virtually all those who considered themselves middle class, received steadily rising wages. In the three decades after the Second World War in particular, the American dream of moving to the suburbs, buying a house and even sending the kids to college was no mere election slogan. Home ownership soared and the living standards of the middle class - idealized in television sitcoms - were the envy of the world.

Today that image is as dated as the television shows it spawned. Falling wages and rising prices have transformed the home economics of tens of millions of Americans. The trend is best illustrated with the help of a mental experiment. Imagine lining up the entire population of the US in order of ascending income, with the poorest on the extreme left and the richest on the extreme right. The person smack in the center of the line - the meridian - would be, by definition, the most middle - class American alive.

In September of 1979 this person was earning (in constant, inflation - adjusted dollars) $498 a week, or $24,700 a year. By 1995 he or she had suffered a wage cut of about a hundred dollars a month, or 4.6 per cent.

The citizens on the right of the income line - up fared very differently. In 1979 the typical full - time worker in the top third of the income distribution was earning $890 a week, or $46,280 a year. By September of 1995 his or her pay - check had swelled to $960 a week, or $49,920 a year - an increase of 7.9 per cent.

The fortunate souls on the extreme right of the income line - up were doing best of all. In 1979 the richest five per cent of American families earned, on average, $137,482, according to Census Bureau data. By 1993 their income had risen to $177,518, an increase of $770 a week, or 29.1 per cent. The top one per cent of families have made spectacular gains. According to the Congressional Budget Office, between 1977 and 1989 their average income rose from $323,942 to $576,553 - a gain of $252.611, or 78 per cent.

The numbers prove what many Americans have suspected for a long time: living standards have fallen or stagnated for the majority, while a small minority have enjoyed a bonanza. Taken together, recent wage and income trends suggest an unavoidable conclusion: America is no longer a middle - class country; indeed, the term 'middle class' has lost its meaning.

Vague meaning

The idea that the United States is a middle - class country is at least as old as de Tocqueville ('The whole country seems to have melded into one middle class') and Matthew Arnold ('That which in England we call the Middle Classes is in America virtually the nation'). …

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