The book tests the double hypothesis of the death of the middle class. Using U.S. and other developed and developing countries' materials, it seeks to answer whether the popular thesis on its demise is true, and second, it shows it is true in a conceptual sense, viz. , the term in question is a misnomer, referring to a stratum rather than a class. In the course of those investigations other key questions are examined, such as an all-important issue of socio-economic inequality: both in national and world context.
The study is underpinned by an original conceptual framework encompassing social class and estate theories and ownership theory. This makes it possible to criticise many other approaches to the problems analysed. For instance, a critique of a well-known book by the French economist Th. Picketty has been undertaken, showing its numerous flaws. In addition, the analysis of the middle class concept demonstrates its defects manifest in its various definitions and usages.
Table of Contents
INTRODUCTION ... 3
CHAPTER 1. TERMINAL ILLNESS? ... 5
1.1. UNIONS AND INEQUALITY ... 27
1.2.THE NATURE OF THE BEAST: NEOPATRIMONIAL CAPITALISM ... 35
1.2.1. NEOPATRIMONALISM DEFINED ... 36
1.2.2. REGULATORY CAPTURE ... 39
1.2.3. HOBBY LOBBY ... 53
1.2.4. MONEY TALKS ... 58
1.2.5. REVOLVING DOOR ... 64
1.2.6. DISTRIBUTIONAL COALITIONS ... 69
1.2.7. IDEOLOGICAL HEGEMONY ... 71
1.2.8. CONCLUDING REMARKS ... 73
1.3. BOOM AND GLOOM ... 74
CHAPTER 2. THE IMPACT OF INCOME DISPARITIES ON THE ECONOMY ... 165
CHAPTER 3. OBAMA CARE ... 177
CHAPTER 4. THE SPECIAL RELATIONSHIP ... 201
CHAPTER 5. BRICKS, MINTS AND SUCHLIKE ... 243
CHAPTER 6. CLASS AND OCCUPATION ... 271
CHAPTER 7. BETWEEN THE BOURGEOISIE AND THE PROLETARIAT ... 295
CHAPTER 8. THE “LEAPING” CONCEPT ... 334
8.1. THE PERILS OF SUBJECTIVISM ... 359
8.1.1. THE MYTH OF AMERICAN DREAM ... 383
CHAPTER 9. THE MEDIAN INCOME PRINCIPLE ... 405
9.1. POLITICAL ARENA ... 414
9.2. THE NEW SPIRIT OF CAPITALISM ... 457
CHAPTER 10. UPPER AND LOWER MIDDLE CLASS ... 461
10.1. STRUGGLING FAMILIES ARE EVERYWHERE ... 475
CHAPTER 11. HIERARCHY AND STRUCTURE OR STRATIFICATION AND CLASS ... 478
11.1. CLASS-DEPENDENT FACTORS ... 499
CONCLUSION ... 505
REFERENCES ... 506
INDEX ... 543
INTRODUCTION
To unpack the title of the book, WHILE it refers to WHAT IS a household word, the reader should be cautioned that the book contains much content that GOES AGAINST THE GRAIN OF DOMINANT VIEW. The main thrust of the book is captured by its subtitle, touching on kind of double ontology of the middle class, which exists both in the real world and in the conceptual domain. The point is that in both those spheres parallel processes can be observed. On the one hand, the thesis on the demise, if not outright death of the middle class in the USA and several other highly developed capitalist countries has recently come to constitute part of the conventional wisdom. This kind of argument will be considered at more depth, with special reference to its underlying explicit or implicit understanding of the class in question, whose survey will shade over into the review of the relevant literature, with an eye to the above-mentioned problem of definition. This analysis will lead to certain INTRODUCTION
To unpack the title of the book, WHILE it refers to WHAT IS a household word, the reader should be cautioned that the book contains much content that GOES AGAINST THE GRAIN OF DOMINANT VIEW. The main thrust of the book is captured by its subtitle, touching on kind of double ontology of the middle class, which exists both in the real world and in the conceptual domain. The point is that in both those spheres parallel processes can be observed. On the one hand, the thesis on the demise, if not outright death of the middle class in the USA and several other highly developed capitalist countries has recently come to constitute part of the conventional wisdom. This kind of argument will be considered at more depth, with special reference to its underlying explicit or implicit understanding of the class in question, whose survey will shade over into the review of the relevant literature, with an eye to the above-mentioned problem of definition. This analysis will lead to certain important conclusions regarding the structure of societal differentiation in general.
Despite the said fundamental distinction as regards their ontological nature, both “middle classes” share a common characteristic-that is to say, we will-to put it bluntly-sort of put the middle class as a notion to death. To put it in a nutshell, it will be demonstrated that the concept in question is actually an oxymoron, whose outward guise does not match its real substance.
The following commentator rightly points out that the concept under investigation gains its political relevance at the expense of its fuzziness, thereby highlighting The perils of this kind of multifunctionality: “National politicians have always been quick to rhapsodize about the middle class—what’s great about it, how to save it, the radical guy in the other party who threatens it. This is partly because the contours of such a social set are stubbornly, though usefully, indistinct” (MAHNKEN 2013). Should one rely on sociological surveys for corrections to those shortcomings, this would only add insult to injury, as it turns out that “Well over half of Americans describe themselves as either ‘middle-class’ or ‘upper-middle class’ (just 2 percent consider themselves ‘upper class’), and politicians like to draw the boundaries as broadly as possible, the better to cater to potential voters” (MAHNKEN 2013).
Showing up in so many diverse areas, it is only legitimate that its study should have its source base extended beyond what is commonly considered a typical academic frame of reference to include also such materials as magazines and newspapers, as it is in those media that one may expect to come across such conceptions of the middle class that come closest to what the proverbial man (and woman) in the street thinks. And for a sociologist, needless to say, that focus on everyday ways of thinking and thereby behaviour is critically importtant.
Recall that the study proposed aims at no less as a thorough recasting of the concept under investigation, a radical shift in the theoretical status on the basis of its critical deconstruction. In a word, given its involvement in a wide diversity of fields of inquiry, as well as in the public policy and the cultural process, the likely end result of the present study, which in all likelihood will virtually turn the notion of the middle class upside down, totally redefining its theoretical standing is, at least potentially, path-breaking (although it is safe to predict that some would be inclined to use such terms as “subversive” or”disruptive” instead).
CHAPTER 1. TERMINAL ILLNESS?
As suggested above, in what follows the aim is both to cast light on the real condition of the U. S. middle class (and also on their counterparts in other countries ), and on what understanding of that class given accounts of it imply.
For theoretical reasons, let us begin this exposition with the case of a developing, or rather emerging country, if only to show that the title “Terminal Illness” spreads far beyond the zone of highly developed capitalist nations, so apparently we are dealing here with a global phenomenon. A Pakistani author informs us that the capital of his country “is rapidly losing its middle class — the class which serves as a bridge between the rich and the poor. Moreover, [...] the utilities associated with the middle class, such as taxis, are also vanishing at the same speed. Like the decline of cinemas and the land grabbing of parks, the taxis of Karachi are fast disappearing. They have been replaced by private cars mostly owned by the rich and the crudely-built multi-seat rickshaws which are used by the poor masses” (Kattak 2014).
The commentator cited above points to some other woes of the middle class, in the first sentence of his argument hinting at what later would be pinpointed as a key flaw of the notion under examination, i.e. its over-inclusiveness; it is at least problematic whether only middle classes fall prey to this kind of crimes: “Looking at the rise in street crimes and the proliferation of extortion rackets, one wonders how Karachi’s residents can cope with these threats day in and day out. The vanishing of taxis is not the only signpost about the death of the middle class. There are probably dozens of other things which also expose the plight of the middle class such as the decline in the quality of educational institutions attended by the middle class, grabbing of their entertainment facilities, skyrocketing ccommodity prices and shrinking job opportunities” (Kattak 2014).
The causal relationship in two above cases is far less clear; at least in the latter instance there seems to be a conflation of cause and effect-which may, or may not apply also to the former factor mentioned; that is to say, both inflation and joblessness should be construed not so much as manifestations of the plight of the said group but rather as important causes of the latter. This is not the only aspect of Kattak’s text that is of interest; for our purposes, what is noteworthy, is above all an explicit linkage between the concept under investigation and the notion of a stratification hierarchy: “the middle class not only serves as a bridge between the upper and poor classes, but also serves as hope for the poor. If the trend of causing trouble to the middle class is not stopped, then crime of all sorts will only increase” (Kattak 2014).
In a similar vein, a host of commentators point to the sorry state in which the present-day U. S. middle class finds itself. An argument below is typical in that regard:
More than half of our families are not part of some “struggling middle class” - they are struggling to get by at all. […] our leaders have accepted inequity.
Unable to affect policy in the Republican House, President Obama is about to do another round of vague campaign-style speeches about the middle class-the same reheated rhetoric we’ve been hearing since 2007. […] We spend millions of dollars and devote front pages to rich white people who no longer have to pay estate taxes, while millions don’t make enough to be taxed. The impoverished majority rarely gets the front page story. Median household income is down 7.3 percent since the start of the recession. (Kirk Edgerton 2013).
Indeed, according to some estimates, wealthy capitalists have avoided around $100 billion in taxes since 2000 by exploiting loopholes that “make the estate tax system essentially voluntary” for people of means, Bloomberg reports.
Billionaires like Sheldon Adelson, the casino magnate and major conservative political donor, can shift their stock holdings into and out of various legal structures in ways exempt the transfers from federal taxes. Adelson has passed nearly $8 billion to his heirs through a series of these transactions, bypassing $2.8 billion in taxes in the process. To grasp what level of sums are involved here, suffice it to indicate that the $100 billion in tax savings that Adelson and people like him have amassed through the tactic over the past dozen years would be enough to pay for every American child to go to preschool for a decade.
That $100 billion estimate comes from Richard Covey, the attorney who came up with one of the most common maneuvers the hyperwealthy use to duck tax liability.
Covey’s tactic has its own tax law jargon nickname — the Walton grantor-retained annuity trust, or “Walton GRAT” — and was born out of a congressional crackdown on Covey’s previous innovation in estate tax avoidance. Those gRATs work by rapidly shifting large volumes of stock into a trust fund that is legally required to return that initial investment after two years. The stocks in the trust gain enough value that when it comes time to repay the initial investment there is a substantial amount of stock left over that can be transferred on to some third party without triggering the gift tax. The government sued one of Covey’s first high-profile GRAT clients, Walmart heir Audrey Walton, in 1993. A judge ruled in Walton’s favor, giving the tax shelter both legal approval and that “Walton GRAT” nickname.
One of Adelson’s most successful Walton GRAT gambits turned about $31 million in stock holdings into more than half a billion untaxed dollars for his heirs. The above scheme was unusually successful because shares in Adelson’s casino company had collapsed in the wake of the recession, and the Walton GRAT in question captured the stock’s dramatic rebound from 2009 to 2011. But because more mundane versions of the transaction happen by the thousands, the total amount of tax avoided is staggering. Covey estimates that his loophole has cheated the government out of $100 billion over the past 13 years, suggesting that there has been a much higher total loss to Walton GRATs since that 1993 court case that gave them their name. “No one knows for sure how much all of these GRATs cost the U.S. government,” Bloomberg notes, but the Internal Revenue Service (IRS) estimates that there were “close to 2,000 separate GRAT filings in 2009 alone.
Adelson, an irascible gambling magnate whose business dealings in China have ended up in a series of allegations of bribery and prostitution and who gives much more in political donations than the typical plutocrat, makes a compelling lead character in the Walton GRAT story. But the tactic is so widespread that JP Morgan ‘has a special unit dedicated to processing GRAT paperwork’, according to Bloomberg. Other banks and tax lawyers work in the same business to multiply the tax savings the technique provides. The tactic is an entirely legal form of tax avoidance, unlike many forms of tax evasion that have drawn legal heat in recent years. Individual and corporate tax dodging costs taxpayers $300 billion each year” (Pyke 2013c).
Even granted that the IRS is likely to succeed in its cracking down on some part of individual tax evasion conducted through offshore bank accounts, Walton GRATs have the legal system’s stamp of approval, and Congress declines to close the loophole in part because donors love it” (Pyke 2013c), which provides another gloss to our analysis of neopatrimonial structures in a later section.
But lest there be any suspicion that we play down the more general practice of hiding money offshore, let us cite a study that estimated that the world’s richest individuals had placed, as of the early 21st century, “about $11.5 trillion worth of assets in offshore tax havens, mainly to avoid taxes” (Perelman 2002). This amount is roughly equal, let us note in passing, to the GDP of the United States. To be sure, citizens of the United States are not responsible for the entire $11.5 trillion, but then the report does not take account of the assets that corporations stash in tax havens.
Although the IRS occasionally convicts an unsophisticated offender, this practice is relatively safe. Furthermore, taxpayers underestimate their tax liabilities by inflating the cost basis of assets on which they take capital gains (toward which the taxman is incredibly tolerant anyway). One estimate put the extent of this inflation at about one-quarter trillion dollars (Dodge, Soled 2005).
And it is clear that this practice serves to benefit the richest taxpayer. The estimated 16 percent of the legal tax obligation goes unpaid, according to the IRS, and it is certain that the vast majority comes from the wealthiest members of society, the upshot being that the clever tactics of tax avoidance prevent the IRS data from capturing a good deal of the wealth and income of the top 10 percent of the population. It follows that, as hotel magnate Leona Helmsley famously said, “Only the little people pay taxes”. The government facilitates shenanigans, such as those used by Helmsley, by steadily increasing the complexity of the tax code while reducing the resources for enforcement. Helmsley served eighteen months in jail for her financial transgressions, but not, mind you, because of diligence on the part of the government. She refused to pay money due to contractors. The fact is, the resulting civil suit incidentally exposed her tax fraud.
In addition, the IRS also reinforces inequities between rich and poor by devoting a disproportionate share of its scrutiny to those without substantial resources, especially poor people who declare an Earned Income Tax Credit (Johnston 2003: 129ff.).
And more broadly, under the current U.S. tax system, a number of millionaires pay a smaller percentage of their income in taxes than a significant proportion of so-called middle class families. Warren Buffett, for example, pays a lower effective tax rate than his secretary, and he himself was first to point out that such a state of affairs is nothing but fair.
A full 22,000 households that made more than $1 million in 2009 paid less than 15 percent of their income in income taxes — and 1,470 managed to pay no federal income taxes on their million-plus-dollar incomes, according to the IRS.
And, the very wealthiest American households are paying nearly the lowest tax rate in 50 years— some are paying just half of the federal income tax that top income earners paid in 1960. By contrast, the average tax rate for what is typically regarded as middle class families has barely budged. “The middle 20 percent of households paid 14 percent of their incomes in 1960, and 16 percent in 2010” (Dees 2013).
The report, by the nonpartisan Congressional Research Service, found that when all federal taxes are taken into account — including those on wages, investment income and corporate profits — some households earning more than $1 million a year paid as little as 24 percent of their income to the Internal Revenue Service in 2006.
And the point is, this is substantially less than the share paid by many families making less than $100,000 a year that faced a top effective tax rate exceeding 26.5 percent, according to the report.
Overall, 94,500 millionaires paid a smaller share of their income in taxes than 10 million households with moderate incomes, the report found. “Most Americans think millionaires ought to be paying a higher rate than middle-class taxpayers, not a lower one,” said Sen. Charles E. Schumer (D-N.Y.), who has long urged policymakers to raise taxes on the wealthiest households” (Montgomery 2011). He pointed out: “This report increases the momentum for our proposal to ensure millionaires pay their fair share”.
For example, in the July 27 issue of The Wall Street Journal, Tom Herman states, “Only losses associated with property used in a trade or business and investment property (stocks) are deductible.” But loss on the sale of a home used as a personal residence is not. Since a home is the largest investment most middle-class people have, that can be devastating.
Moreover, kind of cumulative logic is here at play-those with the most money get the most tax breaks because they can afford to hire experts at finding loopholes and deductions, owing to which they boost their effective incomes still further.
Enrichette Ravina, of Columbia Business School, studied the financial habits of the rich. She said it’s common for them to hire up to eight financial advisers, and that’s why they pay lower taxes and get higher returns on their investments than those with less wealth.
The Center on Budget and Policy Priorities found that the tax cuts have conferred the “largest benefits, by far on the highest income households.”
CBPP used data from the Tax Policy Center that found 24.2 percent of tax savings went to households in the top 1 percent of income compared to 8.9 percent that went to the middle 20 percent.
“While taxpayers earning over $200,000 comprise roughly 13 percent of all taxpayers who itemize, they claim about 28 percent of all itemized deductions. According to calculations by the Joint Committee on Taxation, in 2012, these high-income taxpayers claimed 35 percent of all mortgage interest deducted, 55 percent of state and local taxes deducted, and 57 percent of charitable contributions deducted” (Tax Foundation: 29).
Especially Republicans are seen as political representatives of the bourgeoisie; they rationalize their actions by claiming that lower taxes on corporations result in economic growth. The facts, however, do not back them up. Corporations and the wealthy have enjoyed lower tax rates for more than a decade, and yet job creation is down compared to the years when taxes were the highest for those groups. In fact, “the United States plunged into the Great Recession just a few years after the George W. Bush tax cuts took effect” (Nash, Pat 2014; Montgomery2014 ).
This is not to take issue with the general thrust of the above argument, only with its theoretical framing in misleading class terms. Contrary to the language used, it would be premature to jumpt to any conclusions about “class warfare” on the basis of the aformentioned facts-not so much because of their significance, but because for them to refer to genuine socio-economic classes,, one would have to translate into the latter framework all the income categories deployed above.
A closer approximation to the most fundamental class divide can therefore be found in the widely discussed essay published on Nov. 1, 2013 by the managing director of Pimco, William H. Gross, ranked 252nd on the Forbes 400 list of wealthiest Americans, who candidly revealed the sources of his fortune, having a good deal to do with the tax cuts carried out by Ronald Reagan and George W. Bush, as well as the low interest rate policies of the Federal Reserve that facilitated leveraged borrowing, had become concerned about the plight of labor. That is, the declining share of national income going to workers and the rising share going to capital.
He calls this era the gilded age of credit? Recall that the Gilded Age was a period of American history in the 1870s and 1880s not dissimilar to the present day, when wealth was glorified and the pursuit of riches and rising income inequality was justified on grounds that have come to be called “social Darwinism”-that is, survival of the fittest.
Meanwhile, Gross now thinks that labor has suffered too much from excessive gains by the wealthy.
In his view, the wealthy ought to support higher taxes on themselves. Mr. Gross favors higher statutory tax rates, taxing capital gains as ordinary income -they are now taxed about half - and abolition of the carried interest loophole that allows hedge fund managers to pay capital gains rates on their ordinary income (Bartlett 2013).
It is worthwhile to revert too the aformentioned report, as it offers the first government analysis of federal tax data since the famous billionaire investor Warren Buffett, a former Washington Post Co. board member, complained that he pays a lower tax rate than the 20 employees in his office, who earn much less than he does.
After Buffett wrote an op-ed in the New York Times, Obama argued that policymakers should overhaul the tax code to ensure that millionaires pay at least as large a share of their income in taxes as middle-class families do, a principle the president dubbed “the Buffett Rule”.
In 2011 Senate Republicans rejected a variation on the Buffett Rule — a 5.6 percent surtax on income over $1 million — to cover the cost of Obama’s $447 billion jobs package (though in 2013 The president managed to restore higher tax rates on incomes above $398,350.)
Critics initially blasted the Buffett Rule, arguing that the average millionaire already pays a significantly higher effective tax rate than middle-class families do. The CRS report, by Thomas L. Hungerford, a specialist in public finance, found that to be true: “Millionaires, on average, paid about 30 percent of their income in federal taxes, while households earning less than $100,000 paid closer to 19 percent” (Montgomery 2011). But this is in fact too simple to be true-the averages hide wide variations within income categories, Hungerford pointed out, “with millionaires paying anywhere from 24 percent to more than 35 percent of their income in federal taxes” (Monttgomery 2011). . The lower tax bills are in this interpretation primarily the result of low tax rates on investment income, such as capital gains and dividends.
Although ordinary earnings are subject to payroll taxes as well as income tax rates as high as 35 percent, investment income — which constitutes the bulk of earnings for many very wealthy households — has been taxed till recently at no more than 15 percent.
All told then, “The current U.S. tax system violates the Buffett rule in that a large proportion of millionaires pay a smaller percentage of their income in taxes than a significant proportion of moderate-income taxpayers[do] “ (Montgomery 2011), as Hungerford wrote, although perhaps not to the extent alluded to by the Sage of Omaha.
Furthermore, any discussion of tax issues should take account of the fact that official figures tell but part of the story. “The London School of Economics analyst Gabriel Zucman has investigated what he calls the ‘anomalies’ of international financial record-keeping. His prime example is provided by the “residence principle”.
The naive reader could be forgiven for thinking that at least on paper the said mechanism works simply: say, for instance, that a French national holds a $1 million investment in U.S. financial securities. Financial records, under the residence principle, are supposed to record this $1 million as an asset for France and a liability for the United States.
We’re living in a world where taxes on our wealthy can only be collected if these wealthy self-declare their income.
At the end of the day, these assets and liabilities should balance out globally. But they don’t. Not even close. Why not? The wealthy are stashing a growing share of their wealth in tax haven banks that do not, Zucman notes, “automatically report the investment income earned by their clients to tax authorities.”
In effect, the economist reports, we’re living in a world where taxes on our wealthy can only be collected if these wealthy ‘self-declare their income’.”
And the fact of the matter is, ever fewer do.
Zucman’s detailed statistical investigation ends up concluding that the global super rich — deep pockets who typically hold over $50 million in assets — had stashed, as of 2008, $7.6 trillion in offshore tax havens, about 8 percent of total global personal financial wealth.
About 80 percent of this offshore wealth, Zucman calculates, goes undeclared to tax authorities. Declaring that income — and paying a taxes due on it — would add, Zucman estimates, over $200 billion annually to global tax collections.
Zucman emphasizes that his figures only cover financial wealth. In particular, his calculations do not cover the huge sums the ultra rich have parked in jewels or fine art or luxury real estate.
It is safe to say that helping the wealthy hide their wealth, financial and otherwise, has become an astonishingly lucrative business opportunity for bankers and barristers the world over. The truth is, most all major global banks, including American giants like JPMorgan Chase, have subsidiaries in the world’s top tax havens.
This lucrative, tax-evading universe occasionally surfaces out of the opaque accounting depths. One story broke when a federal judge sentenced powerhouse Illinois lawyer Paul Daugerdas to 15 years behind bars for a two-decade-long fraud that saved his wealthy clients $1.6 billion in taxes.
Those clients ranged from an early investor in Microsoft to the late oil billionaire Lamar Hunt, one of the most powerful owners in professional sports.
For his services, Daugerdas personally pocketed $97 million.
“This case shows the astonishing lengths some super-wealthy Americans will go to avoid their obligation as citizens,” U.S. district court judge William Pauley fumed at the sentencing. “Mr. Daugerdas was a tax shelter racketeer who tapped into the incredible greed of some of the country’s wealthy.”
A new tax law provision that went into effect July 1 could make life for Daugerdas and his colleagues more difficult. Or at least IRS officials hope so.
The 2010 passage of the Foreign Account Tax Compliance Act gave these officials the regulatory wherewithal to level stronger sanctions against foreign banks that play footsie with wealthy American tax cheats.[...]: Foreign banks must now report the accounts of U.S. citizens that total over $50,000.
It remains to be seen what, if any, effects the aformentioned regulations will have.
About 70 nations have so far agreed to abide by the new Foreign Account Tax Compliance Act reporting requirements, many without much enthusiasm.
But other nations — tax havens like the Seychelles, an island nation in the Indian Ocean — remain defiant. They see the new law as an ideal opportunity to boost their global market share in tax-evasion services.
Financial operators in the Seychelles specialize in creating “shell companies” that help their wealthy clients conceal their fortunes. They take a fee for every company created.
“The British Virgin Islands registers 30,000 companies a year,” Paul Chow, a former member of the Seychellois parliament, boasted recently to a visiting journalist. “We are at about 11,000. We are catching up.” The United States has in the past, of course, invaded islands with less “just cause” than the tax-evasion enablers in the Seychelles are now providing.
But the United States wouldn’t have to invade anybody to end the tax evading ways of America’s rich. A serious squeeze on their financial industry enablers a series of sophisticated, high-profile sting operations, for starters — would do.
That squeeze ought to go hand-in-glove with financial wealth reporting reforms that could set the stage for a still bolder step, a global tax on excessive wealth.
With the right policies, as Gabriel Zucman puts it, “this trend in rising wealth concentration could end pretty soon, sooner than we believe” (Pizzigati 2014).
Nothing suggest, however, that such policies are indeed forthcoming.
Congressional Republicans “have attacked the Buffett Rule, as well as the idea for a surtax on millionaires, as ‘class warfare’. They argue that raising taxes on millionaires would penalize many small businesses, the primary engine of U.S. job growth. They also oppose raising taxes on investment income, arguing that doing so would discourage savings and risk-taking” (Montgomery 2011).
Meanwhile, “the CRS report offers a withering rebuttal to both those claims. Just 1 percent of tax returns with business income have adjusted gross income of more than $1 million a year, the report says, and those businesses are some of the least likely to create jobs.
“’Many observers claim that small businesses are the primary creators of jobs,’ Hungerford wrote, but “most of the research cited by these observers is from the 1980s. More recent research suggests that small businesses contribute only slightly more jobs than larger business.” (Montgomery 2011).
The fact of the matter is, “the main difference ‘appears to be due to hiring by new startup firms,” which “generally do not generate much business income in their first years in operation.” (Montgomery 2011).
Consequently, higher taxes on millionaires are unlikely to affect them, the report stated.
As to savings, the report argues that private savings rates have fallen over the past 30 years even as the capital gains tax rate dropped from 28 percent in 1987 to 15 percent, suggesting that ‘changing capital gains tax rates have had little effect on private saving’” (Montgomery 2011).
It should be made clear that the common designation as savings the so-called stock-market investments may be acceptable from the standpoint of mainstream economics, but much less so from a socio-economic perspective, according to which “savings” ought to be distinguished from “capital”. That is to say, even putting aside their supposed macroeconomic effect in the form of capital accumulation, at an individual level, only some part of the aformentioned investment could be couched as savings-the rest expresses capital ownership.
It is not surprising that even quite a few of enlightened members of the ruling class become concerned; the author of the article cited below writes that “ I was visited in my office by the chairman of one of the country’s biggest high-tech firms. He wanted to talk about the causes and consequences of widening inequality and the shrinking middle class, and what to do about it.
I asked him why he was concerned. ‘Because the American middle class is the core of our customer base’, he said. ‘If they can’t afford our products in the years ahead, we’re in deep trouble’.
I’m hearing the same refrain these days from a growing number of business leaders.
They see an economic recovery that’s bypassing most Americans. Median hourly and weekly pay dropped over the past year, adjusted for inflation” (Short 2014).
Furthermore, average real weekly wages of what is couched as the middle class (in fact-the mega-employee class) “of production and nonsupervisory private employees currently amount to $694 -well below its $827 peak back in the early 1970s” (Short 2014).
Between 1970 and 2003, the Gross Domestic Product (GDP) adjusted for inflation almost tripled, from $3.7 trillion to $10.8 trillion.
Because the population also increased by about 35 percent during that same period, per capita income more than doubled. However, not everyone’s income rose. Hourly wage earners certainly did not benefit from the economic growth. According to government statistics, hourly wages corrected for inflation peaked in 1972 at $8.99 measured in 1982 dollars. By 2003, hourly wages had fallen to $8.29, although they rose modestly using a different measure of inflation.
If one was to believe some commentators, it was the economy that accounted for the Republican success in the midterm election, which was the scene of “ a middle class uprising. This was THE REVENGE OF THE MIDDLE CLASS” (Root 2014d). the news that the economy is improving and entered the phase of recovery apparently failed to impress “middle class America[which] knows otherwise; in support of this interpretation its advocates point to the results of exit polls in which 70% of voters said the economy is bad, versus 30% that called it “improving” (cf. Root 2014d).
Yet, this seems a skin-deep take on the election; more to the point is another commentator, who suggests that “in the midterm elections, national anger and frustration was cleverly directed by people with the most money to stir up voters with much less. [...] The Republican politicians were effective at using their money and message to get votes from people who — due to the anger that these messages inflamed — seem not to realize that the politicians they elected will pass policies that further reinforce the very income inequality that makes them angry.
In short, those who were born a step from home plate used their money to enrage everyone else enough to vote for policies that will further enrich the richest” (Cohan 2014).
Cohan’s assessment goes deeper in that it reaches not simply financial or material, but the all-important sources of voting behaviour.
Economists Thomas Piketty from the French research institute, CEPREMAP, and Emmanuel Saez of the University of California at Berkeley assembled detailed information about the distribution of income using data from the Internal Revenue Service. They defined income in current 2000 dollars as annual gross income reported on tax returns, excluding capital gains and all government transfers (such as Social Security, unemployment benefits, welfare payments, etc.) and before individual income taxes and employees’ payroll taxes. For the bottom 90 percent of the population, the average income stood at $27,041 in 1970, then peaked in 1973—at the same time as hourly wages—at $28,540. This figure bottomed out in 1993 at $23,892. “By 2002, average income for this group stood at $25,862, about 4.5 percent below where it stood in 1970” (Perelman 2002).
This estimate does not mean, to be sure, that everybody in the bottom 90 percent fell behind but that the losses among the vast majority of these people were sufficient to counterbalance the gains of the more fortunate members of the bottom 90 percent. So it is safe to say that probably 80 percent of the population was worse off in 2002 than in 1970 “Using tax-return data from the IRS, Saez has built extensive income-distribution datasets going back 100 years. He defines “income” as pre-tax cash market income — wages and salaries; dividends, interest, rent and other returns on invested capital; business profits; and realized capital gains. He excludes Social Security payments, unemployment benefits and other government transfer payments, which are more substantial today than before the Great Depression.
In 1928, the top 1% of families received 23.9% of all pretax income, while the bottom 90% received 50.7%. But the Depression and World War II dramatically reshaped the nation’s income distribution: By 1944 the top 1%’s share was down to 11.3%, while the bottom 90% were receiving 67.5%, levels that would remain more or less constant for the next three decades.
But starting in the mid- to late 1970s, the uppermost tier’s income share began rising dramatically, while that of the bottom 90% started to fall. The top 1% took heavy hits from the dot-com crash and the Great Recession but recovered fairly quickly: Saez’s estimates for 2012 have that group receiving nearly 22.5% of all pretax income, while the bottom 90%’s share is below 50% for the first time ever (49.6%,to be precise).
A century ago, Saez notes that the highest earners derived much of their income from earnings on the accumulated wealth of past generations. By contrast, ‘[t]he evidence suggests that top incomes earners today are…“working rich,” highly paid employees or new entrepreneurs who have not yet accumulated fortunes comparable to those accumulated during the Gilded Age’.
This may be true as far as it goes, but at a deeper level it under-appreciates the real share of capital imcome insofar as a good deal of the so-called wages and salaries comes exactly from capital-stratopheric executive earnings are anything but earned, i n socio-economic terms, they express the real ownership of equity capital.
And conversely, some portion of nominal dividens or capital gains constitutes a small addition to what many wage-earners acquire through their wages.
Americans are not unaware of this increasing income gap. More than half (61%) of Americans said the U.S. economic system favors the wealthy, while just 35% said it’s fair to most people, according to a Pew Research Center survey conducted in March. A similar share (66%) of Americans said the gap between rich and poor had increased in the past five years; nearly three-quarters of respondents said the rich-poor gap was either a “very big” (47%) or “moderately big” (27%) problem.
As one might expect, low- and middle-income people were most likely to say the U.S. economic system favors the wealthy, but even 52% of high-income people agreed that it does. And while 54% of low-income people and 49% of middle-income people called the rich-poor gap a “very big” problem, only 36% of high-income people did so. A third of the high-income group said the rich-poor gap was either a small problem (19%) or not a problem at all (14%).
Furthermore, more than half (55%) of Republicans said the economic system is fair to most people, but majorities of Democrats (75%) and independents (63%) said it favours the wealthy. And 61% of Democrats and 50% of independents said the gap was a very big problem, versus only 28% of Republicans. Four-in-ten Republicans termed the gap either a small problem (22%) or not a problem at all (18%) (DESILVER 2013).
What the public thinks finds its counterpart in the realities; according to The Washington Post, the middle class is no better off than it was twenty years ago. Somehow, actually, six years after crash of 2008, it’s 20 percent poorer.
Source: Russell Sage Foundation the Washington Post does call attention to perhaps the most important caveat of these findings: that the processes involved tend to be cyclical, and that levels of wealth go up and down over time. What we may be looking at is a snapshot in time, where many people may have taken out loans for school or to buy a home, which will then be payed back over time. Either way, the truth of the matter is that the middle class is poorer than it was three decades ago,. It is easy to point out when the recession hit in the late 2000s and to a much lesser degree during 2001 when growth slowed. But one only needs to look at the median to get a glimpse of the strife of the average American.
What needs noting is also a more at least medium-term trend that calls into question any optimism stemming from the emphasis on the cyclical income fluctuations as supposedly accounting for the future negation of the law of gravity-namely, what goes down must come up. The above cited judgment does not take into account that “the median net worth for the typical American family began to diminish prior to the recession.
The decline: During the 20 years prior to the 2007 recession, wealth was incrementally rising among all classes at disparate rates. For the top 95th percentile, or the upper class (better: stratum), net worth doubled between 1984 and 2007, while the 50th percentile or the median rose by only 40%. A lot of those overall increases were due to the rising housing market when homes were valued higher.
Whilst Fabian Pfeffer, Sheldon Danziger, and Robert Schoeni, the study’s authors, all point out that everyone took a big hit during the recession, the distribution of those disadvantages was anything but equal, and as a result, inequality has grown by leaps and bounds.
In the aftermath of the recession, “wealth losses were not distributed equally,” the study says.
American households dwindled in net worth across the board, but the upper-crust classes took a much smaller hit than the other economic brackets.
Since 2003, though, the inequality gaps between the middle class and the wealthy have intensified greatly and at a much more rapid pace. “Households at the 95th percentile held 13.6 times more wealth than the median household,” the study says. “This gap increased to 20.1 in 2009 and then 24.2 in 2013.”
So what does this all mean? The typical American middle-class household has a smaller net worth than their 1984 counterparts. (But that does not necessarily mean that a 1984 middle class family lost money over the past 30 years.) On the positive side, if you like, the middle class fared better than the low 25th percentile that saw fairly little growth in the years before the Great Recession and then plummeted a whopping 60% afterward.
Middle-class households are suffering. Whether that’s because wages have stayed the same and living expenses have increased or that the housing market crashed is irrelevant. The important thing is that wealth inequality is progressively widening and “there is little evidence that these trends are likely to reverse in the near term,” the study concludes.
Many commentators warn that “our parents may be the last ones to have experienced a thriving middle class that could afford a sustainable livelihood and had the promise of mobility.
Meanwhile, today’s middle class fights to stay afloat while the rich amasses more and more wealth, making the American Dream an unattainable fantasy for many” (Kagel 2014).
“Wealth losses,” the study says, “were not distributed equally. While large absolute amounts of wealth were destroyed at the top of the wealth distribution, households at the bottom of the wealth distribution lost the largest share of their total wealth. As a result, wealth inequality increased significantly from 2003 to 2013; by some metrics inequality roughly doubled”.
And, in contradistinction to some over-optimistic predictions, The authors don’t leave on a very optimistic note either, writing, “the American economy has experienced rising income and wealth inequality for several decades, and there is little evidence these trends are likely to reverse in the near term” (Reich 2014a).
Source: Pew Research
This is why the views about the demise of the middle class are being voiced just as stronly today as in the midst of the crisis. The author of the text under the telling title: “ Who pays the taxes when the middle class is extinct?” argues: “You would have to be living on Mars to not realize that the middle class is going the way of the dinosaurs, but my question is: Who’s going to pay all the taxes once the middle class has been eradicated? The rich ain’t and the poor can’t. Come on, people. Wake up” (post-tribune 2015).
The fact of the matter is that the ever-increasing levels of inequality largely flew under the radar up until the most recent recession and didn’t really enter the mainstream as a narrative until protests like “Occupy Wall Street started discussing the ’1 percent’. While that movement has since fizzled out, it was successful in alerting many middle and low class Americans about the growing issue, many of whom were either not aware or not privy to the serious issues inequality arises” (Reich 2014a).
The truth also is that most Americans wouldn’t think anything was wrong until they could not longer have a pizza delivered or until they couldn’t watch the NFL on Sundays. The sad truth is that as long as there’s enough to keep people placated, they usually won’t make much of a fuss. But finding out that a huge percentage of the population has lost one-fifth of their wealth over the past three decades, while many suspected that it had probably grown, may be enough to shake some people out of their cocoons, and force them to pay attention to some of the major economic issues of the day.
Essentially, to couch the matter in the widespread stratification language, the American economy — or any economy, for that matter — depends heavily on a balancing act between the rich and the poor, whose one component works by providing opportunities for the less-fortunate to climb out of poverty on the base of the tools provided to improve their standing, namely education and training. But as the cards become more heavily stacked against the poor, their prospects become more and more grim, at which point unrest can take hold.
Many people may be fairly shocked to learn that while they suspected their assets and wealth had appreciated over the past few decades, they instead find themselves lagging further behind than before. This can have long-standing effects as those caught on the bottom will grow to resent the individuals prospering.
The data of Pew Research show the overall creep of the wealthiest classes into overall wealth distribution, meaning that the problem is still growing, and as the authors of The Russell Sage Foundation study note, it doesn’t look like it will stop any time soon.
Now members of the middle class can pin a percentage on how deeply the past three decades of economic cycles have eroded their wealth.
“Since the depths of the Great Recession in 2009, median real household income has fallen 4.4 percent, according to an analysis by Sentier Research.
The business leaders who voice their concern over those trends are not necessarily driven by their philanthropic motivation. It is rather their class interest that is at stake; they know the U.S. economy “can’t get out of first gear as long as wages are declining. And their own businesses can’t succeed over the long term without a buoyant and growing middle class” (Reich 2014a).
The reader, socialised to the kind of truths laid out above could be forgiven for failing to see that these are just half-truths, hinging upon a particular understanding of the social grouping in question, which issue is elucidated in many places throughout the book.
The aformentioned Chancellor’s Professor of Public Policy at UC Berkeley continues: “They also recognize a second danger.
Job frustrations are fueling a backlash against trade and immigration. Any hope for immigration reform is now dead in Congress, and further trade-opening agreements are similarly moribund. Yet the economy will be even worse if America secedes into isolationism.
At least Barrack Obama seems to understand those challenges, as his presidential executive order concerning the U.S. illegal immigrants suggests.
Lloyd Blankfein, CEO of Goldman Sachs, warned recently on “CBS This Morning” that income inequality is destabilizing the nation and is “responsible for the divisions in the country.” He went on to say that “too much of the GDP over the last generation has gone to too few of the people.”
Blankfein should know. He pulled in $23 million last year in salary and bonus, a 9.5 percent raise over the year before and his best payday since the Wall Street meltdown. This, to be sure, doesn’t make his point any less valid, though.
Several business leaders are suggesting raising the minimum wage and increasing taxes on the wealthy.
Bill Gross, chairman of Pimco, the largest bond-trading firm in the world, said (still prior to scandal that surfaced in September) that America needs policies that bring labor and capital back into balance, including a higher minimum wage and higher taxes on the rich.
Gross has noted that developed economies function best when income inequality is minimal.
Several months earlier, Gross urged his wealthy investors, who benefit the most from a capital-gains tax rate substantially lower than the tax on ordinary income, to support higher taxes on capital gains. “The era of taxing ‘capital’ at lower rates than ‘labor’ should now end,” he said.
Similar proposals have come from billionaire investors, Warren Buffett and Stanley Druckenmiller.
Buffett has suggested the wealthy pay a minimum tax of 30 percent of their incomes.
The response from the denizens of the right to those enlightened representatives of the ruling class has been a standar one: If these gentlemen want to pay more taxes, there’s nothing stopping them.
Which misses the point. The crux of the matter is that these business leaders are arguing for changes in the rules of the game that would make the game fairer for everyone. They acknowledge it’s now dangerously rigged in favor of people like them.
They are aware the only way to legitimise and perhaps even save capitalism in the long run is to make it work for the majority rather than a smaller and smaller minority at the top.
In this respect they resemble the group of business leaders in the Gilded Age who helped spearhead the progressive reforms enacted in the first decade of the 20th century, or those who joined with Franklin D. Roosevelt to create Social Security, a minimum wage and the 40-hour workweek during the Depression.
Unfortunately, the voices of these forward-thinking business leaders are being drowned out by backward-lobbying groups like the U.S. Chamber of Commerce that are organized to reflect the views of their lowest common denominator. And by billionaires like Charles and David Koch, who harbor such deep-seated hatred for government that “they’re blind to the real dangers capitalism now faces. Therefore, the Republican victory in the November mid-term election makes any increases in the legal minimum even more unlikely, although does not rule it out completely.
The aformentioned dangers are a sinking middle class lacking the purchasing power to keep the economy going, and an American public losing faith that the system will deliver for them and their kids.
“America’s real business leaders understand that unless or until the middle class regains its footing and its faith, capitalism remains vulnerable” (Reich 2014).
Reich’s good intentions are evident, but this by itself does not make true neither his claims nor those by the businessmen cited by him, such as entrepreneur Nick Hanauer, who published not long ago in Politico an open letter to “my fellow zillionaires”, in which he stated: “our country is rapidly becoming less a capitalist society and more a feudal society,” (Reich 2014).
The context of this claim suggests that the point is not the role of inherited wealth but rather, more conventionally, growing economic inequalities generally. Unfortunately, the latter fact by no means testifies to the transformation of the U.S. capitalism into a feudal system-it lacks the constitutive attributes of the latter, such as the preponderant role of agriculture in the economy, and correspondingly-land as a form of property, which entails a definite shape of a given society’s class structure. Huge indeed economic disparities, which according to many commentators are comparable with those obtaining prior to the Great Depression should not prompt one to jump to conclusions that abstract from historical specifics of both periods involved, separated-as they do-by the whole epoch of development and amount at best to a bunch of unfortunate metaphors. This in turn is inconsistent with the fashionable thesis concerning “the real dangers capitalism now faces” (Reich 2014). To support such claims, data akin to the following may be cited:” in 17 of 22 developed countries, income disparity widened in the past two decades, according to the Organization for Economic Cooperation and Development” (RUGABER, Boak 2014). In particular to the U.S. society applies the argument that “ those dangers are a sinking middle class lacking the purchasing power to keep the economy going, and an American public losing faith that the system will deliver for them and their kids” (Reich 2014).
Prof.Reich assures the reader that “America’s real business leaders understand that unless or until the middle class regains its footing and its faith, capitalism remains vulnerable” (2014).
From a sociological perspective, however, it is worth stressing that a society is not only a stratified body, but also, and even above all, a class-divided one-in a socio-economic sense. Meanwhile, although Reich mentions a number of individual capitalists, he does not frame his analysis in class terms, but draws on what is a mix of common-sense and stratification language. Effects are less than compelling-“The public”, for example, comes to be identified with the middle class, and Reich’s faith in his handful of enlightened leaders, who will save the U.S. capitalism, turning it-as follows from not very clear remarks-into a stakeholder mode is extremely naive. Even if such transfomation were possible, it could not be accomplished by way of appeals to hearts and minds of a small elite but only as a result of social pressures-ultimately, class and estate struggle.
At this juncture it is well to clarify the distinction between two key concepts that will come up throughout the entire discussion.
Similar theoretical shortcomings mark the following musings of Richard Hanauer — an early investor in Amazon (AMZN) and over 30 startups — who points to the well-documented rise in income inequality during the past 30 years as the ultimate cause of a Mad Maxian dystopia he envisions. “If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us plutocrats”, he writes. “One day, somebody sets himself on fire, then thousands of people are in the streets, and before you know it, the country is burning.
And then there’s no time for us to get to the airport and jump on our Gulfstream Vs and fly to New Zealand” (Newman 2014).
In a similar vein, one of the world’s richest men insists that “We are destroying the middle classes” (Isquith 2015). Johann Rupert, the owner of Cartier, speaking to the Financial Times Business of Luxury Summit in Monaco said “the social dangers created by the entrenched structural inequities of late capitalism “keeps me awake at night.”
“How is society going to cope with structural unemployment and the envy, hatred and the social warfare?” he said. “We are destroying the middle classes at this stage and it will affect us. It’s unfair.” Continuing in dire terms, he said: “We’re in for a huge change in society. Get used to it.”
“And be prepared.”
So it was that Johann Rupert—worth an estimated $7.5 billion as owner of more than 20 luxury brands—worried aloud to the congregated capitalists that luxury-goods markets will suffer during widespread unrest and class war, and that, as Bloomberg paraphrased, “the rich will want to conceal their wealth.”
But that might be even a little too optimistic, according to Cartier’s top customer and unpaid advertiser Jay Z. Jay, while rich and often Cartier-adorned, maintains a more street-level perspective than Rupert, and he concurred with the Cartier chief’s assessment during a 2013 appearance on “Real Time with Bill Maher.” “I don’t really want to scare America, but the real problem is there’s no middle class, right?” he said. “So that the gap between have and have-nots is getting wider and wider.”
But that’s not the scary part, and Jay put the threat in much more dire terms: “It’s going to be a problem that no amount of police can solve, because, you know, once you have that sort of oppression, you know, and that gap is widening, it’s inevitable that something is going to happen.”
Jay foresees a problem that the state will not be able to contain. A revolution, in other words, or at least an uprising, the moment at which the state loses its grip on power and “no amount of police” can bring order back (Isquith 2015).
Another “wealthy worrier”, Venture capitalist Tom Perkins complained earlier about the “persecution’ of the rich through high taxes, while magnates such as Sam Zell, Wilbur Ross and John Mack have griped of late about the unschooled masses scapegoating America’s moneyed elite” (Newman 2014)
Tellingly, the above argument contains no reference to any class conceived as an organised force, for neither mobs nor unspecified “multitudes” are not, by definition, parts to the class struggle, which alone could create a real threat for the position of the privileged classes and estates.
Newman also reckons that “rich ought to chill out. While the masses may envy their wealth, there’s no evidence of a revolution brewing, or even a well-behaved civil disturbance.
Americans are clearly dismayed at the direction the country seems to be heading, but they are also docile in the face of decline and confused about possible solutions-there is no organised force capable of articulating an alternative overall vision of the future U.S. order.
Hanauer fears mobs heading for the castles of Greenwich and Palo Alto, but it could be argued that “America’s disaffected these days are more likely to vent their rage behind closed doors as they shake their fists at Fox News or MSNBC and leave cranky comments on websites” (Newman 2014).
In support of his claim Newman points out that “there’s meager support for more redistribution of wealth. To be sure, polls show that slightly more than half of Americans favor raising taxes on the wealthy for specific causes such as helping reduce poverty, which makes it sound like tax hikes have widespread support and are inevitable. But here’s the catch: “An even higher portion of Americans are disgusted with the government, with little trust that it spends tax money wisely. That’s why Republicans can consistently block tax hikes on the wealthy with little payback at the voting booth” (Newman 2014).
Whether behind this widespread distrust there lies anything more than the traditional American individualistic mindset, will be explore later in this volume.
For the time being let us just point out that the aformentioned author goes on to argue that “if there’s simmering outrage at this state of affairs, it’s not evident in the public square. The “Occupy” movement against the financial elite enjoyed a moment in 2011 but has largely fizzled. Hanauer argues that the occupiers helped sharpen the focus on income inequality, but The Tea Party is probably a more lasting phenomenon. And the Tea Party’s gripes about the wealthy are limited to corporate welfare and crony capitalism that puts government bureaucracy at the service of the rich. As for wealth and income inequality, the Tea Party generally takes a laissez-faire, free-market view: Those who can get rich, should” (Newman 2014).
This is not the end of the story, however, as over and above tax-related distortions of the distribution of income, the wealthy have access to resources that do not count as income; in fact it is only in socio-economic terms that one is able to see that the scope of executive ownership is usually far more extensive than the dominant legal perspective would suggest. After all, Johnston’s (2003)description of the personal use of corporate jets that are company assets, of course, but nevertheless in many cases utilised in the same fashion as if they were personally owned by a given executive is a case in point; (to be precise, technically, this kind of relation should be framed in terms of semi-ownership, as it includes only of the two relations composing the economic ownership-a given asset cannot be sold ) when William Agee was running the engineering firm into bankruptcy, he replaced its one corporate jet, already paid off, with two new ones and boasted about how the way he financed them polished up the company’s financial reports. His wife, Mary Cunnigham Agee, used the extra jet as her personal air taxi to hop around the United States and Europe. When Ross Johnson ran the cigarette-and-food company RJR Nabisco, which had a fleet of at least a dozen corporate jets, he once had his dog flown home, listed on the manifest as “G. Shepherd.” And Kenneth Lay let his daughter take one of Enron’s jets to fly across the Atlantic with her bed, which was too large to go as baggage on a commercial flight (Johnston 2003: 62). The point is not even the frequency of such excesses but rather the sheer opportunity to indulge in them.
What is more, Johnston understates the situation. Consider this fuller description of the RJR-Nabisco case:
After the arrival of two new Gulfstreams, Johnson ordered a pair of top-of-the-line G4s, at a cool $21 million apiece. For the hangar, Johnson gave aviation head Linda Galvin an unlimited budget and implicit instructions to exceed it. When it was finished, RJR Nabisco had the Taj Mahal of corporate hangars, dwarfing that of Coca-Cola’s next door.
The cost hadn’t gone into the hangar itself, but into an adjacent threestory building of tinted glass, surrounded by $250,000 in landscaping, complete with a Japanese garden. Inside a visitor walked into a stunning three-story atrium. The floors were Italian marble, the walls and floors lined in inlaid mahogany. More than $600,000 in new furniture was spread throughout, topped off by $100,000 in objets d’art, including an antique Chinese ceremonial robe spread in a glass case and a magnificent Chinese platter and urn. In one corner of the ornate bathroom stood a stuffed chair, as if one might grow fatigued walking from one end to the other. Among the building’s other features: a walk-in wine cooler; a “visiting pilots’ room,” with television and stereo; and a “flight-planning room,” packed with state-of-the-art computers to track executives’ whereabouts and their future transportation wishes. All this was necessary to keep track of RJR’s thirty-six corporate pilots and ten planes, widely known as the RJR Air Force (Minow; Burrough and Helyar 1999).
David Yermack of New York University’s Stern School of Business published an interesting paper in which he investigated the relationship between this particular luxury and corporate efficiency. He found that the cost for CEOs who belong to golf clubs far from their company’s headquarters is two-thirds higher, on average, than for CEOs who have disclosed air travel but are not longdistance golf-club members.
Based on Yermack’s paper, a Wall Street Journal article (Maremont 2005) titled “JetGreen” described corporate jets “as airborne limousines to fly CEOs and other executives to golf dates or to vacation homes where they have golf-club memberships”. To add insult to injury, the government subsidizes corporate jets, or effective personal property of the managerial class. For example, the government waves the hefty landing fees that commercial aircraft must pay in order to support the air traffic control system. The value of these subsidies amounts to billions of dollars. A significant amount of these subsidies benefits the private lives of corporate executives-although it is not treated as private property.
High-level corporate executives enjoy many other perquisites besides free travel, including the provision of luxury boxes at sports stadia, chefs, lawn care, and a multitude of other benefits that ordinary people would have to pay for on their own, if only they could afford them. New York Times business columnist, Gretchen Morgenson, described the excesses of Donald J. Tyson, former chairman of Tyson
Foods, ranging from the personal use of corporate jets to housekeeping and lawn care. Echoing Leona Helmsley, she appropriately titled her article “Only the Little People Pay for Lawn Care” (Morgenson 2005).
It is also important to note that the Piketty and Saez data overestimate the welfare of the poor, especially if one considers the fact that ordinary people must steadily increase their workload to get what they earn. For example, between 1970 and 2002, annual hours worked per capita rose 20 percent in the United States, while falling in most other advanced economies (Morgenson 2005). Besides, for ordinary workers, benefits, such as pensions and health care, are in rapid decline.
All in all, the patttern of income distribution skewed in favour of the richest of the rich is scarcely disputable. In 1970, the top 0.01 percent of taxpayers had accounted for than 0.53 percent of total income. By the year 2000, their share had soared to 3.06 percent (Piketty and Saez 2005). In other words, the income of these 13,400 taxpayers exploded from being fifty-three times the national average to an almost unbelievable 306 times, only slightly less than it was in the peak year of 1928, right before the Great Depression. These 13,400 richest families in the United States had about the same income as the poorest 25 percent of the households in the country.
Thus, there are good reasons to suspect that we are witnessing the largest transfer of wealth and income in the history of the world—far larger than what occurred during either the Russian or Chinese revolutions.
After all, neither China nor Russia had an economy that came anywhere “near $7 trillion, the amount by which the annual U.S. GDP grew between 1970 and 2002” (Perelman 2002).
In terms of wealth, the differences are far more extreme because creating an annual income flow requires a much greater level of wealth, “comparable to the difference between the annual rent of a house and its purchase price” (Perelman 2007).
1.1. UNIONS AND INEQUALITY
The political prediction reported earlier may, or may not be correct, but more valuable seems to be the comment, revealing a key cause of the demise of class power of the wage-earners:
“Labor unions have represented the workingman’s concerns for a century, but they are on the wane, too. Union membership has been in steady decline for at least 30 years, with no rebound on the horizon. The United Auto Workers couldn’t unionize a Volkswagen plant in Tennessee earlier this year, even with the tacit support of the company itself. Michigan became a ‘right to work’ state in 2013, diminishing the power of unions in their own backyard.
Just one example to illustrate the relevance of anti-union policies. “Between 2000 and 2013, all 50 states saw their number of middle-class households reduced, according to a study by Pew. But Wisconsin — destroyer of white picket fences — had the worst dip, with a 5.7 percent decrease. While the cost of living in dairy land has risen, the median income is down nearly $9,000 and people are devoting more of their wages to rent or mortgages. “Writer Sam Becker lobs a chunk of the blame at Wisconsin’s union-hating governor” (Zurowski 2015).
At this point it may be useful to present our own definition of class, as that concept and certain of its constituents will figure prominently in our later analyses. we may define socio-economic classes as groups of people which differ from each other by the place they occupy in a historically determined system of economic activity (i.e. their ownership of the means of production, exchange, transport, (Both Weber and Marx treated transportation of goods (as distinct from that of persons, which belongs in the services sector) as indirectly productive of material goods and economic value) (finance and services, or labour power).
What needs some clarification is the notion of ownership. In this regard a line of demarcation runs between two basic approaches.
While the law generally sanctions the economic relations of ownership, the latter rarely correspond to the prevailing legal forms. Public or state ownership has varying economic and sociological contents or meanings depending on its concrete historical context. On the other hand, one and the same economic relation of ownership may find its expression in many different legal forms. Furthermore, many legal concepts operate at too high a level of abstraction to be suitable for economic (and sociological) analysis. This applies, among others, to the crucial concept of the corporation. The emergence of the joint-stock company as a major method of business organization involves legal recognition of the corporation itself as the owner of its assets. But economic ownership can be an attribute of only individual concrete or natural, as opposed to legal, persons (or their groups).
It is not only with respect to the subject of ownership that jurisprudential analysis of property is found wanting. The same applies to its object. Property can be not only in physical things such as machines or land, or in incorporeal or intangible objects such as patents, but also in the labor power or, in Max Weber s terms, Arbeitsqualifikationen.
The preceding does not prejudge how that socio-economic ownership is to be conceived. In that regard, too, a dichotomy exists between such notions as control or decision-making on the one hand and what Berle and Means term “beneficial ownership on the other.
According to the treatement developed by the author, it is precisely that ability to benefit, as distinct from the ability to control, that constitutes the substance of ownership. Because the users themselves do not decide on the admission hours to a botanical garden or because there is a state institution that manages public forests, the objects in question do no cease to be common property (because everyone can enjoy them). The fact that the state grants access to fish in rivers and lakes does not turn the fisheries concerned into government property.
In addition, it must be pointed out that the benefits inherent in the ownership of the factors of economic activity always are, to a lesser or larger extent, gratuitous. This applies, amongst others, to the effects of spontaneous natural processes.
It is true that the process of extraction of e.g. mineral deposits always requires some expenditure of human labour power. But can even the greatest effort of a worker be compared with millions of years required for the natural processes to produce these forms of wealth?
If the crucial aspect of economic property is apparent in the case of even transhistorically understood work, the more this is the case in the most developed system of production and labour, including exploitation of nature itself:
that the productive forces resulting from co-operation and division of labour cost capital nothing. They are natural forces of social labour. So also physical forces, like steam, water, &c., when appropriated to productive processes, cost nothing. […] Once discovered, the law of the deviation of the magnetic needle in the field of an electric current, or the law of the magnetisation of iron, around which an electric current circulates, cost never a penny. But the exploitation of these laws […] necessitates a costly and extensive apparatus.[…] by incorporating both stupendous physical forces, and the natural sciences, with the process of production, modern industry raises the productiveness of labour to an extraordinary degree […] After making allowance, both in the case of the machine and of the tool, for their average daily cost, that is for the value they transmit to the product by their average daily wear and tear, and for their consumption of auxiliary substance, such as oil, coal, and so on, they each do their work gratuitously, just like the forces furnished by Nature without the help of man. The greater the productive power of the machinery compared with that of the tool, the greater is the extent of its gratuitous service compared with that of the tool. In modern industry man succeeded for the first time in making the product of his past labour work on a large scale gratuitously, like the forces of Nature. (Marx 1979, ch. 15)
Space constraints preclude any comprehensive presentation of the framework under consideration (a more extensive presentation can be found e.g. in Tittenbrun 2011a, 2011b, 2014, 2015a, 2015b), which by itself is part of a broader theoretical structure, termed socio-economic structuralism, characterised by its own social ontology and epistemology (called dialectical realism (cf. e.g. Tittenbrun 2011a).
It could be argued that the concept of sale more commonly used by Marxist economists and sociologists (and with reference to labour instead of labour power-by non-Marxists alike), should be replaced by “the lease of labour power”. Marx, underlining that in the case of labour power we are dealing with a commodity, always emphasizes that this is a peculiar commodity. And indeed, the peculiarities of that specific commodity, related to the fact that it is an inseparable part of human personality, are remarkable. Any other commodity, for example consumer goods purchased in a store, are wholly owned by the purchaser, who may deal with it at will (and, let us add, according to the popular legal notion of property), including for example, destruction, donation, etc.
Meanwhile, there is no such a thing in relation to labour which is supposed to be also the object of sales. It can be utilized only in a certain way: consumed by the owner in the production process or providing services, or more generally by servicing a given type of operating conditions. However, a capitalist cannot, for example, sell his or her worker or otherwise dispose of her. It results from the fact that the latter remains the owner of her labour power, (which ownership is a key determinant of class position under our analytical framework discussed below), which is reflected,inter alia, in the possibility of its withdrawal, for example by a strike, switching one’s employer altogether. The relationship between the worker and the owner of the working conditions resembles, in our view, the relationship between the owner of the land and the farmer leasing it from the owner who uses the land under cultivation. In addition, the term “lease” rather than “rent” or “hire” should be used in that context for important theoretical reasons; the latter concepts refer, in our view, to personal property, e.g. renting a house from someone for her / his own use, as opposed to its use in the character of business premises.
The relevance of the process of de-unionisation to the ownership of labour power held by the employee classes involved is nicely captured by the following formulation, distinguishing two diametrically different leasing (or hiring, to use that more common term) settings, whereby the collectivised ownership of labour power stands at the opposite end of the spectrum to the individualisation of employment contracts: “there have been two significant changes in the institutional arrangements of shopfloor governance in U.S. manufacturing over the twentieth century. First, during the first half of the century, the mechanism workers used to influence working conditions evolved from one based on voluntary labor turnover, or exit, to one based on an empowered collective voice through informal shopfloor organizations attached to unions. The period of transition from exit to an empowered voice begins with the welfare capitalist measures of the 1910s (e.g., pension plans and profit-sharing arrangements), and moves through the company unions of the 1920s to the rise of an independent industrial labor movement in the 1930s.
Second, this empowered voice weakened during the second half of the century, as the informal shopfloor organizations of workers, based on the strength of informal work groups and shop stewards in production, gave way to a more formalistic, “contract-and-grieve” approach to workers’ influence over working conditions, and finally to “a loss of union leverage altogether” (Fairris 1998).
The significant drop in private-sector unionization levels began in the 1970s (cf. Clawson & Clawson 1999). Suffice it to say that between the mid-1970s and mid-1990s, the private-sector unionization rate among men declined by nearly 50% in the U.S. (Card 1998). The organised working class has been veritably decimated in the 1980s-in industries as varied as transportation, paper production and primary metals, union representation fell dramatically-by nearly 25% in less than 10 years. Today, “only 11.1% of America’s workers are represented by a union, with private-sector unionization at a paltry 6.7%” (Afl-CIO 2016).
Sure enough, the relevance of this weakening, if not the demise of trade unions to the present context is concerned with the impact of the latter on the ownership of labour power. The literature points to two main mechanisms through which unions boost worker wages. One is the union wage premium, which refers to the increased pay unions are able to provide their members directly through collective bargaining (cf. Lewis, 1986). This is more evident, but there exist also another, indirect effect that could be framed in terms of socialisation, or more precisely-collectivisation of the ownership of labour power. What is at issue is the well-documented mechanism whereby Non-union employers, worried about the threat of labour organizing, seek to preempt unionization by raising wages to union levels (cf. Corneo & Lucifora, 1997; Leicht, 1989). In socio-economic terms, this means that given employees benefit from the general bargaining power of unions, including those they themselves do not belong to, which epitomises the ownership effect in the sense of a rent-based approach, discussed at more length elsewhere (Tittenbrun 2011a, 2011b, 2013a, 2013b, 2014).
All in all, what could be defined as the result of a class struggle, decreasing the scope of collectivised labour power has a significant impact on the level of ownership pertaining to non-managerial labour power in general? According to Card’s findings (1998), between 10% and 20% of the recent growth in male earnings inequality is due to falling union membership. In turn, comparing wage inequality in Canada and the United States during the 1980s, DiNardo and Lemieux (1997) draw the conclusion that as much as two-thirds of the differential in earnings inequality between the two nations can be attributed to America’s higher rate of de-unionisation.
Significantly, the aformentioned study also indicates that a loss of members due to union decertification results in 10–15% higher executive compensation for the CEOs of newly non-union firms.
More broadly, at least equally relevant to the debate over income inequality is yet another concern of organised labour: some studies have identified cases of far wider goals of union actions than those ascribed to them by the received wisdom- viz. unions mobilize to reduce inequities, by the same token going beyond the narrow wage interests of their members (underscored even in the Marxist literature by the notion of trade-union consciousness, which is a synonym of this kind of narrow economism). By way of illustration of what is not that rare phenomenon, one may recall that CIO unions in the 1930s and 1940s pursued a broad egalitarian agenda by pushing for greater gender and racial equality in the workplace (Milkman 1987). Of special interest is, therefore, a study undertaken by Rosenfeld (2006) that stands out for its class coefficient; for it seeks to measure the relationship between unionisation and the manager-worker pay disparity.
To begin with, what attracts attention is that by the end of the 1990s, union membership levels settled at around 12% of the full-time non-professional workforce. This can be juxtaposed with the ratio between median managerial pay and median worker pay, which-despite some minor fluctuations – increased considerably in the period between 1983 and 2000, with the most rapid changes occurring in the late 1990s (Rosenfeld 2006).
His sample encompasses two categories of occupations, as he would have it, which in fact means classes. The first group is composed of executives and top-level managers (1980 three-digit SIC occupation codes 3–22).
As the author clarifies, the primary responsibility of these employees is to supervise others, and under National Labor Relations Board regulations they are prohibited from organizing into unions. Whilst a small number of executives and managers indicate that they belong to a union, these respondents have been dropped from the analysis. The second group includes all non-professional, non-managerial full-time workers. Industry-level unionization rates based on this group’s membership status have been calculated.
From his data it follows that union participation rates nearly halved during the time period under investigation; meanwhile, workplace inequality, captured by the ratio of median managerial to median worker pay, increased around 7% during the 1980s and 1990s. Contrary to what human capital theory (here repeatedly criticised) would predict, whilst the mean level of education for workers has increased sharply in recent years, median wages remained quite stagnant, leveling off at the end of the twentieth century only 1.5% higher than where they stood in the early 1980s.
According to the aformentioned researcher’s data, a one-point increase in unionization is associated with a US$ 3.93 raise in median weekly wages. To put it differently, if unionization levels had not decreased from 1983 on, median weekly worker pay is estimated to be around 3% higher.
Another interesting finding is that for supervisors in the middle of the managerial pay distribution, a relatively high union presence works to boost wages. In other words, high union presence pushes wages up at the worker level and reverberates throughout much of the pay scale. Naturally, a key question imposes itself: “how does this finding square with the negative effect of unions on occupational pay inequality?” (Rosenfeld 2006). The answer to that puzzle is relatively straightforward: the positive effects of high levels of membership on worker pay override the smaller effects on managerial compensation. Nevertheless, the presence of the above-mentioned mechanism accounts for the muted labor’s overall effect on the pay inequality: “if unionization remained at 1983 levels, pay inequality between workers and their managers would be about .036 points lower” (Rosenfeld 2006). The upshot, in absolute terms, is that “had union levels not fallen since 1983, workers would enjoy a weekly US$ 15 pay increase while managers would see their pay rise by US$ 13. Without the post-1983 union decline, the managerial to worker pay ratio would be nearly .04 points lower” (Rosenfeld 2006).
From the perspective of class analysis, however, it is important to separate the aformentioned middle-level managers from top corporate executives; it could be said that the latter’s different class/ownership status results in the relationship between them and the rank and file workforce taking much more antagonistic shape. In contrast to the data reported above, unionization operates to narrow the gap between median worker and top-level managerial pay. The relationship is significant at the .05 level. To sum up the results of the study under consideration, “In 1983, the ratio of median managerial to median worker weekly pay stood at 1.77, by the beginning of the 21st Century the gap had grown to 1.90. As income inequality grew – as the gap between median managerial pay and median worker pay widened – private sector unionization levels fell drastically.
Union membership among private sector, full-time workers dropped ten percentage points in an 18-year period”.
What the researcher concerned managed to establish beyond any doubt is that “rising inequality and union decline are intimately related. The significant negative relationship between unionization and pay inequality is robust to controls for a host of other factors” (Rosenfeld 2006).
Thus, the study discussed above demonstrated that “union presence within the workplace operates to narrow the wage distribution, providing evidence of the ability of unions to influence overall pay norms within a firm”.
All the results reported above lend credibility to the conclusion that “the steep declines in union representation over the past few decades have exacerbated earnings inequality in the United States. Declining union presence loosens up the pay scale by granting management the decisive upper hand in bargaining wages and leaving wageworkers at the mercy of shifting market forces.
The drop in wages attributable to declining union presence has contributed to wage stagnation among workers and mid-level management alike: both segments of the labor force stand to gain with strong union presence and both have lost ground during this period of unprecedented union decline”.
Naturally, although the research reported above does not make use of the term “the middle class”, for the reader of this book at least, the relevance of the study to the woes of that social category should be manifestly clear, as it is for Robert Reich, who points out that “one big reason America was far more equal in the 1950s and 1960s than now is unions were stronger then. That gave workers bargaining power to get a fair share of the economy’s gains – and unions helped improve wages and working conditions for everyone. But as union membership has weakened – from more than a third of all private-sector workers belonging in the 1950s to fewer than 7 percent today– the bargaining power of average workers has all but disappeared. In fact, the decline of the American middle class mirrors almost exactly the decline of American labor union membership” (2015).
Against this background, it is not surprising that great hopes could be pinned down by America’s workers on Bernie Sanders who has come to be seen as a “strong advocate for For those who identify with that line of argument, “middle class union workers” (Arnold 2016).
Unions are the essence of the middle class. They provide equal pay among your male and female counterparts, health benefits, paid vacation and sick, safeworking conditions and the right to bargain. Meanwhile, the present-day realities in America are such that “private sector jobs usually don’t provide unions for their employees, therefore working longer hours for little pay, poor working conditions, no paid vacation, sick and maternity leave” (Arnold 2016).
Against this background the left-leaning presidential candidate stands out as kind of the working-class hero: “Sanders has stood by union workers since his time as mayor of Burlington, Vt., in the 1980s. He has joined picket lines on many occasions and stood on the Senate floor to back bills to help increase the right of workers to join unions” (Arnold 2016).
Sanders argues that in order to strengthen the middle class workers rights to bargain for better wages, benefits and working conditions must be restored.
Anyway, it is thus not coincindental that Beginning in the 1980s, the process of what has been dubbed “the decline and fall of America’s working class” has been also set in motion; it is in that period that the U.S. economy started trending toward greater inequality, accompanied by the hollowing out of the middle-skill jobs constitutive of the working class so far. Vast masses of workers lost the semi-skilled jobs that they had held in previous decades. The wworking class became largely a floating low-skilled labor force, which decreased the marriageability of white working-class men. That impaired family formation. A couple of decades later, the lack of family support started to take a big bite out of the emotional health of working-class whites, causing them to turn to alcohol, drugs and suicide once they reached middle age” (Smith 2015). This brief account may help explain many negative phenomena and processes present in the life of present-day U.S. working class, such as going on since the late 1990s. an increase of death rates among working- class middle-aged whites, caused largely by two factors: drugs and suicide. Divorce rates have also risen dramatically for this demographic group, even as they have fallen for many others.
1.2. THE NATURE OF THE BEAST: NEOPATRIMONIAL CAPITALISM
This part of the book sets out to outline what is probably a novel approach to the nature of the present-day capitalist system. On a theoretical plane, the approach draws on conceptual framework, from which the master label featuring in the head has been borrowed. In turn, the empirical data used to derive and/or validate the diverse aspects of the analytic construction the chapter sets out to build come mostly, albeit not exclusively, from the recent crisis and its ramifications. After defining the concept that gave the title to the entire intellectual undertaking reported below, the analysis will concentrate on particular building blocks of the overall framework proposed, using not only the u.S., but also global or worldwide evidence, the proposition positing such a geographical scope of the system under investigation being one of the key contentions of the entire study presented below. By the same token, it is expected that new light will be shed on both the causes and some other crucial circumstances related to the recent global financial crisis. Although focusing on the economy, which is only natural in this kind of study, the latter includes also the political arena, as the thesis on its inextricable interrelationship with the economic system underlies all the analyses conducted in the chapter. Furthermore, the reader’s attention might be drawn to what is arguably another innovative aspect to the approach being deployed below-the use of the class framework (as well as a related one-concerning social estates) as an indispensable analytical tool. It needs to be stressed that class theory, as viewed in this study, is grounded in the economic property relations, whilst its sister notion, that of social estates is, in turn, underpinned by a corresponding set of non-economic ownership relations, which will be elucidated later in the book.
1.2.1. NEOPATRIMONALISM DEFINED
Alongside all the other characteristics making the recent capitalist crisis a unique one, it had a profound, structural and epistemic significance, revealing-as it did-the real ontological nature of the socio-economic system, commonly labelled capitalism (barring, to be sure, ideologically loaded notions, reducing it to just a “market economy”).
It will be argued that the crisis, the developments both in the run-up to it and in its aftermath suggest the relevance of the term “neopatrimonialism” as an overall label defining its character. The term has been coined by some Max Weber’s followers, as referring to a mix of two types of domination distinguished by Weber: “ a traditional subtype, patrimonial domination, and legal-rational bureaucratic domination” (Erdman, Engel2006:17), these in themselves being a derivation from Weber’s concepts of patrimonialism and legal-rational bureaucracy (Weber 1978: 217 ff., 231 ff. 1070 ff.; 1980: 124 ff., 625 ff.).
What kind of difference does the prefix “neo” make? Now, whereas under patrimonialism, all power relations (encompassing both political and administrative relations) between ruler and ruled, are personal relations-which is another way of saying that there is no differentiation between the private and the public realm, under neopatrimonialism the latter distinction, at least formally, exists. It is important to point out that the latter means merely that the division is accepted as a legitimate one, and public reference can be made to it, but its actual social efficacy-i.e. whether it is in fact observed is a different matter. Neopatrimonial rule takes place within the framework of, and with the claim to, legal-rational bureaucracy or “modern” stateness. Neopatrimonialism is, then, a combination of two types of domination that are inextricably interlinked to each other. To put it differently, elements of patrimonial and legal-rational bureaucratic domination penetrate each other, the upshot being that the distinction between the private and the public sphere formally obtains, but in the social and political practice it is often breached. Thus, two role systems or logics-by and large, peacefully, to invoke a well-known political cluster-coexist, the patrimonial network of personal relations and the bureaucratic system of impersonal legal-rational relations. The core of neopatrimonialism is thus this tendency of the patrimonial system to penetrate the legal-rational one and thereby affect its functioning and output (which, however, falls short of its complete takeover)
To give just one example of the subordination of bureaucratic face of American administration to the particularistic pattern, “the members of our ruling class admit that they do not read the laws. They don’t have to. Because modern laws are primarily grants of discretion, all anybody has to know about them is whom they empower.
By making economic rules dependent on discretion, our bipartisan ruling class teaches that prosperity is to be bought with the coin of political support.
Thus in the 1990s and 2000s, as Democrats and Republicans forced banks to make loans for houses to people and at rates they would not otherwise have considered, builders and investors had every reason to make as much money as they could from the ensuing inflation of housing prices. When the bubble burst, only those connected with the ruling class at the bottom and at the top were bailed out” (Codevilla 2010). And more broadly, “Disregard for the text of laws—for the dictionary meaning of words and the intentions of those who wrote them-in favor of the decider’s discretion has permeated our ruling class from the Supreme Court to the lowest local agency. Ever since Oliver Wendell Holmes argued in 1920 (Missouri v. Holland) that presidents, Congresses, and judges could not be bound by the U.S. Constitution regarding matters that the people who wrote and ratified it could not have foreseen, it has become conventional wisdom among our ruling class that they may transcend the Constitution while pretending allegiance to it. They began by stretching such constitutional terms as “interstate commerce” and “due process,” then transmuting others” (Codevilla 2010).
it is along those lines that Clapham defines neopatrimonialism as “a form of organisation in which relationships of a broadly patrimonial type pervade a political and administrative system which is formally constructed on rational-legal lines. Officials hold positions in bureaucratic organisations with powers which are formally defined, but exercise those powers, so far as they can, as a form not of public service but of private property” (1985).
Not delving into somewhat technical conceptual distinctions Weber makes that in particular would replace the term “property” in the above formulation by a different Weberian phrase “appropriation”, let us sum up our discussion so far by indicating that what in Weberian terms should be viewed as neopatrimonialism, i.e. a conjunction of patrimonial and legal-rational bureaucratic domination can be translated into a definition more familiar to economists- the presence of rent-seeking within the structures of bureaucratic state.
Although, to be sure, Mancur Olson was not the only researcher concerned with rent seeking, he coined a useful concept of distributional coalitions as primary social groups engaged in that activity. the distribution of income and wealth, Olson contended, can become as important an issue as wealth creation and growth. Distributional coalitions encompass organized groups of special interests, their advisors, and lobbyists whose rent-seeking actions have the effect of reducing overall economic wealth. This kind of particularism diverts effort from wealth creation to distribution of income and wealth, which is, it may be added, a far more realistic picture than the image of Western, and in particular American society, as dominated by universalistic values, propagated, inter alia, by the functional school in sociology.
1.2.2. REGULATORY CAPTURE
There are grounds to believe that a similar politico-economic mechanism has been at work lately, as a key factor in the worst financial crisis in the post–World War II era, and ensuing economic recession of global proportions.
It was the bankers (bank managers) rather than shareholders who were the prime beneficiaries of regulatory capture, as manifested in a range of policies prior and in the wake of financial meltdown, such as the lowering of U.S. interest rates and nurturing the market in non-conforming mortgage loans, and securities collateralized by non-conforming mortgages, or bailouts on terms favourable to the banks concerned.
A disgruntled critic does not mince words in his description of The Fed as “largely composed of bank CEOs (example Jamie Dimon). The Fed has in essence become a “’self-regulatory’ body (a contradiction in terms if there was ever one that existed). It really has become a branch or extension of the ABA (American Bankers Association) but unfortunately most people are too dumb to see it. The OCC (Office of The Comptroller of the Currency) is by far the most captured of any of the regulatory institutions with John Dugan […] the man who enjoys taking golden showers from the TBTF bankers himself” (Woych 2013).
To take a more historical perspective, the U.S. system of regulation is predicated on the doctrine of Adversarialism–i.e. the notion that the regulator should not trust the regulated and should use the weight of the law against them (Kagan 2001). The principle is the resultant of American populist traditions on the one hand and a widespread culture of adversarial legalism on the other.
But is it only an accident that adversarialism had been at its weakest in the regulation of financial markets? Thus, even the early system created in the 1930s around the US Securities and Exchange Commission (SEC) could be regarded as a semi-privatised one in that it relied heavily on the system of “contracting out” the business of daily regulation to private bodies, such as stock exchanges, as well as to professional bodies in accounting; and, the appointment of the notorious speculator Joseph Kennedy as the first chairman of the SEC, began the epoch of close interrelationship between the Commission and the markets. It stands to reason that the adversarial tradition itself faced a strong adversity in the shape of policies deregulating financial markets, which had become increasingly popular in the u.s., and other advanced capitalist countries as well (though the effect had been most apparent in other Anglophone countries).
Whilst it is true to say that in the wake of massive financial scandals, such as Enron or WorldCom, some modest reforms of accounting and auditing regulation had been undertaken, the regulatory agencies were under-funded, and, even more important, lacked any serious political support, as the intellectual climate, contrariwise, favoured soft or light-touch regulation built aroung the core of co-operation with the interested parties, so that any attempts on their part to extend regulation over practices and institutions that subsequently, by the way, proved to be among the most active trouble-makers, were successfully rebuffed by the lobbying clout of the financial services industry, as epitomised by the history of the Bush Administration’s attempts to regulate Fannie Mae and Freddie Mac (Moran et al., Ch. 5).
in slightly different terms, Johnson and Boone (2011) point to a “common problem underlying the economic troubles of Europe, Japan, and the US: the symbiotic relationship between politicians who heed narrow interests and the growth of a financial sector”. Johnson (2009) argues that “in 2008 American policy makers made a series of decisions which I view helped create the current mess we are in now, in the aftermath of that, and certainly raised the chances of future crises. One of those decisions was the guarantee the assets of Bear Stearns to allow their creditors to lose zero, which sent a signal to markets, which was: Keep going, keep dancing. [...]
That in turn was followed by a series of relentless rescuing. AIG—every AIG creditor got to keep all their money, including obviously some large politically powerful organizations. And then finally the Toxic Asset Relief Program (TARP), hundreds of billions of dollars into the balance sheets of banks, on the grounds of keeping banks in health to avoid a crisis. […] the cronies, the people who are very highly connected to the President of the New York Fed. Mr. Geithner, people he socialized with, people with whom he was on board; and of course people he knew had spent a long time on the phone with hin early 2009”.
It is also instructive to look at the mode of behaviour pertaining to the political side of the neopatrimonial equation whose undemocratic quality should come as no surprise, given what is today known about the salience of oligarchic tendencies in the U. S. political system: “aS OVER-LEVERAGED INVESTMENT HOUSES began to fail in September 2008, the leaders of the Republican and Democratic parties, of major corporations, and opinion leaders stretching from the National Review magazine (and the Wall Street Journal) on the right to the Nation magazine on the left, agreed that spending some $700 billion to buy the investors’ “toxic assets” was the only alternative to the U.S. economy’s “systemic collapse.” In this, President George W. Bush and his would-be Republican successor John McCain agreed with the Democratic candidate, Barack Obama. Many, if not most, people around them also agreed upon the eventual commitment of some 10 trillion nonexistent dollars in ways unprecedented in America. They explained neither the difference between the assets’ nominal and real values, nor precisely why letting the market find the latter would collapse America. The public objected immediately, by margins of three or four to one” (Codevilla 2010). it is important to keep in mind that The New York Fed is one of 12 regional reserve banks that form the Federal Reserve System. It is the largest such bank in terms of assets and volume of activity, according to its website. While the New York Fed is a private bank, the Federal Reserve’s Board of Governors in Washington, D.C., delegates a public regulatory function to it.
And the fact is, “only in the US banking industry would oversight of a private bank be conducted by a totally privately owned institution with a misleading name, (Federal Reserve), of which the bank being investigated was an owner, (Goldman Sachs)” (Bernstein 2013).
What the author of the above sited claim is hinting at, is a flurry of facts that became public thanks to one whistle-blower and the inquiry into the New York Fed’s innermost affairs.
According to the latter, “the most daunting obstacle the New York Fed faced in overseeing the nation’s biggest financial institutions was its own culture. The New York Fed had become too risk-averse and deferential to the banks it supervised. Its examiners feared contradicting bosses, who too often forced their findings into an institutional consensus that watered down much of what they did. ‘supervisors paid excessive deference to banks, and as a result they were less aggressive in finding issues or in following up on them in a forceful way’” (Bernstein 2013).
Accordingly, one New York Fed employee, a supervisor, described his experience in terms of ‘regulatory capture’, the phrase, as is discussed in a separate section, commonly used to describe a situation where banks co-opt regulators.
The aformentioned whistle-blower was terminated for refusing to change her finding that Goldman Sachs did not have appropriate policies for handling conflicts of interest in its business dealings.
Suffice it to cite one episode the aformentioned whistle-blower disclosed-“she asked Gwen Libstag, the executive at Goldman who is responsible for managing conflicts, whether the bank has ‘a definition of a conflict of interest, what that is and what that means?’ “No’,” Libstag replied” (Bernstein 2013).
No wonder that “Neil Barofsky named it pretty well in his book Bailout. There is a bipartisan sell out of the American people by the five money center banks that compose the ‘Fed’ which has commandeered the treasury.
Those banks are calling the shots on who lasts, and who does not.. look at oil vs solar for example. One can see it is not intelligence that is ruling, but the weight of history” (Bernstein 2013).
It is instructive to recall at this point the case of Long-Term Capital Management that at the beginning of 1998 had equity of $4.72 billion and had borrowed over $124.5 billion with assets of around $129 billion, for a debt to equity ratio of over 25 to 1 (Lowenstein 2000:191). It had off-balance sheet derivative positions with a notional value of approximately $1.25 trillion, most of which were in interest rate derivatives.
In the same 1998, the chairman of Union Bank of Switzerland resigned as a result of a $780 million loss due to problems at LTCM (Markham 2002).
The fund sustained massive losses and was in danger of defaulting on its loans. The fund held huge positions in the market, reaching as much as 5% of the total global fixed-income market. LTCM had borrowed massive amounts of money to finance its leveraged trades. Had LTCM gone into default, it could have triggered a global financial turmoil, caused by the massive write-offs its creditors would have had to make. But this wasn’t the only reason why Alan Greenspan, head of the U.S. central bank and by the same token the most powerful financier in the world, rounded up the banks that had lent cash to the troubled fund, [...] and “forced them to stump up enough to bail it out. This was quite a lot of money - $3.65 billion in fact (Greenspan 2007:195). But Greenspan was quite clear that LTCM would get as much as it takes. And it is hard to believe this had nothing to do with the circumstance that Greenspans chums, including a former vice-chair of the US central bank were up to their necks in it.
In September 1998, the fund, which continued to sustain losses, was bailed out with the help of the Federal Reserve and its creditors and taken over. “A systematic meltdown of the market was thus prevented” (Definition of LTCM).
The same scenario, only that with other actors, has been repeated more recently several times, usually with a common justification of “too big to fall”-despite the fact that such justifications can be self-defeating in that at times the claims on the system may become more than can ultimately be paid.
Suffice it to say that A Bank of England study estimates that “intervention to support the banks in the UK, US and the euro area during the recent crisis…totals over $14 trillion or almost a quarter of global GDP. It dwarfs any previous state support of the banking system” (Piergiorgio, Haldane ).
In other words, in the wake of the Great Recession, it has become blatantly clear that a substantial share of the income received by large financial institutions is based on an implicit insurance against bankruptcy (albeit the appropriateness of the term “implicit” after all the financial sector loans and bailouts is rather problematic) granted to big financial organizations by the government. As suggested, this kind of subsidies can be economically significant, both in fiscal costs from post-crisis clean-ups (cf. Laeven and Valencia 2008), as well as reduced financing costs for firms perceived to be too big or too interconnected, or finally, too politically influential to fail (cf. Baker and McArthur 2009). In addition, the value of this implicit or explicit insurance rises with the risk of the underlying activities, and given that deregulation in this sector allowed a wider range of (often quite risky) activities, the value of the said insurance sure enough became larger as well.
But politicians apparently do not care; their conduct mimics the patterns of behaviour public choice theory describes as a “government failure”.
What can be dead risky for the system, constitutes a great opportunity for members of the political estate; it enables them to buy favour and win re-election. They reckon that the problems will become apparent no sooner until the next party or coalition takes charge. And the aforementioned authors hit the nail in the head in pointing to the ownership nature of common interests shared by the social groups involved: “for bankers and financiers of all kinds, this is easy money and great fortune – literally” (Johnson, Boone 2012)
The political decision-makers may, however, overeach themselves and,conversely, under-appreciate the mood of the public, which is not totally defenseless, after all, and if one was to believe certain commentators, they exercised their voting power in a manner that came to be called (Root 2014) “the revenge of the middle class: “The middle class sees the Wall Street bailout, sees Tim Geithner, a former Wall Street wunderkind, orchestrating it, and they get angry”, which apparently accounts forthe Republican success in the November mid-term election.
With captive regulators, it is not surprising that under their protective umbrella, the most striking feature of the post-bust period in the US and UK has been the renaissance enjoyed by those banks that survived the financial crash in the autumn of 2008, although it could only aggravate problems underlying the financial crisis. An economist comments on a glaring contrast between words and deeds of the “three men—probably the three most important on the Board of Governors when it comes to systemic risk regulation”,all of which “say that they know that the megabanks are too big and complex. […]
They all say that the goal is smaller, less complex banks” (Kwak 2013). But for all the economic rationale for such a measure (discussed by the commentator concerned), for all the rhetoric deployed by the decision-makers mentioned above, effective decisions on the matter were not forthcoming. The economist cited above was stunned to such a degree by this indecision that he began to search frantically for an answer to that conundrum. Neither simple-mindedness nor ignorance, however, can account for the conduct of persons, who are surely among those best informed about the state of the U.S. corporate governance and the economy in general.
After all, the aforementioned economist himself cannot reconcile the following two circumstances: “Instead, there’s an obvious solution: rules that limit the size and scope of financial institutions. But Bernanke has ruled out ‘arbitrary’ size caps in favour of his cute regulatory dial-tweaking” (Kwak 2013).
George Stigler’s (i.e. an economist who sort of invented the field of inquiry under consideration) point was that when one regulates industries, the industry will turn around and capture the regulation; in, e.g., utility pricing, one gets then inefficiencies of various kinds.
But in the case of banking, which was not Stigler’s focus because it reportedly was not a big issue at that time, the matter is even more critical, as the banks can turn around, “capture the regulations, get themselves permission to take on all kinds of crazy risk” (Johnson 2009. “Great private benefits“ in this case were captured mostly by the management rather than the shareholders. If one considers the “buy and hold” shareholders of the past 20 years of the big banks, the truth is that they have not done particularly well. By contrast, people who built up those big banks and ran them as their growing empires did incredibly well in cash terms.
The aforementioned author is not a sociologist, nevertheless, he makes an implicit excellent class point in indicating bank executives-as distinct from their shareholders, and legally prime claimants to profits-as the chief beneficiaries of the set of policies under investigation. Of course, this is a theoretical distinction, as in practice many managers also do own shares- through their executive stock options or directly. Moreover, it is only a portion of a manager’s pay package that can be regarded as a compensation for his or her concrete work done; there are rather precise criteria that enable to determine such a share, since in the case of top corporate executives, one is dealing with a mixed class. On the one hand, they perform a specific managerial work that provides use values, but at the same time their often astronomical, indeed higher than many capitalists in a conventional sense of the word, incomes makes them part and parcel of the bourgeoisie.
What is particularly striking about this fairly small group of people who got the population of the entire nation, if not the world, into a disaster is, firstly, their impunity;, for all their fateful malfeasance no bank CEO has been sent to jail; in fact just by way of publicity stunt the banks themselves were made to pay sometimes huge penalties, which of course-in terms of real culprits-is a nonsense, fraud is commited not by banks or any “legal persons” but only -to use still the legalese-by “physical persons”, i.e. real, concrete individuals. Closely related to the aformentioned circumstance is, secondly, the staggering arrogance of those who not without reason have come to be called “banksters”, the powerful bank insiders continued to pay themselves the massive bonuses on the “business as usual” baisis, evading any responsibility for the financial turmoil that did not come into being deus ex machina or ex nihilo, after all.
And to unravel the aformentioned pair of interelated conundrums, one needs to deploy the neopatrimonial framework outlined at the beginning of the present section and look beyond the circle of perpetrators in a strict sense of the word, or, to put it another way, to look to their accomplices-“these people, [who] are throughout the system of government. They are very much at the forefront of the Treasury” (Johnson 209 ).
What this configuration designates, in sociological terms, is a class-estate alliance that fulfills all the criteria of “the ruling class” or elite, though in this case it is not a single class, but a bloc of economic and political groups that is at stake.
Indeed, with this, we are making a decisive step beyond the conventional mainstream economic ideas about regulatory capture (Stigler 1971; Levine and Forrence 1990), which-in theoretical terms-boil down to simple utilitarian notions of group interest on the one hand and asymmetry-based arguments on the other as accounting for the reasons for which the political process of regulation can be easily led astray for the benefit of some relatively compact groups-capturing rents, whilst at the same time large groups pay thinly spread costs.
This is not to deny, of course, that the key ministries and regulatory bodies have been captured by those industries that are supposed to be the object of regulation in the public interest. On the contrary, there is ample evidence to suggest that this has been indeed the case, both in general, and in the specific case of finance. However, from a broader sociological viewpoint, purely economic in the above sense accounts are under-theorised and urgently call for placing them within a broader societal framework. To be sure, the shape of the latter hinges to a crucial degree on one’s own notion of social structuration, dictating which specific groups should be singled out for consideration. According to the present author, it is class relations that provide the pivotal axis of social differentiation. In a way, this could be deemed rather uninformative, given a host of different notions lurking behind what is only seemingly a common label of class; suffice it to recall that alongside class theories sensu stricto the term “class” is commonly employed by what are for all intents and purposes, save their verbal guise are stratification approaches. The undersigned author has developed a theoretical framework of his own, which-drawing, as it does, on some Marxian and Weberian ideas-represents nevertheless an original perspective, its hallmark being its ownership underpinning. Moreover, the latter concept has been framed in very precise terms- as fortuitous benefit, or-to put it in a way, more familiar to economists-as rent. Furthermore, the framework under consideration being a general one, it includes also a non-economic section, referring to such groups or cells of extra-economic differentiation that have been defined as social estates. Again, an innovative aspect to the latter notion consists in its grounding in the property relations, with a significant difference, however-the latter being conceived of as non-economic ownership. From the standpoint of the latter, for instance, the mode of operation of the political department of the overall neopatrimonial enterprise comes as no surprise: “OUR RULING CLASS’S AGENDA IS power for itself. While it stakes its claim through intellectual-moral pretense, it holds power by one of the oldest and most prosaic of means: patronage and promises thereof. Like left-wing parties always and everywhere, it is a “machine,” that is, based on providing tangible rewards to its members. Such parties often provide rank-and-file activists with modest livelihoods and enhance mightily the upper levels’ wealth. Because this is so, whatever else such parties might accomplish, they must feed the machine by transferring money or jobs or privileges-civic as well as economic-to the party’s clients, directly or indirectly. This, incidentally, is close to Aristotle’s view of democracy. Hence our ruling class’ standard approach to any and all matters, its solution to any and all problems, is to increase the power of the government-meaning of those who run it, meaning themselves, to profit those who pay with political support for privileged jobs, contracts, etc. Hence more power for the ruling class has been our ruling class’s solution not just for economic downturns and social ills but also for hurricanes and tornadoes, global cooling and global warming. A priori, one might wonder whether enriching and empowering individuals of a certain kind can make Americans kinder and gentler, much less control the weather. But there can be no doubt that such power and money makes Americans ever more dependent on those who wield it” (Codevilla 2010).
The merit of the approach outlined above lies in its consistent theoretical language all across the board, which however, does not blur the distinction between the economy and the non-economic societal structures.
Regarding the topic under consideration, the class at issue is that of financial capitalists, as the analytic framework mentioned above distinguishes two levels of class analysis: alongside classes pure and simple there are larger megaclasses: e.g. megacapitalist class. Such an approach, so to speak, enables the researcher both “to have” the notion of class as a macrostructure and “eat” the notion in its not so much micro as mezo-range. It is the contention of the author of the present book that this identification of certain fundamental social groupings makes it possible analytically to embed the group actions under consideration in their broader context, which corresponds to their real-world embeddedness, actions of economic agents are structured by their social environment, as well as background, in an infinite multitude of ways-both class and estate are in this sense potent explanatory concepts.
Thus, from the vantage point of the aformentioned estate-class nexus, whose strategic importance in the real world makes it an equally strategic frame of reference for the entire analysis, the various policies blamed for the crisis—“lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership reveal their common denominator-they all benefited the financial sector, which is just the aformentioned capitalist class in action, after all.
By contrast, policy changes that might have forestalled the crisis but would have limited the financial sector’s profits were ignored or swept aside.
The regulatory environment bolstered by the Fed, Alan Greenspan, and the influence of investment bankers over the Clinton and George W. Bush administrations was not just open to innovation and experiment, but actively encouraged those. The emergence of over-the-counter derivatives markets, the creation and structuring of CDOs (collateralized debt obligations) and CDS (credit default swaps) proceeded at an exponential rate of growth with PRECIOUS little oversight or control, allowing the FORMATION of highly complex WEBS of interdependence between financial actors and instruments that became central to the 2007–8 crash. These innovations and contracts MADE on this market were legally enforceable in the United States, AS ENDORSED BY the Commodity Futures Modernization Act of 2000” (CF. Davis 2009; Ho 2009; Tett 2007; Morgan 2010).
Both in the UK and the US, then, these developments nurtured an array of financial institutions, including those formally regulated and those which became known as the “shadow banking System”, that is, hedge funds, off-balance sheet vehicles, and private equity.
To Moran’s mind, what merits special attention, is “[t]he lack of any substantive bureaucratic or legal regulation of the markets”. (1991, 2003). Self-regulation remained the mantra, accompanied by the idea of a “light regulatory touch”. Increasingly in the period from the 1980s, the City became seen as central to the economic growth of the UK as manufacturing continued to decline.
Governments became active in providing what the City wanted in terms of interest rates, fiscal and monetary policy, tax systems, and regulation as well as a supportive socio-economic framework in the form of privatizations, the legislation on personal pensions and the overall financialization of everyday life (cf. Erturk, Froud et al. 2008; Langley 2008).
For the past three decades or so, finance has boomed, becoming ever more powerful.
The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton administration, including such crucial changes like repeal of theGlass-Steagall Act
of 1933, i.e. the most salient piece of the New Deal legislation concerning regulation of financial institutions, which by the same token made it possible to revert to the era of universal banking, combining under one roof investment (merchant in British terms) and commercial banking.
The result of these regulatory or rather deregulatory measures was a large rise in bank concentration, following a long period of economic history in which concentration ratios roughly hold steady. There is precious little evidence that the large rise in bank concentration was reflective of economies of scale or scope that were passed on to consumers in the form of lower prices of intermediation (cf. Haldane 2010a).
It is important to view those particular factors not separately but in their interactions. Thus, although for the layman this may at first glance seem improbable, given gigantic volumes of the markets concerned (the foreign exchange market alone is worth $5.3 trillion a day), banks were able to collude because ten to twelve of those institutions controlled given markets. At the time of writing by no means all the relevant facts are known, to be sure. HoweverBetter late than never, one is tempted to say, reflecting on the suspicious-but for the reader of this book not surprising at all- delay wwith which the regulators all over the world started finally to look at the manner important financial benchmarks have been calculated. These are used to set the value of pension funds, investments and international contracts worth billions of dollars. Financial regulators in the UK, across Europe and in the US are investigating whether the benchmarks have been rigged to increase bank profits -and to short change their customers. What evidence has managed to surface so far is stunning; what can be said for sure is that no lessons have been learned not even from the crisis, but from what happened in its aftermath-banks were already paying big fines over the LIBOR interest rate scandal when the focus has began too shift to the way prices in the foreign exchange, gold and interest rate swap markets have been set. And the evidence of bank conspiracy to manipulate the markets seems increasingly overwhelming, as manifested in the fine levied already against 6 top banks for rigging the foreign currency market to the tune of over L5 bn, and the criminal investigations are still pending. As the U.S. authorities are yet to announce their fines,it is expected that all such penalties will bring the banking industry’s (ten top banks) total bill for misbehaviour to $302,069,000,000.
To be sure, captains of finance are not the only culprits to that calamity. The unitiated reader surely will get astonished by the fact that all those benchmark markets have not been regulated at all (sic!). Such a setting creates not so much an opportunity to be taken advantage of, as-given what agents are at stake-an economic and social compulsion to do so. And the sums involved, just as the implications and ramifications of given market-rigging activities by what had been aptly called by the paticipants to the cartel themselves “the mafia”, “the bandits’ club”and “cartel” are likely to dwarf all previous scandals, and in its history capitalism has been no stranger to the latter, as is well known.
Paul Volcker’s monetary policy in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more lucrative. These and related developments vastly increased the profit opportunities in finance, and Wall Street made the most of them. From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. But in the next decade it reached 41 percent. This translated into an equally spectacular rise in personal earnings; from 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent (sic!) in 2007 (Johnson 2009). An investigation of the top 0.1 percens found that incomes of financial professionals increased particularly dramatically during the stock market boom between 1993 and 2001, drop precipitously in 2002 and 2003, and then recover along with the stock market and the economy to new heights in 2004 and 2005” (Bakija, Heim 2009).
Moreover, the quality of that profit-making deserves closer scrutiny; quite a few financial firms are engaged in the far-ranging process of rent extraction essentially by camouflaging financial risk, rather than managing it. Haldane (2010b) has unearthed many of the devices deployed by financial firms to hide the risk assumed in their pursuit of high profits from their sources of finance. Bebchuck, Cohen, and Spamann (2009) describe a stark example of the huge gap between value actually produced by financial sector institutions and value claimed by their management in their examination of the compensation provided to executives at Bear Stearns and Lehman Brothers—or, as is well known, two of the most spectacular failures in the U.S. financial industry during the crisis. What they show is that even after including the losses suffered by top management from the loss of value of their holdings at the time of each banks’ respective crash, managers at these firms were able to obtain incredible payoffs over the entire 2000 –2008 period: $650 million for Bear Stearns’ top executive team and $400 million for Lehman’s team. Biais, Rochet, and Wooley (2010) point out that in finance it is common for managers to benefit from a combination of asymmetric information and the inability of outside investors to punish moral hazard (because of limited liability), which allows them to capture rents by failing to assess the true underlying risks of new financial innovations when they manage what is technically principals’ capital.
The overall pay of financial sector employees relative to others in the economy has risen substantially-according to The two following economists’ (Bivens and Mishel 2013:66) calculations on the basis of National Income and Product Accounts Data that show the unadjusted ratio of financial sector pay (annual compensation per full-time employee) relative to the pay of workers in the rest of the economy since 1948. Between 1952 and 1982, this ratio never exceeded 1.1. By 2007, after decades of steady growth, it had reached 1.83. The rise in financial sector pay persists in the data even when standard wage-equation controls for experience and education are introduced. Philippon and Reshef (2009) also chart a rapid rise in the pay of financial sector employees, and they construct a time-series to chart the tight correlation between above-average pay in finance and the historical ebb and flow of financial regulation and deregulation.
They point out that a significant pay premium to working in finance persists even in regressions with multiple controls, and conclude that roughly 30 –50 percent of pay premium in finance seems due to rents.
In short, what the above implies is that in one of the most important sectors driving top 1 percent incomes in recent years, there was an extraordinary divergence between what top managers took home and even what shareholders (surely a privileged group compared to the wider US economy) gained. This sort of divergence provides robust evidence that the extraordinary rise of top 1 percent incomes, to use that symbol of class divide, cannot be viewed as a result of well-functioning markets allocating pay according to contribution or skill, but instead it resulted from “shifting institutional arrangements leading to shifting of rents to those at the very top” (Bivens and Mishel 2013:66).
Another study found that since the mid-1990s, financial sector workers have been capturing “rents that account for between 30 and 50 percent of the difference between financial sector wages and wages in other jobs” (Philippon, Ariel 2009:9).
Such a massive property redistribution, and The resulting huge wealth concentrated by the financial sector gave bankers enormous political clout—not seen in the U.S. since the era of J.P. Morgan (the man). Recall that in that period, the banking panic of 1907 could be stopped only by coordination among private-sector bankers: no government agency was able effectively to manage the emergency. “But that first age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent” (Johnson 2009).
These are strong words; but there is evidence to support such a claim, let alone appraisals of other authors. By way of example, two well-regarded academics, Martin Gilens of Princeton University and Benjamin I. Page of Northwestern University, argued in a recent paper that economic elites have gained so much power that “America’s claims to being a democratic society are seriously threatened” (Newman 2014).
Simon Johnson of MIT (ex-IMF Chief Economist) in his article under consideration compared the recent US crisis with a range of previous crises in emerging economies, finding, perhaps to many readers’ surprise, that they have a lot in common. The basic mechanism in each case was the same: certain businessmen took too much risk and at the same time became unduly powerful in economic terms and influential politically by virtue of which they got elevated to the rank of oligarcheess. What is probably pivotal about the (anti-)heroes of this narrative is that they could be certain that if risks go bad they will be bailed out by the government. And indeedfor all the diversity of its specific embodiments the core logic was surprisingly similar-whether it were the oil sector companies in Russia, Chaebols in Korea, etc., including, finally, the financial sector in the U.S.
It is also this affinity that accounts for the common reason for IMF’s concern and frustration that used to come to surface as a criticism of the politics of countries in crisis as the most serious obstacle on the road to recovery. In a nutshell, the reason for the predicament of all these countries could be brought down to the fateful circumstance that their powerful elites overreached in good times and took this many risks that the latter became unmanageable. Typically, emerging-market governments and their private-sector partners form a tight-knit cooperative enterprise, the principal force binding its partners being reciprocity: “you scratch my back and I’ll scratch yours”; viewed from a slightly different angle, though, this co-operation cemented oligarchy, running the country not unlike a profit-seeking company in which they are the controlling shareholders. As Johnson points out, when a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. This is not to deny that in their role of masters of their mini-universe the participants to the network in question make some investments that may be advantageous for the economy and society at large. As evidence shows, though, they virtually invariably engage also in a series of far riskier ventures, which decisions rest on -largely justified- belief that their political connections will allow them to push onto the government and thus indirectly onto the general population any substantial problems that may arise (which is couched in economics in terms of “moral hazard”). In a typical sequence of events, the IMF tells the government in question to fix the oligarchy, but without over-generalising, this iss often to no avail. The upshot is that those which manage oligarchy faster recover faster, otherwise the situation of the country is hardly enviable. Obviously, the U.S. government is not in need of IMF help ; the crux of the matter is that financial capitalists are in a position to ensure that all the plans put forward suit them.
The preceding raises a few questions, notably- how the class of financial capitalists (or financial sector) did gain prominence and become so powerful? To put it differently, what are the pillars of the estate-class alliance which, to all intents and purposes, plays the role traditionally assigned to the ruling class? It appears that three such-interrelated, to be sure, but nevertheless discrete- mechanisms could be distinguished, with some of these having their own subtypes.
1.2.3. HOBBY LOBBY
Two of the largest mortgage lenders in the United States had spent millions of dollars on political donations, campaign contributions, and lobbying activities from 2002 through 2006 (Simpson, 2007).
Ameriquest Mortgage and Countrywide Financial fought anti-predatory-lending legislation in Georgia and New Jersey and fended off similar laws in other states, as well as at the federal level. In a word, the financial sector fought, and defeated, measures that might have allowed for a timely regulatory response to some of the reckless lending practices and consequent rise in delinquencies and foreclosures that in the majority opinion played a pivotal role in igniting the crisis. The Center for Public Integrity, a nonprofit Washington, D.C.–based investigative reporting organization—in 2009 linked subprime originators, most of which are now bankrupt, to lobbying against tighter regulation of the mortgage market (Center for Public Integrity 2009). In fact, banks continued to lobby intensively against tighter regulation and financial regulatory reform, even as the industry struggled financially and suffered from negative publicity regarding its role in the economic crisis (Labaton, 2009).
As these facts suggest, regulatory failure (the flip side of the aformentioned regulatory capture), in which the political influence of the financial industry played a part, may have contributed to the 2007 meltdown in the U.S. mortgage market, which by fall 2008 had escalated from a localized U.S. crisis to the worst period of global financial instability since the Great Depression of the 1930s.
To any unitiated observer, it cannot but be perplexing that for all the positive noises about how urgent and inevitable post-crisis reform of finance is, the political estates in all three key jurisdictions, i.e. in the United States, the EU, and the United Kingdom, have failed to deliver the goods. What stands behind this seeming paradox -given the enormity of the crisis, the size of both its social cost and public anger over those who crashed the economy and still enjoy the freedom to be a law unto themselves-is the neopatrimonial system, explaining why and how have financial elites had been able to operate so as to ensure their continuing significant role in shaping the regulatory framework around finance, and in doing so, minimize the extent of reform Indeed, the class of financial capitalists remained remarkably resilient and at the same time politically effective in defending the status quo or frustrating reform. In this connection it should be first of all noted that the class concerned committed massive resources to political lobbying whose effectiveness has been increased by the remaining conduits of exerting their influence-to be discussed below. In their blocking endeavours, Wall Street insiders exploited what they presented as the specialist and impenetrable character of financial instruments and markets, having some industry insiders co-opted into the process of sorting out the mess, while the rest could reach a similar outcome by lobbying.
And more broadly, this old tactics was successfully employed to water down reform measures.
What could be regarded as another paradox is that the political forms and conditions of lobbying were very different in the three aformentioned principal jurisdictions which “were nevertheless equally susceptible to the influence of finance. This was more than enough for finance to win, because “if finance succeeded in blocking significant reform in investment banking in either London or New York, it would nullify reform efforts elsewhere” (Moran et al. 2011:165).
In terms of the conventional measures of lobbying such as expenditure or exchange of personnel through revolving door appointments,the finance sector, alongside some others, such as health care, pharmaceuticals, and defence contracting, has long been in the lead of major political lobbyists in the United States In other jurisdictions, characterised-as they do-by different institutional structures, lobbying activity is less transparent which does not mean that less relevant, as manifested in the fact that the financial class concerned have by no means been excluded from the process of reconfiguring financial regulation.
With reference to the EU, the phrase “democratic deficit”, which has become kind of ubiqutous buzzword, in conjunction with the compact central bureaucracy enable us to realize how strongly conducive conditions for lobbying have been formed in Brussels. And accordingly, there is much evidence that “successive Commissions have shown themselves highly receptive to direct dealings with (big) individual enterprises (Coen 1998:75–9). At the same time the chairman of the regional lobbying association lectured-too curious in his opinion-journalists on their professional virtues, instructing them that it is “very dangerous” to focus on the money spent by lobbyists and that “linking money with influence sends the wrong message” (Alter-EU 2010:25).
For a change, in the third and last case, one has to do with, as it is noted by moran (2011:169), with “a typically fudged British compromise of half-hearted disclosure of financial contributions to political parties with the wide-ranging preservation of influence wielded by City insiders”.
True, the aformentioned opacity would not, other things being equal, allow to demonstrate for the Uk what is an open secret in the U.S.: “Washington is overrun with fat-cat lobbyists whose lavish campaign contributions and insider connections manipulate the White House and Congress to serve big corporations and the rich”, the upshot being commonly couched as the state of affairs in which “we have the best government money can buy” (Samuelson 2013), which draws on Greg Palast’s phrase (2002), referring to democracy instead.
It does not mean, however, that for Britain or other European states evidence regarding their neopatrimonial qualities is lacking.
As regards the UK, its public opinion was shocked by what had been revealed about some MPs, who were making money by acting not only as representatives of the people, but also as efficient lobbyists within Parliament itself, thereby confusing their mandate with personal financial gain. It also happened in France, but in this case the reaction -stirred up by the apparent hypocrisy of the politicians involved-was stronger and lasted longer as the political parties and leaders continued their malpractices while adopting virtuous attitudes and introducing legislation, reportedly intended to fix the problem. Adding insult to injury, political leaders (who were otherwise the principal beneficiaries of the corrupt practice related to their political campaigns) escaped blame and punishment. Leaks to the press have shown year after year that all leaders were either directly or indirectly involved in these malpractice. Everybody more or less knew the story, but it was another matter when the shocking evidence CAME TO LIGHT, as happened in October 2000 with the famous “cassette Méry”-a videotape recorded by one of the main providers of “soft money” to Chirac’s RPR that described all the sensitive details of his financial contributions to the party-whilst it was under the control, direction, and, last but not least, for the benefit of Jacques Chirac. Whereas the President’s popularity hit rock bottom prior to his 2002 electoral campaign, he avoided judicial prosecution, as the constitutional and legal rules gave him immunity, which constitutes, recall, one of the non-economic property relations pertaining to what within our socio-economic structuralism is called social estates.
He escaped political responsibility, too, as public opinion proved to be not strong enough to force him to resign (Crouch 2003:207).
By contrast, in the United States evidence regarding how the interests of finance are intertwined with political and regulatory institutions is widely available and commensurately used by the interested parties.
Thus, e.g., “the NGO Public Citizen reported in 2010 that, since early 2009, nearly 1,000 lobbyists have worked on at least one of the nine bills that together ‘rewrite the rules governing derivatives’. Using House of Representatives disclosures, they estimate that lobbyists representing opponents of reform outnumber pro-reform lobbyists by more than eleven to one” (Public Citizen 2010).
To be sure, it could be argued that the phenomenon reported above is neither new nor peculiar to the finance industry. As far as continuity is concerned, Hannah Holleman (2010) documents the extent of lobbying that surrounded the earlier deregulatory process, including legislation such as the Financial Services Modernisation Act of 1999 or (Gramm-Leach-Biley) the Commodity Futures Modernisation Act of 2000, which initiated the growth of derivatives trading in the 2000s and greatly facilitated the ensuing growth of the investment banks. She also discusses in detail the longstanding practice of the movement of personnel between government and banks, noting that the six biggest banks have each hired more than forty ‘revolving door lobbyists’ since the 2008 bailout of Bear Stearns.
While the revolving door by itself is certainly not an invention of the recent crisis, Johnson cogently shows that the latter case reveals some novel features insofar as banks have been using more covert channels of lobbying, with banks funding both established organizations, like the US Chambers of Commerce and the Business Roundtable, as well as shadow organizations that can promote the interests of the derivatives industry even more easily than banks that have benefitted from bailouts and other support. In a word, with the perspective of reform looming on the horizon, banks have deftly deployed a number of effective and sophisticated tactics freshly devised by the specialised corporate lobbying industry.
As a matter of fact, this narrative is corrorobated by ample empirical evidence; according to an investigation applying rigorous methodological standards, during 2000–06, a bill less favourable to the financial industry was three times less likely to become law than one promoting deregulation. Significantly, two key pieces of legislation that contributed in a big way to the spread of lax lending in mortgage markets—the American Homeownership and Economic Opportunity Act of 2000 and the American Dream Downpayment Act of 2003 were signed into law during exactly this period.
The researchers did not stop at that point, but went on to the question whether the vote of individual legislators on a particular bill is linked to the lobbying expenditures of firms affected by the bill and to the network connections those lawmakers share with the lobbyists and the financial industry. The empirical analysis of the data resulted in three main conclusions.
First, there was a clear association between the money affected financial firms spent on lobbying and the way legislators voted on the key bills considered before the crisis. The more intense the lobbying, the more likely legislators were to vote for deregulation. Furthermore, lobbying was more likely to be effective in that sense in the case of conservative legislators.
Second, social connections between politicians and lobbyists who worked on a specific bill also influenced voting patterns. Namely, if a lobbyist had worked for a legislator in the past, the legislator was very likely to vote in favor of lax regulation. (Igan and Mishra 2011A, 2011B).
1.2.4. MONEY TALKS
It will be seen that (which is in accord with what has been suggested at the outset of this part of our discussion, after all) that the present section to a degree overlaps with the previous one. While seeing parallel features of the regimes prevalent in the developing countries on the one hand and the so-called advanced democracies on the other, Simon Johnson, in the aforementioned article,does not push the comparison exceedingly far; he indicates that in a primitive political system, power is transmitted through violence, or at least the threat of violence: military coup d’états, private militias, political assassinations, etc. are the daily occurrence. In somewhat more civilised conditions, more frequent in emerging markets, it is the monetary medium that becomes the means by which to transmit power: bribes, kickbacks, offshore bank accounts, and so on.
The United States, just as the EU countries or the UK represents, to be sure, the most highly advanced form of money-commodity economy known in human history thus far. Lessons to be drawn from this seem at first glance self-evident. But, sure enough one should not shift the pendulum too far in the other direction and gloss over the factor treated in most classical theories of the state as its substance, and to which the bourgeois state resorts every so often when status quo is -genuinely or seemingly-threatened; albeit the use of money will, obviously, be preferred in normal conditions, including politics.
As hinted above, the logic of corporate lobbying also affects another important aspect of the finance industry’s activity: contributions to election campaigns. The US political system stands out in that regard insofar as its politicians seem to exhibit sponge-like qualities, being ready to soak up virtually unending flood of campaign money, while being able to make credible this insatiable demand by the ability of Congressmen to shape regulation in desired ways, which creates in turn a correspondingly huge supply of political patronage on the side of affected interests. Therefore, donations to political election campaigns have created a traditional and crucial bridge between politicians and the finance sector. To cite but one estimate, according to Ralph Nader, over ten years to 2009, $1.7 billion was given as campaign contributions by the finance sector. However, the Centre for Responsive Politics calculates that political contributions from the FIRE (finance, insurance, and real estate) sector dwarf all others (including health and defence), with a total of $2.3 billion given to individual candidates and party committees between 1989 and 2009 (Renick Mayer et al. 2009; quoted in: Moran et al. 2011:171).
What speaks volumes about the dependence of politicians upon their class allies is the fact that the leadership of both parties actually ranks particular Congress committees according to their fundraising potential. There are lists of the A, B, and C committees with fundraising targets for each one. Those numbers aren’t public, albeit many lawmakers admit these lists exist.
It has been, however, possible, to build such a list on one’s own account, based on publicly-disclosed fundraising numbers, starting from the early ‘90s. The outcome of the calculations showed the best committee is Ways and Means. Just getting on that committee earns you an estimated quarter million dollars more in donations than the average member of Congress. It is not surprising at all, given that The Ways and Means Committee covers the US tax code: Who gets tax breaks, who pays more. It stands to reason that every corporation in America is concerned about the tax code.
But what is most revealing for our present purposes is the secondplace of the Financial Services Committee, which covers banks and Wall Street. It brings in $182,000 more per member than the average (Bloomberg 2012).
Whilst on the base of the facts cited above some educated guesses regarding the strength and direction of impact wielded by the finance-capitalist side of the neopatrimonial equation are possible, there is far more robust evidence available confirming that the capitalists make their expenditures, as well as other political investments in a prudent fashion-bringing in tangible benefits.
As partly suggested earlier, the Three researchers mentioned above studied six bills before the crisis and found that aggregate campaign contributions from the financial industry played a significant role in the vote results for these bills (Mian, Sufi, and Trebbi 2010).
Those institutions noted positive abnormal returns around the announcement of the bailout programme. The extent of rent-seeking was further highlighted thanks to their examination of how bailout funds were distributed, as they found that being a lobbying lender was associated with a higher probability of being a recipient of these funds (Igan and Mishra 2011A; 2011B).
Viewed from the other end of the neopatrimonial nexus, the relevance of campaign funds is evident-“candidates who are the bigger spenders may not always win but they usually do, as has been the case over the last fifteen years in more than 80 percent of House and Senate contests. Even in “open races,” with no incumbent running, better-funded candidates won 75 percent of the time” (Parenti 2010), which, to be frank, is not surprising, given the central role money plays in launching a campaign and even defining who qualifies as a “serious” candidate According to a Public Citizen report on the 2010 midterm elections, in 58 of the 74 contests in which power changed hands, the winning candidates rode enormous waves of cash, outspending their opponents with funds from “shadowy front groups, giant corporations and the super rich.”
Unfortunately, there are grounds to expect not only subsequent capitalist crises, as they form part and parcel of the capitalist mode of production, but also all indications are, the neopatrimonial qualities of the present-day U.S. system will, if anything, get accentuated (colouring the course and effects of the former thereby ), as the 2010 Supreme Court decision in the Citizens United case paved the way for unlimited political spending; and it gave birth to entities called “Super PACs.”. Super PACs can raise unlimited funds from individual and corporate donors and spend it on politics. Moreover, the laws make it possible for Super PAC donors -either temporarily or, sometimes, permanently-to keep their identities from becoming public (Calhoun 2012).
Clearly, this kind of measures cannot but entrench further SUCH SOCIETAL PATTERNS AS THOSE DEPICTED BELOW: “Washington is awash with lobbyists who do secure tax breaks, congressional preferences and regulatory advantages for wealthy clients” (Samuelson 2013). From that perspective, what from the viewpoint of the man and woman in the street is definitely “not working, [...] it is actually working just fine for most of the politicians and lobbyists in D.C. Special interest legislation, chock-a-block with tax breaks and regulatory favors, still finds its way through an otherwise gridlocked Congress; and campaign contributions from the appreciative find their way back to the campaign coffers of incumbents. It’s a tidy little back scratching system” (Samuelson 2013).
And the effects of the extraordinary influence and connections enjoyed by a panoply of lobbies and pressure groups, alongside the general, equally incredible role of money in the U.S. politics are exactly such as might be expected from the standpoint of their class orientation.
A study “examined Senate responsiveness for the 107th through 111th Congresses. The results show consistent responsiveness toward upper income constituents. Moreover, Republicans are more responsive than Democrats to middle-income constituents in the 109th Congress, and a case study of the 107th Senate reveals that responsiveness toward the wealthy increases once Democrats take control of the chamber” (Hayes 2013). More specificallly, senators overall represent their wealthiest constituents, while those on the other end of the economic ladder are neglected.
“The fact that lower income groups seem to be ignored by elected officials, although not a new finding, remains a troubling observation in American politics,” Thomas J. Hayes of Trinity University wrote in his study.
Senators overall represent their wealthiest constituents, while on the other hand, Hayes demonstrates a chronic neglect of non-rich Americans by the upper chamber of Congress.
With income and wealth inequality spiking to historic highs after 2002, Hayes wondered if past research finding that members of congress were most responsive to the middle class and the wealthy would hold up under the increased societal strain of extreme inequality and the increased political influence that wealthy interests tend to obtain. Instead of a legislature that ignores the poor but is moderately attentive to middle-class concerns, however, Hayes found “evidence of responsiveness to only the wealthy, a distinct problem for any democracy.”
The journal article provides quantitative, statistical evidence for the common anecdotal facts that the American political system primarily serves the richest and that its “oligarchic tendencies” become more pronounced as the wealthiest pull further and further away from the rest of the country. And it echoes past research that similarly shows that politicians respond much more to the wealthy and tend to ignore the needs of the poor-which is true as far as it goes, but would for sure benefit from the use of class language.
Sequestration has provided an extreme example of this phenomenon of not only stratum, but also class bias.
Head Start funding, Meals on Wheels programs, public housing funds, and public defenders’ offices around the country have been forced to stomach sequestration cuts. But Congress was quick to offer a one-off fix for Federal Aviation Administration funding once lines at airports began to get long and inconvenienced business class travelers.
Meanwhile, the rich continue to amass wealth. The growth of the financial sector has played a substantial role in the feedback loop between economic inequality and an inequitable political system that Hayes describes. Decades of deregulation pushed Wall Street to the forefront of the U.S. economy, and recent research indicates the financialization of the economy was a primary driver of modern inequality.
At the same time, working folks have seen their earning power flatten out completely, making no gains whatsoever since 2000.
The government’s response to the financial crisis returned Wall Street to record profits in just a few short years while failing to bring unemployment back to its pre-crisis levels along the same time frame” (Pyke 2013a).
Again, Pyke’s comments hit the nail right on the head, and it is encouraging to be able to see other researchers’ observations that neatly correspond to our own insights.
The study used data from the 2004 National Annenberg Election Survey to compare constituents’ political opinion to the voting behavior of their Senators in the 107th through 111th Congresses. With more than 90,000 respondents, the NAES is the largest public opinion survey conducted during presidential elections.
In all of the five Congresses examined, the voting records of Senators were consistently aligned with the opinions of their wealthiest constituents. The opinions of lower-class constituents, however, never appeared to influence the Senators’ voting behavior.
The neglect of lower income groups was a bipartisan affair. Democrats were not any more responsive to the poor than Republicans.
“My analysis, which examines Senator behavior on a large number of votes, shows evidence of responsiveness to only the wealthy, a distinct problem for any democracy,” Hayes wrote in the study. “In some ways, this suggests oligarchic tendencies in the American system, a finding echoed in other research.”
Nothing more nothing less.
Hayes found that middle-class opinion was only represented in two of the Congresses examined. In the 110th and 111th Congresses, when Democrats controlled both the Senate and the House, the voting records of Senators reflected the opinions of middle-class constituents as well as upper-class constituents.
Contrary to popular opinion, it was Democrats — not Republicans — who were more responsive to upper-class opinion in the 111th Congress.
Noteworthy for its appositeness is also the conclusion that “although Americans might not easily identify along class lines, this does not mean that politicians representing these citizens do not respond to them in this manner. If equal responsiveness is a fundamental practice in a democratic society, my findings question the degree to which this occurs,” Hayes wrote.
If the finding that Democrats’ class sympathies differ little from the other principal party may seems surprising, the class nature of American politics is the issue we come back to later, and in light of those observations, the above conclusion can be seen as simply the corollary of those political processes being played out WITHIN America’s ARCHCAPITALIST SOCIETY GROUNDED IN PRIVATE PROPERTY RELATIONS.
The aformentioned commentator traces back what is IN our terms the ascendancy of neopatrimonial capitalism “to the Democratic Congress of 1979-80, which “began rolling over for corporate lobbyists in order to defuse the conservative tidal wave it could sense was coming” (Samuelson2013).
The importance of the said phenomenon can be seen also from some of the criticisms levelled at the chief executive of the nation. “Obama has made two fundamental errors. First, when he became president in the midst of an economic crisis, he surrounded himself with members of the establishment that caused the problem. The result was that no meaningful reform was enacted and the heads of the financial institutions responsible for the problem were not held accountable. In fact, most of them are still there, making millions in the same old irresponsible ways. (Lauenstein 2014).
In fact, there is even more to this than that. According to the Washington Post, President Barack Obama has “largely abandoned ”talking about wealth inequality in America to appease corporate Democrats worried about losing support from the wealthy contributor group.
Thus, according to this line of reasoning, “instead of taking on the plutocracy that owns and operates the country– aka hope and change – Obama has talked about ‘raising the middle class’ with policies such as a minimum wage increase and pay inequality between men and women” (Wright 2014). This example clearly shows the pernicious character of the concept under investigation that can mean so many different things to different people, making it thus possible for the above named political commentator to dismiss the purported direction of new interest of the president: “the middle class was almost entirely destroyed by the financial crisis [...] in other words, there is an argument to be made the middle class no longer exists anyway” (Wright 2014).
Be that as it may, there can be no denying that during the first half of a given year, Obama shifted from income inequality to the more politically palatable theme of lifting the middle class, focusing on issues such as the minimum wage and the gender pay gap that are thought to resonate with a broader group of voters.
Regardless of whether the cause of the aformentioned shift has been indicated correctly or not, the final conclusion of the commentator cited above is noteworthy: “Even if Obama really desired to change things [...], the game is rigged. As long as money dominates American politics, moneyed interests will be dominant” (Wright 2014).
1.2.5. REVOLVING DOOR
However, it is plausible that Much the same, or even more lasting effects than by means of tons of dollars financing politicians or with the aid of legions of lobbyists getting things done on their behalf, can be achieved by the class of financial capitalists through securing a far smaller number of strategic positions, thereby ensuring that key decisions will be taken by people whose class background guarantees that those measures will promote the dominant class interests. Spectacular examples of an intensive exchange of personnel between the two structures involved in the operation of neopatrimonial system abound. To be sure, what has just been said does in no way mean that, just as in the case of the remaining mechanisms, the present one is separated from the latter by anything like a Chinese Wall. Henry Paulson, CEO of Goldman Sachs (by far the most powerful investment bank worldwide)during the long boom, became Treasury secretary under George W. Bush. Meanwhile, John Snow, Paulson’s predecessor, left to become chairman of Cerberus Capital Management, a large private-equity firm that also counts Dan Quayle among its executives.
Robert Rubin, Bill Clinton’s former Treasury secretary, spent 26 years at Goldman before becoming chairman of Citi group — which, as is well known, received a $300 billion taxpayer bailout from the above-mentioned Paulson. In turn, John Thain, the asshole chief of Merrill Lynch gained notoriety after he bought an $87,000 area rug for his office as his company was imploding; a former Goldman banker, Thain, too, enjoyed a multi-billion-dollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain’s sorry company. In a similar vein, Robert Steel, the former Goldmanite head of Wachovia, scored himself and his fellow executives $225 million in golden-parachute payments as his bank was self-destructing.
Or consider Joshua Bolten, Bush’s chief of staff during the bailout, and Mark Patterson, the current Treasury chief of staff, who was a Goldman lobbyist in 2009, and Ed Liddy, yet another former Goldman director whom Paulson put in charge of bailed-out insurance giant AIG, which happened to fork over $13 billion to Goldman after Liddy came on board.
That, considering the sheer lenghth of its tentacles, there is little exageration in describing Goldman Sachs as “a great vampire squid wrapped around the face of humanity” (TAIBBI 2010) is exemplified also by The heads of the Canadian and Italian national banks, who are Goldman alumni, as is the head of the World Bank, the head of the New York Stock Exchange, the last two heads of the Federal Reserve Bank of New York — which, incidentally, is now in charge of overseeing Goldman (cf. Juhasz 2010; Moran et al. 2011).
The firm concerned epitomises the most salient features of neopatrimonialism- it has become something of a tradition for Goldman Sachs employees to go into public service after they leave the firm. The flow of Goldman alumni—including Jon Corzine, now the governor of New Jersey, along with Rubin and Paulson—not only placed people with Wall Street’s worldview in the halls of power; it also helped create an image of Goldman (inside the Beltway, at least) as an institution that was itself almost a form of public service, which brings us to the topic of the next section. To end the present one, let us stress that such personal connections (whose list could be extended) were multiplied many times over at the lower levels of the past three presidential administrations, strengthening the ties between Washington and Wall Street, i.e. two fundamental parts of the socio-economic formation of neopatrimonial capitalism.
Space constraints preclude what would have to be an in-depth comparative analysis of other salient features of various capitalist systems existing in the present-day world. Underlining neopatrimonial qualities of today’s capitalism, we by no means downplay all the remaining characteristic of given socio-economic systems or obliterate the differences between them. From that persspective, the model of stakeholder capitalism, prevalent in many countries of continental Europe is in many respects different from the system pertaining to The Anglophone countries.
Such considerations explain why, for all the similarities reported above, in terms of the set of neopatrimonial mechanisms analysed, Europe constitutes a distinct, (but not entirely different from an American one) case.
Prima facie, nowhere in Europe the financial industry gained a comparably prominent position to that enjoyed by it in the USA. This is accounted for by several salient features of stakeholder capitalism, such as the indluence of social-democratic parties, condemning-as they do-predatory finance, which judgment is shared by their political rivals. The bipartisan consensus regarding the role of finance may be attributed to the different than in the U.S. shape of class structure (underpinned by the EU’s peculiar economic structures). Thus, to use Galbraith’s term, in Europe there exist a number of strong countervailing forces to financial interests, such as the class of industrial bourgeoisie and the organised working class.
Given the above-mentioned circumstances, the reader could be forgiven for being surprised by the purportedly “illogical” reality in the sense of its failing to conform to what appears to follow from the factors underlined above.
In brief, all indications are that the European regulatory system should be more resistant to the lobbying of finance. Meanwhile, there is no shorthage of evidence that finance is structurally well placed to frustrate the European reform process: notably, the way much policymaking in Brussels is done in Commission-sponsored expert groups dominated by econocrats and industry representatives.
Some commentators, like the Brussels Sunshine blog, argue that “Members of the European Parliament (MEPs) are too close to the finance sector and that there is a need for ‘a change in political culture and vision, away from the pre-crisis thinking that what is good for mega-banks is good for society’” (2010; quoted in Moran et al. 2011:171), which, incidentally, differs little from the hallmark of the U.S. motto.
Furthermore, in 2010, the French Green MEP, Pascal Canfin, started a campaign to counter financial lobbying that seeks to influence EU policymaking (McCann 2010; quoted in: Moren et al. 2011:271), arguing that, as distinct from such fields as environment or health, both the very number and influence of NGOs and other pressure groups that are concerned with the area of finance are limited and thereby are no match to large international banks and other financial organisations. Significantly, this diagnosis is corroborated in a “very detailed report by the Alter-EU NGO.
In the case of the European Union, the legislation that paved the way for the crisis was heavily influenced by the financial lobby, not least thanks to their key position as advisers to the Commission in a large number of so-called ‘expert groups’.
External expert advice is regularly sought by the Commission to help it fulfil its legislative and policy-making role. Often this comes from advisory bodies called expert groups
Expert groups have played a key role advising on financial regulation at the EU level since the adoption of the Financial Services Action Plan in 1999. Meanwhile, an analysis of the composition of the groups which gave or still give advice to the Commission on financial issues shows they are overwhelmingly dominated by representatives from the financial industry. This means that large private banks, insurance giants, and other financial firms -through their control over a range of expert groups-are in a position to shape both the drafting of EU strategies and laws and their implementation.
Of 21 groups providing ongoing policy advice on the financial sector, nine are dominated by industry, eight by Member States, one has equal NGO/industry membership, and one is mainly made of academics. Two cannot be assessed because their full membership is not disclosed (Alter-EU 2010:88). Overall, within these groups, industry experts outnumber representatives from academia, consumer groups and trade unions by a ratio of four to one. The 229 industry experts also outnumber the Commission’s civil servants (approximately 150), who are officially responsible for financial policy.
According to the Commission, expert groups are always supposed to include a wide diversity of opinion, from independent experts to smaller investors and consumers. Yet the representatives of these groups participating in those bodies are few and far between.
When the Commission asked for expert advice on the crucial pieces of legislation which regulated the kind of bad investments that unleashed the crisis, they asked experts almost exclusively from the financial sector itself, i.e. individuals whose vested interest precluded their unbiased, objective judgment.
It is also worth noting that specific facts concerning finance sector lobbying are consistent with Coen’s wider picture (1998) of the explosion of business lobbying in Brussels from the early 1990s.
Overall-given the systemic distinctiveness of European capitalism-it is remarkable that the FINANCIAL class managed to copy in Europe certain -vital for itself-practices known from the U.S.
Kind of symbbbolic of that replication is the worst EU lobbying award, which in 2008 was given for the Worst Conflict of Interest, with candidates including MEPs and a number of officials in the Commission who seemed to have spent their time at work promoting often lucrative outside interests. The winner was the Finnish MEP Piia-Noora Kauppi, who having secured a job with the Federation of Finnish Financial Services, used her role as an MEP to encourage ‘light touch’ regulation for the banking sector (Alter-EU 2010:138).
Although a EU member, the UK is structurally far closer to America than to the continent. And accordingly, the role of the City is comparable to that of Wall Street and, even more importantly, the government is wholly supportive of the financial sector, while paying only lip service to transparency and accountability. Leading politicians of all main parties had celebrated the City of London as an emblem of British economic success that should be left to get on with its own affairs. The finance sector became the national champion for successive Conservative and Labour governments largely by default, filling the void, as other sectors like manufacturing were either manifestly unsuccessful or, like pharmaceuticals, unfit for purpose owing to its bad reputation. UK national interests have long been perceived to be directly linked to the finance sector and, particularly after the 1980s deregulation, successive governments of the right and left have acknowledged the significance (economic and political) of the sector through words and deeds, as mentioned above.
This policy was continued even in the post-crash climate of anger toward the class under consideration. Remarkably, though, as a professor at City University London and Director of the Global Political Economy at the latter points out: new restrictions on bonus pay in banking have been overcome in the industry, which-for all the talk about informational asymmetries-the authorities must have known about. And they implement more such protective measures; the regulators are calling for the return of securitisation – which includes the practice of bundling up loans and converting them into liquid securities – as an instrument reportedly needed to kick-start lending and investment in the real economy (2014), as if this very instrument was not a pivotal catalyst of the crisis.
Connectedly, lobbying in the United Kingdom is a much less tightly regulated activity, while financial contributions to political parties remain less transparent than in the U.S. Nevertheless, Successive Conservative and Labour governments have not been able to sweep the issue of party funding completely under the rug, as illustrated, inter alia, by the so-called “cash for honours” scandal, in which attractive favours wer offered in return for donations and loans from those with business fortunes often made in the City, sometimes without paying any taxes in the United Kingdom (Moran et al. 2011:176). Even more fruitful-from the standpoint of its beneficiaries- was the easy access of City elites to the Treasury under Gordon Brown, which enabled them to acquire significant tax concessions. Overall, the UK government’s susceptibility to City influence only increased, and noticeably so, under New Labour.
1.2.6. DISTRIBUTIONAL COALITIONS
Having outlined the fundamental elements of the architecture pertaining to what has been dubbed neopatrimonial capitalism, we are also in a position to relate briefly to another important notion mentioned above. To be sure, the latter, as defined by its creator (Olson 1982: 44), in many ways fits in with the analytic framework expounded here. After all, “distributional coalitions comprise organized groups of special interests, their advisors, and lobbyists whose rent-seeking efforts to cause a redistribution of wealth may impose substantial losses on society.
According to Olson, when powerful sectional groups are threatened with losses from reforms, they choose blocking tactics. In an overall societal balance, “the gains (or avoidance of loss) to that discrete group are far outweighed by social losses as sectionalism diverts effort from wealth creation to distribution of income and wealth” (Moran et al.:175).
Symptomatically, all examples Olson provides are of clearly pro-free market character: manufacturers resisting free trade and seeking protection, or organized labour which in turn resists technological changes and innovations (which-as market-induced are by default welcome).
However, this evidently biased view is predicated on the premise about a conservative sectional coalition standing in the way of progressive market forces, which does not apply to our case, i.e. the pro-market, bourgeoisie-based financial operators of the deregulatory and post-crisis era. In The thrust of Olsonian argument is that producers and workers, such as farmers or unionists would typically lobby to restrain free-market forces by promoting state interventionism in the form of protectionist policies, which are bound to turn into a two-edged sword, ultimately undermining their interests (Lane 1995; Jones 1999).
Meanwhile, the class of financial operators are normally pro-market and anti-intervention (unless it is a measure promoting their special interests, to be sure), especially against such interventions and regulatory changes that would constrain financial innovation, free movement of capital, and the freedom to take risk to make a killing, before dumping losses onto the state’s balance sheet ; the truth of the matter is that this kind of considerations are totally absent in Olson’s frame of reference.
The second apparent difference between our treatment and that of Olson’s is that the latter presumed that the distributional coalition was an organizational form that flourishes in and thanks to periods of economic prosperity and stability; it is quite another matter that it itself contributes to the former in an perverse way-by blocking change. Again, since Olson left out the class under consideration, he was not able to take its real market behaviour into account to reconcile it somehow with the aformentioned general account; meanwhile, financial operators normally profit from market volatility, to wit, rapid changes.
But the most important reason for which Olson’s account flies in the face of reality is that US cotton farmers or the auto workers union, as well as the scale of their activity have little in common with today’s “masters of the universe” in whose game the stakes are much higher, and correspondingly, far wider is the collateral social and economic damage caused by finance, which, as we now know all too well, can bring about a major recession “rather than slow down beneficial growth” (Moran et al. 2011:176), as in Olson’s model.
All this does not imply that Olson’s notion of distributional coalition should be dismissed, as it highlights “the asymmetrical distribution of concentrated benefits and widely distributed losses because the benefits of the growth in the finance sector were largely concentrated within the sector, while the costs of the bailout of the banking and other sectors have been spread very broadly across the population, including the substantial secondary effects that result from dealing with public expenditure deficits” (Moran et al. 2011:176).
1.2.7. IDEOLOGICAL HEGEMONY
A good introduction to the present section, or its motto could be provided by the well-known statement of Marx and Engels from their “German Ideology” (part. I, ch. 1): “The ideas of the ruling class are in every epoch the ruling ideas, [...] The ruling ideas are nothing more than the ideal expression of the dominant material relationships, the dominant material relationships grasped as ideas; hence of the relationships which make the one class the ruling one, therefore, the ideas of its dominance”.
And indeed,Although notably the American political system is hardly imaginable without lobbying and campaign contributions, perhaps the decisive underpinning of the power enjoyed by the class of U.S. financial capitalists, or-in its institutional guise-the American financial sector is an ideological force—a definite belief system. Everybody knows the slogan: “what is good for General Motors is good for the country”, which imperceptivly, however, has become first and formost a reflection of the historical role of the car industry; to reflect the present-day realities, the aformentioned slogan would have to be reworded as “what is good for Wall Street is good for the country”.
The fact of the matter is that while the banking and securities industry has come to play the role of an indispensable prop to the political process, at the peak of its influence it did not have to buy favours the way, for example, the tobacco companies might have to. Instead, it benefited from the fact that Washington decision-makers already believed that big financial institutions and free-flowing capital markets were crucial to America’s position in the world (Johnson 2009).
This capitalistic ideology extends itself onto culture. Works like Barbarians at the Gate, Wall Street, and Bonfire of the Vanity, intended as cautionary tale, sserved instead only to increase Wall Street’s allure.
Michael Lewis noted in 2008 in Portfolio that when he wrote “Liar’s Poker”, an insider’s account of the financial industry, in 1989, he had hoped the book might provoke outrage at Wall Street’s hubris and excess. Instead, he found himself knee-deep in letters from students at Ohio State fishing for stock tips. The truth of the matter is, even Wall Street’s criminals, like Michael Milken and Ivan Boesky, became larger than life celebrities. In a society that worships the art of making money, it was only natural to infer that the interests of the financial sector were the same as the interests of the country—and that the winners in the financial sector knew better what was good for America than did the career civil servants in Washington. Faith in free financial markets grew into conventional wisdom—trumpeted on the editorial pages of The Wall Street Journal and on the floor of Congress alike.
How entrenched has become the belief in the entitlements and privileges accrued to the Wall street, is shown by the following story told by a former IMF official, who recalls “a meeting in early 2008—attended by top policy makers from a handful of rich countries—at which the chair casually proclaimed, to the room’s general approval, that the best preparation for becoming a central-bank governor was to work first as an investment banker” (Johnson 2009).
From this confluence of campaign finance, personal connections, and ideology there (undergirded in the last analysis by economic ownership) flowed, in just the critical decade, a wide stream of deregulatory policies that is, in hindsight, astonishing.
To be sure, the class in question and the government policies that aided it did not alone cause the financial crisis that ERUPTED in 2008. Many other factors contributed, including excessive borrowing by households and lax lending standards out on the fringes of the financial world-which both, however, at least indirectly stem from the activity of the industry, the government or both. Crucially, though, major commercial and investment banks—and the hedge funds that ran alongside them—were the big beneficiaries of the twin housing and equity-market bubbles of THE decade, AS their profits WERE BOOSTED BY an ever-increasing volume of transactions founded on a relatively small base of actual physical assets. The rest is history; which, to be sure, it would be useful to relate here, owing above all to its theoretical significance -consisting in the demonstration that benefits reaped by financial capitalists consisted predomonantly of rents, which means their income directly enhanced their ownership, and thus class position.
1.2.8. CONCLUDING REMARKS
The modern credit system, and financial sector generally, are the essential factor in the reproduction and development of the capitalist economy. The crux of the matter is, however, notably in recent decades the financial system has increasingly transformed itself from an efficient mechanism of capital allocation into an equally effective, but without any of the beneficial effects pertaining to the Smithian “invisible hand”, rent-seeking machinery that draws support from politicians, as it suits their private interests and encourages deleterious public policies. Repeated lamentations about “credit crunch”, the banks’ failure to fulfill its function of the prime credit provider to the economy refer to one side of what has become a skewed financial system whose economic and societal rationale have both been seriously undermined. If anything, the most frequent accounts of the role played by banks in society have had little in common with textbook idealisations, focusing on the range of negative externalities as the pivotal product of bank activities. In theory, it is the mission of the state to come up on behalf on the public interest and intervene when appropriate. That such key institutions as banks require regulation and oversight is at first blush self-evident. But that argument fails to take account of not a menntal by any means, but sort of ontological circularity. it would be inhumane, as well as imprudent, indeed to expect from a neopatrimonial actor, whether collective or individual, a type of behaviour that is inconsistent with the very underlying conditions of the neopatrimonial universe of which it is an integral part.
In the foregoing discussion a panoply of connections between the two constituent parts of the overall neopatrimonial structure have been documented, space constraints not enabling us to analyse a range of pertinent issues, such as the so-called real economy, and thus social classes rooted in the non-financial economic relations, or alternative treatments of the crisis, such as the “financialisation” theory.
1.3. BOOM AND GLOOM
In July, 2014 Barrack Obama was interviewed by “the Marketplace”. It is worthwhile to cite some of his thoughts. Thus, Obama, as if preempting what queries might the incisive journalist have, at the very outset of the interview stated bluntly that “the underlying trend for middle-class families is that “they don’t feel like no matter how hard they work, they’re able to get ahead in the same way that their parents were able to get ahead” (Rysdall 2014b). This has many aspects to it. While the traces of recovery in the economy were plain for all to see, the official rate of unemployment dropped, as a range of new jobs had been created, it still was not the process that would benefit the majority. This is reflected in the exchange below:
“we sit here in an economy where corporate profits are up, but the money’s not being spent, where the jobs that are being created are low-wage, low-skill jobs. How’s that supposed to work? How do you reconcile the disconnect there?” (Ryssdal 2014b).
It must be admitted that the President’s answer left something to be desired, as it focused on the anti-functional Congress.
For a change, the next point shifts the focus on the beneficiaries of, by the way, not only post-crisis period:
“I want to talk for a second about Wall Street and its role in the economy. The Dow today sits plus or minus 17,000, right? Record highs. Banks’ profits are up; the big banks are bigger than they were during the financial crisis; their appetite for risk is growing, as we’ve seen; and all of this is happening after Dodd-Frank - the financial reform bill that we were told was going to prevent all these things from happening. It was going to rein in the banking system. So how do you look at the American people and say, “You know what? ‘Too big to fail’ has been taken care of. What happened in 2008 is not going to happen to you again” (Ryssdal2014b).
Note that Obama’s response kind of bridges the content of section 1.2., the above pronouncement of the interviewer, and the content of the aformentioned pronouncement: “the problem is that for 60 years, we’ve seen the financial sector grow massively. Now, it’s a great strength of our economies that we’ve got the deepest, strongest capital markets in the world, but what has also happened is that as the financial sector has grown, more and more of the revenue generated on Wall Street is based on arbitrage - trading bets - as opposed to investing in companies that actually make something and hire people. And so, what I’ve said to my economic team, is that we have to continue to see how can we rebalance the economy sensibly, so that we have a banking system that is doing what it is supposed to be doing to grow the real economy, but not a situation in which we continue to see a lot of these banks take big risks because the profit incentive and the bonus incentive is there for them. That is an unfinished piece of business” (Ryssdal2014b).
Curiously enough, and in harmony of our earlier remarks, the phenomenon of economic inequalities that once had been receiving definitely more of presidential attention, in this context has been superseded by the above-mentioned narrative on the middle class, which-given the currency of the latter-could be read as an attempt at entering the mainstream of public opinion; though, to be sure, in substantive terms there is no opposition between the two topics or stresses; if there is one, the only concern could regard the all-inclusive, fuzzy quality of the terrm in question, which in this sense stands in the way of revealing true class divisions. Sadly, it has to be admitted that most accounts of the socio-economic divergence confine themselves to what at best is a stratification framework.
According to the Census Bureau report, (CBPP 2013)The shares of the nation’s income going to each of the bottom 60 percent of households in 2012 remained at 2011’s record low levels in data that go back to 1967. The share going to the top 20 percent was statistically unchanged at last year’s record highs.
By contrast, the bottom 20 percent of households received just 3.2 percent of all household income in 2012, and the middle fifth received only 14.4 percent. Meanwhile, the top 20 percent of households got 51 percent, and the top 5 percent of households garnered 22.3 percent.
To add insult to injury, a recent study suggests that the income inequality trends reported above after Census may underestimate how much inequality is growing, because of gaps in how Census collects and reports data, especially its omission of substantial income going to top earners. Using preliminary tax data, which are more accurate for the highest-income households, economist Emmanuel Saez finds that the share of the nation’s total income going to the top 10 percent of households rose in 2012 to its highest level on record, with data available back to 1917.
Saez finds that the average incomes of the top 1 percent rose sharply in 2012 — by 19.6 percent — while the incomes of the other 99 percent grew by just 1 percent, which fitsin neatly-it may be noted-with the socio-economic map deployed by the Occupy movement., It should be made clear that the aformentioned magnitued is in fact not just symbolic, as it appears to possess some substantive significance. “Because the top 1 percent have much larger shares of capital income (56.2 percent in 2007) as compared to what in standard economic parlance is referred to as labor compensation (8.8 percent in 2007), the overall shift from labor- to capital-based incomes mechanically pushes up the top 1 percent income share. This shift from less - to more-concentrated sources of income accounts for over a quarter of the rise in the top 1 percent share, with rising concentration within income categories accounting for the rest” (Bivens and Mishel 2013:62).
Based on pre-tax and pre-transfer market income (excluding nontaxable fringe benefits such as health insurance but including realized capital gains) per family reported on tax returns, the share of total annual income received by the top 1 percent has more than doubled from 9 percent in 1976 to 20 percent in 2011 (Piketty and Saez, 2003, and the World Top Incomes Database)., There have been rises for other top shares, to be sure, but these have been much smaller: during the same period, the share of the group from 95th to 99th percentile rose only by 3 percentage points. The rise in the share of the top 1 percent has had a noticeable effect on overall income inequality in the United States” (Atkinson, Piketty, and Saez 2011, Section 2).
In absolute terms, this means that, on average, the income of the top 1 percent grew by more than $200,000 — about four times as much as the total income of the median household in 2012,
More specificallly, “median household income peaked in 1999 at $56,080, adjusted for inflation. It fell to $51,017 by 2012. The percentage of American households with income within 50 percent of the median — one way of measuring the middle class — fell from 50 percent in 1970 to 42 percent in 2010.
Given the size of disparities outlined above, it is obviously important to determine who the top 1 percent in income are.
To be sure, huge sums involved mean that even a person not being a capitalist by occupation, becomes the latter by virtue of investing her money in equities, etc., which-as will be clarified in the 2d volume-represent an indirect ownership of the means of economic activity.
Anyway, the aformentioned top of the pyramid comprises “bankers, lawyers, hedge fund managers, founders of successful companies, entertainers, senior managers and others. An interesting trend to note: Corporate executives, doctors and farmers made up smaller shares of the top 1 percent in 2005 than in 1979. By contrast, the proportion of the wealthiest who work in the financial and real estate industries has doubled. Specifically, corporate CEOs (31% of the top earning one percent), bankers and stock traders (13.9%), but also doctors (1.85%), real estate professionals (3.2%) and entertainers in arts, media and sports (1.6%), professors and scientists (1.8%), lawyers (1.22%), farmers and ranchers (0.5%), and pilots (0.2%).. Together, executives, managers, and supervisors, and financial professionals account for 59.2 percent of the distribution of income (including capital gains) in 2004 (Bakija et al. 2005, data from 2005, found on table 2). Some sources, however, exclude from calculations occupational categories “which represent a very small share of top income earners (including farmers and ranchers, pilots, government workers, teachers, social workers, blue collar workers, and miscellaneous service professions)” (Bakija, Heim 2009).
The top 1 percent earned at least $394,000 in 2012. “ The mean income in the cross-section file is in excess of $1.5 million, though when capital gains are excluded, this figure drops to $834,490” (Bakija, Heim 2009). Through most of the post-World War II era, the top 1 percent earned about 10 percent of all income. By 2007, that figure had jumped to 23.5 percent, the most since 1928. As of 2012, it was 22.5 per cent” (RUGABER, Boak 2014).
From the perspective of our rent-based ownership theory the geographical pattern that the wealthiests Americans’ places of residence exhibit is by any means surprising (as being related to the so-called positive externalities )-they “mainly cluster around the largest cities. Of the 515 U.S. billionaires, 96 live around New York City, according to the intelligence firm Wealth-X. Los Angeles is home to 22, Chicago 21, San Francisco 20, Houston 14. Millionaires are more widely dispersed. Maryland has the highest concentration. Of all its households, 7.7 percent have $1 million or more in financial assets. New Jersey, Connecticut, Hawaii and Alaska have the next-highest concentrations, according to a report from Phoenix Marketing International” (RUGABER, Boak 2014).
It is significant that even researchers working within more conventional perspectives increasingly find it necessary to invoke precisely the concept of rent as an explanation of extraoridnary shifts in what from our perspectives are economic property relations: “In a study of tax returns from 1979 to 2005, Bakija, Cole, and Heim (2010) show the trend in the shares of total income of US households accruing to the top 1.0 and top 0.1 percent of households. They establish that the increases in income at the top were disproportionately driven by households headed by someone who was either an “executive” (including managers and supervisors and hereafter referred to as “executives”) in nonfinancial sectors or someone who is in the financial sector as an executive or other worker. Households headed by a nonfinance executive were associated with 44 percent of the growth of the top 0.1 percent’s income share and 36 percent in the growth among Pay of Corporate Executives and Financial Professionals as Evidence of Rents” (Bivens and Mishel 2013:61).
Another study estimates that executives, managers, supervisors, and financial professionals account for about 60 percent of the top 0.1 percent of income earners in recent years, and can account for 70 percent of the increase in the share of national income going to the top 0.1 percent of the income distribution between 1979 and 2005. The literature on the causes of rising income inequality over the past few decades has identified many factors that may contribute to rising top income shares. First, it is important to note that Piketty and Saez (2003, updated 2008), among others, have shown that wage and salary income, as well as self-employment income and closely-held business income that largely reflect labor compensation, now account for the vast majority of the incomes of top income earners, and have also been growing substantially as a share of that income in recent decades. To be sure, this finding is not inconsistent with the contention put forward elsewhere in the book regarding the underlying division between capital and labour power as accounting for the bulk of income inequality in capitalism in general, and its American embodiment in particular-for the above cited claim reflects largely shifts in the share of different forms of income in the overall pie engendered by specific modifications in their treatment by the taxman. This concerns, inter alia, stock options, which from a socio-economic standpoint are obviously an equity-based form of compensation, expressing in the last analysis the share of capital rather than labour power in the total income pool.
During the mid-2000s, stock repurchases escalated dramatically, quadrupling for the SP 500 companies from a per company average of almost $300 million in 2003 to $1.2 billion in 2007—before being constrained by the financial meltdown of 2008 (Lazonick, 2008). I have argued that the only purpose of stock repurchases is to manipulate a company’s stock price, and that executive stock options, the main source of the ongoing explosion of US executive pay since the 1970s, serve as the prime inducement to this mode of corporate resource allocation (Lazonick, 2008). I have also documented, on an industry-by-industry basis, the ways in which these manipulative attempts to “maximize shareholder value” have undermined investments in innovative enterprise.
In the 2000s, it can fairly be said that the Chandlerian corporation has ceased to exist.
In historical retrospect, Alfred Chandler uncovered the dynamics of a historically specific business model that drove the development of the world’s richest economy (Lazonick, Teece 2012:117).
One explanation for rising income inequality emphasizes that it coincided with advancing globalization, as indicated for example by increasing shares of imports and exports in GDP. This may increase the demand for the labor of high-skill workers in the U.S., because they can now sell (or rent out, as our theory would have it) their skills to a wider market, and highly-skilled workers are scarcer in the rest of the world than in the U.S. Globalization may similarly depress wages for lower-skilled workers, because they now have to compete with abundant low-skill workers from the rest of the world (cf. Stolper and Samuelson, 1941; Krugman 2008). For example, even among the top 0.01 percent of income recipients in 2005, salary income and business income (that is, self-employment income, partnership income, and S-corporation income) accounted for 80 percent of income excluding capital gains, and 64 percent of income including capital gains. Those figures were 61 percent and 46 percent, respectively, in 1979. (Source: authors’ calculations based on data posted by Emanuel Saez at <http://elsa.berkeley.edu/~saez/TabFig2006.xls>).
In addition, “About 25 percent of individuals comprising the top 1.0 per cent of the income pyramid “derived a majority of their combined salary and business income from a closely held business” (Bakija, Heim 2009). This may be significant, as is explained by the authors of a comprehensive study of income distribution: “In the tax data, 18.4 percent of the top 0.1 percent of the income distribution had financial professions (including financial executives, managers, and supervisors), 6.2 percent were lawyers, and 3.1 percent were in the arts, media or sports, while in their data sources, Kaplan and Rauh were able to identify 10.3 percent of the top 0.1 percent of the income distribution coming from financial professions, 2.4percent employed in law firms, and 0.9 percent having an occupation in arts, media or sports.
Kaplan and Rauh were also able to identify 3.8 percent of the top 0.1 percent of income as top non-financial executives in publicly traded firms. Based on this, they argued that executives represent too small of a share of top income earners for corporate governance issues and stock options to be a good explanation for rising top income shares (which apparently does not refer to the mega-managerial class, in our parlance). In addition, whilst their tax data do not contain information about the ownership structure of the firm for which the taxpayer works, but over 40.8 percent of the top 0.1 percent report their occupation as being an executive, manager, or supervisor of a firm in a non-financial industry, and 28.6 percent report being an executive, which are impressive numbers, no doubt about it. Undoubtedly, many of these executives work for closely-held businesses rather than large publicly traded firms. To investigate this issue, they attempt an approximate division of executives, managers, and supervisors into “salaried” versus “closely held business” categories. An executive, manager or supervisor is assigned to the “closley held business” category if the sum of primary earner self-employment income, and partnership and S-corporation income for the return as a whole, exceeds wage and salary income on the return. Otherwise, the executive is assigned to the “salaried” category. Among managers and supervisors in the “salaried” category, wages and salaries represent 94 percent of combined labor and business income reported on the tax return; the corresponding figure for those in the “closely held business” category is only 12 percent, so this method of division appears to work well, although it still does not go to the heart of what capital and capital ownership is. The authors expect that those in the “salaried” category are likely to be working for publicly-traded corporations, or at least large closely-held corporations. Salaried non-financial executives account for 15 percent of the top 0.1 percent, and salaried managers represent another 4.7 percent, for a total of about 20 percent. The vast difference between this and Kaplan and Rauh’s 3.8 percent figure might be explained partly by non-publicly-traded firms, to the extent that executives and managers of these firms receive most of their income from wages and salaries. Some of the difference must also be due to the fact that Kaplan and Rauh only look at the top 5 executives at each firm, and some may be due to other income of executives and managers that is not disclosed in public documents but which is included on their tax returns. This suggests that corporate governance issues and stock options may be more important for explaining top income shares than Kaplan and Rauh suggested. Moreover, while principal-agent problems may be smaller in closely-held firms, they are not always absent, and executives and managers of closely held firms are sometimes compensated with stock options, so that financial market asset prices may be important for explaining their pay. Later in the paper, they demonstrate that the incomes of executives, managers, and supervisors in the top 0.1 per cent of the income distribution are highly sensitive to stock prices (this has been demonstrated before for top executives at publicly traded firms by Eissa and Giertz, 2009).
And more broadly, it is demonstrable that “income is indeed highly responsive to stock market prices for executives, managers, and supervisors in the top 0.1 percent. A 1 percent increase in real stock prices is estimated to increase pay of top earning executives, managers and supervisors by a statistically significant 0.3 percent” (Bakija, Heim).
Together, executives, managers, and supervisors, and financial professionals account for 59.2 percent of the distribution of income (including capital gains) in 2004.
Therefore, it seems that “corporate governance issues and stock price movements may indeed play a large role in explaining the movement of top income shares, at least for the top 0.1 percent” (Bakija, Heim 2009:19-20). To reiterate, the study referred to above demonstrates that “the incomes of executives, managers, supervisors, and financial professionals can account for 60 percent of the increase in the share of national income going to the top percentile of the income distribution between 1979 and 2005. The study also demonstrates significant heterogeneity in income growth across and within occupations among people in the top percentile of the income distribution, suggesting that factors that changed in the same way over time for all high-income people are probably not the main cause of increasing inequality at the top, which is another way of saying that a class framework would be a more useful explanatory tool in this case that commonly used strata categories. The incomes of executives, managers, financial professionals, and technology professionals who are in the top 0.1 percent of the income distribution are found to be very sensitive to stock market fluctuations. Most of the evidence gathered by the authors points towards an important role for “financial market asset prices and possibly corporate governance and entrepreneurship in explaining the dramatic rise in top income shares” (Bakija, Heim 2009:19-21). Regarding income trends, where the latter is conceived of as excluding capital gains, the data compiled by the authors of the study concerned show that “for many occupations, the share of the top percentile of taxpayers in each occupation remained relatively stable between 1979 and 2005, but for executives, financial professions, and real estate these shares changed noticeably. The fraction of the top 1 percent that are non-financial executives, managers, and supervisors gradually declined, starting at 36 percent in 1979 and dropping to 31 percent by the end of the sample period: “The fraction of the top 1 percent that are non-financial executives, managers, and supervisors gradually declined, starting at 36 percent in 1979 and dropping to 31 percent by the end of the sample period. Salaried executives declined sharply from 21 percent of the top percentile in 1979 to 11.3 percent by 2005, while executives of closely held businesses rose from 1.8 percent to 4.8 percent of the top percentile. Both changes were sharpest between 1979 and 1993, which is consistent with the observation that TRA86 created an incentive to switch firms from C-corporation to S-corporation status. The share of the top 1 percent in financial professions has almost doubled from 7.7 percent in 1979 to 13.9 percent in 2005. The share of the top 1 percent in real estate related professions was stable between 1979 and 1997, and then grew from 1.8 percent in 1997 to 3.2 percent by 2005, no doubt reflecting the effect of increased housing prices on the incomes of these taxpayers. Among taxpayers in the top 0.1 percent of the distribution of income, the share in executive, managerial and supervisory occupations drops from 48.1 percent in 1979 to 42.5 percent in 2005, which is similar to the decline for the top one percent as a whole. But the share in financial professions increases even more dramatically, from 11.0 percent to 18.0 percent, and the share in real estate increases from 1.8 percent in 1997 to 3.7 percent in 2005. By 2005, executives, managers, supervisors, and financial professionals accounted for 60.5 percent of the top 0.1 percent of the distribution of income excluding capital gains. Other occupations particularly well-represented in the top 0.1 percent as of 2005 include: lawyers (7.3 percent); medical professionals (5.9 percent); entrepreneurs not already counted elsewhere (3.0 percent); arts, media, and sports (3.0 percent); business operations, which includes professions such as management consultant and accountant (2.9 percent); and computer, mathematical, engineering and other technical professions (2.9 percent)” (Bakija, Heim 2009). It is also extremely important to bear in mind exactly what and whose shares are at issue-while the share of people in the top 1 percent employed as executives, managers, and supervisors declined, the share of national income going to members of this group in fact increased substantially, from 3.7 percent to 6.4 percent between 1979 and 2005. The share of income received by financial professionals in the top 1 percent also increased dramatically, from 0.8 percent to 2.8 percent. These two classes alone explain the bulk of the increase in the income share of the top 1 percent, accounting for 60 percent of the increase between 1979 and 2005, and 61 percent of the increase between 1993 and 2005 (cf. Bakija, Heim 2009).
The share of income received by the top 0.1 percent of income recipients increased from 2.8 percent in 1979 to 7.3 percent in 2005. Again, the shares received by executives, managers, supervisors, and financial professionals increased markedly, with the increase in the share of income among these occupations accounting for 70 percent of the increase in the share of national income going to the top 0.1 percent of the income distribution between 1979 and 2005.
A second hypothesis regarding the driving force behind the aforementioned trends is skill-biased technical change (Katz and Murphy, 1992; Bound and Johnson, 2002; Card and DiNardo, 2002; Garicano and Rossi-Hansberg 2006; Garicano and Hubbard 2007). Technology has arguably changed over time in ways that complement the skills of highly-skilled workers, and substitute for the skills of low-skilled workers. A third hypothesis, closely related to the previous two, is the “superstar” theory suggested by Sherwin Rosen (1981). In this theory, compensation for the very best performers in each field rises over time relative to compensation for others, because both globalization and technology are enabling the best to sell their skills to a wider and wider market over time, which displaces demand for those who are less-than-the best. This is easiest to see for entertainers, but-according to those who subscribe to that view-could easily apply to other professions as well.
A fourth hypothesis is that the increasing inequality may be explained to some extent by executive compensation practices (Bebchuk and Walker, 2002; Bebchuk and Grinstein, 2005; Eissa and Giertz, 2009; Friedman and Saks, 2008; Gabaix and Landier, 2008; Gordon and Dew-Becker, 2008; Kaplan and Rauh 2009; Murphy 2002; Piketty and Saez 2006). A large share of executive pay comes in the form of stock options, and almost all stock options are treated as wage and salary compensation on tax returns when they are exercised (Goolsbee 2000). Because of this, the values of stock options exercised by employees are generally counted in the measures of income used in the income inequality literature. It is clear that executive compensation has increased greatly over time, but there is a raging debate over why this has happened, and whether there are enough executives for this to explain much of the rise in top income shares.
Federal income tax law classifies compensation in the form of stock options into two categories. “Non-qualified” stock options are treated as wage and salary income when exercised. “Incentive” stock options are taxed as capital gains at the personal level when exercised, but are denied a deduction for labor compensation from the corporate income tax. Under current law, the non-qualified options are generally much preferable from a tax standpoint compared to incentive stock options and Goolsbee (2000) indicates that almost all stock options used in executive compensation are of the non-qualified type. However, before 1986 incentive stock options were less tax disadvantaged.
The taxable income elasticity and inequality literatures usually focus on income excluding capital gains, because we usually only have data on gains realizations (rather than accruals) reported on tax returns, because capital gains realizations fluctuate wildly over time, because capital gains receive different tax treatment than other income, and because capital gains have obvious alternative explanations (e.g., stock market booms and busts).
Bebchuk and Walker (2002) and Bebchuk and Grinstein (2005), among others, have argued that high and rising executive pay reflect the fact that the pay of executives is set by their peers on the board of directors, that free rider problems prevent shareholders from doing sufficient monitoring of executive compensation practices, and that the problems have been getting worse over time. Some others (for example, Murphy 2002) argue that executive pay reflects economically efficient compensation necessary to align executive incentives with those of shareholders. Gabaix and Landier (2008) argue that the increasing scale of firms has been critical to explaining rising executive pay; however, Friedman and Saks (2008) show that real executive pay grew very little between World War II and the mid-1970s despite large increases in firm size during that period, casting doubt on the Gabaix and Landier hypothesis.
A fifth hypothesis is that technological change and compensation practices in financial professions play a critical role. Philippon and Reshef (2009) show that the skill-intensity of financial sector jobs has grown since the early 1980s. Moreover, they estimate that since the mid-1990s, financial sector employees have been capturing rents that account for between 30 and 50 percent of the difference between financial sector wages and wages in other jobs. Of course, compensation of executives, financial professionals, and perhaps top earners in other fields (such as high technology) can be expected to be heavily influenced by financial market asset prices, particularly stock prices, which went up dramatically at the same time as the increase in inequality. So part of the rising inequality may simply reflect that people in these professions have compensation that is strongly tied to the stock market, and got lucky when the stock market went way up. This might be counted as a separate hypothesis or a subset of the previous two.
Another hypothesis related to the past few is that social norms and institutions in the United States may be changing over time in a way that reduces opposition to high pay (see, e.g., Piketty and Saez 2006). For example, perhaps the “outrage constraint” once played and important role in preventing executives and their peers on the board from colluding to grant excessively high pay, but social norms against high pay have weakened over time so this constraint no longer binds. Alternatively, perhaps the social norms of old were harming efficiency by preventing corporate boards from granting stock options that were sufficiently large to align the incentives of the executive with those of the shareholders.
Yet another hypothesis brings us back to taxes. Prior to TRA86, top personal income tax rates exceeded the top corporate income rate by a wide margin, so there was a strong incentive to organize one’s business as a C-corporation, because it enabled one to defer paying high personal tax rates on one’s income as long as it was retained within the corporation, at the cost of paying the lower corporate rate right away. After TRA86, the top personal rate was reduced below the top corporate rate, which created an incentive to change one’s business to a pass-through-entity such as an S-corporation, the income of which is taxed only once at the personal level. This has important implications for the income inequality and taxable income elasticity literatures, because it suggests that part of the difference in top incomes before and after 1986 does not reflect the creation of new income, but rather income that was previously not reported in the data (which is derived from personal income tax returns) and now is. Slemrod (1996) and Gordon and Slemrod (2000) demonstrate that this factor must explain a substantial portion of the increase in top incomes around 1986. Yet, even if one restricts attention to the period from 1988 forward, the income share of the top 0.1% still increased from 5 percent of national income to 8 percent.
“The role of financial market asset prices in influencing top income shares is corroborated by Roine, Vlachos, and Waldenstrom (2008), who estimate regressions on cross-country data from a large number of years and find that top income shares are strongly positively correlated with stock market capitalization; they also find that higher marginal income tax rates are associated with smaller top income shares, although their tax measures are rough” (Bakija, Heim 2009).
What is more, the disparity in incomes is even larger when the highest-income households are considered. The incomes of households in the top one-tenth of 1 percent rose by an average of nearly $1.4 million in 2012, or 27 times median household income.
Mishel and Sabadish (2013) present a CEO compensation series, including stock options measured as the value of options granted. Those in the financial sector were associated with nearly a fourth (23 percent) of the expansion of the income shares of both the top 1.0 and top 0.1 percent. Together, finance and executives accounted for 58 percent of the expansion of income for the top 1.0 percent of households and an even greater two-thirds share (67 percent) of the income growth of the top 0.1 percent of households. The class significance of the data being reported is manifestly clear. Relative to others in the top 1 percent, households headed by executives had roughly average income growth, those headed by someone in the financial sector had above average income growth, and the remaining households (nonexecutive, nonfinance) had slower than average income growth. The researchers mentioned above opine that this analysis of household income data understates the role of executives and the financial sector because they do not account for the increased spousal income from these sources.
Mishel and Sabadish (2013) examine chief executive officers of 350 firms with largest revenue in any given year and show that their compensation grew 79 percent between 1965 and 1978 during a period when the stock market (as measured by the Dow Jones and Standard & Poor’s indices) fell by about half” (Bivens and Mishel 2013:61). That fact alone speaks to the unique class and ownership position of the group under consideration. Evidence is compelling: “average CEO compensation grew strongly over the 1980s but then exploded in the 1990s and peaked in 2000 at nearly $20 million, growing by a multiple of 13 from 1978 to 2000.1 This growth in compensation for chief executive officers far exceeded even the substantial rise in the stock market, which grew roughly fi ve-fold in value over the 1980s and 1990s.
Since 2000, compensation for chief executive officers first dropped after the fall in the stock market in the early 2000s, rebounded by about 2007, fell again in the financial crisis of 2008 –2009, and then has rebounded again. By 2012, average compensation had returned to $14.1 million. The compensation of chief executive officers in 2012 is high by any standard, except when compared with its own peak in 2000 after the 1990s stock bubble. From 1978 to 2012, “even with the setbacks provided by the 2001 and 2008 stock market crashes, CEO realized compensation grew 876 percent, more than double the real growth in the stock market” (Bivens and Mishel 2013:62).
To illlustrate the size of the class divide in question, the hourly compensation of a private sector production/nonsupervisory worker grew a meager 5 percent, which situated the class in question at the end of the spectrum opposite to that occupied by “chief executive capitalists”.
Only slightly different are figures provided by a study conducted by economists at the University of California, Berkeley, the Paris School of Economics and Oxford University, revealing-as they do- that the top one percent of earners garnered 19.3 percent of household income in 2012. That’s their largest share of the pie since 1928.
Interestingly, one of the study’s authors, Emmanuel Saez of the University of California, Berkeley, contends that the surge may be due in part to those Americans cashing in stocks to avoid higher capital gains taxes that kicked in at the beginning of the year. And indeed, the recently released IRS data, which go through 2012, show that “the top sliver of taxpayers recovered quickly from the recession. That’s not what happened for everyone else.
Income Concentration by Percentile U.S. household income is getting increasingly concentrated at the top. That was especially true in 2012, when there was a race to sell valuable assets before the top capital gains tax rate jumped to 23.8 percent from 15 percent.
Bottom 50% 1% .1% .01% Top .001% income percentile Share of total U.S. income 68,050,000 filers 1,361 filers in 2012 13,610 filers 136,100 filers 1,361,000 filers The top 136,100 filers earned about the same share of the total adjusted gross income in 2012 as the bottom 68 million While the top earners’ share of the total income has bounced back since the 2009 low, the share of the bottom half has only shrunk further 10% 15% 20% high before recession recession low 2012 2009 2007 Income Thresholds from the Middle Class to the Top Earners It takes more to be at the top these days. The threshold level at which someone enters the top 0.1 percent is going up, while the minimum income to enter the top 50 percent is slowly falling.
0 300k 600k 900k 1.2m Top 50% Top 1% Top 0.1%incomepercentile 2012 2009 2007 37% 136,100filers 1.4m filers 68m filers Note: Dollar amounts are adjusted for inflation to 1990 dollars $1.4m $895.4k 37% from 2007 ▼ $1.2m ▲ $268.9k $214.5k 20% ▼ $247.5k 15% ▲ $22.4k $20.8k 7% ▼ $20.5k 1% ▼ Tax Rates for Top Earners, 2012.
The income tax is progressive, mostly. Effective tax rates rise with income before dipping for the very richest who pay capital gains rates (before the increases Obama sought took effect in 2013). This doesn’t include payroll taxes and state and local taxes, which tend to fall more heavily on middle-income and lower-income households” (Rubin, Collins 2015).
Saez’s evidence covering the years 2009-2012 is equally striking. Top 1 percent incomes grew by “31.4 percent while bottom 99 percent incomes grew by just 0.4 percent from 2009 to 2012” (Ahlert 2013). In other words, “the top 1 percent captured 95 percent of the income gains in the first three years of the recovery”.
Over the last 6 years, Wall Street and the investor class have been on a bull run, but the economy has been, at best, torpid for the vast majority of the population. Despite blather about our “democratic capitalism,” stock ownership is increasingly concentrated with the wealthy.
A recent study by the Russell Sage Foundation suggests these patterns of inequality, which have been developing over the last several decades, have become more pronounced in the post-Recession years. In 2013 the wealth of those at the 90th and 95thpercentiles was actually higher than 10 years ago. “Everyone else is lower.
[...] Wage growth has been weak, rising 2.5% annually since 2009, according to Bloomberg,
Compared with a 4.3% annual rise from 2001 to 2007. Consumer spending, which makes up roughly 70% of the economy, has expanded an average 2.2% since the recession ended, behind the 3% advance in the prior expansion” (Kotkin 2014). In previous recoveries, small businesses have provided much of the spark and job creation. Not so this time. Small business start-ups “have declined as a portion of all business growth from 50% in the early 1980s to 35% in 2010, while their share of employment dropped down from 20% to 12%” (Kotkin 2014). Indeed, a 2014 Brookings report revealed that small business “dynamism,” measured by the growth of new firms compared with the closing of older ones, has declined significantly over the past decade, with more firms closing than starting for the first time in a quarter century.
This kind of data help explain why many working-age people are still sitting discouraged on the sidelines – the labour force participation rate remains the lowest since 1979-and the former fact is likely to be largely responsible for the decrease in the official unemployment rate below 6 per cent.
Clearly, people in marginal or part-time jobs are not likely to drive consumer spending. Instead we have seen the emergence of a new, top-heavy consumer market.
In 2012 the top 5% of households have increased their share of total spending to almost 40%, up from 27% in 1992 and 28 per cent in 1995, according to the Institute for New Economic Thinking. “Economist Steven Fazzari of Washington University in St. Louis said the top 5 percent in this country are consuming about as much as the bottom 80 percent” (Jacoby 2014), which is truly stunning.
Former Citigroup economist Anjay Kapur has described this situation as a “plutonomy,” in which the economy is increasingly based on the global wealthy and their tastes and predilections” (Kotkin 2014b), which is as strong an endorsement of the capitalist nature of the underlying system as one can get.
It is useful to place the developments discussed above in a wider historical context. IN OCTOBER 2005, three Citigroup analysts, Ajay Kapur, Niall Macleod, and Narendra Singh, released a report describing the pattern of growth in the U.S. economy. To really understand the future of the economy and the stock market, they wrote-and quite rightly so-you first needed to recognize that there was “no such animal as the U.S. consumer,” and that concepts such as “average” consumer debt and “average” consumer spending were highly misleading.
In fact, in their view, America was composed of two distinct groups: the rich and the rest. And most relevantly, for the purposes of investment decisions, the second group didn’t matter; tracking its spending habits or worrying over its savings rate was-of course, from a purely economic, not sociological point of view-a waste of time. All the action in the American economy was at the top: the richest 1 percent of households earned as much each year as the bottom 60 percent put together; they possessed as much wealth as the bottom 90 percent; and with each passing year, a greater share of the nation’s treasure was flowing through their hands and into their pockets. It was this segment of the population, almost exclusively, that held the key to future growth and future returns. The above-mentioned analysts had coined a new term for this state of affairs: plutonomy.
In a plutonomy, Kapur and his co-authors wrote, “economic growth is powered by and largely consumed by the wealthy few.” America had been in this state twice before, they noted - during the Gilded Age and the Roaring Twenties. In each case, the concentration of wealth was the result of rapid technological change, global integration, laissez-faire government policy, and “creative financial innovation.” In 2005, the rich were nearing the heights they’d reached in those previous eras, and the analysts concerned saw no good reason to think that, this time around, they wouldn’t keep on climbing. While some of specific claims put forward by Kapur and his co-authors were wrong or under-specified-this applies, first and formost, to their glossing over the underlying role of private property relations, And their two-class division of America is surely over-simplified, nevertheless they captured in their analysis some salient aspects of the U.S. economy.
According to Gallup, from May 2009 to May 2011, daily consumer spending rose by 16 percent among Americans earning more than $90,000 a year; among all other Americans, spending was completely flat. The consumer recovery, such as it is, appears to be driven by the affluent, not by the masses, which confirms the peculiar class character of the U.S. shareholder capitalism, but at the same time hardly testifies to the long-term health of the latter. Three years after the crash of 2008, the rich and well educated (or the owners of capital and certain kinds of labour power) were already putting the recession behind them. The rest of America is stuck in neutral or reverse. Indeed, “Between 2000 and 2012, American wages grew…not at all” (Matthews 2013).
According to a study by Sentier Research, based on monthly Census Bureau data, the median household income is still some $4,000 lower today than it was before the recession began in 2008, and about $2,000 lower than it was since the recovery began in June of 2009.
Usually periods of recovery from a financial meltdown are years when workers rapidly make up the lost ground in income and job opportunities surrendered during recession. In this case, average workers have continued to lose ground. This explains why more than half of workers think the recession never ended.
For them, it hasn’t” (Rand, Moore 2014).
Concomitantly, income inequality usually shrinks during a recession, but in the Great Recession, it didn’t. From 2007 to 2009 it widened a little. The top 1 percent of earners did see their incomes drop more than those of other Americans in 2008. But that fall was due almost entirely to the stock-market crash, and with it a 50 percent reduction in realized capital gains. Excluding capital gains, top earners saw their share of national income rise even in 2008. And in any case, the stock market has since rallied. Corporate profits have marched smartly upward, quarter after quarter, since the beginning of 2009.
Even in the financial sector, high earners have come back strong. In 2009, the country’s top 25 hedge-fund managers earned $25 billion among them- or more than they had made in 2007, before the crash. And while the crisis may have begun with mass layoffs on Wall Street, the financial industry has remained well shielded compared with other sectors; from the first quarter of 2007 to the first quarter of 2010, finance shed 8 percent of its jobs, compared with 27 percent in construction and 17 percent in manufacturing. Throughout the recession, the unemployment rate in finance and insurance has been substantially below that of the nation overall. (Peck 2011).
While the author concerned sticks to the conventional conceptual framework, wrongly identified with that of class, as it in fact pertains to social stratification, his exposition tacitly buttresses the aforementioned alternative approach, as only class categories are sufficiently numerous and precise to be able to depict the picture of given groups true to their socio-economic nature.
It’s hard to miss just how unevenly the Great Recession has affected different classes of people in different places. From 2009 to 2010, wages were essentially flat nationwide - but they grew by 11.9 percent in Manhattan and 8.7 percent in Silicon Valley. In the Washington, D.C., and San Jose (Silicon Valley) metro areas both primary habitats for America’s meritocratic winners- job postings in February of this year were almost as numerous as job candidates.
In Miami and Detroit, by contrast, for every job posting, six people were unemployed. In March, the national unemployment rate was 12 percent for people with only a high-school diploma (and thus, in our terms, a distinct type of certified labour power), 4.5 percent for college grads, and 2 percent for those with a professional degree.
Housing crashed hardest in the exurbs and in more-affordable, once fast-growing areas like Phoenix, Las Vegas, and much of Florida-all meccas for aspiring middle-class families with limited savings and education. The professional class, clustered most densely in the closer suburbs of expensive but resilient cities like San Francisco, Seattle, Boston, and Chicago, has lost little in comparison. And indeed, because the stock market has rebounded while housing values have not, the middle class as a whole has seen more of its wealth erased than the rich, who hold more-diverse portfolios. A 2010 Pew study showed that the typical middle-class family had lost 23 percent of its wealth since the recession began, versus just 12 percent in the upper class.
The ease with which the rich and well educated have shrugged off the recession shouldn’t be surprising; strong winds have been at their backs for many years.
The recession, meanwhile, has restrained wage growth and enabled faster restructuring and offshoring, leaving many corporations with lower production costs and higher profits - and their executives with higher pay Anthony Atkinson, an economist at Oxford University, has studied how several recent financial crises affected income distribution- and found that in their wake, the rich have usually strengthened their economic position. Atkinson examined the financial crises that swept Asia in the 1990s as well as those that afflicted several Nordic countries in the same decade. In most cases, be says, the middle class suffered depressed income for a long time after the crisis, while the top 1 percent were able to protect themselves -using their cash reserves to buy up assets very cheaply once the market crashed, and emerging from crisis with a significantly higher share of assets and income than they’d had before. And the point is that we have seen the same thing, to a large extent, in the United States since the 2008 crash. “The rich seem to be on the road to recovery,” says Emmanuel Saez, an economist at Berkeley, while those in the middle, especially those who’ve lost their jobs, “might be permanently hit.” Coming out of the deep recession of the early 1980s, Saez notes, “you saw an increase in inequality ... as the rich bounced back, and unionized labor never again found jobs that paid as well as the ones they’d had. And now I fear we’re going to see the same phenomenon, but more dramatic”. Middle-paying jobs in the U.S., in which some workers have been overpaid relative to the cost of labor overseas or technological substitution, “are being wiped out. And what will be left is a hard and a pure market,” with the many paid less than before, and the few paid even better - a plutonomy strengthened in the crucible of the post-crash years” (Kotkin 2014b).
It is useful to put some flesh on the above discussion, which the narrative reported below provides:
Kaiser Mead plant had been idled in 2000, but in 2003, the company formally stopped holding out hope for a reopening. If the sun had been setting on Kaiser, this was the year it dipped below the horizon.
Was that also a sunset for Spokane’s middle class? The decline of Kaiser marked a waning of solid, middle-class, family-wage jobs in the county. If it’s not sunset, it’s looking dusky out there for the middle class – both nationally and here – and the trends are woeful. Most incomes are flat or declining, and that holds true both before and after the recession.
“If you adjust for inflation, the average household in Spokane has roughly the same purchasing power they had in 1998 or 1999,” said Grant Forsyth, chief economist for Avista” (Vestal 2013).
The growing gulf in incomes has been well documented nationally. Forsyth, a former economics professor at Eastern Washington University, has gathered data about the “hollowing out of the middle” in Spokane, showing-as they do-not surprisingly that such lower-level socio-economic structures had suffered just as much as the overall economy and social classes rooted in the latter.
Forsyth divided the Spokane economy into fifths based on levels of “occupational pay” and looked at the data from 2000 to 2011. Where did employment grow? At the bottom. The lowest-paying jobs – those paying $19,000 to $36,000 a year – showed the most growth, rising from 53 percent to 57 percent of all jobs. The top quintile – jobs paying more than $62,000 – grew slightly from 13 percent to 14 percent of the economy.
And the middle shrank. Jobs paying between $36,000 and $62,000 dropped from 34 percent of the economy to 29 percent.
Forsyth also documented the way the income pie is divided. The top 20 percent of households (earning more than $89,000 a year) brought in 46 percent of all Spokane’s income. The proportions get larger the higher you go. “The top 5 percent of earners bring home almost 20 percent of all income in Spokane” (Vestal 2013).
This is typical nationwide. The disparity in income growth has expanded even further during the so-called recovery, according to research published recently by Emmanuel Saez of the University of California at Berkeley.
“From 2009 to 2012, average real income per family grew modestly by 6.0%,” according to Saez’s paper, titled ‘Striking it Richer: The Evolution of Top Incomes in the United States’” (Vestal 2013).
“However, the gains were very uneven. Top 1% incomes grew by 31.4% while bottom 99% incomes grew only by 0.4% from 2009 to 2012. … In sum, the aformentioned economist revealed that top 1% incomes are close to full recovery while bottom 99% incomes have hardly started to recover.”
These statistics reflect in fact much of the experience that working people have seen in the past few decades. Administrative bonuses have gone hand-in-hand with layoffs and pay cuts. Executive salaries soar, and the self-rewarding cycle for the managerial class – executives collaborating on a system that pushes executive salaries ever higher – plows forward in any and all circumstances.
Saez’s paper makes this point explicitly: The long-term rise in income inequality derives, in large part, from a pattern of trickle-up economics.
“A significant fraction of the surge in top incomes since 1970 is due to an explosion of top wages and salaries,” he asserts. (Vestal 2013).
One of the most salient features of severe downturns is that they tend to accelerate deep economic shifts that are already under way. Declining industries and companies fail, spurring workers and capital toward rising sectors; declining cities shrink faster, leaving blight; workers whose roles have been partly usurped by technology are pushed out en masse and never asked to return. It may be mentioned that while there is something to be said for such a technological explanation, in another sense it represents an ideology of technological determinism that belittles the degree to which the processes involved are driven by human action, including not only economic, but also political agents. Some economists have argued that in one sense, periods like these do nations a service by clearing the way for new innovation, more efficient allocation of resources, and and faster growth. Again, an extensive discussion of this theory of the “creative destruction” lies beyond the confines of the present study. For our purposes suffice it to point out that economic crises typically allow us to see, with rare and brutal clarity, where society is heading- and what sorts of people and places it is leaving behind to which key aspect we come back later.
Arguably, the most important economic trend in the United States over the past couple of generations has been the ever more distinct sorting of Americans into winners and losers, and the slow hollowing-out of the middle class, to use that popular cliche whose defects are extensively analysed throughout the present book . At any rate, median incomes declined outright from 1999 to 2009. For most of the aughts, that trend was masked by the housing bubble, which allowed working-class and middle-class families to raise their standard of living despite income stagnation or downward job mobility. But that fig leaf has since blown away. And the recession has pressed hard on the broad center of American society.
“The Great Recession has quantitatively but not qualitatively changed the trend toward employment polarization” in the United States, wrote the MIT economist David Autor in a 2010 white paper. Job losses have been “far more severe in middle-skilled white- and blue-collar jobs than in either high-skill, white-collar jobs or in low-skill service occupations” (Autor 2010; Autor et al. 2006) Note how clearly the pronouncement cited above exemplifies the discord between both main approaches to social differentiation-it focuses on income groups at the expense of socio-economic classes, which are mentioned only in passing.
Bearing in mind that caveat, one can dwell on the aformentioned view of Autor and other leading labour economists, according to whom the American middle class has been “hollowed out” over the past three decades because job growth is increasingly concentrated at the high and low ends of the wage distribution.
The fact of the matter is, the prospects of those at the upper end of the skill distribution continue to improve, while on the other hand growth in menial, low-paying positions has remained steady.
Meanwhile, middle-income job opportunities are shrinking. Explanations for this phenomenon include globalization and technological change, leading to the outsourcing and automating of routine, middle-income jobs as well as a deceleration in the supply of educated workers, driving an increase in the wage premium for high-skilled workers.
But even this does not tell the whole story. “Four decades it’s been the working class that has suffered the brunt of the effects of globalisation and automation in the workforce. Now machines are taking middle class jobs, with serious implications for societies – like Australia’s – that have staked their future on white collar, knowledge-based service industries.
At the beginning of July, 2014, the Associated Press announced it was replacing business journalists with computer programs, following sports reporting where algorithms have delivering match reports for some years.
Some cynical media industry commentators would argue rewriting PR releases or other people’s stories - the model of many new media organisations-is something that should be done by machines. And the fact is that Associated Press’ management has come to the same view with business data feeds.
AP’s managing editor Lou Ferrara explained in a company blog post how the service will pull information out of company announcements and format them into standard news reports.
Ferrara wrote of the efficiencies this brings for AP: “Instead of providing 300 stories manually, we can provide up to 4,400 automatically for companies throughout the United States each quarter.”
The reputed benefit for readers is that AP can cover more companies with fewer journalists, the question is how many people can afford to read financial journals if they no longer have jobs?
Parallel processes could be said to make many middle managers redundant.
Many of those fields that cheered the loss of manufacturing are themselves affected by the same computer programs taking the jobs of journalists; any job, trade or profession that is based on regurgitating information already stored on a database can be processed the same way.
For lawyers, accountants, and armies of form processing public servants, computers are already threatening jobs -as with journalism, things are about to get much worse in those fields, as mining workers are finding with automated mine trucks taking high-paid jobs.
According to some estimations, most vulnerable of all could well be managers; when computers can automate financial reports, monitor the workplace and make many day-to-day decisions then there’s little reason for many middle management positions.
To make matters worse for white collar middle managers, many of their positions are only needed in organisations built around paper based communication flows; in an age of collaborative tools there’s no need to gatekeepers to control the movement of information to the executive suite.
According to Irish economist David McWilliams, the forces that disrupted the working classes in the 1970s and 80s are now coming for middle classes.
“The industrial class was undermined by both technological change and globalisation, but rather than lament this, many people who were unaffected by this social catastrophe labelled what happened from 1980 to 2010 as the “inevitable consequences” of global competition.” Mc Williams writes, thereby framing the process under consideration as doubly contingent: it does not represent any “iron law of nature”, being instead the resultant of a myriad of human actions and decisions; and secondly, both its occurrence and social reception are class (and estate, [insofar as also certain groups located in the non-economic sphere of social division of labour are affected by it as welll. Those “inevitable consequences” are now coming for the middle classes, not without irony claims McWilliams.
It seems that the author of the commentary cited below did not catch this aspect of McWilliams’ ruminations in that he squeezes it into the straighjacket of conventional narrative, representing-as it does-a narrow economistic point of view, leaving out all the social aspects and consequences of the process concerned:
“While this sounds frightening it may not be bad for society as a whole; the Twentieth Century saw two massive shifts in employment - the shift from manufacturing to services in the later years, and the shift from agriculture to city-based occupations earlier in the century.
A hundred years ago nearly a third of Australians worked in the agriculture sector; today it’s three per cent. Despite the cost to regional communities, the overall economy prospered from this shift” (Wallbank 2014).
Later on, however, the same author points to some more interesting and going beyond the conventional wisdom factors:
“The question today though is what jobs are going to replace those white collar jobs that did so well from the 1980s? The Maker Movement may have answers for governments and businesses wondering how to adapt to a new economy” (Wallbank 2013).
He recalled the initiative of president Obama,who some time ago welcomed several dozen leaders of America’s new manufacturing movement to a Maker Faire at the White House, where he proclaimed ‘Today’s DIY Is Tomorrow’s ‘Made in America’” (Wallbank 2014 ).
This draws on a report titled “Building a Nation of Makers” that offers some “ideas on creating manufacturing jobs, which have been an engine of well-paying, middle-class employment throughout U.S. history”. The report, by a University of Virginia Miller Center commission proposes six ideas to accelerate the pace of innovation for America’s small and medium-sized manufacturing enterprises n “The main goal is producing quality employees for our workforce so SMEs can grow, prosper and provide more jobs” (Bay 2014).
Whether the movement itself will live up to those high expectations, is another matter, but in theoretical terms the most salient aspect of the above accountis the prefix “middle-classs”, as it appears to be at best redundant, and under less positive interpretation-cognitively harmful insofar as it creates a false impression that apart from the working class -that is the real target of the plan there is yet another industrial employee class, named “the middle class”. As has been repeatedly pointed out, this mixes up two different approaches-that in terms of class and that based on social stratification. Instead of this misleading language, the authors of the report should indicate simply that what is at stake is the creation of middle-income jobs, which does not refer directly to class and thus does not engender the aformentioned confusion. Meanwhile, the remaining argument provides another endorsement for the socio-economic class framework.
Proposals include:
1. Talent investment loans to expand human capital – Government-backed talent investment loans will give SMEs the capital to hire the workers necessary to expand their businesses, as well as to up-skill these new and current employees” (Bay 2014).
Putting aside the abuse of the term “talent”, which inborn gift is conflated above with the notion of skill in general-one may have got a talent for drawing or singing, but there is not such a entity as a talent for welding, an even more pernicious conceptual pest present in the above statement is constituted by the celebrated “human capital”, which-as is extensively argued elsewhere (Tittenbrun 2013; 2014)-is in fact a misnomer, referring in actual fact to labour power, which is of course a key category of class analysis.
Another significant trait of this whole discussion is the fact that the commentator concerned no longer talks pure business, allegedly driven by some mechanisms independent of human actions. The same property pertains to his further remarks in which he focuses on Singapore, where “the government is putting its hopes on these new technologies boosting the country’s manufacturing industry in one of the world’s highest-cost centres”, citing in support of his assertion the words of Board Managing Director Yeoh Keat Chuan: “The future of manufacturing for us is about disruptive technologies, areas like 3D printing, automation and robotics” (Wallbank 2014).
Some encouraging news come also from Britain’s experiments with modern technologies, as the BBC’s World of Business reported about how the country is reportedly reinventing its manufacturing industry.
By way of illustration, “Tim Chapman of the University of Sheffield’s Advanced Manufacturing Research Centre describes how the economics of manufacturing changes in a high-cost economy with a simple advance in machining rotor disks for Rolls-Royce Trent jet engines.
“These quite complex shaped grooves were taking 54 minutes of machining to make each of these slots. Rolls-Royce came to us and said ‘can you improve the efficiency of this? Can you cut these slots faster?’”
“We reduced the cutting time from 54 minutes to 90 seconds.” the lesson being that “that’s the kind of process improvement that companies need to achieve to manufacture in the UK.”
Pro domo sua, the commentator laments that “while leaders in the US, UK and Singapore ponder the future of manufacturing, Australian governments continue to have faith in their 1980s models of white collar employment”, which for him illustrates how far out of touch the nation’s (again misnamed) political classes are with reality when they proclaim Sydney’s future as an Asian banking centre or Renminbi trading hub.
“In the apparatchiks’ fevered imaginations this involves rooms full of sweaty white men in red braces yelling ‘buy’ into telephones as shown in 1980s Wall Street movies. In truth, the computers took most of those jobs two decades ago” (Wallbank 2014).
In his further comments the author being cited addresses head-on the aformentioned issue of social dimension to the process under examination:
“As McWilliams points out, the dislocations to the manufacturing industries of the 1970s and 80s were welcomed by those in the professions as the inevitable cost of ‘progress’.
Now progress might be coming for them” (Wallbank 2014).
And indeed, studies suggest that the situation is not limited to the U.S., but is also present in Europe and other advanced countries (cf. Goos et al. 2010).
And the class coefficient constitutes an intrinsic aspect to the socio-economic dislocation being described: “from 2007 through 2009, total employment in professional, managerial, and highly skilled technical positions was essentially unchanged. Jobs in low-skill service occupations such as food preparation, personal care, and house cleaning were also fairly stable. Overwhelmingly, the recession has destroyed the jobs in between. Almost one of every 12 white-collar jobs in sales, administrative support, and nonmanagerial office work vanished in the first two years of the recession; one of every six blue-collar jobs in production, craft, repair, and machine operation did the same” (Root 2014b).
This pattern in fact confirms one of the claims of our theory of labour-power ownership: Proposition 10: The more complex (with multi-faceted skills), and on the other hand, simpler labour power, the easier it is employed in the job market. It is the hardest thing to find a job for the employees with an average level of competence.
Root’s further comments come close to disclosing the class content of conventional stratification categories:
Overall, “the downturn hit hard at industries that employ middle-wage workers, particularly those categories with large concentrations of men, and the subsequent recovery has done little to improve their position. More than 1.5 million construction jobs, paying wages of $55,120, on average, are still missing.
The manufacturing sector, which pays an average of $51,480 a year, has regained several hundred thousand jobs in the last couple of years but now employs 1.7 million fewer workers than it did before the recession.
By contrast, the health care sector has continued to thrive, expanding its role as a leading employer at all salary levels and emerging as the backbone of an evolving new middle class. Home services and outpatient centers grew the most, as the American population aged and health services shifted away from hospitals to less expensive ways of delivering care. And while the growth has slowed under pressure to keep costs down, health care services have added 1.5 million jobs and are expected to expand further” (Root 2014b).
The overall societal balance of those transformations is striking:
“Industries whose average salaries are in the middle of the wage spectrum have shrunk by 2.5 million jobs.
Not all industries recovered equally over the past five years. Those that paid wages in the middle of the economic spectrum fared the worst overall, while low-paying industries hired the most during the recovery. Fast-food restaurants — which pay less than $22,000 a year, on average — added more jobs than nearly any other industry. Several high-paying areas also helped drive the recovery, including oil and gas extraction, computer programming, consulting, doctor’s offices and investment firms” (Root 2014b).
No wonder that Autor (2010) isolates the winnowing of middle-skill, middle-class jobs as one of several labor-market developments that are profoundly reshaping U.S. society.
The others are: rising pay at the top, falling wages for the less educated, and “lagging labor market gains for males”. “All,” he writes, “predate the Great Recession. But the available data suggest that the Great Recession has reinforced these trends.”
Tellingly, “Sixty percent of the jobs lost were middle-class jobs. But only 22 percent of the new jobs are middle-class jobs with decent wages” (Root 2014b).
Along the same lines, a recent “report from the Federal Reserve Bank of New York says job creation overall is back to where it was before the Great Recession. But not all types of jobs have returned, at least not in the numbers that existed prior to the economy tanking. “In the five years since the United States began its slow climb out of the deepest recession since the 1930s, the job market has undergone a substantial makeover. The middle class has lost ground as the greatest gains have occurred at the top and bottom of the pay scale, leaving even many working Americans living in poverty. [...] After a long climb from the valley, the number of jobs has finally reached the previous peak of January 2008, with gains of more than 8.5 million jobs since early 2010. Still, the working-age population has grown substantially in the last six years, and the nation’s economy, by reliable estimates, is at least seven million jobs below its potential. That has cost Americans hundreds of billions of dollars in lost output.
With the weak recovery from the recession, more than four million people are still considered among the long-term unemployed, out of work for at least half a year. They face considerably dimmer prospects of finding another job as their skills deteriorate and their contact with the world of work fades” (PARLAPIANO et al. 2014), which in more theoretical terms could be couched as a partial dispossession of given employees’ principal asset, that is, labour power.
Moreover, that does not count the more than six million of those who relinquished their ownership, as they “have opted out of the labour force altogether” (PARLAPIANO et al. 2014).
To recapitulate, The U.S. lost a bevy of middle-class employment opportunities from 2008 to 2010, particularly construction, teaching and clerical positions, according to the study. Many of these jobs have not returned, owing to a sluggish housing market and cutbacks in government budgets (which impact public school hiring).
This factor has an even wider significance, underscoring-as it does-yet another way in which the supposed “creative destruction” is a man-made process: one social commentator asks: “Why have the wealthy increased their share of American wealth by 23 percent while the middle class holds even and the poorest Americans have lost 4 percent since 2007?” (Thomas 2014).
And his answer is as follows: “My guess? Tim Eyman, promoter of tax-limitation initiatives in Washington state, and wealthy friends have created a situation in which taxes cannot be raised” (Thomas 2014).
The flip side of this forced austerity is an intense Pressure to reduce government services. “Republican allies of the wealthy scream for privatization of government middle class jobs. These middle class state jobs are transferred to private for-profit contractors who pay poorly and whose benefits are lousy. Thus middle class jobs turn into paycheck-to-paycheck jobs and long-term impoverishment. Worse yet, some of my tax dollars, instead of providing services for all, are paid directly into stockholder’s pockets as profits.
This privatization scheme created by Eyman and his corporate friends is a direct redistribution of my money into corporate pockets. Government policy is being manipulated by the Republican wealthy to the benefit of the wealthy” (Thomas 2014). He concludes his fine socio-economic analysis with a rhetorical question: “Why do the Republican wealthy scream about redistribution of money from their pockets when it’s the other way around?” (Thomas 2014).
The developments outlined above are but a part of a broader job polarisation, by virtue of which the job growth can be found almost exclusively at the top and bottom ends of the spectrurm.
In other words, there are on the one hand high-skill positions in engineering, medicine, Wall Street and high tech, and plenty of low-skills, low-wage jobs in fast food, retail and child care on the other.
The importance of this bifurcation can be gleaned from the fact that employment at the bottom provides salaries ranging from $9.48 to $13.33 an hour. These jobs accounted for 22% of the losses during the recession, but now make up 44% of those during recovery.
Certain events at this end of pay scale bolster our theoretical case. As reported by PRNewswire-USNewswire from HARRISBURG, Pa., the U.S. Supreme Court’s decision made on June 30, 2014 in Harris Vs. Quinn aimed at home care workers “is not only bad for union, but for all workers and the middle class. “This decision is an attack on workers’ freedom to form strong unions and to bargain for decent wages, benefits, and to advocate effectively on behalf of their patients. Strong unions build and expand our middle class. This decision weakens the bargaining strength of all workers and undermines their efforts to rebuild and expand our middle class which is essential to freedom and democracy”, CIO President Rick Bloomingdale said.
According to Pennsylvania AFL-CIO, “The ones who are hurt by anti-worker laws and court cases are the families with parents and grandparents who need personal care to live at home with dignity.
The union assured that this court case “isn’t going to stop home care workers from fighting for good jobs and quality care” (PR Newswire 2014).
The thing is that the term “the middle class” appears in the above statement out of the blue; the union activist in question keeps couching the grou he is talking about as “workers”, and it is only not very fortunate-at least in that regard-socialisation that accounts for an otherwise inexplicable omission of the incongruence between the former conceptualisation and the catchword “the middle class”.
Still, it is exactly this term that creates the prime frame of reference for also other observers of the labour-power market:”high-wage industries, [...] accounted for 41% of the losses at the end of the last decade but have only made up 30% of the gains in recent years” (Peck 2011).
These statistics reflect an erosion of the middle class itself over the past four decades, reports Bryce Covert of ThinkProgress. He notes that the middle class shrunk from 61% in 1971 to 51% in 2011, and that today there are 700,000 fewer middle-income households than there were at the onset of the economic crisis of six years ago” (2014). To put those developments in a longer historical perspective, according to the above-mentioned commentator, “for more than 30 years, the American economy has been in the midst of a sea change, shifting from industry to services and information, and integrating itself far more tightly into a single, global market for goods, labor, and capital.” (Peck 2011).
Note the standard conceptualisation of the purported economic transformation, which calls for at least a brief commentary. Indeed, there are good grounds to suspect that at least certain of the terms usually utilised in that connection are as ambiguous as the term featuring in the title of the present book. Indeed, the concept of services, for instance, in many interpretations runs the risk of conceptual stretching, whilst the above-mentioned concept of information is entirely baselessly pitted against that of industry, as if -which, after all, is illustrated in a later part of the same statement cited below-computers, information technologies, etc. were not closely involved in the process of production.
To come back to Peck’s analysis of globalisation and other processes impinging on the situation of the middle class, he notes that:
“to some degree, this transformation has felt disruptive all along.
But the pace of the change has quickened since the turn of the millennium, and even more so since the crash. Companies have figured out how to harness exponential increases in computing power better and faster. Global supply chains, meanwhile, have grown both tighter and more supple since the late 1990s-the result of improving information technology and of freer trade - making routine work easier to relocate. And of course China, India, and other developing countries have fully emerged as economic powerhouses, capable of producing large volumes of high-value goods and services” (Peck 2011).
In much the same vein as that of our earlier remarks on the conventional economic wisdom, Peck goes on to take issue with what proves to be a myth rather than fact:
“Some parts of America’s transformation may now be nearing completion. For decades, manufacturing has become continually less important to the economy, as other business sectors have grown. But the popular narrative- rapid decline in the 1970s and ‘80s, followed by slow erosion thereafter - isn’t quite right, at least as far as employment goes. In fact, the total number of people employed in industry remained quite stable from the late 1960s through about 2000, at roughly 17 million to 19 million. To be sure, manufacturing wasn’t providing many new jobs for a growing population, but for decades, rising output essentially offset the impact of labor-saving technology and offshoring” (2011).
Peck indicates, though, that the above statement does not hold for the latest period:
“But since 2000, U.S. manufacturing has shed about a third of its jobs. Some of that decline reflects losses to China. Still, industry isn’t about to vanish from America, any more than agriculture did as the number of farm workers plummeted during the 20th century. As of 2010, the United States was the second-largest manufacturer in the world, and the No. 3 agricultural nation. But agriculture is now so mechanized that only about 2 percent of American workers make a living as farmers. American manufacturing looks to be heading down the same path” (Peck 2011).
By contrast, he believes that “another phase of the economy’s transformation -one more squarely involving the white-collar workforce - is really just beginning. [...] information technology [...] is extremely broadly applicable” (Peck 2011), which can be only helped by its cheapening. The above-mentioned wide applicability of IT can be illustrated by a series of examples: “computer software can now do boilerplate legal work, for instance, and make a first pass at reading X-rays and other medical scans. Likewise, thanks to technology, we can now easily have those scans read and interpreted by professionals half a world away” (Peck 2011).
It is pertinent to recall that in 2007, the economist Alan Blinder, a former vice chairman of the Federal Reserve, estimated that between 22 and 29 percent of all jobs in the United States had the potential to be moved overseas within the next couple of decades” (Peck 2011).
And he goes on to point out that “with the recession, the offshoring of jobs only seems to have gained steam. The financial crisis of 2008 was global, but job losses hit America especially hard. According to the International Monetary Fund, one of every four jobs lost worldwide was lost in the United States. [...]
Anxiety Creeps Upward
Over time, both trade and technology have increased the number of low-cost substitutes for American workers with only moderate cognitive or manual skills people who perform routine tasks such as product assembly, process monitoring, record keeping, basic information brokering, simple software coding, and so on. As machines and low-paid foreign workers have taken on these functions, the skills associated with them have become less valuable, and workers
lacking higher education have suffered” (Peck 2011).
From a dialectical standpoint, one and the same phenomenon may have extremely varied, and even contradictory effects, which is exactly what has been going on recently:
“For the most part, these same forces have been a boon, so far, to Americans who have a good education and exceptional creative talents or analytic skills.
Information technology has complemented the work of people who do complex research, sophisticated analysis, high-end deal-making, and many forms of design and artistic creation, rather than replacing that work. And global integration has meant wider markets for new American products and high-value services-and higher incomes for the people who create or provide them” (Peck 2011).
It is not, however, that the researcher under consideration totally shies away from the received wisdom, as his claim, implicitly invoking the notion of human capital, shows:
However, it appears as though Peck was not entirely convinced of the ostensible merits pertaining to human capital theory, as he clearly suggest, and rightly so, that what would be in terms of socio-economic structuralism an explanation resting solely on one type of labour power, namely an achievement-based one would be inadequate: The return on education has risen in recent decades, producing more-severe income stratification. “But even among the meritocratic elite, the economy’s evolution has produced a startling divergence. Since 1993, more than half of the nation’s income growth has been captured by the top 1 percent of earners, and the gains have grown larger over time: from 2002 to 2007, out of every three dollars of national income growth, the top 1 percent of earners captured two” (Peck 2011).
Education could not be conceived of as an assured and easy springboard to the very top of the U.S. income ladder: “nearly 2 million people started college in 2002 -1,630 of them at Harvard- but among them only Mark Zuckerberg is worth more than $10 billion today. (Peck 2011)
In slightly different terms, largely the same trends are highlighted in the following statement: “During the Great Recession, middle-skill jobs plummeted 9.3%:
[...] During the recovery, there’s been just a 1.9% increase in middle-skill jobs, compared with much more robust increases in high- and low-skill ones: the breakdown for the New York Fed region (which includes Puerto Rico), for example, shows that During the recession, middle-skill jobs fell across the board, with the most severe declines in Puerto Rico and northern New Jersey”. In turn, during the recovery, middle-skill job growth has been either negative or nonexistent, while high- and low-skill jobs have surged, especially in the New York City area In a later post on Liberty Street Economics, Abel and NYFed senior vice president Richard Deitz put those facts in a broader context:
These patterns primarily reflect three trends. First, they show that the decades-long process of job polarization that is, a loss in middle-skill jobs combined with job growth at the upper and lower ends of the skills distribution — has continued through the latest business cycle. Second, ongoing weakness in housing has meant that there has been little bounceback in construction jobs. Finally, fiscal pressures in the public sector, which accelerated after the recession as stimulus spending wound down, have resulted in fewer teachers and cuts in state and local government jobs” (Delong 2014). As a consequence, while a growing number of places in the region have gained back the number of jobs lost during the Great Recession, the types of jobs in the region have changed: job growth has been geared toward higher- and lower-skilled workers, with job opportunities in the middle continuing to shrink.
“This is the death of the middle class in real time”. (Delong 2014), which is kind of interesting, since it implicitly narrows down the concept to the wage-earners only.
Even so, the view that “America’s Income Gap Is Really an Education Gap” (Tax Foundation 2013) is overly simplified and thereby untenable; Those who subscribe to that view, point to, to be sure, some figures that are to substantiate their claim:
The median income for all households was $51,244 in 2011. By contrast, the median income for a household headed by a worker with a four-year college degree was $78,251, more than 50 percent above the typical household. Those with professional degrees earn more than twice the median household income.
At the other end of the scale, the median income for a household headed by a worker with only a high school diploma was nearly 25 percent less than the typical household—$39,420. The incomes of households headed by workers without high school diplomas is just half as much as the typical household and about one-third as much as someone with a college degree. (Tax Foundation 2013:31). And the authors of the report concerned argue further that “perhaps nothing better illustrates the causes of income inequality in America today than the vast differences in educational attainment between high-income households and low-income households. Nearly 70 percent of Americans at the bottom end of the income scale have a high school degree or less, while just 10 percent have a college degree or more. At about $62,000 of income, a roughly equal percentage of workers have a high school degree (35 percent) as have a college degree (34 percent). However, at the top end of the income scale, nearly 80 percent of high-income households have a bachelor’s degree or higher, while less than 10 percent have only a high school diploma. Raising taxes on high-income taxpayers will not correct this education-based income disparity” (Tax Fundation 2013), which politically motivated gloss may rise some eye-brows regarding the objectivity of the claims cited earlier.
Even more significantly, this kind of data can at first blush justify the view that America is becoming a stratified society based on education: a meritocracy.
For this view too be true, a revolutionary change would be required in the fundamental mechanisms driving the U.S. capitalist system in which education itself is stratified. Historically, America’s education system has been the main avenue for upward mobility. Mass secondary education supplied the workforce of the world’s most successful industrial economy in the late 19th century; mass university education did the same for the period of American economic dominance after the Second World War. But now, worries Lawrence Summers, the president of Harvard University, what had been engines of social mobility risk becoming brakes.
At secondary-school level, American education is financed largely by local property taxes. Naturally, places with big houses paying larger property taxes have schools with more resources. At university level, the rise in the cost of education has taken Ivy League universities out of the reach of most middle-class and poor families, to use those common labels. The median income of families with children at Harvard was even before the latest upsurge in inequality, $150,000. The wealthy have always dominated elite schools, but their representation has risen and is rising further. Between 1976 and 1995, according to one study, students from the richest quarter of the population increased their share of places at America’s elite universities from 39% to 50%.
Even outside elite schools, students from poor backgrounds are becoming rarer. The budget squeeze on states in 2001-04 forced them to increase fees at state colleges, traditionally the places where the children of less wealthy parents went. Those children also face increasing competition from richer kids squeezed out of the Ivy League. As a result, a student from the top income quarter is six times more likely to get a BA than someone from the bottom quarter. American schools seem to be reinforcing educational differences rather than reducing them. And, of course, there is nothing meritocratic about such trends.
Another reason for gloom is the possibility that, as the researchers (Sawhill, McMurrer 2013) at the Brookings Institution argues” (), one’s chances of a good education, good job and good prospects-in other words, of moving upwards-are partly determined by family behaviour. On this view, the rich really are different, and not just because they have more money; moreover, these differences are becoming embedded in the structure of the family itself” (Economist 2005).
There is more to stratification, in other words, than differences in income or inherited wealth.
College graduates tend to marry college graduates. Both go out to work, so in the households of the most educated the returns to a university education are doubled. College-educated women are also postponing children for the sake of their careers. On average, they have their first child at 30, five years later than in the 1970s and eight years later than their contemporaries who have not been to college. By contrast, at the bottom of the heap, one sees the opposite: women have children younger, often out of wedlock and without a job. True, out-of-wedlock births are falling and welfare reform has increased the chances of mothers holding down jobs, but the gap is still vast. If, as Sawhill argues, the key to upward mobility is finishing your education, having a job and getting and staying married, then the rich start with advantages beyond money. Not only for that reason, however, the reduction of inequalities to differences in scholastic attainment is untenable.
Notice that incomes tend to rise and fall with the business cycle. Between 1987 and 2010, the bottom 50 percents real income grew by 25 percent, middle-income Americans’ by 46 percent, and upper-middle-income Americans’ by 56 percent.
Clearly, the incomes of the top 1 percent tend to rise more and fall more during the business cycle because most of their income comes from business and investments, which reflects their class status. As a matter of fact, the top 1 percent’s income fell 26 percent in real terms during the recession, far more than any other income group. It is, therefore, useful to correct some widespread misunderstandings regarding this income elite.
On the basis of what some politicians say, one would think that millionaires were some monolithic group that can be taxed at will. But IRS data clearly show that the number of millionaire tax returns fluctuates wildly each year, largely due to changes in the business cycle. Thus, between 2002 and 2007, the number of millionaire tax returns more than doubled to a record 392,220. However, owing to the recession, the number of millionaire tax returns fell by 40 percent between 2007 and 2009, or more than 155,000. Moreover, the recession reduced the total amount of income reported on millionaire returns by 48 percent and the amount of income taxes they paid by 43 percent.
Furthermore, for most Americans, incomes tend to rise with age. Thus, it is not surprising that in 2011, more than 80 percent of millionaires were older than age 45, and close to half of all millionaires (48 percent) were older than age 55. In fact, there are still more millionaires over the age of 65 than between the ages of 35 and 45. Moreover, despite the publicity given to the growing number of young millionaire athletes, celebrities, and entrepreneurs, only about 3 percent of all million-dollar tax returns are filed by taxpayers under the age of35.
Numerous studies have shown that millionaire status can in many cases be transient or episodic, as many people become millionaires as the result of a one-time event such as the sale of a business or stock. And indeed, a recent Tax Foundation study found that “between 1999 and 2007, about 675,000 taxpayers earned over $ 1 million for at least one year. Of these taxpayers, 50 percent (about 338,000 taxpayers) were a millionaire in only one year, while another 15 percent were millionaires for two years” (2013).
By contrast, just 6 percent (38,000 taxpayers) remained millionaires in all nine years.
It is also pertinent to reflect on some peculiarities of the U.S. tax code; because the latter is divided between sections that apply to individuals and those that apply to corporations, it is easy to assume that there is no overlap between households and businesses when it comes to taxes. Meanwhile, anyone who has ever been part of a small business venture can testify that this is far from the truth.
Recall that more than 30 million U.S. businesses are organized as partnerships, sole proprietorships, LLCs, or S corporations, and the income from those entities is claimed by the owners on their individual tax returns. In fact, since 2005, the total amount of net business income claimed on individual returns has exceeded the net income claimed by the traditional C corporations that issue publicly-traded stock. The weight of this overlap can hardly be over-estimated. In particular, any ppolicy-makers in the field of taxation, including a tax reform, need to take it into consideration, as it shows that one cannot treat business and household income as utterly separate and unrelated sources. It is important to note that what sets the entrepreneurial middle class apart from other taxpayers is that they derive a large share of their overall earnings from pass-through businesses such as S corporations, LLCs, and partnerships.
These pass-through business owners pay their business taxes on their individual tax returns. What is more, since the 1980s, the number of traditional C corporations has shrunk while the total number of pass-through businesses such afs S corporations, partnerships, and sole proprietorships has tripled to over 30 million in total. Today, there are 1.7 million traditional C corporations, compared to 7 A million partnerships and S corporations, and 23 million sole proprietorships, which is a far cry from the popular image of corporate America Inc.
As a result of the remarkable growth of pass-through businesses over the past two decades, there is now more net business income reported on individual income tax returns than on traditional C corporation returns. The U.S. Treasury has estimated that as much as 40 percent of all business taxes are now paid on individual tax returns rather than on corporate tax returns. It is interesting to note that pass-through business income tends to be far more stable than traditional corporate income. Since the peak of the last business cycle in 2006, non-corporate income has fallen by just 8 percent, while corporate income has fallen off by 26 percent, which entails some interesting implications for the debate over the relative efficiency of individual and collective private ownership.
Those are some of the circumstances surrounding the rise of the superrich elite, which could not be understood as a product of educational differences. The following statement, however, identifies merely some of the causes behind this rise, as it largely leaves out such crucial factors as capital, ownership and class-at least on the surface, since it is arguable that those factors are present in the formulation cited below implicitly: “In part, it is a natural outcome of widening markets and technological revolution, which are creating much bigger winners much faster than ever before- a result that’s not even close to being fully played out, and one reinforced strongly by the political influence that great wealth brings” (Tax Foundation 2013), as indeed has been argued at length above.
Regarding education, which of course cannot be reduced just to an acquisition of a skilled labour power, one should aalso mention that “recently, as technology has improved and emerging-market countries have sent more people to college, economic pressures have been moving up the educational ladder in the United States. It is, therefore, useful to make a distinction between college and post-college. For people with professional and even doctoral °, job prospects have been very good for a very long time, including recently. By contrast, the group of highly educated individuals who have not done so well recently would be people who have a four-year college degree but nothing beyond that-in their case Opportunities have been not so good, wage growth has been lower, the recession has been more damaging. They have been displaced from mid-managerial or organizational positions owing to their lack of specialized, hard-to-find skills” (Peck 2011).
Moreover, it could be surmised that college graduates may be losing some of their luster for reasons beyond technology and trade. The point is that as more Americans have gone to college, the quality of college education bas become arguably more inconsistent, and the signaling value of a degree from a nonselective school has perhaps diminished. Whatever the causes, “a college degree is not the kind of protection against job loss or wage loss that it used to be” (Peck 2011).
This, to be sure, does not alter the fundamental fact that it is far better to have a college degree than to lack one. Indeed, in terms of human capital theory, “on a relative basis, the return on a four-year degree is near its historic high” (Peck 2011). But it is important to point out that given graduates owe that favourable outcome to flat or falling prospects facing people without a college degree. The truth of the matter is that incomes for college graduates barely budged. All things considered, it is true that College graduates are not doing badly, as Timothy Smeeding, an economist at the University of Wisconsin and an expert on inequality, sttresses. Either way, “all the action in earnings is above the B.A. level” (Peck 2011).
In conclusion of his essay, Peck offers a handful of more general remarks regarding what he considers as the U.S. class structure, and what in actual ffact is merely a stratification scale-in its version where income comes up as the paramount foundation of the latter:
“America’s classes are separating and changing. A tiny elite continues to float up and away from everyone else. Below it, suspended, sits what might be thought of as the professional middle class - unexceptional college graduates for whom the arrow of fortune points mostly sideways, and an upper tier of college graduates and postgraduates for whom it points progressively upward, but not spectacularly so. The professional middle class has grown anxious since the crash, and not without reason. Yet these anxieties should not distract us from a second, more important, cleavage in American society- the one between college graduates and everyone else” (Peck 2011),
which in theoretical terms should be rendered as the distinction between the owners of formal, certified labour power and those lacking such ownership.
However, not only in light of the foregoing discussion, the above contention, perhaps inadvertently, misconstrues the fundamental class divide, as in a capitalist society the latter does not concern just the ownership of labour power whose different types and levels are an outgrowthh of the process of education, but first and formost, all those who own solely their labour power on the one hand and capital owners on the other.
This by no means detracts from the appositeness of the information, according to which “nationwide, even among people ages 25 to 34, college graduates make up only about 30 percent of the population”, as well as the reminder that “a family income of $113,000 in 2009 would have put you in the 80th income percentile nationally” (Peck 2011).
And again, provided-from our perspective-that one can separate the class wheat from the chaff of stratification, so to speak, Peck’s remarks reproduced below are useful:”the true center of American society has always been its nonprofessionals - high-school graduates who did not go on to get a bachelor’s degree, making up 58 percent of the adult population. And “as manufacturing jobs and semiskilled office positions disappear, much of this vast, nonprofessional middle class is drifting downward” (Peck 2011).
In his view, the above data should be gendered, albeit with a difference as compared to the traditional feminist discourse: “men without higher education have been the biggest losers in the economy’s long transformation (according to Michael Greenstone, an economist at MIT, real median wages of men have fallen by 32 percent since their peak in 1973,” (Peck 2011), once one accounts for the men who have dropped from the workforce altogether).
According to the Harvard economist Lawrence Katz, since the mid-1980s, the labor market has been placing a higher premium on creative, analytic, and interpersonal skills, and the wages of men without a college degree have been under particular pressure. And the recent downturn has exacerbated the problem. One reason is that “during the aughts, construction provided an outlet for the young men who would have gone into manufacturing a generation ago. Men without higher education did not do as badly as one might have expected, on long-run trends, because of the housing bubble. The problem, however, is that it is “hard to imagine another such construction boom coming to their rescue” (Peck 2011).
The issue of gender in the context of the present-day condition of what passes as the middle class merits some further discussion.
As a matter of fact, one of the great puzzles of the past 30 years has been the way that men, as a group, have responded to the declining market for blue-collar jobs. Opportunities have expanded for college graduates over that span, and for nongraduates, jobs have proliferated within the service sector (at wages ranging from rock-bottom to middling). Yet in the main, men have pursued neither higher education nor service jobs. The proportion of young men with a bachelor’s degree today is about the same as it was in 1980. And as the sociologists Maria Charles and David Grusky noted in their 2004 book. Occupational Ghettos, while men and women now mix more easily on different rungs of the career ladder, many industries and occupations have remained astonishingly segregated, with men continuing to seek work in a dwindling number of manual jobs, and women “crowding into nonmanual occupations that, on average, confer more pay and prestige” (Peck 2011).
As recently as 2001, U.S. manufacturing still employed about as many people as did health and educational services combined (roughly 16 million). But since then, those latter, female-dominated sectors have added about 4 million jobs, while manufacturing has lost about the same number. Men made no inroads into health care or education during the aughts; in 2009, they held only about one in four jobs in those rising sectors, just as they had at the beginning of the decade. They did, however, consolidate their hold on manufacturing - those dwindling jobs, along with jobs in construction, transportation, and utilities, were more heavily dominated by men in 2009 than they’d been nine years earlier, which seems to suggest that for all the talk about “the gender revolution”, some differences between the sexes remain as firm as ever.
“I’m deeply concerned” about the prospects of less-skilled men, says Bruce Weinberg, an economist at Obio State. In 1967, 97 percent of 30-to-50-year-old American men with only a high-school diploma were working; in 2010, just 76 percent were. Declining male employment is not unique to the United States.
It’s been happening in almost all rich economies, as they’ve put the industrial age behind them-although,as suggested above, it is important to see other than technological factors contributing to what has come to be called de-industrialisation. Weinberg’s research has shown that in occupations in which “people skills” are becoming more important, jobs are skewing toward women. And that category is large indeed. In his working paper “People People,” Weinberg and two coauthors found that interpersonal skills typically become more highly valued in occupations in which computer use is prevalent and growing, and in which teamwork is important. Both computer use and teamwork are becoming ever more central to the American workplace, of course; the restructuring that accompanied the Great Recession has only hastened that trend.
The above, more or less descriptive account should be viewed in theoretical termms, discussed at length elsewhere, (Tittenbrun 2012) such as horizontal co-operation or sociation (in the context of teamwork, the latter should be narrowed down to the collectivisation of labour power ), as well as what has been dubbed a particularistic labour power-that is, displaying the aformentioned interactive or communicative skills. Recall that the point here is not to indulge in a professional jargon or, in its more favorable reading, novel terminology; the crux of the matter is, rather, that those concepts are an integral part of a coherent and theoretically grounded analytic framework within which to analyse what labour economics or other social sciences view as unrelated factors (or by some kind of ill-conceived linkage, such as implied by human capital approach). Thus, the debate is on the supposedly innovative language as such but its being part and parcel of of an analytic framework underpinned by solid theoretical foundations.
To come back to the substance of the argument partly laid down above, it is abundantly clear that a great many men have excellent people skills, just as a great many men do well in school. And it is important to bear in mind that as a group, men still make more money than women, in part due to lingering discrimination, to be framed in some other categories intrinsic to the above-mentioned theoretical approach. From a sociological viewpoint, what also needs to be emphasised is that whilst the impact of “nature”, understood as genetics, on the observable differences between men and women is undeniable, though its real strength is by any means a resolved matter; the role of “nurture”, or the second element in the famous equation, is, just as in the former case, an issue that only unbiased and objective research can establish.
All of that notwithstanding, a substantial number of men have struggled badly as the economy has evolved, and have shown few signs of successful adaptation.
To be sure, men’s difficulties are hardly evident in Silicon Valley or on Wall Street. But they’re hard to miss in foundering blue-collar and low-end service settings across the country. (cf. Peck 2011)
Amazingly, there seems to be some kind of relationship between those real-life difficulties and problems encountered by those who attempt to theorise them in terms of “class polarization in America’s largest metropolitan areas by breaking down their net domestic migration levels according to educational attainment” (Iglesias 2014), which purportedly “paints a really excellent portrait of the dynamics in a place like San Francisco. The point is that thanks to the booming high tech industry clustered in the Bay Area, highly educated workers are flocking to this metropolitan area. But development restrictions prevent Bay Area housing stock from expanding rapidly in response to this demand. The result is that instead of the boom trickling down to the area’s working class residents, they are being pushed out by high housing costs. A similar overall trend, though perhaps less dramatic, can be observed in Seattle, Washington, Miami, and some other coastal cities.
By contrast Atlanta and Riverside are witnessing huge growth in its middle class, to use that otherwise contested term, even while losing highly educated workers-owing to “a lack of prestige jobs and high-end amenities” (Iglesias 2014).
The remaining part of the account under investigation reveals all its conceptual shortcomings: All in all, these kind of trends illustrate how housing patterns are reenforcing trends toward inequality. Both highly-skilled and less-skilled workers have higher earnings potential in San Francisco than Atlanta, and both highly-skilled and less-skilled workers have higher housing costs in San Francisco than Atlanta. But the point is that for the highly-skilled the San Francisco wage premium outweighs the San Francisco housing premium. For the working class, it doesn’t.
So less-skilled workers end up moving to Atlanta despite the worse job opportunities, driving a further wedge between the classes” (Iglesias 2014).
“Classes”? Precisely what classes? The SF highly-skilled “middle class” turns in Atlanta into the same class but this time “less-skilled”. Not only the protean term “the middle class”, but also equally imprecise “worker” are responsible for this confusion; the latter term should be reserved for the working class, since describing in this tautological way all those who work is bound to engender gross misunderstandings. For instance, engineers and technicians employed in high-tech industries are mostly a distinct-pre-material or conceptual-class, whose name is derived from the type of their intellectual labour power and work effected by means of the latter that produces intellectual means of production, constituting a prerequisite of the process of material production.
Anyway, these comments do not question the main thrust of the above argument, capturing one aspect of a broader pattern-socio-economic chasm dividing the U.S. society: “ Higher paid jobs are concentrated along the coasts and in metropolitan areas in the heartland. Real estate values in cities have been rising—along with inequality. The National Association of Realtors found that in 90 of the 100 urban areas it surveyed, homeownership rates have declined, leading to a rise in the Gini coefficient, the common measure of differences in income.
Bureau of Economic Analysis data show that in coastal states consumers spend 50–70% more on health care, food and shelter. Even though both average and minimum wages are also higher there, many low earners are moving to lower-cost regions.
Republicans argue the program essentially forces local governments to give over control of American neighborhoods to federal bureaucrats. Again, this case would benefit from the adoption of real socio-economic class framework, instead of the language of the folk sociology. The reader could be forgiven for being not surprised at the usual in such cases scenario: the attacks of the right-wing deploying always the same arguments:
“The administration] shouldn’t be holding hostage grant monies aimed at community improvement based on its unrealistic utopian ideas of what every community should resemble,” said Rep. Paul Gosar, R–Ariz., according to The Hill.
“American citizens and communities should be free to choose where they would like to live and not be subject to federal neighborhood engineering at the behest of an overreaching federal government.”
Advocates of the new rule argue that it is needed to help poverty-stricken families escape crime-ridden communities. But Gosar, who is leading an ef fort to stop HUD from adopting the rule, says the end result will be neighborhoods that are less appealing to middle-class Americans.
“Instead of living with neighbors you like and choose, this breaks up the core fabric of how we start to look at communities,” Gosar said. “People have to feel comfortable where they live.”
There is also concern over how the new rule would impact local zoning laws. In theory, the agency could dictate what types of homes are built, and who would be permitted to live in those homes, according to Gosar.
Critics have also suggested that moving low-income housing into wealthy communities will depress property values, causing trouble for existing home owners” (Schaus 2015).
Overall, then, it be ruled out that despite of the efforts of Obama’s adiministration to the contrary, the upshot will be that under the Obama presidency this kind of social divisions will solidify, as we indeed are seeing the “haves” making use of their money to create distinctly separate—and more comfortable—lifestyles. Equal access to places and services will be limited and placed on a pay-to-play basis. When Bloomberg was New York City’s mayor, he came up with a congestion pricing scheme, proposing to charge tolls for access to Manhattan and offering fewer traffic jams to those who could pay. The proposal was defeated, but it is an idea whose time has come.
Highways and airways have been this country’s most important egalitarian institutions built up in the post-World War II era, the golden age of the middle class. They linked the continent-size country and are the secret behind the famed mobility of America’s labor force. This may be changing. In Miami—a city that, like New York, is booming thanks to the influx of rich foreigners buying overpriced real estate—you can now drive in a toll lane to reduce commuting time. Tolls in prosperous metropolitan areas are already steep: New York City bridges and tunnels will set you back $15 for a round trip, which is two hours’ worth of work for those who get the minimum wage.
Steep tolls are coming to interstate highways, too. Funding the nation’s highways has been an annual struggle in Congress. The White House has just drafted a six-year, $478 billion bill. Raising tolls is the only way to raise funding without raising taxes, and people with means will be glad to pay them since they will get good, uncongested roads in return. In many parts of Europe, toll roads are a costly luxury and the average motorist takes free local roads.
Airlines are also coming up with an array of for-pay services. Business class is getting more and more luxurious and out of reach: A round trip between New York and Amsterdam costs as much as $10,000” (Jeter 2015). Still another aspect of the social divition in question is concerned with the privatisation and commodification of social life:
“the “haves” keep paying taxes, they increasingly buy their way out of government services—which tend to be subpar, at best, as more and more people depend on them and money to provide them dries up. People in the high income brackets pay for their own medical care, send their kids to private schools, provide for their own pensions, and live in gated communities that minimize dependence on the local police force” (Jeter 2015).
Nor do our earlier remarks detract from the validity of the argument put forward by Rana Foroohar, who writing in the Dec. 2, 2013, issue of Time, has argued that despite an abundance of monetary liquidity, “we have a real-economy-growth problem”. Foroohar acknowledges that the Fed’s monetary policies have benefited the top quarter of American households, which hold most of the country’s equity assets. Yet “they have done much less for the rest,” she contends, “people who continue to struggle with flat wages and higher than normal unemployment.” (Droke 2013)
Boston Fed President Eric Rosengren related to the same trend, but in a different way, which calls into question at least certain modes of arguing for the purported middle class plight-after all, house ownership constitutes part and parcel of many mainstream definitions of the middle class: “If you don’t have a house or stock, you don’t benefit as much from QE” (Droke 2013).
The official rationale of the qe policy is not supported by the hard facts-by printing money, (trillions of dollars, in fact, as we are dealing with the biggest financial stimulus ever attempted-brought finally to an end in the fourth quarter of 2014, i.e. after the third round of this unprecedented programme) for which bonds had been purchased, which liquidity in theory was to strengthen balance sheets of the banks that should augment their credit programmes, giving the spur to the economy. But it did not work quite like that; the bulk of loans extended by the banks landed not in the so-called real economy, or-tied to the latter-in the customers’ pockets but in the hands of the so-misnamed investors, since in most cases the vorrowers were simply speculators and other players in the financial market; the wall between the two worlds: Wall and Main Street had been even fortified, instead of being torn down. Thus, not only from a wider social standpoint, but even from an economic perspective, it is easy to imagine a different shape of the same qe, where the money at stake would be given directly to the U.S. households; a surge in demand would exert a positive pressure on production, and if the firms would need an additional capital for investment, one can guarantee that the latter would be not difficult to find, whether in the form of bank loans, crowd financing, etc.
As the above suggest, it should be useful to trace back at least part of those staggering trends to certain specific policies of the period under consideration.
“Catapulted by the extremist free money policy of the Federal Reserve bond, stock, (upper end) housing and fine art markets have exploded upwards hitting escape velocity.
Global net worth hit a new record high of $81 trillion driven by the inflation of assets held almost exclusively by the 1%. Global central banks acting in coordinated effort have pumped a mind-boggling $29 trillion into major markets causing all manner of price distortions and bubbles.
And on the basis of historical experience, it is not difficult to predict what usually happens next: when these bubbles pop, the working class will pay the price with joblessness and austerity while the capitalist elite will buy up the deflated assets on the cheap, increasing their ownership positions (cf. Wright 2012.
This kind of data and predictions they lead to notwithstanding, the Fed chair would insists that the Fed’s objectives “are squarely tied to Main Street,” as he insisted last year in response to questions at the National Economists Club in November. “The economy has been growing, jobs have been coming back and the Fed has been an important factor in maintaining that momentum.”
The truth of the matter is, however, this is the weakest recovery since the Great Depression, job growth is overwhelmingly part-time and low-paying, and the Fed has created a massive asset bubble best described by David Stockman, who was President Reagan’s director of the Office of Management and Budget: “The Fed is exporting this lunatic policy worldwide,” he explained. “Central banks all over the world have been massively expanding their balance sheets, and as a result of that there are bubbles in everything in the world, asset values are exaggerated everywhere.” This is due to the reality that there is a virtually unlimited supply of money – printed out of thin air, no less – chasing a fixed set of assets, thereby creating ideal conditions for the so-called ficticious capital to arise. All those deveelopments have taken place during the same half a decade in which the rich got much richer and the middle class stagnated, even as Americans have been told time and again by this administration that things are getting better – even as interest rates remain at historic lows precisely because they aren’t. Art Cashin, director of floor operations for UBS, explained what was occurring after five years of unrestrained stimulus: “This market, this whole economy has kind of a split personality. “Wall Street is making a record, and yet your brother-in-law can’t find a job.” (Ahlert 2013)
And indeed, the stock market euphoria could not be stopped even by Ben Bernanke’s announcement that the Federal Reserve would begin “tapering” its purchase of government bonds and mortgage securities by $10 billion per month, as it was, contrariwise, the reason for Wall Street’s rally.
For simultaneously Bernanke announced far more important news: interest rates would remain near zero for the foreseeable future. Thus, the nation remained wedded to a policy best described by Andrew Huszar, who was responsible for executing the first round of Quantitative Easing (QE), as “the greatest backdoor Wall Street bailout of all time”. the plan to keep interest rates low through 2014 should be conceived of as part and parcel of the policy that even the New York Times characterized as one “that began as shock therapy in the winter of 2008” and transformed “into a six-year campaign to increase spending which policy, it may be argued, has led to a massive income and wealth redistribution, whose exact class nature has been more often than not misconstrued-which is above all linked to the problematic notion of the middle class this book is all about.
That there are problems with the aformentioned concept, can be gleaned from many places in the present work, so in the current context let us consider just one case in point.
The commentator in question lays out an explanation of the background to the recent crisis. Starting in 1979, the federal government began de-regulating the banks and brokerage houses. In 1999, the Glass-Steagall Act was repealed allowing commercial banks, investment banks and insurers to merge. The Financial Services Modernization Act did away with more regulation. In 2000 the Commodities Futures Modernization Act did away with still more regulation, this time in derivatives trading and collateral debt obligations.
By 2007, Fannie Mae and Freddie Mac collapsed. In 2008 the U.S. and the rest of the world’s financial system collapsed. Yet the top people in all these corporations got their salaries and bonuses year after year after year. The middle class paid. (cf. CLEAVER 2013)
In what way? This is not made clear, as though the author thought the matter was so self-evident that hardly in need of any additional clarification. But in fact her skipping over the question concerned is indicative of the condition of popular opinion rather than of the real state of affairs. And her further argument makes a little difference in that regard.
She argues that:
The large corporations vote their CEOs and board of directors huge salaries, bonuses and stock options year after year after year, even though their corporations may be losing money. The small stock holders are voting “no” to salary increases, bonuses and stock options but they can do nothing because so many shares are held by the CEO, their boards and their supporters. Again, the middle class is paying to enrich the top money earners.
The middle class struggles and the top money earners laugh all the way to their off-shore accounts. (CLEAVER 2013)
The state of affairs illuminated in the first two sentences of the above paragraph is nothing new, it is well-known at least since the seminal work of Berle and Means. But the problem is the logical fallacy: non sequitur-whether that separation of ownership and control, as it is conventionally framed, is real or not is one thing, but whether it follows from the previous argument is quite another. From claims on banks and government-insured companies it does not immediately follow what conditions have been created for corporations (if they are defined, as it is commonly done, as different entities than banks and other financials, and hence the author’s thesis blaming the government for the woes of the American middle class falters on that count. But is it valid at least as regards the second element of the equation? Hardly so. It is no brainer that the middle classes are-by definition-not present among what she calls the top earners, but again this does not imply that, conversely, it is the former from which the small stock holders necessarily are recruited. In a word, the commentator in question employs as many others do, an array of mental cliches taken for granted by the author and perhaps by some portion of the reading public, which, however, does not render them one iota less problematic.
An Australian newspaper’s reflections on the local bull equity market tell, for instance, quite another story as far as the alleged misfortunes of the middle class are concerned:
The Age urges that the corporate welfare debate be extended - the government should ask the Productivity Commission to report on the full extent of such welfare. Billions of dollars are given to the mining and agricultural sectors each year, for example, through rebates on fuel taxes. Is this the best use of scarce public resources? We would urge, too, an even broader debate about “middle-class welfare” - the numerous tax breaks and transfer payments to people on middle and upper incomes. In particular, we believe negative gearing - the subsidisation of speculation in property and financial markets – and the tax treatment of superannuation are ripe for reform. (Editorial 2013)
And specifically to the U.S. case refers the following critique of Fed’ interest rrate policy from the perspective of its purported victim: the middle-class saver, as though this was the only segment of society prone to save: “Bernanke’s rate ploy robs from middle class“ (Crudeli 2013).
Nevertheless, whether the social reference group in the following claim has been indicated correctly or not, the latter aptly reveals the socio-economic implications of the financial policies concerned which the decision-makers themselves can hardly deemed their success: “The Federal Reserve’s zero interest rate policy (ZIRP) is stripping middle-income people of any fair return on their savings. This is a great impediment to the consumptive economy, for there simply are more people who choose not to borrow to purchase than those who wish to run up credit card balances.
Low interest rates may initially help those who borrow to spend, but eventually those people get credit maxed out, and the consumption ends” (Longstreet 2015).
And indeed, “ recent research by Anthony Webb and Richard Kopcke of Boston College’s Center for Retirement Research confirms that retirees in the middle and upper middle classes (third and fourth wealth quintiles) are more exposed than others to declines in interest income” (Bernanke 2015).
To come bak to the previous thread, in November Boston Fed President Eric Rosengren contended that that particular brand of shock therapy could continue into 2016 (Ahlert 2013).
And the results are plain for all to see: while Wall Street has flourished, Main Street has remained mired in the “new normal.” It is the new normal where a staggering 75 percent of the jobs createdin 2013 have not only been part-time, but low-paying. It is the new normal where the “decline” in unemployment to 7 percent is belied by the reality that a record high 91,541,000 of Americans are no longer in the labor force as of October, 2013, and the workforce participation rate was 63 percent, the lowest it had been since 1978. While some of that decline can be attributed to Baby Boomers retiring, but the participation rate of workers aged 16-54 also declined during the recession.
For reasons described in any textbook of financial economics, the aformentioned interest rate policy has been a godsend for Wall Street, forcing many investors out of low-yield bonds into equities, which have soared-the flood of money, pouring into the market thanks to, above all, the “ printing” magic of the Fed has fuelled the bull market that over the span of 68 months (as of the time of writing)has constantly reached new highs (in 2013, e.g. stocks rose by 27 per cent.)But the consequences of those movements have been by no means purely financial-they need to be viewed in socio-economic and even political terms, as the windfall gains brought about by the Wall Street boom fly in the face of Democrats’ concern with regard to addressing the “income inequality” President Obama rightly characterized as a “fundamental threat” to American prosperity. Meanwhile, 5 percent of Americans hold 60 percent of stock market wealth, and the top 10 percent own 80 percent of It. (Ahlert 2013), and according to BBC, as of October 2014, this number rose to 90 per cent. Put another way, as of 2010 the bottom 90 percent of households owned 19.2 percent of stocks and mutual funds.
During the so-called (six-year) Obama rally wages for most Americans have continued their stagnation. Thus, the people who make most of their income from investments have done very well, thank you. But those who depend on wages have not. Nor have housing prices recovered enough to help the large number whose principal residence is their major investment. The working poor, who are increasingly stuck in minimum- and low-wage jobs, usually lack even flawed 401 (k)s.
It should be also noted that even as more workers receive the minimum wage, it has lagged inflation (and productivity). The $1.60 an hour minimum wage received in 1973 by a low-skilled high-schooler has the same buying power today as $8.43. But the federal minimum is only $7.25.” the federal minimum wage of $7.25 is now worth 30 percent less than it was in the 1960s, after adjusting for inflation.” For someone trying to raise two children on it, it puts one “$4,000 below the federal poverty line” (Morette 2014 ). Symptomically, “McDonald’s even has a resource line to help employees sign up for food stamps and Medicaid, so that they can have healthy employees with the confidence that the rest” (Marcotte 2014) of the nation will foot the bill.
And the constitution of the market under the U.S. shareholder capitalism causes that the odds are permanently against the worker: “the institutional investors that reward or do a beat-down on stocks put a premium on keeping labor costs down. They also like mergers, even though these destroy jobs and tend to deliver only short-term rewards to shareholders. Similarly, what could be for sure said about Offshoring high-skilled, high-paying middle-class jobs or any American jobs is that the market loves it” (Talton 2014).
The specific ownership structure accounts for the exclusive focus on shareholder value with its accompanying short-termism.
“Unlike the stock market when the American middle class was at its zenith, this one mainly prizes the short-term and the cheap. If more and more Americans can’t buy stuff to keep the companies going, then call in Scarlett O’Hara as a consultant. Think about that tomorrow, from your offshore tax shelter.
So it is clear there is “no contradiction between a roaring market and unrest in much of the middle class and working poor” (Talton 2014).
And it is fair to say that it is precisely this asset wealth that has fuelled income inequality more than anything else over the recent years.
And indeed wealth is no less concentrated than income; (indeed, its Gini coefficient is twice as much as that for income (Dabla-Norris et al. 2015)) EVEN PRIOR TO THE LATEST FINANCIAL TURMOIL, Total household wealth was distributed nearly evenly into three groups: the wealthiest 1%, the next 9%, and the remaining 90% (Kennickell, 2006). At the bottom of the wealth distribution, nearly 17% of Americans in 2004 had zero or negative net worth (Wolff, 2007). Individuals in this wealth-poor group who owned assets were also more likely to carry debt (Kennickell, 2006). Furthermore, current household income and total household net worth share a low correlation (Lerman & Mikesell, 1988), suggesting that income inequality can only partially explain wealth inequality (Wolff 2001).
To put it another way, with the bursting of the dot-com bubble, wealth inequality had temporarily fallen a bit. Even so, by 2001, the top 1 percent of households owned 40 percent of the financial wealth in the United States (Wolff 2004). Of course, had the calculation of the wealth holdings of the richest 1 percent been made while the stock market had still been expanding, the number would have been even more extreme than the reported 40 percent.
To be sure, whilst the wealth ladder is not absolutely parallel to that of income, they have much in common. To illustrate, in 1983, the median wealth of middle-income families was $95,879. This was much higher than the $11,544 wealth of lower-income families, but it was far less than the $323,402 wealth of upper-income families. Thus, in 1983, upper-income families had nearly 30 times as much wealth as lower-income families and about three times as much wealth as middle-income families.
The wealth gaps across families in the three income strata widened greatly from 1983 to 2013. Families in all income tiers lost wealth since 2007, but only upper-income families have started to recover; the wealth of lowest of the three income strata was 18% less than they had in 1983, the wealth of middle-income families was essentially unchanged, rising “only 2% to $98,057. However, the wealth of upper-income families doubled to $650,074 in 2013. Thus, in 2013, upper-income families had almost 70 times as much wealth as lower-income families and nearly seven times as much as middle-income families” (Kochhar et al. 2015).
A recent paper by economists Emmanuel Saez and Gabriel Zucman shows that the bottom 90 percent of Americans owns less than a quarter of the country’s wealth, “down to 23 percent from a high of 36 percent in the mid-80s. This is the lowest amount of the country’s wealth controlled by the middle and working classes since 1940.
Back then, New Deal-era economic policies were allowing working people to keep an increasing amount of the wealth they created, but since the mid-80s, there’s been a dramatic downturn, as the top 10 percent hoard most of the wealth” (Marcotte 2014) while the rest of the population watch their savings accounts dwindle. Really, it’s more like the top 1 percent, as the In other words, “from the Great Depression in the 1930s through the late 1970s there was a substantial democratization of wealth. The trend then inverted, with the share of total household wealth owned by the top 0.1 percent increasing to 22 percent in 2012 from 7 percent in the late 1970s. The top 0.1 percent includes 160,000 families with total net assets of more than $20 million in 2012. [...] wealth inequality has exploded in the United States over the past four decades. The share of wealth held by the top 0.1 percent of families is now almost as high as in the late 1920s, when “The Great Gatsby” defined an era that rested on the inherited fortunes of the robber barons of the Gilded Age.
In recent decades, only a tiny fraction of the population saw its wealth share grow. While the wealth share of the top 0.1 percent increased a lot in recent decades, the share of the next 0.9 percent (families between the top 1 percent and the top 0.1 percent) did not. And the share of total wealth of the “merely rich”—families who fall in the top 10 percent but are not wealthy enough to be counted among the top 1 percent—actually decreased slightly over the past four decades. In other words, family fortunes of $20 million or more grew much faster than those of only a few millions” (Saez, Zucman 2014).
And the consequences of this concentration of wealth at the top of the ladder are bound to affect the lower tiers, including the one being in the focus of that study. The erosion of wealth among the middle class and the poor, speaking in terms of stratification,undermine “a widespread public view across American society that a key structural change in the U.S. economy since the 1920s is the rise of middle-class wealth, in particular because of the development of pensions and the rise in home ownership rates” (Saez, Zucman 2014). The two researchers mentioned above show that “while the share of wealth of the bottom 90 percent of families did gradually increase from 15 percent in the 1920s to a peak of 36 percent in the mid-1980, it then dramatically declined. By 2012, the bottom 90 percent collectively owns only 23 percent of total U.S. wealth, about as much as in 1940 The growing indebtedness of most Americans is the main reason behind the erosion of the wealth share of the bottom 90 percent of families. Many middle class families own homes and have pensions, but too many of these families also have much higher mortgages to repay and much higher consumer credit and student loans to service than before. For a time, rising indebtedness was compensated by the increase in the market value of the assets of middle-class families. The average wealth of bottom 90 percent of families jumped during the stock-market bubble of the late 1990s and the housing bubble of the early 2000s. But it then collapsed during and after the Great Recession of 2007-2009.
Since the housing and financial crises of the late 2000s there has been no recovery in the wealth of the middle class and the poor. The average wealth of the bottom 90 percent of families is equal to $80,000 in 2012—the same level as in 1986. In contrast, the average wealth for the top 1 percent more than tripled between 1980 and 2012. In 2012, the wealth of the top 1 percent increased almost back to its peak level of 2007. The Great Recession looks only like a small bump along an upward trajectory” (Saez, Zucman 2014).
And indeed, most recent data confir Saez and Zucman’s findings. The contrast between the broad economic recovery and its effects in the area of socio-economic stratification is stark: “over the past six years the ship was righted and, amidst bleak economic news elsewhere, the United States once more stands as a paragon of economic strength. All three major stock market indices are at all-time peaks, corporate profits are at a record and the jobless rate is back to its pre-crisis lows. Consumer confidence and consumer spending are rising along with an uptick in wages.
Growing Gap But there is a paradox at the core of Obama’s legacy. No other president has spoken more about the need to help the middle class, and yet on his watch the middle class suffered an unprecedented deterioration of its economic position, both in relative and absolute terms. Various statistics, including the tri-annual survey of consumer incomes and net worth by the Federal Reserve, show that the recovery has been shared unevenly, with the lion’s share of gains accruing to the highest income brackets.
Much has been made about the enormous enrichment of the top 1% of households, or the richest 0.5%, who now own as much wealth as the bottom 90%.
To put it differently, “99 percent of all new income is going to the top 1 percent”, [...] In the last two years, the wealthiest 14 people in this country increased their wealth by $157 billion. That increase is more than is owned by the bottom 130 million Americans – combined” (Sanders 2015).
The flip and scary side of the coin occurred in “the middle third of the income brackets. According to the Fed, between 2010 and 2013, the years of economic recovery, the top third of American households saw an increase in their net worth measuring 7.3%, to over $600,000 in constant dollars. The bottom third suffered an 11.4% decline, to less than $10,000. The middle third was stagnant, at $96,500.
What actually happened within this middle-income third is the stratification of the middle class. Some households saw their assets increase even as others experienced a decline. The resultant impact was a wash” (Jeter 2015).
Compared to their solid research and competent mathematics, the explanation of the growing wealth disparities in the U.S. they offer is rather superficial, failing to touch on the deep structure of property relations that underpins the trends observed: the combination of higher income inequality alongside a growing disparity in the ability to save for most Americans is fuelling the explosion in wealth inequality. For the bottom 90 percent of families, real wage gains (after factoring in inflation) were very limited over the past three decades, but for their counterparts in the top 1 percent real wages grew fast. In addition, the saving rate of middle class and lower class families collapsed over the same period while it remained substantial at the top. Today, the top 1 percent families save about 35 percent of their income, while bottom 90 percent families save about zero” (Saez, Zucman 2014). Not that the aformentioned explanation is incorrect; but it is only partial, being framed in conventional economic terms, it lacks a deeper theoretical foundation, which is difficult to grasp when sticking to the language of stratification, instead of class and property relations. It does matter whether we embed our explanations in the context of the notion of “market economy”, “ (post)industrial society”, or “capitalism”. Only the latter is inextricably linked to the concept of the underlying economic property relations, whose analysis is striking by its absence in the bulk of the literature.
The pattern is especially stark if one excludes home equity. This is a useful exercise because we know from 2010 to 2013 financial assets have performed very well. Housing has performed decently as well, but much of the strong performance of housing is driven by investors who are likely part of the richest 20% of the distribution. The ratio of non-home equity wealth of the richest 20% to the middle 20% exhibits an unequivocal tendency: A sharp rise in wealth inequality. In 1998 the richest 20% had 25x the non-home equity wealth of the middle 20%. It has risen to almost 45x in 2010 (Mian, Sufi 2014b). To exclude any suspicion of statistical manipulation, inequality based on home does show anything like dramatically different, let alone opposite trend to that noted above.The rise in wealth inequality focusing only on home equity is, to be sure, smaller in magnitude, but goes in the same direction overall. Interestingly enough, the middle 20% made gains on the top 20% from 2004 to 2007, which reflects the fact that house prices rose fastest in middle and lower income areas (Mian, Sufi 2014b).
Let us turn to those sttatistics that use the measure of concentration made famous by the Occupy Wall Street movement. In 2007 the richest 1% of the American population owned 34.6% of the country’s total wealth, and the next 19% owned 50.5%. Thus, the top 20% of Americans owned 85% of the country’s wealth and the bottom 80% of the population owned 15%”. The result is that financial inequality (Financial wealth” is defined by economists as “total net worth minus the value of one’s home”, including investments and other liquid assets.) was greater than inequality in total wealth, with the top 1% of the population owning 42.7%, the next 19% of Americans owning 50.3%, and the bottom 80% owning 7% (Jacobs 2011). However, after the Great Recession, which should be rather dubbed depression, that started in 2007, the share of total wealth owned by the top 1% of the population grew from 34.6% to 37.1%, and that owned by the top 20% of Americans grew from 85% to 87.7%.
And it should be mentioned that those are official figures, far from accurate.
“The top 1 percent of U.S. earners were previously estimated to control 30 per cent of the country’s wealth but it seems that number could be closer to 37 per cent.
A new working paper from European Central Bank senior economist Philip Vermeulen claims 30 percent is a lowball estimate of the net worth of the nation’s elite because wealthier households are less likely to respond to surveys about their assets than lower-income families, which pattern can be also found in sociological research.
Vermeulen ‘s research may also suggest that the wealth controlled by the richest 5 percent in America, which was always thought to be a huge 60 percent, may be more as well.
The men and women on the Forbes’ billionaires list have an aggregate wealth of $6.7 trillion” (Daily Mail Reporter 2014).
More specifically, The ultrarich-“people with net worth of more than $100 million owned 11% of total wealth in 2012 (their share nearly tripled in relation to the mid-1980s when they owned just over 4% of the total wealth in the U.S., according to a recent paper by University of California Berkeley economists Emmanuel Saez and Gabriel Zucman), those who could be regarded as really rich have done pretty well too. Those worth between $20 million and $100 million have seen their wealth share nearly double, while the merely rich - those with wealth between $4 million and $20 million - saw only a slight uptick.
The crux of the matter is, the other 99% of households saw a relative decline in wealth.
There is a regularity (known as the Matthew effect) pointed out by Branco Milanovic, a visiting professor at the City University of New York and an expert on income inequality: “The higher you are in the income distribution, the greater the gains”.
At the same time “people who are poorer haven’t really benefited from the expansion.”
The reasons lying behind This wealth explosion cannot be brought down to tax advantages alone, though it is true that-as evidenced in this book-the wealthy enjoy low tax rates. But blaming tax cuts for the current wealth concentration would be far too simple, as evidenced by the fact that the trend worldwide has been similar, and is expected to accelerate in the years to come.
Indeed, according to the Boston Consulting Group,the ultra rich around the world are expected to see their wealth grow by over 9% a year between 2012 and 2017. There are over 3,000 of these $100 million-plus households in the United States alone.
Meanwhile, households worth less than $100,000 are expected to see their net worth grow just 3.7% a year.
Among reasons why the rich are getting richer faster than everyone else, the following factors are usually mentioned: according to one view, today’s entrepreneurs tend to be quickly vaulted into the ultra rich category (think of Facebook’s Mark Zuckerberg). Another position holds that the already well-off have access to better financial products.
A somewhat related theory is that the wealthy are better able to take advantage of technology and globalization: As companies and markets become bigger, those at the top are given bigger rewards. All those factors have in fact a common origin in the “Matthew effect” that in colloquial terms couches what constitutes the core of ownership, as will be later illuminated by our rent-based approach.
For a change,” Robert Frank, Cornell University economist and author of a book under a trendy title: “The Winner-Take-All Society” represents a view whose relevance is more limited. He says: “Talent is hard to find, production workers are not”. It has much more specific application inasmuch as real talent is really rare-the very concept can refer to a soprano, but very seldom to a manager, and of course, you don’t need to have any talent at all to be a member of the arch-rich Walton family, which, with its Wal-Mart fortune, now owns more wealth than the bottom 40 percent of Americans (Wolfe 2014).
There is more to be said for the view of French economist Thomas Piketty, who in his “Capital in the 21st Century” argues that inequality has always been extreme, as-it might be added-an endemic feature of shareholder capitalism with its emphasis on certain types of capital ownership. In his opinion, the relative drop in inequality witnessed during the middle of last century was an anomaly, caused at that not so much by the middle class becoming new affluent winners, but rather by the rich turning into relative losers-as a consequence of two world wars and the Great Depression.
Anyway, according to what Piketty recently told CNN, “we’re going back to the kind of concentration of wealth we had in the 19th century,” (Hargreaves 2014). While the quality of the French economist’s data attracted some critical attention, more important seems to be his theoretical blunders. In Ch. 3 of his book Pickety deals with historical transformations of capital, taking land as his starting point. This makes clear that his purportedly historical account is in point of fact ahistorical, squeezing into the straightjacket of capital certain economic categories that may be its antithesis rather than subvariety. Pickety defines capital as a tradeable asset, which is evidently over-inclusive. It is difficult not to associate this theoretical ignorance of major proportions with the cavalier posture toward the author of another work, having “capital” in its title. Indeed, it is even more than that, it is bad manners andd THE UTTER LACK of CLASS. Namely, during the BBc’s “Exchanges” broadcast 21st of June, 2014, Pickety -asked about the relation of his work to Marx, to whom it is related at least by the title, dismissed any suspicion of affinity-in a very bad style, claiming not only that the head of his book has nothing in common with Marx’s work, whose “reading was always boring for him”, and moreover he is, after all, wholeheartedly for capitalism, free market and private property, and never ever disgraced himself with anything like membership in the communist party. Conversely, he, always pure academic supported instead the collapse of communism in Eastern Europe, and so on. These are rather disconcerting confessions, even from the perspective of the present author, whom history made a viewer of sometimes pitiful spectacle of ideological conversions and twists taking place in recent years in his country. “Communism”, “Marxism”, “historical materialism”, and “Marxian political economy” are all distinct concepts, even if they have something in common, this “something” being again very different from case to case.
Given the underlying assumptions of the reasoning being marked by such flaws, it is not surprising that also the propositions drawn from those are faulty; for Picketty (2014: 20144) The “rate of return on capital” ® represents the sum of interest payments, dividends, rents and other forms of annual income, except labour income, as a percentage of total wealth This definition only confirms that for Picketty capital equals wealth, which is naturally untenable. The growth rate (g) represents the annual growth of national income. Both rates are understood in real terms, that is they exclude inflationPicketty (2014: 571) argues that the return on capital exceeds the growth rate and elevates this relationship to the rank of “the central contradiction of capitalism”, contending on that basis that “[t]he inequality r > g implies that wealth accumulated in the past grows more rapidly than output and wages”.
From a logical point of view, the latter claim is fallacious, or to be more exact, can be true only under very special conditions, i.e. wherein the entire return on capital is reinvested. Ironically, the French economist, distancing himself from Marx, adopted thereby one of the theoretical premises put forward in “Capital”. But what was satisfactory for Marx’ analysis of political economy of capitalism, need not be such in a grand theoretical scheme of historical and interdisciplinary ambitions From a sociological standpoint, the Marxian simplified assumption treating economic agents as functions of theirownership positions, where the latter are understoodaccording to the simple, dual schema, is not sufficient.
It is apparent that a portion of the return on capital may be consumed by its owner, which applies to an even greater extent in the case of land and other non-capitalistic forms of wealth.
Picketty then introduces what he terms “the first fundamental law of capitalism”: α = r × β, where α represents the capital income share and β denotes the wealth–income ratio. This equation simply states that the capital income share equals the product of the interest rate and the wealth–income ratio, which represents a mere accounting identity, as Piketty admits. Nevertheless, he gives it a causal interpretation on p. 221, claiming that an increase in β is likely to induce subsequent increases in α because “the accumulation effect will outweigh the decrease in the return on capital”. Law or not, the above statement constitutes in point of factthe central claim of the study : owing to high accumulation and low growth, the wealth–income ratio rises, as does the capital income share – with the effect that workers receive a correspondingly smaller piece of the total cake. The latter regularity may well be true, the point is that Picketty’s study does not substantiate it at all.Picketty (2014:200 passim), presents what he regards as British and French capital income shares over the 1770–2010 and 1820–2010 periods, respectively. Quite apart from his “capital” being in fact a misnomer, these longitudinal data suggest anything but an upward trend in capital income shares. On the contrary, capital income shares were lower in 2010 than in 1820 and 1900, reaching record lows in the 1970s and 1980s. Rising capital income shares show up only in time series starting in 1975, at about the all-time minimum; (cf. Piketty 2014:20144. Therefore, his key premise that the mechanism of distribution works in the long run against labour income has not been vindicated, and Piketty acknowledges this by pointing out the possibility that “technological changes over the very long run will slightly favour human labour over capital, thus lowering the return on capital and the capital share” (2014:233), to which he adds as frankly as helplessly: “The future development of the income shares is simply a matter of speculation”. Were it not for Picketty’s averse relation to Marx, mentioned above, one could recommend to him a deeper thinking over of Marxian law of the falling rate of profit which framework makes it possible to tackle the issues mentioned and unmentioned by the French economist in a far more theoretically informed and evidence-based manner.
Picketty goes on to lay out the second fundamental law of capitalism which reads: β = s/g, where s represents the savings rate. In other words, the said equation holds that the wealth–income ratio equals the savings rate divided by the growth rate. By contrast to the first law, the second law is not an identity; rather, it holds only in a steady state where income and wealth grow at the same rate, In this case, the wealth–income ratio remains constant. Ironically, Piketty’s account of economic growth in terms of both the “central contradiction of capitalism” and the “second fundamental law of capitalism” is itself self-contradictory, since the former proposition posits a rising wealth–income ratio, whilst the latter one implies a constant wealth–income ratio.
As sort of counterbalance to pickety’s confession mentioned above one may cite one Russian columnist’s claim, adding -as it does-to the list of presumed causes of the central trend examined in chapter one, as well in many others, since asserting that it was “the fall of Soviet Union” that “ruined the American middle class”. There is a grain of truth in this claim inasmuch as there is little exaggeration to the claim that not the workers in the Soviet Union itself but those in the West benefitedmost from the existence of the state whose regime was officially defined as the dictatorship of the proletariat. While the notable improvement in the working-class living standards had obviously more sources, the Western governments’ striving to outpace the Soviet Union also on this front of the then Cold War was a significant contributing factor. Therefore, the Russian commentator could write that “the crumbling of Soviet Union in the Eighties, helped by the betrayal of Mikhail and part of the bureaucrat[ic] elite, put an end to that golden age in the West” (Bonnal 2014). To be sure, this kind of treatment, common in today’s Russia, is untenable-it substitutes moral judgments (of the then Soviet leader) for a substantive analysis of endogenic and exogenic factors causing the system of “real socialism” to crumble, to use Bonnal ‘s Bphrase. In a nutshell, (a more extensive analysis can be found in Tittenbrun 1993) those reasons could be brought down to the fact that “real socialism” never was, it remained at the stage of formal socialism. This draws on Marx’s parallel idea concerning capitalism-formal capitalism was one in which the mode of production still employed the productive forces of the previous historical formation, and it is only in real capitalism in this sense that with the industrial revolution specifically capitalistic forces of production emerged. Meanwhile, actually existing socialism, to use its alternative name, never exxperienced what would be a counterpart of the latter revolution, and as a result never generated (on any considerable scale) class-tilted means of production whose class properties, would manifest in a favourable relation to the needs and interests of direct producers. My contention is, “real socialism”’s inability to innovate manifested in the most salient and fateful way precisely in that area. Socialism did not form anything like mechanisms of capitalist competition that force innovation and efficiency-oriented measures on a massive scale.
The Great Recession also caused a drop of 36.1% in median household wealth, which can be treated as a wealth counterpart of the common income indicator of the middle class, but a drop of only 11.1% for the top 1%, further widening the gap between the 1% and the 99% (Jacobs 2011; Wolff 2010).
A key reason why such evidence of huge socio-economic inequalities can co-exist with a widespread self-identification with the middle class is provided by surveys of US populations that indicate an “ideal” distribution that is much more equal, and a widespread ignorance of the true income inequality and wealth inequality” (Norton, O’Reilly 2011).
To revert to the above-cited commentator, little wonder that the author of such a pessimistic account concludes his “blues” with the following conclusion: “To paraphrase the Roman historian Tacitus, where we have made a desert of the middle class, we call it a recovery” (Hanson 2013).
But even he is being outperformed in this odd competition of malcontents by an author of the following “view of what is developing over about a generation: “the Middle Class is being decimated, death of a 1000 cuts. By 20-30 years expect the MC to be no more than a half in size. The majority of the leavers will become Poor. The rest will become SubPoor – no income and no assets” (Davis 2013). Compared to this detailed forecast, the following otherwise dramatic claim seems not that impressive: “I wrote during the financial crisis that the devastation from the crisis was so severe that America would be forced to become more like Europe, where the middle class disappeared and there are only the rich and the poor now. That’s a forecast I made five years ago, which with each passing day, unfortunately, comes closer to fruition.
[…] That social class that once helped the U.S. economy grow and prosper is coming apart. Will the U.S. economy ever be the same without it or is this the new norm?” (Guest writer 2013).
The next lamentation in the series under the title “the death of the middle class”” adds a number of details to the portrait of this largely defunct social group: “Seventy-six percent of all Americans live check to check, and 46 percent have less than $800 in savings. America’s second largest employer, after Wal-Mart, is a temp agency, Kelly Services! With the exception of the wealthy, the incomes of Americans are declining.
The implosion of the housing market has savaged the middle class. The delinquency rate on single-family mortgages earlier this year was 558 percent higher than the delinquency rate in the first quarter of 2005. Homeownership is at it lowest rate in almost 20 years. Median household income has declined by almost 8 percent since 2000. Sixty percent of the jobs lost in the recent recession were good-paying jobs, but almost 60 percent of the jobs created since then have been low-wage jobs. The nation has lost 56,000 manufacturing plants since 2001, and the number of Americans employed in manufacturing has dwindled from 17 million to 12 million.
Almost 50 million Americans live in poverty. About 25 million American adults live with their parents. In 2000, 17 million Americans were on food stamps, while today it’s 47 million” (Goldman 2013).
Other data relevant to the issue under consideration include the median middle class household income in 2012: $51,017 and in 1989: $51,681 Year inflation-adjusted median household income peaked at $56,080: 1999
Income needed in a two parent, two child home in St. Louis for an adequate living standard:
$64,673 and in New York City: $94,676 Share of self-described middle-class adults who say it’s more difficult now than a decade ago for middle-class people to maintain their standard of living:85 Percentage of Americans that consider themselves to be “lower class” (the highest percentage ever):
Percentage increase in salary growth for the median worker from 1979 to 2012: 5
Percentage drop in average real income per family since 2007: 8.3
The median net worth of a family in 2010: $77,300 and in 2007: $126,400
Percentage of Americans that are unemployed/underemployed rate: 14, which figure for 2014 should be lowered to 12, according to some experts.
Number of states in which poverty rates rose between 2007 and 2010: 46
Approximate poverty rate from 2009 to 2012: 15.
The last time it remained at or above 15 percent for three years running: 1965. (Kamp 2013)
To expand a little on the latter statistics, “
US population 2011: 312,408,474
49 million—including 16.7 million children—are having trouble putting food on the table.
91.6 million (30% of the population) in poverty at 200% of the Federal Poverty Level—equal to the entire populations of California, Iowa, Texas, New York and Massachusetts combined.
In 1950 the poverty rate was 22% or 39.5 million. 1973 = 11.1% or 23 million. 2000 =11.3 % or 31 million. 2005 = 12.6% or 37 million. 2008 = 13.2% or 39.8 million, 2011 = 15.1% or 46.2 million.
Over one in six Americans live in poverty.
And here are a couple of other shocking statistics: “Over half of Americans will live in poverty sometime during their lives.
48 million people between 18 and 64 did not work even one week. This is up from 45 million in 2009” (Poverty Statistics 2012).
It should be clarified that “in America, a family needs twice the federal poverty level to provide basic needs” (Poverty Statistics 2012). At the same time, at the other end of the spectrum, 34% of all billionaires are Americans. Overall, “of the 19 OECD nations, the USA has the highest rate of income disparity and poverty other than Mexico and Turkey” (Poverty Statistics 2012). In terms of UN Poverty Index US ranks 17th out of 19 countries. “According to the OECD, the U.S. poverty rate is the highest in the developed world”. (Poverty Statistics 2012) The last magnitude figures prominently also in the following logical exposition of the current plight of the grouping under examination, though the ttruth is, those musings refer primarily to the employee mega-class, and less so to certain other fractions of the “middle class”, for which the risk of being made redundant is, if any, not that great.”According to a Bankrate survey, 55 percent of women and 45 percent of men do not have at least three months’ worth of emergency savings” (Rawes 2014), the critical relevance of which fact surfaces in the event of losing a source of income in the form of a job.
The author reminds the reader that “the official poverty rate in the U.S. is 15 percent.
That’s 46.5 million people earning less than $11,670 per year ($972.50 per month) for single-person households. Families of four in this category are earning $23,850 or less annually.
Although many of the lower-income earners are among those who have no emergency savings and are in essence broke, they are not the only ones. Most Americans 76 percent, in fact – live paycheck to paycheck. This category includes those across many income levels, particularly middle-income earners.” (Rawes 2014).
It is stated that “a middle-class standard of living requires that families have adequate financial security to meet current obligations, invest in the future, and access opportunities” (Draut, Wheary 2008). The Middle Class Security Index, created by Demos Abstracting from the problematic ontological status of what goes by the name of “the middle class”, another issue posed by the above reasoning is that such needs are by no means peculiar too the group concerned; poorer workers may even more care about their financial security, after all. And what follows does not repeal the criticism of “classism”, analoguous to sexism or racism, i.e. discrimination with regard to class- as the middle class is accorded a privileged status, the remaining classes become, by implication, disadvantaged.
“The Institute on Assets and Social Policy at Brandeis University, focuses on five interrelated factors that in combination describe the security or vulnerability of middle-class families—assets, education, housing, budget and healthcare.
For each of these factors measured by the Index, researchers established an optimal threshold for overall financial security as well as one for economic vulnerability. [...] Between 2000 and 2006-even before the 2008 Recession the economic well-being of middle-class families slipped noticeably. Between 2000 and 2006 an estimated 4 million middle-class families lost their financial security, bringing the total number of middle-income families on shaky ground to 23 million” (Drout, Wheary 2008).
It is thus noteworthy that between 2000 and 2006:
“The median financial assets held by middle-class families declined by 22 percent. This means that for every dollar in median assets that middle-class families held in 2000, they held just 78 cents in 2006. These figures do not include home equity and therefore do not reflect additional losses families may have experienced due a decline in their home values” (Draut, Wheary 2008).
The role of the factor considered above has been underscored in the pronouncement whose author inadvertently endorses our core thesis in that she proposes to dispense with the term “class” altogether, replacing it with the term related at least indirectly to income, and thereby stratification: “Perhaps a better term for ‘middle class’ might be ‘financially secure’. It’s the insecurity that makes life so difficult for people in the broad range of the middle class. One job loss, one health emergency, and all you’ve worked for - a home, retirement, savings etc. can be wiped out. I live in Palo Alto, where the house we bought 20 years ago for $375,000 is now worth $2 million. Basically, I won the real estate lottery, but I am very concerned about the effect that has on my community, the kind of people who can afford to live here and those who can’t (including my own children). My husband and I have been careful savers, and we’ve been lucky. A start-up funded three college tuitions, so that my oldest was able to graduate with no loan debt. He and his husband were able to buy a house two years out of college, and they are solidly in the middle class. But how many of their peers can say the same thing? The main threats I see to the middle class is a younger generation so burdened with student loan debt, so far behind in the job market, and therefore unable to buy a house or start a family. As I enter my 50s, I want to see government policies that stop rewarding the older generation at the expense of the young. That’s the only way we’ll have a middle class that’s expanding, rather than shrinking” (Wahl 2014).
Just as in the above case, the following respondent took part in an online poll, answering the question: “Do you consider yourself middle class? Not anymore. I’ve been ‘relieved’ of this ‘position’ in the class structure of America. The social/educational programming of most Americans has let them accept conditions which our forefathers would have considered intolerable. Those of the entitled class, elitist if you will, allow economic failures to occur which benefit only themselves and then push the debt onto the public, via the government. The new slavery is economic, wherein all are bound by their debt, be it car, home, health or education” (Seger 2014).
The author of this otherwise interesting pronouncement is, however, incapable of articulating his social-structural views, which is not surprising, given the effects of socialisation stressed by himself, AFTER ALL. He is hesitant as to how to frame those at the top: the privileged class, the elite, or whatever. Still more awkward is the collective name given to all the various debt-credditor relations. Historically (and in our times, too, in the form of peonage) there was indeed the relationship between the latter and the former -debt bondage or bonded labour as a means of paying off loans with direct labor that could lead to the loss of ownership of his or her labour power, or turning into a slave proper. Still, one must not conflate both those concepts, as in the case of bonded labour one remains a part-owner of his/her labour power.
The aformentioned analyst is curious to know “why is this? Why is the average consumer, who is earning a middle-class income, broke? In his opinion, there are five reasons why this is the case:
1. Employment and earnings
In all likelihood, “you’re earning less than the middle-class members of some of the previous generations. A family that earns a median household income of $51,017 today is a fairly accurate representation of a middle class household in the United States. In 1969, a middle-class household earned $54,817 in today’s money. In 1979, that number went up to $54,993 in today’s money. By 1999, middle-class households were earning $59,758 in today’s dollars —more than $8,700 per year more than they are making today” (Rawes 2014).
The aformentioned author goes on to recall that in addition to the middle class earning less than it did in the past, the recent economic downturn caused a spike in unemployment in 2009, where rates reached 10 percent in October and then remained at 9 percent or above for the next 23 months. When there are that many people unable to find a job that they are actively looking for, many of them end up obtaining low-paying positions for which they are overqualified.
2. Prices high gas prices pump
While you’re earning less, you’re also paying more for the goods and services you purchase. A publication by Daily Finance compares prices between 1999 and 2009. A gallon of gas was $1.30 in 1999, and by 2009, that price went up to $2.56. Today, you pay an average price of
$3.65 per gallon at the pump. For a McDonald’s Big Mac, you’d shell out $2.50 in 1999 and today, you’re looking at an average of around $4.60 (Rawes 2014).
3. Lifestyle and overspending
Under this rubric, what in the author’s opinion deserves to be stressed is consumerism, which indeed constitutes an enormously strong ideology in today’s society. Suffice it to state that one estimate indicates that 52 percent of Americans are spending more than they earn. The Bureau of Labor Statistics’ consumer expenditure surveys reflects this sentiment. Annual expenditures exceed income across several locations, income levels, and demographics (cf. Rawes 2014).
To expand on this topic, “each time the newest piece of technology hits the market, consumers rush out to purchase it. Wants have turned into perceived necessities, resulting in
more spending and less savings” (Rawes 2014).
This should be commented upon, as what has been described above has by no means just macroeconomic consequences; in socio-economic terms, heavy users of credit cards enter into a definite debtor-creditor relation, which at the same time has an ownership significance. From the standpoint of the theory held by the present author, what matters in an analysis of economic property relations is above all their substance per se, i.e. benefit; of minor importanc, therefore, are differences regarding ways in which those benefits are acquired; in other words, from this point of view, for instance, all the various categories of financial claimants to corporate profits could be regarded -provided that the benefits in question are substantial enough-as part owners of this corporation’s capital. What is alluded to, is the fact that consumer debt could also be treated in terms of property relations. Again, depending on the size of the sums involved, consumers get via this route partially expropriated. As a general rule, it can be assumed that the object of that ownership is composed of savings, since we are dealing with consumers. But, sure enough, this is just the first approximation; the real-world situations present far more complex configurations, notably mixing capital income with pay for work, and what have you. This is a relatively uncharted territory, but certainly worthy of further research.
The next item is related to the previous one:
4. Student loans
“In addition to earning less and spending more, you may also begin your career in debt. Starting out behind, it may be difficult to get caught up while paying your loans on top of a home, vehicle, and all of your other expenses. Student loan debt in the U.S. adds up to a combined total of more than $1 trillion.
5. Credit and debt
Interest on revolving lines of credit may result in long-term high monthly payments. The result is one ends up paying for a single credit card purchase or series of purchases for several years. As of late 2013,
Creditcards.com reports the total revolving debt in the U.S. was around $860 billion, with the average cardholder owning 3.7 credit cards each.
So while you are earning less, spending more, and starting your adult life in debt, you are also borrowing additional funds at high interest rates just to get by – that is why you are broke” (Rawes 2014).
Such pessimistic judgments are no exception; on the contrary, obituaries announcing “demise”, “decline”, “meltdown”, “collapse”, etc. abound. To cite but one example of an article, whose author wonders “why the middle class is being destroyed”. Significantly, his definition of the middle class has been couched in two tenses: “people facing hard times, […] people who used to be part of what we nostalgically call the middle class” (Jaco 2013).
The next story goes further; had it not contained certain graphic phrases, it might qualify as an epitaph-it reports a conversation of two financial experts: “he said, “look out the windows”. We looked out at all the office buildings around us. “What do you see?” he said. “I don’t know.” “They’re empty! All the cubicles are empty. The middle class is being hollowed out.” And I took a closer look. Entire floors were dark. Or there were floors with one or two cubicles but the rest empty. “It’s all outsourced or technology has taken over for the paper shufflers,” he said. “Not all the news is bad,” he said. “More people entered the upper class than ever last year.” But, he said, more people are temp staffers than ever. And that’s the new paradigm. The middle class has died […] You’ve been replaced. Technology, outsourcing, a growing temp staffing industry, productivity efficiencies, have all replaced the middle class. The working class. Most jobs that existed 20 years ago aren’t needed now. Maybe they never were needed. The entire first decade of this century was spent with CEOs in their Park Avenue clubs crying through their cigars, “how are we going to fire all this dead weight?”. 2008 finally gave them the chance. ‘It was the economy!’, they said. The country has been out of a recession since 2009. Four years now. But the jobs have not come back. I asked many of these CEOS: did you just use that as an excuse to fire people, and they would wink and say, “let’s just leave it at that” (Rawes 2014).
This gives rise to an almost apocalyptic picture:
“I’m on the board of directors of a temp staffing company with $600 million in revenues. I can see it happening across every sector of the economy. Everyone is getting fired. Everyone is toilet paper now” (Altucher 2013)
This view is echoed by a well-known right-wing broadcaster, Leo Dobbs, who is “deeply worried about our middle class, because it is the foundation of our society and our nation. And both parties seem quite content to let working men and women flail, when indeed we should be creating an environment for the empowerment of working men and women to make not just a good living, but a living that allows them to provide for their children and their children’s future.
Instead, we are outsourcing jobs, we are off-shoring production, and we are paying lip service to the quality of education but not really doing much to change the sorry conditions of our public schools. [...]We’ve still got more than 20 million people unemployed, underemployed or having given up being employed.
Twenty million people! That’s just about 15 percent of our labor force. That’s unthinkable” (Heyl 2014).
It also comes as no surprise that similar claims are advanced not only at the federal, but also at the state level. For instance, in an article under the telling title “The Disappearing Middle Class: Help Needed”, it is stated that “throughout southern New Jersey, the number of households considered middle class - earning between $35,000 and $100,000 annually - has fallen, while the number of households earning more and the number earning less than that have grown” (Perskie 2013). Thus, at that mesolevel, just as at the macrolevel, income criteria are used to define the middle class. The author’s claims concerning growing income disparities are typical for the literature under consideration as well; “In the slow recovery from the recession, the wealthiest New Jersey residents have benefited the most.
At the other end of the spectrum, the loss of good-paying, full-time jobs and their replacement with low-wage jobs, often without benefits, has been ongoing.
The recession exacerbated that trend, causing about 58,000 New Jersey households to drop out of the middle class and join the working poor.
Many of these formerly middle-class families are facing financial hardship for the first time. People who have worked hard all their lives are now turning to charities - the same charities they used to support - for help. The Community Food Bank of New Jersey reported that requests for help were up 50 percent in November” (Perskie 2012).
The category under examination (as it ought as a matter of fact to be called until the question of its classness or the lack thereof is resolved) finds itself in so dire straits that even slow recovery of the economy in 2013 apparently failed to make dent in the former. According to the Bureau of Labor Statistics, in November the economy added 203,000 new jobs, at the same time revealing however that “millions of Americans are still struggling to secure a middle-class standard of living—just days after President Barack Obama declared that rising inequality and lack of upward mobility are fundamental threats to the American Dream” (Hirsch 2013).
Of course, it is not all gloom and doom; already in 2013, the reader of any popular daily could find in it some more encouraging news, especially to the effect that “more jobs are becoming available for those on the hunt, and job growth is now fast enough
to bring down the unemployment rate slowly. Headline unemployment fell 0.3 percentage points to 7 percent in November, and below 6 per cent in 2014, though this decrease was due in part to federal government employees returning to work after temporary furloughs in the recent government shutdown, the BLS report shows.
Speaking still of 2013, November showed slow but steady progress. The improving labor-market outlook drew a wave of frustrated job seekers back into the workforce. After shrinking by an average of 61,000 people over the preceding 12 months, 455,000 people returned to the labor force in November. Participation in the labor force, at 63 percent of the civilian population, still remained 3 percentage points below its level in December 2007—before the start of the Great Recession. Relative to the overall population, the share of people gainfully employed in the U.S. economy, at 58.6 percent in November of 2013, is essentially unchanged from the start of the labor-market recovery in February 2010” (Hirsch 2013 ).
This kind of facts cannot but exert a considerable influence on the nation’s class structure, and not only, of course, in its stratification guise.
All the more that over 50 per cent of those jobs—both in November and since the labor market began its postrecession recovery—are paying below-average wages and are concentrated in parts of the economy where wages, productivity, and prospects for career advancement are low, which have come to be dubbed mcjobs. Since the start of the jobs recovery, 56 percent of new jobs are in the retail trade, leisure and hospitality, health care and social assistance, and temporary-help sectors, where workers’ hourly wages averaged just $17.80 in November, compared to $24.15, on average, for the economy overall” (Hirsch 2013).
It is further stressed that this “lack of opportunity in growth industries led fast-food workers to strike in more than 130 cities and those in big-box store retailers to protest working conditions on Black Friday” (Hirsch 2013).
To account for, and at the same time point to the way out of the current situation the aformentioned commentator invokes a peculiar mix of pro-market and anti-government argument with a left-wing one, or, as they call it in America, liberal:
“A creeping recovery and lack of opportunity are not primarily the result of private market forces, but rather of public policy choices. In other words, America can do much better if its representatives in Congress so choose. And we know how to do this: Focus on growing the economy from the middle out, rather than hoping prosperity trickles down from the top.
Congress can start by choosing to replace the sequester’s mindless spending cuts with a growth-oriented budget that creates good jobs and investment today to create the future of broadly shared prosperity all Americans want. Without the sequester’s blind, across-the-board spending cuts and other fiscal austerity in 2013, the economy could have added more than
400,000 jobs per month, rather than the 195,000 per month actually experienced, according to estimates by economists at Deutsche Bank” (Hirsch 2013).
From a theoretical standpoint, what remains unclear is what exact relationship there is between, say, the policy of minimum wage, or more open borders recommended by the above-mentioned commentator, and the expected strengthening of the ranks of the middle class.
The first of these aspects is focused upon by an economist, who along the way provides new evidence for the claim on the ambiguity of the concept under examination.
His argument has much to be said for it-first of all, a pointed defense of a well-known socio-economic policy that is almost unanimously condemned by the classes of owners and their agents:
“Fast food workers in more than a hundred cities across the country went on strike for a $15 an hour wage earlier this month. They were calling it a strike for a livable wage. Fast food workers epitomize the low-skilled working poor in America, but a $15 an hour wage is not about poverty. Rather it speaks to their desire to become respected members of the middle class" (Levine-Waldman 2013).
The author by any means forgets that "opponents, particularly those in the fast food industry and other low-wage employers, will naturally trot out the standard economic model that such an increase can only lead to lower employment. Because only a small fraction of the labor market earns the minimum wage, the benefits to the poor cannot outweigh the costs of lower employment, especially in a bad economy. Moreover, most minimum wage earners are not primary breadwinners, but are either spouses or teenagers" (Levine-Waldman 2013).
But he convincingly argues that "all these arguments are wrong. First and foremost, it isn’t those who earn the minimum wage but those who earn around the minimum wage — what we will call the 'effective' minimum wage, between the statutory minimum and 50 percent of average annual hourly earnings — who count” (Levin-Waldman 2013).
The author recalls that “istorically, Congress attempted to keep the minimum wage at 50 percent of average annual earnings, but failed.
The average annual hourly earning in 2012 according to the Census Bureau was $21.43. The current minimum wage of $7.25 is only 33.8 percent of the average annual hourly earning and would have to rise to $10.72 to meet the 50 percent goal.
Efffective minimum wage earners are those making between $7.25 and $10.72. Who are they? In 2012, 67.6 percent of effective minimum wage workers were between the ages of 25 and 54. Nearly 57 percent of effective minimum wage workers were women, and the percentage of black effective minimum wage workers, at 20.9 percent, was higher than all black workers” (Levin-Waldman 2013).
He goes on to argue that “the claim that a hike in the minimum wage will lead to lower employment is simply not borne out by the data. It is possible that a $15 an hour wage might
be a tipping point, but an increase to $10.10, as proposed by President Barack Obama recently, is not going to have much of an impact because it will still be far below the market clearing wage, where labor supply equals demand, which probably hovers around the $14.90 median wage” (Levin-Waldman 2013).
In fact it is known from studies of the fast food industry during the 1990s that “the minimum wage did not have adverse employment effects in states where it was raised because the fast food industry is a labor monopsony. That means that they are the primary employer of minimum wage workers and as such employment can actually be expected to rise following an increase in the minimum wage” (Levin-Waldman 2013).
Card and Krueger’s comprehensive research benefits from using a “natural experiment” approach of comparing minimum wage increases between states. In a telling statement, they conclude: “The findings…suggest that the direct test posed by the minimum wage fails to confirm the predictions of the conventional model…We believe there is a need to reformulate the set of theoretical models that are applied to the low-wage labor market, taking into account the fact that increases in the minimum wage do not necessarily lead to decreases in employment… (1995:397).”
So far, so uncontroversial-from our point of view, and-it is safe to say-from the European viewpoint (which is, by and large, that of stakeholder capitalism) generally.
Further on, however, the reasoning in question, trying to link the policy discussed above to the growth of the middle class, offers a specific financial bracket purportedly pertinent to the middle class:
The real reason the minimum wage needs to be raised is because its macroeconomic benefits would shore up the middle class. “One has to wonder why a law that only affects a limited percentage of the labor market elicits such strong political opposition. The obvious reason is that its benefits are broader than opponents would like you to believe.
Consider that the wage distribution is divided into intervals. The first interval begins with the actual minimum wage and ranges to 25 percent, and second ranges an additional 25 percent, and so on. Data from 1962-2008 shows that when 10 such intervals were created, the median wage in each interval increased in years that the minimum wage increased, and in years when it did not increase the median wage in each interval remained the same. Because the construction of these 10 intervals accounted for up to 70 percent of the labor force in 2008, the ripple effects from the minimum wage were effectively benefiting the middle class.
Of course, critics will say this causes inflation, but there is a difference between good inflation and bad inflation just as there is a difference between good cholesterol and bad cholesterol. This was clearly the intent of those who designed the minimum wage in the first place because they understood that people with more money to spend would be able to demand more goods and services in the aggregate, and this was what was ultimately going to drive the economy.
The minimum wage as a middle class issue ultimately becomes a foundation for job creation at the grassroots level. As the fast food workers go on strike for wages that appear to be in line with the median hourly wage, we as a society should consider just who these workers are. Those who like to dismiss them as secondary earners are trying to obscure the moral issue here, which is what type of society we would like to be. A society that wants to maintain a strong and viable economy must choose the high road rather than the low road. It must choose policies that benefit the middle class” (Levin-Waldman 2013).
Much as we agree with the general social tone of the argument cited above, in our terms its most flagrant flaw is a conflation of two orders of analysis: fast food employees are indeed a dsocio-economic class of employees, employed in the service sector, whilst the so-called middle class has been distinguished in this, as in other cases, on the basis of income, which isn’t a class determinant at all, as is argued at more length in chapter 11.
Be that as it may, the debate alluded to above is rather unlikely to be definitevely resolved by today’s U.S. empirics. All but one Republican rejected a federal $10.10 minimum wage hike proposal when U.S. Sen. Harry Reid, D-Nev., brought it up in the Senate in May. This is only partly redressed by the President’s decision to lift the minimum wage for federal contract workers to $10.10 an hour, which shamed Republican obstruction of this long overdue measure” (vanden Heuvel 2014),as well as several states, such as Maryland, Connecticut, Minnesota and Hawaii that to “their credit raised the minimum wage to $10.00 this year “after years of people not about to make ends meet on several dollars less” (Myers 2014).
The next commentator to be quoted contributes to our discussion a useful historical perspective, whilst employing a rather general and conventional notion of the middle class:
Until 1970 wealth had been fairly evenly distributed so that the rising tide of economic growth lifted most boats, but then something happened. The middle class began to disappear, with wealth flowing upward, so what was left was either the poorest or richest among us.
The results of such a ‘divergence’ of wealth from what was its distribution since World War II have not been well documented, and ultimately resulted in the Great Recession (which some have called the Lesser Depression). Middle class consumers in particular saw their accumulated wealth disappear with the busted housing bubble, and income growth that did not keep up with inflation. Both household and government revenues declined to record lows as a percentage of overall economic activity. (Green 2013)
Well, to gloss over a seminal historical moment by simply stating that “something happendd”, is definitely not satisfactory; Green may be right or not as to how well particular stages of the process under examination have been documented, yet it may be indicated here that the turning point mentioned above was associated with Keynesianism as a type of the welfare state and Fordism as its corresponding mode of industrial production having been replaced by neoliberalism and neo-Fordism. It is, however, important not to exaggerate the role of policy factors, leaving out of the picture some underlying conditions independent of the latter, and constituting in fact economic rents. The golden age rested on a set of irreproducible economic circumstances more than it did on the triumph of Keynesianism. As the only majar industrial power that suffered battlefield casualties but no physical destruction during World War II, America had advantages unique in modern economic history. According to Grand Expectations by James Patterson, “[w]ith 7 percent of the world’s population in the late 1940s, America possessed 42 percent of the world’s income and accounted for half of the world’s manufacturing output. American workers produced 57 percent of the planet’s steel, 43 percent of electricity, 62 percent of oil, and 80 percent of automobiles” (Voegeli 2010). With these caveats in mind, Green rightly points to the role macropolicies can play: “What happened since then is conservative economic policies begun under Presidents Carter and Reagan, have gradually shifted most of U.S. wealth created to the wealthiest individuals and corporations, resulting in “money flowing to those who either hoard it (such as record corporate cash assets of more than $2.2 trillion), or play the financial markets, causing speculative bubbles that have resulted in 5 recessions since 1980.
There has also been a gradual reduction in economic growth since then, with GDP growth averaging 2.5 percent, whereas it averaged 3.5 percent up to 1980, including the Great Depression. [...]
According to the Congressional Budget Office, between 1979 and 2007 incomes of the top 1 percent of Americans grew by an average of 275 percent. During the same time period, the 60 percent of Americans in the middle of the income scale saw their income rise by 40 percent. From 1992-2007 the top 400 income earners in the U.S. saw their income increase 392 percent and their average tax rate reduced by 37 percent. In 2009, the average income of the top 1 percent was $960,000 with a minimum income of $343,927
If the aformentioned processes are actually man-made, this all the more applies to, for instance, “the brutal cuts to federal spending known as the sequester that have wreaked havoc on important programs for mostly the poor, cutting off hundreds of thousands from Head Start and low-income housing assistance, setting back scientific research and environmental protection, and costing more than a million jobs. While it is true that getting rid of the sequester for domestic programs was a high priority for Congressional Democrats, yet very little was achieved in a budget deal ultimately reached between the interested parties to right this great divergence of wealth from the have-nots to the haves.
Lowering the maximum income tax rates for the wealthiest to 36 percent from as high as 48 percent during the Reagan era, lowering capital gains and inheritance tax rates, as well as giving energy companies and major corporations huge tax loopholes to drive through, has transferred most of the wealth created since then to the top 1 percent, while corporations have amassed record amounts of cash reserves, much it held overseas where most growth has occurred for the multinational corporations.
And corporations have used their increased economic power and profits to cement their economic dominance; by suppressing collective bargaining, minority voting rights, and a great number of environmental regulations in state legislatures via ALEC, the American Legislative Exchange Council that actually writes the legislation for conservative state legislatures.
The result is that most of the productivity gains enabled by both technology and globalization (i.e., relaxed trading regulations and oversight) have gone to corporations and their investors, abetted by the reduced tax base.
This is while the middle class incomes and retirement accounts have been depleted, and governments have been starved of funds to even keep up with outmoded infrastructure maintenance, while reducing educational spending, environmental enforcement that are all paying forward benefits for future generations.
The Great Divergence is once again a fact, but a fact that highlights the decline of western economies due to the increasing concentration of wealth. It should raise alarms in Europe as well, where austerity programs are at work impoverishing their middle class. (Green 2013)
This may seem an unduly harsh judgment, but in fact it is not. The European economy remains in a much worse condition than an American one, which is not exactly blossoming either, after all. This, to be sure, involve a wide range of factors, whose analysis goes beyond the confines of the present book. Suffice it to point out, for instance, that the EU is very far from taking advantage of economic integration between its member countries. There is much to be said against the present prevalent model with virtually just one power engine, that of Germany, which is not exactly willing to play the role of the driver for the growth of Europe as a whole; the German, exports-based economic model, whose second pillar is wage suppression is unfit for such a purpose.
Along similar lines the same period as above has been described by a sociologist:
“We have labeled the quarter century after World War II the Age of Shared Prosperity because during these years the annual earnings of American workers at all levels grew at a healthy pace. But this pattern of wage growth came to an abrupt halt in the 1970s (Danziger and Gottschalk 1995; Levy and Murnane 1992; U.S. Department of Labor 1994).
We call the period since the mid-1970s the Age of Growing Inequality. Three key tendencies characterize job earnings during these years: (1) On average, men’s earnings (ininflation-adjusted “real” dollars) have morę or less stagnated, in sharp contrast with the growth of preceding decades; (2) women’s earnings have risen steadily; and (3) boththe distribution of meris earnings and distribution of women’s earnings have become morę unequal. The first two tendencies [...] have inevitably brought men’s and women’s wages closer.
SOURCES: U.S. Census Bureau 1975, Historical Statistics of the United States:164 (before 1970), and U.S. Census Bureau, Statistical Abstract of the United States, various editions (after 1970).
The third tendency documents the process whereby Real wages near the bottom and at the middle of the labor market (20th and 50th percentiles) were hardly different in 2007 from what they had been three decades earlier, but wages near the top (90th percentile) had risen substantially. A widening gulf separates workers in the lower half of the labor market from the high-wage workers at the top. [...] in 1973, men in the 90th percentile earned 180% more than men in the 20th; by 2007, they earned 282% more. Over the same period, the gap between men in the 50th and 90th percentiles grew by almost 50%. Women’s wages reveal a similar pattern of growing wage inequality.
SOURCES: U.S. Census Bureau, Statistical Abstract of the United States, various editions.
An especially discouraging feature of the new age has been the growing number of men working for what can be considered poverty wages. A 1992 Census Bureau report defined a “low-wage worker” as someone who worked full time, year round, without making enough to maintain a family of four above the federal poverty linę ($22.000 at 2008 price levels [...] the proportion of men in this sad situation dropped in the 1960s only to rise again in the 1980s. Poverty wages did not disappear along with rotary dial telephones and vinyl records. In 2007, one in five working men and one in three working women were earning poverty-level hourly wages.’
SOURCE: Calculated from Mishel, Bernstein, and Schierholtz 2009:136, 138, 124.
SOURCES: U.S. Census 1992 and unpublished tables provided by the Census Bureau.
At the other end of the job market, earnings have soared, especially among the CEOs of major corporations. From 1980 to 2000, the real earnings of CEOs rose by over 600%-a remarkable increase in an era of stagnant wages. The gulf separating the typical CEO from the typical American worker has grown to colossal proportions. The average CEO of a major corporation earned a stupendous 475 times the wagę of an average blue-collar worker in 1999-up from roughly 42 times in 1980 (Business Week. April, various years). To take a concrete case, the CEO of Wal-Mart earns about as much in two weeks as an average Wal-Mart employee does in a lifetime (Reich 2008:113). In 2008, a year of declining corporate profits and reduced executive pay, CEOs at the top 200 corporations earned an ąverage of $10.8 million in total compensation’ Even among the top executives of the same firm, inequalities of pay have grown over what they were in the 1950s, 1960s, and 1970s (Reich 2008:100).
A telling feature of the new age is the disconnect between productivity and pay. In the Age of Shared Prosperity, wages rose in tandem with rising productivity-that is, as output per worker increased because of factors including better training, improved technology, and added machinery, the wages of the average worker also increased. But beginning in the mid-1970s, the wages of the average worker lagged behind the continuing gains in productivity. The benefits of economic progress were no longer shared, but flowed disproportionately to those at the very top of the labor market (Levy and Temin 2007; Reich 2008:103; Gilbert 2011 )
What this familiar narrative lacks is a class perspective, the unearthing of which highlights its distinction from its alternative, i.e. social stratification.
Consider the following series of comparisons that on their part can be taken as illustrating the distinction between stockholder and stakeholder capitalism referred to in several places in the book. Thus, the Average number of hours U.S. workers put in annually is 1,790, whereas the Norwegians work 1,420 and the French 1,479 hours.
During these long hours, U.S. workers managed to achieve 75 Percent increase in productivity from 1979 to 2012.
It is instructive to calculate what the median middle-class income ($51,017) would be if wages grew at the same rate: $77,131.
Those figures should be supplemented by some others:
Number of guaranteed days of paid vacation given to U.S. workers: 0
Number of vacation days U.S. workers are entitled to, but don’t take, in a typical year: 175 million
Number of paid maternity days in Germany: 98 (100% pay)
Number of paid maternity days in France: 112 (100% pay)
Number of paid maternity days in U.S.: 0
Number of industrialized countries that do not mandate paid maternity leave: 1
(Yes, the U.S. is the only one that does not require paid leave” (Kamp 2013). Thus, this still giant in economic terms treats her labour force like a troll.
Considering how overwhelming evidence on the salience of redistributive dimension pertaining to the U.S. income distribution is, it is really stunning that still there can be some unbelievers, who can hold such views as David Brooks mentioned below:
“In arguing that the problem of poverty is distinct from widening inequality, David Brooks overlooks what’s happened to the middle class.
The median wage of the bottom 90 percent of Americans is lower today than it was three decades ago, adjusted for inflation, even though the economy is twice as large. Almost all the gains from that growth have gone to the top. As a result, the middle class doesn’t have the buying power necessary for buoyant growth” (Reich 2014).
Considering that the author of that rejoinder is a well-known professor of public policy, it is disappointing that he, too, jumps on the bandwagon, confirming the sad truth that within the public debate in the present-day United States it is taken for granted that each and every issue under the sun is reducible to those concerns that are relevant to the celebrated middle class.
Even when prof. Reich does finally start to take notice of that collectivity whose problems, after all, have prompted the whole debate, the middle class still looms large as an explanatory category.
“Slow growth and high unemployment hit the poor especially hard because they’re the first to be fired, last to be hired and most likely to bear the brunt of declining wages and benefits” (Reich 2014).
The above paragraph shows how weak a typical argument based on stratification categories is bound to be. The notion of “poor” more obfuscates than illuminates-as opposed to, not deployed here, class (i.e. economic-ownership) concepts owing to which one could ground one’s analysis in the economic structure, being able to cappture the socio-economic dynamics at work in all its complexity.
Let us end this chapter on a slightly different note. Below a dissident voice is presented; while broadly subscribing to the end of the middle class thesis, the commentator in question puts however an altogether different gloss on it:
“I’ve reread Rick’s thread on income inequality and I find the assumptions contained in the original newspaper article so dubious that it’s almost impossible to know where to begin on critiquing it. This is the sentence that I was really struggling with:
‘They were terribly successful and they helped turn America on its head. Since the late 1970s, it has been average Americans who have experienced comparative wage stagnation and who are more likely than their parents to stay in the same economic position. For the rich, the story is the exact opposite’” (Blogs 2014).
So far, so conventional, but this label does not hold as regards the author’s further argument:
“Over the past thirty years, the trend in American history is to challenge the notion of a historic middle class. Truth is, the the middle class as we know it is a manufacturing success story that mostly impacts the so-called Greatest Generation. Post world-world II, veterans came home, were sold on the idea of the American dream and what it meant, were showered with federal programs to make it possible, and a standard of living exploded that created what we perceive as the modern middle class. Problem is, it was based on advertising and fraud and borrowing. Those trappings of middle class life that everyone needed were purchased with borrowed money, and with little questioning of whether the gizmos were ever needed. This was all well and good until it got to be cheaper to make the gizmos over seas. So, instead of making cars and tvs for each other [it should be: one another], Americans began to cut each other’s hair and bought Japanese tvs, and the logical result was the crash of the entire ponzi scheme that defined middle class life. Thus, what we’ve seen since the late 70s is the logical deflation of structural deficiency, and a return to the pre World War II normal. Problem is, people still want that middle class lifestyle, and still want to borrow to do it, and our government still wants to subsidize it, though now we borrow out children’s future as collateral to the Chinese. Get over it–there is no middle class. Government programs are welfare programs, and Obama keeps piling more on. And the gap between rich and poor is just a return to the new normal, and whatever is left of the middle class is being taxed to death to pay for it all. NPR came close to a truth this morning in a story on monetary policy, and whether the fed would end its bond program. NPR noted that the fed has pumped nearly one trillion dollars into the economy and it hasn’t made any difference. Why? In large part, it’s because the banks aren’t lending out that money. Why? Well, two reasons. First, individuals can’t borrow if they can’t pay back. Second, most money is lent to small business owners, who aren’t borrowing because of uncertainty caused by government policies. Rick made that crack about people of ‘my class’,” by which I guess he meant middle class business owners who are getting caught in Obama’s squeeze” (blogs 2014).
The above argument was surely worth citing, albeit it is contradictory-first the reader is told that in the present-day USA there is no middle class at all, but later on it turns out that squeezed as they are, business owners still are alive and represent the allegedly defunct middle class.
But there are also other important reasons for which the notion that the middle class is shrinking is controversial, if not outright suspect, the paramount being the chameleon-like character of the concept in question, whose economic boundaries-as will be illuminated later-may vary widely. Households that earn between $25,000 and $75,000 represent approximately the middle half of the income distribution, according to the U.S. Census Bureau. Over the past two decades, the number of households in those brackets decreased by 3.9%, from 48.2% to 44.3%. During the same time period, “the number of households with incomes below $25,000 decreased 3.5%, from 28.7% to 25.2%, while the number of households with incomes above $75,000 increased over 7%, from 23.2% to 30.4%” (Weeks 2007).
One might suggest that the increase in the higher earnings categories is accounted for by the fact that more households now have two wage earners (Weeks 2007).
This explanation, however, flies in the face of the fact that all of the 7% increase can be found in households who earn over $100,000 (Bernstein, Aaron 2013).
It is worth noting that the change has not always been in the same direction. Poverty rates increased early in the 1980s until late in the 1990s when they started to go back down.
Since 2000, the percent of all people living in poverty has risen from 11.3% to 15.1% in 2010. This statistical measure of the poverty rate takes into account only a household’s current year’s income, while ignoring the actual net worth of the household (Bernstein, Aaron 2013).
Anyway, a study by Brookings Institution entitled “Where Did They Go? The Decline of Middle-Income Neighborhoods in Metropolitan America” in June 2006 revealed that Middle-income neighborhoods as a proportion of all metropolitan neighborhoods declined from 58 percent in 1970 to 41 percent in 2000. As housing costs increase, the middle class is squeezed and forced to live in less desirable areas making upward mobility more difficult. Safety, school systems, and even jobs are all linked to neighborhood types.
Dr. Paul Craig Roberts, a former assistant secretary of the US Treasury, is not alone in pointing to the fact that “…the income distribution […] is so badly skewed now that all of the evidence is clear – a very small percent of the population receives almost the entire gain and income increases and the wealth is being concentrated in the top. […] “So you’ve got 40 percent of people earning less than 20,000 per year. You’ve got 53 percent that earns less than 30,000 dollars per year,” he added.
“So, the squashing of the middle class and the forcing of so many middle class people down into the bottom ranks; and the squashing of the bottom ranks this is a very socially unstable situation and it’s certainly economically unstable. And it certainly interferes with an economic recovery.” (2014).
An appeal couched in even more condemnatory terms is, however, due to its misregognition of its potential beneficiaries built on sand: “in 2013 median CEO pay jumped to $10.5 million dollars – an increase of about 13 percent. However, most workers didn’t see their paychecks go up by a single dime. To compare the situation of corporate executives with this time round the stratum under consideration, let us mention that The Economic Policy Institute reported that the average chief executive salary in 2013 was $15.2 million. While middle-class income did not increase even 1 percent a year, “executive pay went up 937 percent from 1978 to 2013”, prompting the following bitter reaction: “Our middle class has been pounded for 40 years. There are many reasons for this, not the least of which are deliberate policy decisions made by U.S. corporations with the support of politicians” (Rotondaro 2016).
According to an analysis by USA Today, corporate executives scored huge pay bumps thanks to big gains in the stock market. But earnings for average workers stayed pretty much stagnant – only increasing 1.4 percent in all of 2012. According to the New York Times survey, executive “Pay packages have increased by an average of 9 percent since 2012, continuing a steady and spectacular rise even as average wages in the United States and throughout much of the developed world have stagnated.
[...] The top 100 CEOs in the survey took home a total of $1.5 billion” (Karbell 2014).
“Since the financial crisis in 2008, CEO salaries have gone up an astounding 181%.
For comparison, the average U.S. salary increased just 1.3% in 2013.
According to the Bureau of Labor Statistics (BLS), wages for the average work week in the United States are $820, still below the peak set in 2006.
And the average CEO is now making 257 times what a standard worker in the United States pulls in, according to analysis by The Associated Press and Equilar.
“In The Washington Post, Mark Shields (“Pay the Workers,” Aug. 22, 1995:A17) observed how, in 1960, the average pay, after taxes, for chief executives at the largest U.S. corporations was 12 times greater than the average wage of factory workers. By 1974, the CEO’s compensation had increased to about 35 times that of the company’s average worker. In 1980 the average CEO was making 42 times as much as the average blue collar worker, doubling ten years later to 84 times. Then hyper-inequality kicked in. By the mid-1990s, according to Business Week, the factor was 135 times as much. In 1999, it had reached 400-fold and in 2000 jumped again to 531!
What accounts for this staggering enrichment, is the underlying shift in corporate ownership relations. “During the 1990s, U.S. managerial capitalism underwent a profound transformation from a technocratic to a “proprietary” form. “In the technocratic era, managers had functioned as teams to sustain the firm and to promote social welfare by satisfying the demands of competing stakeholders. In the new proprietary era, corporate bureaucratic teams broke up into tournaments in which managers competed for advancement toward the CEO prize. The reward system of the new era depended heavily on stock options that were accompanied by downside risk protection. The tournaments turned managers into a special class of shareholders who-not unexpectedly- sought to maximize their individual utility functions even if deviating from the firm’s best interest. Once this new regime became established, managers discarded their technocratic, stakeholder creed and adopted a property rights ideology, originally elaborated in academia by financial agency theorists.
Managers hardly noticed (or cared) they were capturing a disproportionate share of the new wealth being generated in the U.S. economy” (Englander, Kauffmann 2013).
The reason for which corporate managements allow themselves to be that tight-fisted toward their workforces is not hard to find-a stubbornly high rate of unemployment – at the time of writing at 6.3% –“under which conditions companies are not as afraid of losing core employees and hence are not so keen on giving them raises, the flip side of which is that there’s more money to add to the CEO’s paycheck. And we all know the gap is only going to widen from here…” (Brown 2014).
To be sure, one may question the undue fatalism of the aformentioned comments, stemming from the absence of a class lens through which the social world looks very different from the vision within a stratification perspective. It is the case because it is only social classes and estates, and not statistical collections, existing perhaps solely in Popper’s quasi-Platonic world of ideas that can be the agents of social change. Still, it is not difficult to concur with the further remarks cited below:
“According to the myth of Reaganomics, when those at the top make tons of money, some of that wealth should trickle down to the rest of us. But, for more than three decades, we’ve seen how that could not be f[u]rther from the truth.
Last year, degenerate gamblers on Wall Street made 20 billionaires $81 billion dollars richer, but that did no thing to boost our real economy, or provide more financial security for the average American. Our economy is so rigged that the very banksters who crashed our economy – and the CEOs who pay workers poverty wages – continue to be rewarded, while hard-working Americans can’t even keep up with the cost of living. If we don’t change this system, the billionaires will keep raking in hoards of cash, and we can kiss the American Dream goodbye forever.
As it stands, the middle class is shrinking day by day, and the super-rich control the very lawmakers who should be working to protect us. We need to get money out of politics. We need to ensure that workers share in our nation’s prosperity. We need to stop rewarding the very folks who’ve rigged the system.
That’s why we need progressive policies that will strengthen the middle class, stand up to the banksters, and rebuild the American Dream” (Hartmann 2014)
If the author dropped the misleading term of middle class, and stated in a non-crytptic language that he argues for an income redistribution, consisting in particular in higher working-class wages, the statement presented above would not raise any eye- brows, except perhaps for the realism of his ideas. Anyway, an implicit neopatrimonial frame of reference deployed by the aformentioned researcher is surely worthy of mention.
A pertinent comment regarding the statistics used to track the share of income going to the top 1% has been put forward by Alan Reynolds (2006: 73-108). He points out that the Tax Reform Act of 1986 changed the way that income is defined on tax returns, which is the primary source of data utilized to compile income shares.
These changes include, inter alia, the fact that beginning in the 1980s, many C-Corporations switched to S-Corporations, which changed the way that their income is reported on income tax returns. S-Corporations report all income on the individual income tax returns of the owners, while C-Corporations file a separate tax return and corporate profits are not allocated to any individuals. Prior to 1986, approximately one fourth of all American corporations were S-Corporations, but by 1997 this share had risen to more than half. In addition, by 2001 S-Corporations were responsible for about 25% of before-tax profits.
This shift to S-Corporations means that income previously not included on personal income tax returns appeared there during this change, as S-Corporation investors directly pay taxes on corporate profit regardless of whether it is distributed or not. Furthermore, Reynolds points out that tax-deferred savings accounts grew substantially from the 1980s onward, so that investment income to these accounts was not included as personal income in the years which it accrued. The CBO (Congressional Budget Office 2006:8) noted that at the end of 2002, $10.1 trillion was in tax-deferred retirement plants, and that $9 trillion of that was taxable upon withdrawal.
“These numbers amount to potentially large amounts of investment income to middle-class families that are no longer reported on tax returns each year, but were reported prior to the widespread growth of tax-deferred retirement plans”.
Most relevantly, panel data that track the same individuals over time are, in a way, more informative than statistical categories that do not correspond to specific people. The Treasury did a study (Department of Treasury 2007) in 2007 that tracked the same individual taxpayers over the age of 25 from 1996 to 2005 and found differing results from what the study mentioned above above shows.
Namely, the results demonstrated that during those years, half of taxpayers moved to a different income quintile, with half of those in the bottom quintile moving to a higher one. About 60% of taxpayers in the top 1% in 1996 no longer stayed in that category by 2005.
On an absolute scale, the lowest incomes saw the greatest gains in percentage terms and the highest incomes actually declined. Half of those in the bottom 20% in 1996 saw their income at least double during these years, and the median income of the top 1996 top 1% declined by 25.8%. The reason-rather evident to any sociologist-that the results are so inconsistent with household income statistics is that household statistics do not track the same people over time; it is important to specify how many of the households in the top 1% in a given year were still there when looking at that category years later and gauging income gains. Along similar lines, a more thorough examination of the well-known claim to the effect that “the middle class is shrinking and that income levels have been stagnate or falling in all but the upper reaches of the income distribution” shows that there is much more to it than meets the eye.
Comparisons of income growth frequently rely on data from the Census Bureau that show growth rates of income in the income distribution divided into 20 percent segments called quintiles. The typical conclusion is that inflation-adjusted income has been stagnant or negative in the lower four quintiles (lower 80 percent), and only the top quintile (highest 20 percent) has grown.
We revert to this important topic below, so at this juncture let us recall that the Census Bureau defines household income as before-tax money income. That includes wages and salaries, interest, dividends, rents, business income and money transfer payments such as Social Security benefits and unemployment compensation. The Census numbers do not include in-kind transfer payments such as food stamps, Medicaid and Medicare, and school lunches, nor do they include employer-paid benefits such as health insurance.
In a comprehensive analysis of household income, researchers at the Congressional Budget Office (CBO) adjusted Census Bureau income data to account for these omissions and also adjusted for income taxes to understand after-tax total income. Since the tax code now includes refundable tax credits, meaning that tax filers receive refunds for such things as the child tax credit and the earned income tax credit even if they owe no tax, this adjustment is an important addition for households in the lower quintiles.
An economist at the liberal-leaning Brookings Institution used this comprehensive CBO income data to assess inflation-adjusted growth of household income in the five quintiles of the income distribution. Looking first at income growth of a 30-year period between 1979 and 2010, the Brookings report found that, over the entire period, the total growth of comprehensive income ranged from 36 percent to 49 percent in the lower four quintiles of the income distribution. The 49 percent growth occurred in the lowest quintile. The middle quintile, which contains the median income for all households, accounted for the 36 percent growth.
The Brookings report broke up the top quintile into four subgroups, one of which was the now infamous 1 percent. In the four top subgroups, growth rates over the 1979-2010 period ranged from 54 percent to 202 percent, with the 1 percent group representing the largest growth.
Thus, the Brookings’ study confirms the widely reported faster growth at the top of the income distribution, but at the same time it shows that incomes in the first four quintiles of the income distribution have not been stagnant or declining. They have been growing, including substantial growth in the lowest quintile. Brookings also looked at household income growth between 2000 and 2010 using the CBO comprehensive income data. This period includes the effects of the Great Recession on household incomes. Income growth in the lower four quintiles ranged from 11 percent to 20 percent. The highest rate was again found in the lowest quintile. Among the four subgroups in the top quintile, growth ranged from -4 percent to +12 percent. The negative growth occurred among the top 1 percent.
Closely related to reports in the news media about income growth are stories about the “shrinking middle class.” There is no authoritative definition of “middle class,” but logic suggests a range around median household income. Since median household income is roughly $50,000, one reasonable definition would establish a range of $35,000 to $75,000 as “middle class.” Using Census Bureau inflation-adjusted data for household income, we find that the percentage of households with incomes in that range indeed has fallen since the 1970s.
The point is, where did the “shrinking” households go? The media reports suggest they fell below $35,000. This, however, cannot be the case- the percentage of households with incomes less than $35,000 has also decreased. The reader, bombarded by the news about the purported demise of what is commonly regarded as the principal class in the U.S. society, could be forgiven for being surprised at The finding according to which the “shrinking” middle class has actually moved upward into higher incomes. More specifically, the growth occurred in the percentage of households with incomes above $75,000.
It is important to recognize that while there has been growth in real incomes in all quintiles of the income distribution, the growth rate for a quintile does not define growth for the same set of households, because there is mobility among quintiles. However, studies by the Treasury Department have examined the incomes of the same tax filers at five- and 10-year intervals and found that tax filers move among quintiles. For example, about 50 percent of tax filers in the lowest quintile move to a higher quintile over the study periods” (Arch, Laber 2014).
However, the conclusion that “despite reports of stagnant or declining incomes among U.S. households, comprehensive income data adjusted for taxes, transfers, benefits and inflation show that income has been growing across all quintiles of the income distribution” must be supplemented with an important -also because it is often, especially in the USA, misrecognised or left out of the picture-reminder about the role of the state as a centre of income redistribution, which function is absolutely critical for the above result.
Only with that caveat in mind, and thus with a grain of salt, one should read such rhapsodic claims as the one below: “It is true that growth has been more rapid at the top, especially the top 1 percent, but that does not change the conclusion that households generally are seeing their purchasing power rise” (Arch2014). The weight of this central issue prompts a comparison with Piketty’s data on income distribution that suggest “that virtually all of the gains over the last three decades have gone to the richest 10 percent and that the growth in the middle has been negligible—only three percent from 1979 to 2010” (S. rose 2014).
Meanwhile, the CBO, which conducts an extensive study of American income trends, found that the incomes of middle-income households experienced a rise of 35 percent during this period” (S. Rose 2014). The dramatic difference in the two findings is accounted for by Piketty’s selection of only tax records to measure inequality. By contrast, the CBO combines tax records with data on transfers and on household composition from Census social surveys.
[...] Relying only on IRS forms leads to understating median incomes. Because IRS forms are created to determine taxable income, there are many elderly filers who appear to have little or no income when in fact they receive Social Security checks (with an average monthly benefit of $2,100 a month for an elderly couple both receiving benefits) and Medicare (which provides an average of $12,000 a year for each beneficiary). In addition, there are many young people who live at home and a few low-earning spouses who file separately. Because of this skewing of the data, the median income of tax filers is considerably lower than the median household income found in Census surveys.
By contrast, the Congressional Budget Office has developed an approach that reflects living standards—it uses post-tax income, includes capital gains and government and employer-provided benefits, and adjusts for the number of people in the household (because people can live better if there are fewer people sharing the income). In the period from 1979 to 2010, Piketty and Saez report that the income of the top 1 percent grew by 260 percent while those in the middle of the income distribution saw only a 3 percent gain. While the CBO reports that the income of the top 1 percent grew by 200 percent (which is not worlds apart from Piketty’s figure), their estimate of 35 percent income growth for middle income Americans is, by contrast, very different. This makes only natural to ask: “where does the extra income middle class growth in the CBO reports come from? First, there is a substantial increase in non-elderly earnings. The stagnation of average earnings hides the fact that women workers have had huge earnings gains across the board due to higher hourly earnings and more hours worked per year. In contrast, men in the bottom, as noted above, half of the earnings ladder had almost the exact same earnings in both periods, while men in the top half saw their pay rise. Second, employer-paid benefits (that are included in the CBO approach but not in the Piketty or Census surveys) as a share of earnings rose from 11 percent in 1979 to 19 percent of in 2010. Third, the share of elderly households in the middle quintile increased from 14 percent in 1979 to 26 percent in 2010, while the value of Social Security, Medicare, and other government programs has gone from $15,700 to $34,300 (2010 dollars in both years). Fourth, in an odd technical twist, these income gains appear diluted in Census and IRS data because of the fast growth of small single adult households; but the CBO avoids this diminution by adjusting reported income for household size” (S. rose 2014).
Whilst this greater statistical rigour is certainly to be welcomed, the data reported above lead also to some conceptual conclusions concerning the category we are dealing with throughout the book. To include the retirees in the latter constitutes an error of the same sort as that committed when a pensioner is placed in the system of social differentiation not according to the principal source of her income, i.e. occupational or state pension, but on the basis of her previous occupation, say, as a teacher or a shop assistant.
The aformentioned issue is so hugely important that it is useful to re-examine the findings cited above-all the more that there is more to the issue than meets the eye.
To sum up,a “study by Cornell University’s Richard Burkhauser and two others, reported in the paper, “A ‘Second Opinion’ on the Economic Health of the American Middle Class”, concludes that Piketty and Saez overstate income inequality and that the middle class actually showed strong income growth from 1979 to 2007.
Growth in the median income of tax units (single or joint taxpayers) in the Piketty and Saez studies was only 3.2 percent over the period. But when using households as the basis, Burkhauser’s preferred method, median income grew about 37 percent. Presto - a healthy and prosperous middle class.
A columnist writing for Bloomberg, an organ that it would be preposterous to accuse of an anti-business bias, however, “takes issue with that conclusion. A more complete inquiry into the data leads to the opposite conclusion - the middle class has fallen behind over the last generation in important respects.
The Burkhauser paper has received a great deal of attention because its conclusions are highly convenient for market triumphalists, not to mention the affluent bourgeoisie who fear their income will be siphoned off for redistribution to the 99 percent.
This obviously prompts the question: How can studies on the same topic come to such different conclusions? The answer comes down to the definition of income and whose income is being measured.
Because Piketty and Saez rely on actual federal income-tax returns, they have by far the best detail on all the components of market income (wages, self-employment income, income from investments) in each year, particularly at the highest levels.
But tax-return data do not include government transfers, such as food stamps and Medicaid, or in-kind benefits such as housing subsidies. So these forms of “income” are not included in the Piketty and Saez data.
Burkhauser, on the other hand, relies on the March Current Population Survey (CPS), a detailed, face-to-face annual Census Bureau survey of about 60,000 households.
CPS data include government benefits but not capital gains (profits from selling investments, a business or a home). If one wants to say something useful about how the most affluent Americans are doing relative to the rest of the population, one, without any question, needs to include capital gains. But the Census Bureau doesn’t collect information on capital gains, so the Burkhauser paper simply ignores them.
Thus, both datasets have drawbacks.
while measuring income using the cash, market-based data from Piketty and Saez does indeed have some shortcomings, “in fact, movements in this type of income do overwhelmingly drive trends in inequality even in the more comprehensive income dataset tracked by the Congressional Budget Office. This finding should come as no surprise, given that cash, market-based incomes account for roughly 80 percent of all incomes even in the CBO data. Both of these points hold even more strongly when looking just at incomes in the top 1 percent and above: growth rates for these incomes are nearly identical in the decisive for the recent intensification of income inequality period between 1979 and 2007 in both datasets, as the dominance of cash, market-based incomes is even greater for the highest income households” (Bivens and Mishel 2013:63).
That both data sets have their imperfections does not entail that they should be treated on an equal footing. With regard to measuring top incomes, tax-return data are in fact clearly preferable, since High-income individuals are likely to be more forthcoming about their exact income on tax returns (where noncompliance can lead to large civil or even criminal penalties) than in a Census Bureau interview with no such sanctions at its disposal.
Another complaint with the Piketty and Saez results is that they ignore important forms of what might be called “invisible” compensation such as employer-provided health insurance. The street value of that policy - what one’s employer pays - might be in the neighborhood of $12,000 a year for a family plan.
Piketty and Saez ignore such invisible income because it is not reported to the IRS. Burkhauser, by contrast, imputes the missing data. (That is, he does his best to estimate what the missing number might be.) This tends to bring up middle-class income relative to the affluent. Burkhauser argues that cash wages may have stagnated in real terms, but that’s because employees are getting paid more in invisible currency.
Not so fast, one is tempted to protest at this point, as the matter is not that simple.
Whilst at first blush there may be some logic to the aformentioned procedure, a far more robust case could be made for the claim that the value to employees of employer-provided healthcare is not the same as the amounts employers pay. Crucially, most employees have no choice but to take the health-care program given them, and get lower wages as a result in this kind of firm trade-off. They can’t decide how to allocate their wages as they see fit.
From that perspective it is being argued that “rapidly increasing health-care costs are in large measure the result of overconsumption of health care (and indifference to its cost” (Kleinbard 2014). This means that by including the imputed amount of health-care premiums at face value, Burkhauser conflates income and welfare.
This raises the question: What is the upshot of all this?
The fact is, “ between 1979 and 2007, the top 1 percent of American tax units accounted for 59.8 percent of average growth in cash, market-based incomes compared to just 9 percent of average growth accounted for by the bottom 90 percent over the period. While including transfers and noncash incomes reduces the share of growth received by the top 1 percent, as shown in the Congressional Budget Office data, the top 1 percent still account for 38.3 percent of growth, more than the 31.0 percent share received by the bottom 80 percent” (Bivens and Mishel 2013:59).
In other words, even with its limitations, the Burkhauser data still show a substantial increase in inequality from 1979 to 2007. Congressional Budget Office data show that the market incomes of all households grew about $6 trillion, to $10.6 trillion in 2009 from $4.6 trillion in 1979, in constant 2009 dollars.
The middle quintile of households - the middle class - captured about 10 percent of this. The top 1 percent captured more than 28 percent, or nearly three times as much.
The same data show that in 1979 the middle quintile of households earned 77 percent more market income than did the top 1 percent - just as one would expect in a healthy market economy. In 2007, however, the top 1 percent earned 61 percent more in market income than did the entire middle quintile. This is an extraordinary reversal in less than 30 years.
Burkhauser tells us that median household market income - adjusting for household size and the value of employer-sponsored health care - grew all of 19 percent from 1979 to 2007, with a third of that coming in the precrash bubble. In addition, Burkhauser’s results are boosted because more adults are earning income in each household, beyond the husband and wife filing a joint return. There are also fewer mouths for those income-earning adults to feed, probably because they’ve decided to have fewer children.
It may be conceded that some of these shifts capture welfare-enhancing moves, such as “gay couples cohabiting now that society is more tolerant of that choice. “But when a mother-in-law moves in or an adult son won’t move out, the shifts reflect deterioration in income security. Burkhauser is insensitive to the welfare implications of these developments” (Kleinbard 2014).
Most relevantly, “the very modest gains in median real household market incomes from 1979 to 2007 were mostly the result of more women working - and getting paid more. Male workers in the middle saw no gains for their labor. It is fair to suggest that this is one of the most important issues underlying social and political unrest and dissatisfaction in America today.
Furthermore, as the CBO data show, almost half the growth in median real disposable income was the result of lower taxes or larger government transfers, not real economic gains. Median disposable income grew about 35 percent from 1979 to 2007, while median household market incomes grew 19 percent.
A moment’s reflection will reveal that one cannot trumpet the advances in available resources of the middle class when those advances are driven to such a large extent by government tax and transfer policies, unless one is willing to entertain ever- increasing government transfers - and steeper taxes on the highest-income Americans to fund them, and this is probably the last thing those who question the credibility and/or relevance of inequality data want the decision-makers to do.
And what is more, market triumphalists use the work of Burkhauser and others to argue the opposite: Everything is fine, and there is no need to raise taxes.
The fact of the matter is that “the buoyant middle class that inequality deniers purport to have discovered is a creature of a decades-long fiscal policy of borrowing against the future by “delivering more transfer benefits than the nation’s current level of tax collections can support” (Kleinbard 2014).
Again, a discussion, leading to, as this writer believes, the critique of the above thesis, is beyond the confines of the present book. The author in fact has to his credit an article on the welfare state, which is highly relevant to the aformentioned issue (Tittenbrun 2013d).
Just to round off the present chapter, let us cite the most recent data which provide as strong an evidence for the trends discussed above as one can get. “While the share of U.S. adults living in both upper- and lower-income households rose alongside the declining share in the middle from 1971 to 2015, the share in the upper-income tier grew more.
Over the same period [...], the nation’s aggregate household income has substantially shifted from middle-income to upper-income households, driven by the growing size of the upper-income tier and more rapid gains in income at the top. Fully 49% of U.S. aggregate income went to upper-income households in 2014, up from 29% in 1970. The share accruing to middle-income households was 43% in 2014, down substantially from 62% in 1970. And middle-income Americans have fallen further behind financially in the new century. In 2014, the median income of these households was 4% less than in 2000 (To be fair, it has to be noted that while the middle class has not kept pace with upper-income households, its median income, adjusted for household size, has risen over the long haul, increasing 34% since 1970. To be sure, that is not as strong as the 47% increase in income for upper-income households, though it is greater than the 28% increase among lower-income households, thus illustrating again the trend toward the income divergence). Moreover, because of the housing market crisis and the Great Recession of 2007-09, “their median wealth (assets minus debts) fell by 28% from 2001 to 2013.
Meanwhile, the far edges of the income spectrum have shown the most growth. In 2015, 20% of American adults were in the lowest-income tier, up from 16% in 1971. On the opposite side, 9% are in the highest-income tier, more than double the 4% share in 1971. At the same time, the shares of adults in the lower-middle or upper-middle income tiers were nearly unchanged” (Kochhar et al. 2015). To put it differently, a further subdivision of the adult population into five income tiers shows that the number of lowest-income adults grew more sharply than the number of lower-middle income adults from 1971 to 2015. Among upper-income adults, the number in the highest-income tier grew more than the number in the upper-middle tier over the same period. The upshot is that the distribution of adults by income is “thinning in the middle and bulking up at the edges. The number of adults in highest-income households quadrupled from 5 million in 1971 to 20.9 million in 2015, and the number in upper-middle income households more than doubled, from 13.4 million in 1971 to 30.2 million in 2015. The number of adults in lowest-income households also rose sharply, from 21.6 million in 1971 to 48.9 million in 2015. The growth in numbers in between - in lower-middle and middle-income households - was more modest. The adult population in lower-middle income households increased from 11.6 million in 1971 to 21.4 million in 2015, and the number of adults in middle-income households increased from 80 million to 120.8 million over the period” (Kochhar et al. 2015).
Another lens through which to look at the statistical evidence available is to frame the latter as the hollowing of the American middle class which process has proceeded steadily for more than four decades. The fact is that since 1971, each decade has ended with a smaller share of adults living in middle-income households than at the beginning of the decade, and no single decade stands out as having triggered or hastened the decline in the middle. While “the country’s lower and middle income households have declined as a share of all households between 1967 and 2014, while at the same time, the share of high-income households has increased threefold.
In other words, there are fewer households earning under $100,000 a year, whether divided at the $50,000 or $35,000 per-household amount. In 1967, they represented 91.9% of all households, and that dropped to 75.3% by 2014” (Hausam 2015).
Based on the definition used in the report of PRC cited above, the share of American adults living in middle-income households has fallen from 61% in 1971 to 50% in 2015. The share living in the upper-income tier rose from 14% to 21% over the same period. Meanwhile, the share in the lower-income tier increased from 25% to 29%. Notably, the 7 percentage point increase in the share at the top is nearly double the 4 percentage point increase at the bottom.“ (Kochhar et al. 2015).
Thus, from 1971 to 2015, the distribution of adults by income has hollowed in the middle, with greater shares living at the top and the bottom-more specifically, the 7 percentage point gain at the top is nearly double the 4 percentage point growth at the bottom.In terms of numbers, American adults who lived in middle-income households in 2015 were matched by those who did not. Of the total adult population of 242.1 million in 2015,120.8 million were middle income and 121.3 million were either low income or upper income. By contrast, in 1971, the 80 million middle-income adults greatly outnumbered the other 51.6 million adults.
Considering that the measure Pew Research Center uses for income groups accounts for size of household, let us present such detailed data: “for a household to be considered upper-income, it must earn a minimum of $66,000 annually for one person; $93,300 for two; $114,300 for three; $132,000 for four; and $147,600 for five.
A household is considered middle-income when it earns a minimum of $22,000 for one; $31,100 for two; $38,100 for three; $44,000 for four; and $49,200 for five. By this measure, forty-six percent of U.S. households are middle-income, one-third are lower-income, and twenty-one percent are upper-income” (Nicki 2016).
The authors of the report being cited conclude: “As the middle-income population hovers near minority status, the population of upper-income adults is growing more rapidly than the population of lower-income adults. From 1971 to 2015, the number of adults in upper-income households increased from 18.4 million to 51 million, a gain of 177%. During the same period, the number of adults in lower-income households increased from 33.2 million to 70.3 million, a gain of 112%” (Kochhar et al. 2015).
Moreover, “the rising share of adults in the lower- and upper-income tiers is at the farthest points of the income distribution, distant from the vicinity of the middle. The share of American adults in the lowest-income tier rose from 16% in 1971 to 20% in 2015. Over the same period, the share of American adults in lower-middle income households did not change, holding at 9%.
The growth at the top is similarly skewed. The share of adults in highest-income households more than doubled, from 4% in 1971 to 9% in 2015.
Growth in income for middle-income households is less than the growth for upper-income households since 1970 Median income, in 2014 dollars and scaled to reflect a three-person household. But the increase in the share in upper-middle income households was modest, rising from 10% to 12%. Thus, the closer look at the shift out of the middle reveals that a deeper polarization is underway in the American economy” (Kochhar et al. 2015) and society.
The gaps in income and wealth between middle- and upper-income households widened substantially in the past three to four decades. As noted, one result is that the share of U.S. aggregate household income held by upper-income households climbed sharply, from 29% in 1970 to 49% in 2014. Moreover, upper-income families, which had three times as much wealth as middle-income families in 1983, more than doubled the wealth gap; by 2013, they had seven times as much wealth as middle-income families.
The median income of upper-income households increased from $118,617 in 1970 to $174,625 in 2014, or by 47%. That was significantly greater than the 34% gain for middle-income households, whose median income rose from $54,682 to $73,392. Lower-income households fell behind even more as their median income increased by only 28% over this period although 2014 incomes are generally higher than period of decline in the 21st century brought about by the 2007-09. The greatest loss was felt by lower-income households, whose median income fell 9% from 2000 to 2014, followed by a 4% loss for middle-income households and a 3% loss for upper-income households.
The same problem matter could be viewed from yet another angle: “In 2014, upper-income households accounted for 49% of U.S. aggregate household income. That was more than double the share of adults living in those households (21%). Middle-income households held 43% of aggregate household income in 2014, less than the 50% share of adults living in those households. And although 29% of adults lived in lower-income households, they commanded only 9% of aggregate income.45
Over the past 45 years, the share of aggregate income held by upper-income households has risen consistently, and the share held by middle-income households has fallen just as steadily. In 1970, the upper-income tier accounted for 29% of aggregate income, the middle-income tier had a 62% share, and the lower-income tier held 10%. At the time, the share of the middle-income tier in aggregate income was about the same as its share in the adult population (61%). Upper- and lower-income households accounted for 14% and 25% of the adult population, respectively.
In the past four decades, the share of aggregate income going to upper-income households has risen by 20 percentage points - more than the 7 percentage point increase in the share of upper-income households in the adult population. Meanwhile, the share of aggregate income going to middle-income households has fallen more sharply - by 19 percentage points - than the 11 percentage point decrease in their share of the adult population. The share of aggregate income held by lower-income households has fallen by 1 percentage point despite a 4-point increase in their share in the adult population.
The end result of the trends in income and the distribution of the adult population is that nearly half of aggregate income today is in the hands of households where only one-in-five adults lives. Much of this redistribution of income occurred in the 1980s and the 1990s. In those two decades, the growth in income for upper-income households greatly outdistanced the growth in income for middle-income households” (Kochhar et al. 2015).
The Great Recession of 2007-09, which caused the latest downturn in incomes, had an even greater impact on the wealth (assets minus debts) of families. The losses were so large that only upper-income families realized notable gains in wealth over the span of 30 years from 1983 to 2013 (the period for which data on wealth are available).
Before the onset of the Great Recession, the median wealth of middle-income families increased from $95,879 in 1983 to $161,050 in 2007, a gain of 68%. But the economic downturn eliminated that gain almost entirely. By 2010, the median wealth of middle-income families had fallen to about $98,000, where it still stood in 2013.
Meanwhile, upper-income families more than doubled their wealth from 1983 to 2007 as it more than doubled from $323,402 to $729,980. Despite losses during the recession, these families recovered somewhat since 2010 and “had a median wealth of $650,074 in 2013, about double their wealth in 1983.
The disparate trends in the wealth of middle-income and upper-income families are due to the fact that housing assumes a greater role in the portfolios of middle-income families-by and large, the aspect of personal, as opposed to private, property in the case of housing is more significant among the non-proprietary classes; the crash in the housing market that preceded the Great Recession was more severe and of longer duration than the turmoil in the stock market. In addition, “in the post-Great Recession period, the stock market recovered more quickly than the housing market. The S&P 500 index rose 47% from December 2010 to December 2013 compared with a rise of 13% in the Case-Shiller national home price index” (Kochhar et al. 2015). Thus, in class terms these trends in asset values favoured those classes that commanded the sufficient resources to acquire substantial holdings of financial assets as opposed to those for whom the principal property owned remained their house, thereby widening the wealth gap during the course of the recent economic downturn and recovery. All in all, “upper-income families, which had three times as much wealth as middle-income families in 1983, had seven times as much in 2013” (Kochhar et al. 2015).
Therefore, the available Wealth data point to the shrinking middle of the economic ladder as much as the income data do: “It’s time to stop saying ‘middle class’; it does not exist. 0.1 percent of Americans have as much wealth as the bottom 9 percent” (Hajda 2016).
CHAPTER 2. THE IMPACT OF INCOME DISPARITIES ON THE ECONOMY
Inequality is important not only per se but for its socio-economic effects. On the surface, it engenders the distortion in prices of important assets like houses in good school districts.
And from the vantage point of the extremely affluent, it becomes all too easy “to disengage from the rest of America and to see one’s wealth as divine reward for special genius, rather than for many other factors, including blind luck. That sense of difference in turn may “lead to the absurd sort of narcissism and insensitivity to others” (Kleinbard 2014) or affluenza, as it was dubbed by a psychologists, N. Robinson.
But even from a narrowly economic viewpoint that massive income and wealth redistribution is bound to have pernicious effects.
In fact, the U.S. economic polarisation worries not only the country’s president. “Americans enjoy, on average, high levels of income and well-being, thanks to the country’s dynamic economy and thriving business sector,” the OECD-an organisation not known, sure enough, for any left-wing leanings-wrote in a recent report. “Nonetheless, there is evidence to suggest that the benefits from these gains have not been sufficiently broad-based.”
The OECD’s observations about income inequality echo the sentiment of Treasury Secretary Jacob J. Lew, who told the Economic Club of New York that the U.S. needs broad policy changes to strengthen growth and spread the prosperity.
“The ultimate test for all of us will be how inclusive tomorrow’s economy becomes and how widely our economic gains flow,” he said in a June 11 speech (Katz 2014).
For the last 15 years, an international consortium of economists has been building data bases on the income shares of the richest people in the developed countries, based on pre-tax market income including capital gains and tax-exempt income, and excluding government transfers. In accord with what the typology of different capitalist systems would suggest, the American data reveal the greatest inequality by far, followed by Great Britain. “between 1992/3 and 2007/8 median income increased by 61 per cent, but for those in the top 10 per cent their income increased by 76 per cent and for those in the top 1 per cent it increased by 137 per cent. Given that the distribution of wealth is even more unequal than that of income and that surveys tend to underestimate its extent, the conclusion that in the recent past the rich got richer and the gap between the rich and the rest became wider is an understatement. The researchers blame the ruling Coalition policy towards the rich as a “’very softly-softly approach’ which contrasts with its ‘hard-line policies towards those on benefits” (Rowlings, Mckay 2011:205).
The stunning income distribution in the U.S. has a remarkable symmetry. In 2012, the top 10 per cent captured half of all reported income. But the top 1.0 per cent got almost half of that - 22.5 per cent - while the top 10th of 1 per cent (0.1 per cent) captured half of that. All three are within a few decimal places of the previous highs - which occurred in 1928, just before the market crash that ushered in the Great Depression.
Moreover, the above percentages don’t quite capture the violence of the skew. The stock market implosion of the 1930s followed by World War II’s strict price controls and high marginal taxes brought the top 1.0 per cent’s income share down to about 9.0 per cent by the end of the war. Executive and financial sector pay was quite restrained, even through the good times of the 1950s and 1960s, and the 1.0 per cent’s income share did not start to rise until the late 1970s.
It took off for the stratosphere then - amid the oceans of cash sloshing around Wall Street during the 1980s leveraged buyout boom.
The sums involved are enormous. The difference between the 1.0 per cent’s income share in 1975 (8.9 per cent) and today’s 22.5 per cent is 13.6 per cent.
That additional share of personal income is worth $1.6 trillion. Each year.
It’s more than the annual outlays for Social Security payments, and about twice as large as Defence Department appropriations (sic!). “It’s enough to pay off the federal debt held by the public in about seven years” (Morris 2014).
It is also noteworthy that to amass that incremental $1.6 trillion, the 1.0 per cent took 68 per cent of all personal income growth between 1993 and 2012. To be fair, those same folks lost a great deal of income during the 2008 financial collapse, because much of their income comes from financial assets. But “during the recovery of 2009-2012, they took a whopping 95 per cent of the income growth - so their relative income and wealth positions are nearly all the way back to their pre-2008 high (Morris 2014), which is the most condensed definition of bourgeois ownership relations as one can get.
The usual economical retort to such musings is that all segments of society benefit from a well-fed and contented super-rich. They are the ones, the argument goes, who supply the high-octane financial fuel to maintain America’s advantage in high technology, keep its job-creation machinery humming, and lay the foundation for solid long-term growth. Whatever the merits, if any, to such an argument in general, it most emphatically is not proved true in recent experience. There can be no denying that since financial markets were liberalised in the 1980s, the finance sector’s income and debt has soared, income inequality has skyrocketed, and the world economy has flopped from crisis to crisis - the Savings and Loan fiasco, the petrodollar debacle, and the leveraged buyout excesses of the 1980s; the “hot-money” driven currency crises and hedge-fund collapses of the 1990s, and the wild mortgage games of the 2000s.
The dangers of runaway finance have been getting some academic attention of late, as scholars have begun connecting the dots between the super-rich and financial instability.
The scale of the paradigm shift that has since taken place also in the mainstream economics is encapsulated by the following subversive to the trickle-down orthodoxy contentions coming from...the institutional bulwark of that orthodoxy-the IMF: “inequality that nets out taxes and transfers) is associated with lower output growth over the medium term, consistent with previous findings. More importantly, we find an inverse relationship between the income share accruing to the rich (top 20 percent) and economic growth. If the income share of the top 20 percent increases by 1 percentage point, GDP growth is actually 0.08 percentage point lower in the following five years, suggesting that the benefits do not trickle down. Instead, a similar increase in the income share of the bottom 20 percent (the poor) is associated with 0.38 percentage point higher growth. This positive relationship between disposable income shares and higher growth continues to hold for the second and third quintiles (the middle class)” (Dabla-Norris et al. 2015).
This is not to deny that “the very rich do invest productively, of course, and are also interested in capital preservation - so large chunks of their portfolios are invested in safe, AAA-rated assets. As their income soared, however, their appetite for safe assets greatly outstripped the available supply. So the financial industry dutifully set about creating allegedly top-quality assets out of whatever lower-quality paper was at hand.
Adair Turner, the former head of the British financial regulatory authority, has outlined the “complexification” of finance that gave rise to the insane derivative structures and synthetic portfolios that unravelled so dramatically in 2008.
Stephen Cecchetti and Enisse Kharroubi, two senior economists at the Bank for International Settlements, have documented the “inverse U-shaped curve” of finance’s contribution to the economy. The history of all developed countries shows that as finance employment rises, economic growth and productivity increases. But only up to a point. After that, continued growth of the finance sector often triggers falling growth and declining productivity.
The two authors also worked out a model of why this happens. “As the financial sector grows more sophisticated, it competes with technology and manufacturing industries for the smartest and most ingenious engineers and mathematicians. At the same time, however, broad-gaged finance needs highly “pledgeable” assets that can be readily leveraged, like residential and commercial mortgages. (High-technology investing has a very high risk of failure, and so is the preserve of specialist venture-capital firms.) The best and the brightest, they found, instead of creating new technology breakthroughs, become the servants of the super-rich - because they pay the most. The engineers devote themselves to increasing low-productivity, easily understandable assets in order to transmute them into new, highly complex, instruments that look super-safe, but often are not” (Morris 2014).
The above suggests that apart from its evident social and moral, and thus ideological and political significance, this sharp inequality has detrimental effects on the economy. This contention would still be regarded as a kind of heresy in many economic quarters. “Equality and Efficiency: The Big Trade-off” was a 1975 book written by the late Arthur Okun, a Harvard University economist and pillar of the economic establishment.
Okun’s title encapsulated an economic consensus: Inequality is the price America pays for a dynamic, efficient economy; one may not like it, but the alternatives –as in the case of democracy, according to a well-known saying -are far worse. As long as the bottom and the middle are moving up, there is no reason to mind if the top is moving up faster, except perhaps for an ideological grudge against the rich—what conservatives call the politics of envy and class warfare.
For years, the idea that inequality, per se, is economically neutral has become kind of conventional wisdom, to use J.K. Galbraith’s apt phrase.
“The debate for many years looked settled,” said Robert Shapiro, an economist with Sonecon, a Washington consulting firm. “Changes in the economy and changes in the data have reopened the debate.”
For one thing, economists know more today than they did in Okun’s day about the distribution of income. “There’s been enormous progress in measuring inequality—Nobel Prize-level progress,” said David Moss, an economist at Harvard Business School. As the data came in and the view got clearer, the picture that emerged was unsettling, to say the least.
“In the 1990s,” Moss said, “it began to appear that income was being concentrated among the very highest earners and that stagnation was occurring not just at the low end but across most income levels.” It wasn’t just that the top was doing better than the rest, but that the very top was absorbing most of the economy’s growth. This was a more extreme and dynamic kind of inequality than the country was accustomed to. According to a Congressional Budget Office report, those in the top 1 percent of households doubled their share of pretax income from 1979 to 2007; the bottom 80 percent saw their share fall. Worse, while the average income for the top 1 percent more than tripled (after inflation), the bottom 80 percent saw only feeble income growth, on the order of just 20 percent over nearly 30 years. The rising tide was raising a few boats hugely and most other boats not very much.
It thus began to seem that the old bargain, in which inequality bought rising incomes for all, had failed-“The majority of Americans have simply not been benefiting from the country’s growth,” as Joe Stiglitz wrote, admittedly overstating things—but not by a lot.
Why does it matter? The point is, the wealthy have what in standard economic terms is referred to as a lower propensity to consume at the margin. This is another way of saying that because their income is such that they can handily meet their needs and wants, an extra dollar that goes their way is more likely to be saved than spent. Thus, one would expect that –other things being equal-income concentration, by distributing national income away from those with higher consumption propensities—generally seen as poor and middle-class individuals to those with lower consumption propensities such as the rich and the financially well off—would lead to slower growth in consumer spending.
Sure enough, those “other things” not always are constant. This was, for instance, the case of the time period before, and by the same token the origins of the recent financial crisis, not to mention its continuation in the form of an economic depression.
And indeed, looking at the data, economists cannot but noticed that the last time inequality rose to its current heights was in the late 1920s, just before a financial meltdown. This immediately suggests that there might be a connection. In 2010, Moss plotted inequality and bank failures since 1864 on the same graph; he found a close fit. That is, in both the 1920s and the first decade of this century, inequality and financial crisis went hand in hand. Others noticed the same conjunction. Although it is well-known that a simple correlation (based at that on only two examples) cannot by itself prove any causal connections, on the other hand it was clear that it would not be sensible to dismiss that evidence out of hand.
As Christopher Brown, an economist at Arkansas State University, put it in a pioneering 2004 paper, “Income inequality can exert a significant drag on effective demand.” Looking back on the two decades before 1986, Brown found that if the gap between rich and poor had not grown wider, consumption spending would have been almost 12 percent higher than it actually was. That was a big enough number to have produced a noticeable macroeconomic effect. Joseph Stiglitz, in his book, (2014) argues that an inequality-driven shift away from consumption accounts for “the entire shortfall in aggregate demand—and hence in the U.S. economy—today.”
Orthodox economists would argue that saving and spending should eventually re-equilibrate. But “eventually” can be a long time. And in the long run, as Keynes pointedly said, we are all dead. Thus, long before those reputedly favourable effects do begin to work out, extreme and growing inequality might depress demand enough to deepen and prolong a downturn, perhaps even turning it into a lost decade—or two.
That is why President Obama’s words to the effect that he would make reducing inequality the keystone of his final years in office, initially dismissed by his political opponents as a class warfare rhetoric or a way for the White House to deflect attention from the incompetent Obamacare rollout, very soon came to be reappraised; the inexorable significance of the data forced observers of the American scene and economists of all ideological stripes to concede that “the growing gap between the richest Americans and the middle class is holding back the economy” (Click 2014), and Some indeed view such inequality as the main reason for the continuing stagnation in the job market. it became clear that-using the terminology of stratification approaches,-the richest households don’t spend in aggregate their outsized pay and stock market gains the way the middle class and poor do.
And when the pay base is stagnant or shrinking, consumer spending, which is the main driving force of the U.S. economy, goes down. This entails that employers hold back on hiring and investment because of the uncertainty over spending capacity of the middle class-accounting for the bulk of consumer expenditures, which, of course, only reduces pay and spending further.
The crucial aspect to the issue under consideration is that a growing pay gap is no transient phenomenon, which would be the only sensible reason for not being that pessimistic about its economic impact. Conversely, the trend dates back 20 years: Average income for the wealthiest 5 percent is up 17 percent but up only 5 percent for the middle 20 percent. Translated into current dollars, it takes about $53,000 a year for a family a four in Coconino with a preschooler to be financially self-sufficient — that is, not needing government aid or incurring unreasonable household debt to survive. Yet 28 percent of all county residents live below the poverty line ($26,400 for a family of four) and 44 percent of all Flagstaff schoolchildren are enrolled in the free and reduced-price school lunch program based on income.
Under the circumstances, a mainstream columnists willy-nilly put forward claims and recommendations that before the formation of the great gap would be dismissed out of hand by a large portion of the American political scene as dangerous left-wing or even socialist ideas: As Henry Ford noted, if business owners don’t pay their workers enough, who will buy their products?
Yet the events on that front seems to be going in the opposite direction. Suffice it to recall that the budget deal in Congress discussed earlier was, inter alia, an assault on 1.5 million jobless and their long-term benefits, which definitely may not be depicted in terms of workfare vs. welfare, as their job prospects — many are older and lack a higher education — are slim.
Furthermore, recall the facts documented in the section on Neopatrimonialism. If anything, all indications are, money will play an even bigger role in politics. And it is to be presumed that it will be directed at policies that widen the income gap by opposing safety net programs like Medicaid and continuing to reduce taxes that underwrite government investment in education.
The latter, of course, is widely recognized as one of the key ways to lift not only the poor out of poverty but spur economic growth and increase the general standard of living.
Arguably, then, inequality might suppress growth. It might also cause instability. As follows from the teachings of public choice theory, in a democracy, politicians and the public are unlikely to accept depressed spending power if they can help it. They can try to compensate by easing credit standards, effectively encouraging the non-rich to sustain purchasing power by borrowing-irrespective of their political colours and overt attitude towards Keynesianism.
They might, for example, create policies allowing banks to write flimsy home mortgages and encouraging consumers to seek them. Call this the “let them eat credit” strategy.
“Cynical as it may seem,” Raghuram Rajan, a finance professor at the University of Chicago’s Booth School of Business, wrote in his 2010 book, Fault Lines:
How Hidden Fractures Still Threaten the World Economy, “easy credit has been used as a palliative throughout history by governments that are unable to address the deeper anxieties of the middle class directly.” The point is, that certainly seems to have happened in the years leading to the mortgage crisis. Marianne Bertrand and Adair Morse, also of Chicago’s business school, have found that legislators who represent constituencies with higher inequality are more likely to support the easing of credit. Several papers by International Monetary Fund economists comparing countries likewise find support for the “let them eat credit” approach. And credit splurges, they find, bring on instability and current-account deficits. (Rauch 2012)
At this point, the contours of the overall picture should have become clearer.
The economy, propped up on shaky credit, becomes more vulnerable to shocks. When a recession comes, the economy takes a double hit as banks fail and credit-fueled consumer spending collapses. The reader may be forgiven for being surprised at finding the above account to be a good description of what happened in the 1920s and again during these past few years. “When—as appears to have happened in the long run-up to both crises—the rich lend a large part of their added income to the poor and middle class, and when income inequality grows for several decades,” the IMF’s Michael Kumhof and Romain Rancière wrote, “debt-to-income ratios increase sufficiently to raise the risk of a major crisis” (Rauch 2012). And indeed, a recent study by Mian and Sufi (2014a) provided robust evidence to support the contention that both “the Great Recession and Great Depression [...] “were caused by a large run-up in household debt”; the total amount of debt for American households doubled between 2000 and 2007 to $14 trillion.
Mian and Sufi’s argument adds some additional fuel to the debate over what has been dubbed earlier a neopatrimonial policy:
Mian and Sufi argue strongly with actual data that current policy is too heavily biased toward protecting banks and creditors. Increasing the flow of credit, they show, is disastrously counterproductive when the fundamental problem is too much debt.
As their research shows, excessive household debt leads to foreclosures, causing individuals to spend less and save more. Less spending means less demand for goods, followed by declines in production and huge job losses. It is as simple as that.
At this juncture one could ask: which is it? Does inequality depress demand? Or does it inflate credit bubbles that maintain demand? The sad truth is that it can be both. If inequality is deep enough, there could be enough of it to cause the country to inflate a dangerous credit bubble and still not offset the reduction in demand.
Moreover, inequality can be a destabilizing force in a yet another way.
“Of every dollar of real income growth that was generated between 1976 and 2007,” Rajan found, “58 cents went to the top 1 percent of households.” In other words, for decades, more than half of the increase in the country’s GDP poured into the bank accounts of the richest Americans, who needed liquid investments in which to put their additional wealth. Their appetite for New investment vehicles fueled a surge in what Arkansas State’s Brown calls “financial engineering”—the concoction of exotic financial instruments, which acted on the financial sector like steroids. Those changes, the French economists Jean-Paul Fitoussi and Francesco Saraceno wrote in a 2010 paper, “help explain why the expansion of the financial sector was so out of kilter with the economy., Particularly in the UK and the U.S. the financial sector has come to constitute a disproportionately large part of the economy-for example, in the latter,, the financial sector represented about 40 percent of the total profit of the economy. From our neopatrimonial perspective, we could not agree more, of course.
And it is arguable that another circularity in the economy was that underpinned by these neopatrimonial foundations, financial sector’s gigantism turned out to be its protective shield (the doctrine “too big to fail”), but at the same time magnified the crisis.
The issue of inequality, its causes and consequences constitutes a key subject of the present book, but the thrust of the argument permits us to debunk some popular myths. The point is that under capitalism, inequality is not an accidental by-product of otherwise healthy economic development. On the contrary, it stems from the underlying mechanisms of the capitalist mode of economic activity with its inherent tendencies to concentration of capital, and thus wealth and income, whose flip side is the tendency to immiseration and dispossession. “Every accumulation becomes the means of new accumulation. With the increasing mass of wealth which functions as capital, accumulation increases the concentration of that wealth in the hands of individual capitalists” (Marx 1967:ch. 25).
In point of fact, even those who could not be accused of Marxist or even left-wing sympathies acknowledge that capitalism and inequality are two sides of the same coin. Recall Winston Churchill’s observation
That capitalism should lead, in a settled economy, to the concentration of wealth. As Churchill memorably pointed out, “The inherent vice of capitalism is the unequal sharing of blessings”; arguably, this tendency arises from the nature of the system. The rewards of capitalism flow disproportionally to those who have ventured capital, therefore those with greater access to capital, the affluent, can expect to benefit most in absolute terms. Further, those with economic power also have greater means to influence policy and markets in their favour. Thus, in a settled economy, with no government intervention, economic forces will tend to concentrate wealth.
While the issue is the subject of a separate section, at this juncture it is worthwhile to relate briefly to the claim that inequality and the envy which accompany it are spurs which promote economic growth. “However, it is opportunity which motivates – inequality arises as a result of making the most of such opportunities. Inequality, from a social point of view, is an externality which arises from economic growth. It is not a cause of growth, it is a side-effect. Indeed, too much inequality can choke off growth” (albertson 2014)
From this standpoint, the following is a typical bourgeois fairy tale, failing to take consideration of the property and class structure of the U.S. society:
“The U.S. economy sustained a real rate of economic growth of 3.3% from 1945 to 1973, and achieved the same 3.3% sustained real growth from 1982 to 2007.
(Note that this 3.3% growth rate for the entire economy includes population growth. Real wages and benefits discussed below is a per worker concept). It was only during the stagflation decade of 1973 to 1982, reflecting the same Keynesian economics that President Obama is pursuing today, that real growth fell to only half long term trends. And Obama is falling short of even that, now in our sixth year of his misleadership and misrule, way too long to wait for now long overdue true recovery” (Ferrara 2014).
That the present president of the country is not exactly the idol of the aformentioned economist, is clear as day; but more relevant are significant gaps in his economic and historical knowledge; the era of u.S. post-war rapid growth was the result of nothing other than (despised by him)Keynesianism .
Meanwhile, the economist concerned shares with the reader further details of his Pollyanna-like vision: “If we could revive and sustain that same 3.3% real growth for 20 years, our total economic production (GDP) would double in that time. After 30 years, our economic output would grow by 2 and two-thirds. After 40 years, our prosperity bounty would grow by 3 and two-thirds. If we are truly following growth maximizing policies, we could conceivably do even better than we have in the past world dominant (though actually declining) 40 years. At sustained real growth of 4% per year, our economic production would more than double after 20 years. After 30 years, GDP would more than triple. After 40 years, a generation, total U.S. economic output would nearly quadruple. America would by then have leapfrogged further generations ahead of the rest of the world.
Such restored, sustained, economic growth would rebuild the rapidly rising living standards that today’s middle class so anxiously wants to see again.
It is also the ultimate solution to poverty, as after a couple of decades or so of such growth, the poor would climb to the same living standards as the middle class of today” (Ferrara 2014).
He goes on to argue, occasionally even dropping his cautious conditional mode, that “such renewed, booming growth would empower the middle class to the prosperous retirement to which they still aspire, or at least still dream about [...] If total real compensation, wages and benefits, grow at just 2% a year, after just 20 years the real incomes and living standards of working people would be nearly 50% greater, and after 40 years they would be 120% greater, more than doubled. At sustained 3% growth in wages and benefits, after 20 years the living standards of working people will have almost doubled, and after 40 years they will have more than tripled” (Ferrara 2014).
Those predictions are plucked out of thin air, as the existing property and class relations will inevitably reproduce itself-through a series of crises-putting an abrupt end to such pipe dreams-extrapolations on paper, statistical models reflecting primarily one’s wishful thinking rather than more sober realities only contribute to what is not exactly a flawless reputation of the discipline involved.
The author of the following praise of Marxian accumulation law is not any Marxist, but a columnist of the most respectable daily of them all: “The New York Times”: “ pressure on wages [...] would prove to be ultimately self-defeating, since the drive to lower pay levels to restore and increase profit levels would wreck markets for goods and services. That’s very much in keeping with the dynamic in advanced economies today.
Marx’s forecast has proven correct by this weak recovery. U.S. companies’ profits account for the highest share of gross domestic product in the post-war era” (Blodget 2014) while workers have gotten the lowest cut of G.D.P. growth ever recorded.
The relentless pursuit of lower labor costs by large corporations, which historically paid the highest wages, has helped push pay levels down, which in turn has resulted in weak demand and short job tenures. To the extent jobs have been created since the crisis, they’ve been concentrated at the bottom of the pay spectrum” (Smith Yves 2014).
The following pronouncement is cited not only for its content, but also because of its author whom “Business Insider” introduces as “One of the country’s most successful entrepreneurs and investors”: “America’s middle class has been pummeled, in part, by tax policies that reward ‘the 1%’ at the expense of everyone else.
It has also been pummeled by globalization and technology improvements, which are largely outside of any one country’s control.
And, most importantly, it has been pummeled by our corporate obsession with short-term profits—by a prevailing business ethos in which employees are viewed as ‘costs’ and companies strive to pay as little in wages as possible” (Blodget 2014).
This assertion goes to the heart of the Anglo-Saxon shareholder capitalism. But the accompanying claim is also remarkable: “The economic story that justifies this behavior is the ‘trickle down’ theory. Eventually, the mountains of money America’s owners make, will get spent and, thus, find its way to the middle class...
Unfortunately, that’s not the way it actually works.
America’s richest entrepreneurs, investors, and companies now have so much money that they can’t possibly spend it all. So instead of getting pumped back into the economy, thus creating revenue and wages, this cash just remains in investment accounts.
And Dick Hanauer explains:
I earn about 1,000 times the median American annually, but I don’t buy thousands of times more stuff. My family purchased three cars over the past few years, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. I bought two pairs of the fancy wool pants I am wearing as I write, what my partner Mike calls my “manager pants.” I guess I could have bought 1,000 pairs. But why would I? Instead, I sock my extra money away in savings, where it doesn’t do the country much good.
From a sociological perspective, if $9 million out of Hanauer’s $10 million of annual earnings went to 9,000 families instead of Hanauer, Hanauer himself has pointed out, it would get pumped back into the economy via consumption. And, in so doing, it would create more jobs. Instead, it sits in Hanauer’s bank account or gets invested in companies that don’t have enough well-off potential customers to sell to, thus possibly duplicating the problem, by, e.g. stock buybacks multiplying the wealth of those of abundantwealth and income.
Hanauer estimates that, if most American families were taking home the same share of the national income that they were taking home 30 years ago, every family would have another $10,000 of disposable income to spend.
That, Hanauer points out, would have a huge impact on demand — and, thereby job creation.
Here we come across what is probably the ultimate cognitive barrier on the part of a member of the ruling class who seeks to understand the system to which he (as well as his peers) owes his wealth.
CHAPTER 3. OBAMA CARE
This topical issue will, as will be seen, provide us with some new approaches to the middle class definition. Anyway, the situation in the health care resulting from the ground-braking President Obama’s initiative in that area is seen by some as aggravating the plight of the U. S. middle class, as the very subtitle of an article discussed below suggests: “The middle class: the first ones slandered as bigots and louts and the first ones billed for all the latest schemes” (Wargas 2013). The commentator in question invokes a powerful phrase, which perhaps is too vague to serve as a useful indicator of the class in question, but admittedly can capture one’s imagination: “Too rich to be poor, too poor to be rich”. Too little power to rewrite laws in their favour, too much power to be gushed over by champagne socialists and metropolitan editorial boards.
Admittedly, this is yet another point characteristic of the U.S. capitalism and how the latter system has come to diverge from its counterpart in Europe, where from the viewpoint of that continent it seems stunning that a newspaper can publish such blatantly egoistic, smacking of Social Darwinism indictment of the president: “While he pushes to help the uninsured and the unemployed, what has he done about the people who are working and insured” (Kingcaid 2013).
Beyond being narrow-minded, the above claim is simply false, which in all likelihood stems from its author having even not heard about Max Weber’s norm of value-neutrality and by the same token indulging in his wild ideologising with impunity.
Meanwhile, the myth of the uninsured and underinsured as “simply the poor, those who don’t work is not supported by evidence- As a matter of fact, eight out of 10 of the uninsured are in working families. 60.4 percent of those uninsured are in full-year, full-time working families. Another 22.3 percent are other workers that are not full time” (Gordon 2012).
It is no wonder that akin in that regard remarks come up in some UK public debates, such as that spurred by Top universities’ decision to sign up to a scheme that means disadvantaged teenagers don’t need to obtain the same grades as their better-off rivals to get a place. Clear merits of the programme which promotes fairer access and will increase the number of pupils from working-class families and poorly performing state schools going to university have not convinced critics, who have argued that it is unfair to discriminate against hard-working pupils from middle class (Harris 2013), though, sure enough, the term “discrimination”, correct as it could turn out from a narrow technical point of view, in a broader, social sense much better fits in with the situation of those disadvantaged rather than privileged.
The aformentioned indictment of the type of spin purportedly employed by the White House is paradoxical in light of demagogic jeremiades disseminated by, let it be said bluntly, the right-wing for whom anything to the left smacks of socialism or any other hated ideology:
So far, millions of Americans have lost their health-insurance coverage thanks to Obamacare. Those most affected are younger, healthy citizens as well as the middle class. Yes, this middle class includes many liberals. ProPublica has published an article describing the plight of two liberal Democrats who lost their coverage because their comprehensive plan still “did not meet the requirements of the Affordable Care Act”. The couple now must pay exorbitant rates for worse coverage. Since they are of the middle class, they make too much money to qualify for subsidies to help defray the cost of a new plan.
(If you are single, the cut-off for subsidies is a salary of $46,000 a year. The cut-off for a family of four is $94,000 a year.)
Now, no nation does anger like the United States. Unlike most government programmes, which conduct their wealth-siphoning out of the public eye, the effects of Obamacare are starkly visible, especially to those it needs to exploit the most. You can complain about welfare and affirmative action all you want; still, to most people, those programmes are abstractions that don’t alter everyday life in any substantial way.
But there really is nothing quite like being a hard-working, tax-paying, law-abiding citizen and receiving a letter in the mail from your health insurance company saying you’ve been dropped – thanks to a law you were told would help you. The letter instantiates, to that upstanding citizen, the fact that he is now merely a sacrificial tax lamb. Millions of little tax lambs have received such letters, and even the most capable spin doctors can’t hide this nasty fact. In fact, the more creative they get with their spin, the more the victims of Obamacare will become enraged that their hardship is being trivialised.
Obama is at least smart enough to have learned this, which is why he has offered a very late apology to the tax lambs on NBC News.
It’s a good thing, for him at least, that he’s shifting the tone. Obamacare supporters have used several stock arguments to the cancellation letters, and these have only made things worse. One is to say that it’s the insurance companies’ fault for terminating your coverage, since nothing in the so-called Affordable Care Act mandates dropping coverage. Obama himself used this talking point recently.
But the companies have terminated the plans due to the costs imposed by the law itself. The US government, you see, is using the insurance companies as middleman proxies in its wealth-redistribution scheme. By forcing these companies (among other things) to cover people who are certain losses, the government has effected a massive cost shift onto the pool of less risky customers, as well as to those too “wealthy” (i.e. $47,000 a year) to qualify for help.
Imagine if the US government passed a law mandating that every restaurant in the nation give away a certain number of free meals per day. Then imagine that when the restaurant owners raised prices on other meals to cover the guaranteed losses, the government claimed it was an innocent bystander in the affair.
How dare those greedy owners not want to give away free merchandise! We didn’t mandate they raise prices!
Or imagine if the government raised the minimum wage to $50 an hour, and then claimed the ensuing mass unemployment was the fault of greedy shop owners.
After all, nothing in the minimum wage law mandates firing employees. (Koffler 2013).
Naturally, it seems pointless to refer the critic cited above to those research findings that are inconsistent with his deep-seated belief. This is clear also in light of his further argument:
“The other reply, equally arrogant, is to say that the terminated coverage was “substandard”. Substandard to whom? As you can see from reading the ProPublica piece, the liberal author admits the cancelled plan was damn fine coverage by any standard.
The point is that Obamacare will continue to enrage people if the law’s supporters persist in using such dismissive talking points. People do not want to be talked about as though they were the eggs in the government omelette. Nor do they want to be told to stop their whining and take their bumps in the name of some abstract ‘equality,’ when the concrete effects of that “equality” are higher costs and worse health coverage for them. If Obamacare is ever repealed, it will be because the American middle class finally stands up for itself” (Koffler 2013).
A broadsheet newspaper launches a vitriolic satirical attack on the reform involved from what purportedly is a specific class perspective: “at a certain point you’ve made enough money. Like at around $50,000” (Koffler 2013). The assault mentioned above refers, of course, not to that hypothetical middle-class reader, but to the president of the USA, who, in the journalist’s opinion, “after lunch, before taking his nap, wonders to himself, Have I done enough so far today for the middle class? If the answer is no, he still takes his nap, but he gets on the case immediately upon waking up two hours later. Sometimes, an aide will be talking about, say Iran, or something, and Obama will suddenly interject, “WHAT HAVE YOU DONE FOR THE MIDDLE class TODAY??” The middle class, of course, is not what this White House is about. Its incessant assertions of providential care for average income earners [, or ...] the White House’s voluble concern for the middle class is a political tactic – the middle class has lots and lots of voters – and a smokescreen for what Obama is really up to: Transferring wealth from the upper and yes, the middle class, to the lower class” (Koffler 2013).
Now, this sentence is really interesting, since it presents the most widely used scheme of social stratification, organised-as it does-around the concept of the middle class.
At this juncture what has been mentioned earlier as the fundamental distinction between the two approaches to social differentiation may be discussed at some length. Whilst social stratification is inherently hierarchical, class interrealtions are by and large more complex in nature. Further, classes are always-and they were so conceptualised in both classic theories, those developed by Marx and Weber-part and parcel of the economy, whereas the units of social stratification can be located in the non-economic societal structures as well. This is related to another kind of universality-in time: whilst classes arise at the definite point of human history and-at least in theory-a society without classes is imaginable, the notion of unstratified human society is out of the question.
The reader is then told that the New York Times […] is running at the top of its website a story titled, “Health Care Law Frustrates Many in the Middle Class.”
Even the Times, it appears, has finally discovered that the Affordable Care Act is not at all about making care affordable. It’s about taking money from the middle class and giving it to poor people. It’s a wealth redistribution scheme.
Many in the middle class do not qualify for assistance with their purchase of insurance, even as premiums rise to pay for the new costs to insurers caused by Obamacare. Middle class people who work hard and pay for their insurance are, to use a technical term employed by financial advisors, screwed.
An analysis by The New York Times shows the “cost of premiums for people who just miss qualifying for subsidies varies widely across the country and rises rapidly for people in their 50s and 60s. In some places, prices can quickly approach 20 percent of a person’s income.
Experts consider health insurance unaffordable once it exceeds 10 percent of annual income. By that measure, a 50-year-old making $50,000 a year, or just above the qualifying limit for assistance, would find the cheapest available plan to be unaffordable in more than 170 counties around the country, ranging from Anchorage to Jackson” (Koffler 2013)
The reader can be forgiven for suspecting that that there is more to the story of health insurance for the various social classes than that. In brief, this is indeed suggested by VICTOR DAVIS HANSON, according to whom “The problem with Obamacare is that its well-connected and influential supporter’s pet businesses, unions and congressional insiders - have already won exemption from it. The rich will always have their concierge doctors and Cadillac health plans. The poor can usually find low-cost care through Medicaid, federal clinics and emergency rooms” (2013).
There have been scores of similar attacks on the health reform in question, more often than not failing to abide by the rules of fair play. Suffice it to say that more than $400 million has been spent by the law’s opponents to turn Americans against it, according to an analysis by the Campaign Media Analysis Group at Kantar Media. That compares to just $75 million spent by supporters to defend and explain the legislation which is a tough job, considering that the bulk of the anti-ACA propaganda has been misleading or downright false (Potter 2013a).
How biased is in fact the argument cited above, can be seen from the following polemics. It is not that its author is uncritical toward the Obama-initiated reform, and notably its implementation, as at the very outset he states:
“I’m as ready as the next guy to call out the Obama administration for the shoddy rollout of the ACA. I’m also confident that at the end of the day, as the exchanges become more accessible and as families with incomes below four times poverty get help paying for the coverage they buy there – coverage that for some will be of higher quality than what they had - the reforms will first become more popular, and later become an appreciated, and probably pretty dull, part of the fabric of life in America.
One of the problems in getting from here to there is articles like this one in yesterday’s NYT. No question there are people paying more for health care under the ACA, but the examples in here seem awfully cherry-picked to support the headline claim that the new law “Frustrates many in Middle Class” (Bernstein, Jared 2013).
And the researcher in question takes the bull by the horns in what seems a bipartisan, unbiased rejoinder:
“First, let’s talk middle-class. The median family income in the U.S. right now is about $62,000. For families of four, like the one featured in the piece, it’s about $80,000. Income eligibility for the subsidies goes up to four times the poverty threshold, or about $94,000 for a family of four, meaning that a median-income family buying coverage on the exchange would be eligible for a subsidy. The family featured in the piece was chosen to be above the subsidy level-their income was $100,000. That’s certainly a fair point and I’m not denying they’re “middle-class.” But the piece should have mentioned the median, or more to the point, the fact that according to Census data, the ratio of income to the poverty threshold for families in the middle fifth of the income scale is 3.5, again, below the subsidy cutoff of 4 (cf. Bernstein, Jerd 2013).
And the author goes on to analyse some other claims put forward in the article concerned:
“But what of this ‘cliff’ business on which the piece focuses, i.e., that the family takes a huge hit by not being eligible for the subsidy? As noted, the subsidy cutoff for a family of four is about $94,000 and the family’s contribution is capped at 9.5 percent of their income, or about $9,000. The Chapman’s, the family featured in the piece, with income of $100,000, may now pay about $12,000 per year for coverage.
The piece states: “If they made just a few thousand dollars less a year - below $94,200 - their costs would be cut in half, because a family like theirs could qualify for federal subsidies.” But $9,000 is not half of $12,000, so, at least as I read it, they’re exaggerating the cliff effect (h/t, PvDW).
What did they have before? The Chapman’s previous plan, for which they paid $665/month, was cancelled, and as noted, the cheapest plan they could find will cost $1,000. But what did their old plan cover compared to the new plan? My guess, based on the cost and quality of non-group coverage in states with not a lot of competition, is: not much. Any piece like this that compares premium costs before and after the ACA must dig into the quality of the plans, otherwise they’re comparing apples and oranges (cf. Bernstein, Jerd 2013).
Next, he demonstrates that his judgment is by no means unique:
Dean Baker objected to the assertion in the piece that paying more than 10 percent of your income for health coverage is unaffordable. As Dean shows, under the widely accepted assumption that employees pay for their employers’ share of their coverage in lower pay, than most people have unaffordable coverage by this benchmark.
In other words, health coverage is not cheap, because health care is not cheap, especially in America, where costs are often far higher for the same treatment or drug than they are in other countries. Thus, in the interest of sustainability, we have to implement some version of reform to squeeze inefficiencies out of the system, and as I’ve stressed many times before, whatever form that takes, it will likely involve risk pooling, mandates, and subsidies. “Some will pay more, though they will often get more coverage for their extra bucks. Many - post subsidy - will pay less (as the piece notes, the largest subsidies are targeted at the uninsured).
It’s not a simple story, and it’s certainly not the case that most of the middle class will end up facing higher costs under ACA than under either the current system or any plausible alternative. To the extent this piece leaves readers with that impression -and I thought it did- that’s quite misleading” (Bernstein, Jerd 2013)
After all, despite the problem-laden launch of the program, “Senate Majority Leader Harry Reid’s defence of the health care law points to the basic and undeniable fact: “I can’t come here and say the rollout was great. It was awful. But look where we are today. The website’s been fixed. Perfect? No. But right now as we speak there are nine million Americans, nine million Americans, who have health care that didn’t have it before,” (Face the Nation 2014). And paradoxically, the programe has been fixed largely thanks to the social category inquestion.
For the fact of the matter is, “the Obamacare website rollout might have been a fiasco, but its saving grace was that it was very public and had a big clientele among the middle class” (Drum 2014a).
How big, though, is a matter of dispute owing to the lack of an unequivocal definition, which otherwise has a big political potential, as the case discussed below shows.
In Kentucky’s hotly contested U.S. Senate race Sen. Mitch McConnell’s campaign saw an opportunity to attack his Democratic opponent, Kentucky Secretary of State Alison Lundergan Grimes, on the issue of health care after a new report came out on the country’s long-term fiscal health.
“Alison Lundergan Grimes fully supports the implementation of Obamacare and the devastating tax hikes it will have on middle-class Kentuckians,” McConnell spokeswoman Allison Moore said in a press release on July 17.
The press release included several links to and excerpts from a July 16 Politico story about a new report from the Congressional Budget Office. The campaign said the story was “background information highlighting” how “Obamacare implementation will hurt middle-class
Kentuckians” (Contorno 2014). The problem is, however, the said study does not support such a claim at all. “The Congressional Budget Office, Congress’ top fiscal scorekeeper, released a report in July on the country’s long-term budget outlook. It also mentions the future impact of taxes — including some in the Affordable Care Act.
“Because some parameters of the tax system are not indexed to increase with inflation, rising prices alone push a greater share of income into higher tax brackets,” the report says.
This means that in 25 years, inflation will push some people past the threshold who, in today’s dollars, would not be required to pay those taxes. The thing is, though, that the effect of the Affordable Care Act is much more limited than other parts of the tax code.
There are a couple tax levels in the Affordable Care Act that are not indexed to inflation, and therefore, over time, some people who were not paying this tax will, unless Congress makes some changes.
One is a levy on investment income for individuals who earn more than $200,000 a year. It also applies to families with incomes beyond $250,000” (Contorno 2014).
But it is important to stress that this is an inflated watermark. A salary of $200,000 today would put an individual in about the top 5 percent of all income earners in the United States, according to the Tax Policy Center, an independent think tank. What middle-class could be about this income group, one might ask a rhetorical question. If one shifts one’s time point of reference, the basic conclusion still applies.
According to the CBO report, the median total income in 2039 will be $50,900, well below the $200,000 level to qualify. For a family of four with two parents and two children, median income will be about $146,000. Higher, but still $100,000 short of the $250,000 threshold for families.
Bob Williams of the Tax Policy Center provided some additional projections. By his estimates, in 2039, someone making $205,000 would be among the top 20 percent of all earners.
Even granted that middle class is a loosely defined term, it would not be, sure enough, fair to say that top 20 percent is middle class In that sense, even there, these taxes are not likely to hit very many people in the middle class, if anybody,” Williams said.
And that’s especially true in Kentucky, a state with the fourth-lowest median income in the country.
In 2018, the Affordable Care Act also phases in an excise tax on the so-called “Cadillac” or high-cost health insurance policies. The premiums for these plans are paid for almost entirely by employers, and often offer generous benefits and little cost-sharing for employees.
Under Obamacare, plans that cost more than $10,200 are subject to a 40 percent tax, but only on the amount that exceeds $10,200. (Meaning if a plan costs $11,000, the insurance provider will pay taxes on $800 of it.) Those costs are likely to be passed on to employers, the CBO said.
In 2009, Sarah Palin said this tax would hit those making under $200,000 the hardest. Even though this judgment could be said to be largely true, one has to take into account the following:
At the time, however, the Affordable Care Act was still working its way through Congress and the unfinished bill taxed policies exceeding $8,000, significantly less than the final outcome. Even then, analysts said it was only expected to affect about one-in-four insurance policies in 2019. (We couldn’t find any studies that analyzed this tax in the form it was signed into law.)
It would be a stretch to call this tax “devastating.” The CBO said the vast majority of employers are more likely to offer workers less expensive plans than pay the higher costs. However, the CBO and other economists said wages will increase to make up for the lost health benefits (which is a form of compensation).
So those workers may pay some higher taxes on the increased income and see changes to their health care plans, but they’ll make more money as well.
One study from the Massachusetts Institute of Technology said that the increase in wages would far surpass additional taxes collected by the government. That is based on taxing at $8,000, not $10,200, but the general concept still holds, said Steve Zuckerman, a senior fellow in the Health Policy Center of the Urban Institute.
“It’s a tradeoff in compensation and slightly less generous fringe benefits,” Zuckerman said. “It doesn’t seem to me it’s going to be a devastating tax increase. If anything, on balance, they’ll be paying more taxes ... but they’ll also have more take-home pay.”
We took all of this to Moore, McConnell’s spokeswoman. In addition to arguing that the taxes mentioned above would, over time, affect the middle class, she also pointed out that the individual mandate requiring almost all uninsured Americans to buy insurance should be considered a tax on the middle class.
In upholding the law, the Supreme Court said the mandate “may reasonably be characterized as a tax” when it upheld the law. But this is not what was highlighted by the CBO report or the Politico story the campaign cited.
How does this argument square with, for example, the claim that the implementation of Obamacare as outlined in the report would mean “devastating tax hikes ... on middle-class Kentuckians.”
Meanwhile, the fact is that more high-income earners will have to pay taxes over time, but most of the middle class wouldn’t be affected, even 25 years from now.
The exception is the excise tax on high-cost plans. While just a fraction of plans would be affected, there are plenty of regular folks who have these types of policies. Still, they’re not likely to face “devastating” tax increases. It’s more probable that employers will provide less expensive insurance policies. Those employees will subsequently pay more in taxes, but only because their incomes will increase.
All in all, the claim from McConnell’s campaign as must be deemed mostly false (cf. Drum 2014a).
The argument cited below has two sides to it-a positive one, pointing to the supposed favourites of the politicians and those who are neglected by the latter, and both labels being common-speech words, whose true meaning is only to be found out by means of a scientific method.
One of the guiding principles of politics is that programs for the poor can be managed badly and nobody cares. But if a program for the middle class is badly managed, there’s hell to pay. More broadly, there’s ample evidence that politicians—even liberal ones—care about the middle class, but not about the poor.
Peter Super, a professor of law at Georgetown University notes that the rollout of Obamacare’s federal exchange was actually fairly typical for a new program that serves low-income people.
“But the recovery has been startlingly fast. […]There’s an old line that goes, “programs for the poor are poor programs.” When you compare programs that are used by the poor, like food stamps, to programs used by Americans of all income brackets, like the IRS or the DMV, it’s night and day. I hear people complain about the IRS and I’m just astounded. Its level of customer service is radically better than what we see in even fairly well-run poverty programs. There’s all sorts of things the IRS would never dream of doing that are absolutely routine in these other programs. […]
With Obamacare, a lot of middle class, and even upper middle class, people were using the system, and because it was all online, it was easy for journalists to try it out, and so there was a lot of public pressure. But what do you do when services don’t get as much attention and don’t have beneficiaries with political power?” (cf. Drum 2014a)
An expert’s comments on an authentic case show how easily one can adopt a biased perspective in dealing with the health insurance matters:
The bakery owner in Montana has had no health insurance for his family of four for two years.
“His annual income is $88,000, and he could now buy a policy covering them all for $697 a month.
But he says the cost “is hard to justify” because he will “need” a new car in two years. What he really means, almost certainly, is-a professor of law and affiliate professor of psychology at Arizona State University Sandra Day O’Connor College of Law pointed out-that he likes having a new car more than making sure that he can pay the hospital bill if his children get sick.
Studies by psychologists and behavioral economists have shown repeatedly that such flawed thinking is common, one reason medical bills are the leading cause of personal bankruptcy.
The cost is paid not only by his children but also by the rest of us, who must cover, through our insurance and taxes, the medical bills he cannot pay.
He’s frustrated? What about the rest of us?” (ELLMAN 2013)
Unless the said partisanship is taken into consideration, the following argument may seem odd-given what have been argued in the previous chapter: “Under ObamaCare, individual tax filers earning more than $200,000 and families earning more than $250,000 will pay an added 0.9 percent Medicare surtax on top of the existing 1.45 percent Medicare payroll tax. They’ll also pay an extra 3.8 percent Medicare tax on unearned income, such as investment dividends, rental income and capital gains.
A new tax on capital gains smuggled into the “health care” bill… that’s just what a weak economy struggling to emerge from the endless Obama non-recovery needed” (Barone 2013). Sure enough, what the author of that contention overlooks, is a rift between Wall Street and the economy at large-also in a broader, social sense.
And indeed, while they obviously do not satisfy any statistical-rigour requirements nevertheless individual case histories, such as that discussed below, show the issue from the perspective of everyday life of ordinary Americans to whom the programme has been, after all, addressed.
Dean Angstadt is a self-employed, self-sufficient logger who has cleared his own path for most of his 57 years, never expecting help from anyone. And even though he’d been uninsured since 2009, he especially wanted nothing to do with the Affordable Care Act.
“I don’t read what the Democrats have to say about it because I think they’re full of it,” he told his friend Bob Leinhauser, who suggested he sign up.
That refrain changed last year when a faulty aortic valve almost felled Angstadt. Suddenly, he was facing a choice: Buy a health plan, through a law he despised, that would pay the lion’s share of the cost of the life-saving surgery - or die. He chose the former.
“A lot of people I talk to are so misinformed about the ACA,” Angstadt said. “I was, before Bob went through all this for me. I would recommend it to anybody and, in fact, have encouraged friends, including the one guy who hauls my logs.” Leinhauser, 55, a retired firefighter and nurse, would urge Angstadt to buy a plan through the ACA marketplace. And each time, Angstadt refused.
“We argued about it for months,” Angstadt said. “I didn’t trust this Obamacare. One of the big reasons is it sounded too good to be true.”
January came, and Angstadt’s health continued to decline. His doctor made it clear he urgently needed valve-replacement surgery. Leinhauser had seen enough and insisted his friend get insured.
“The only thing he was ever really adamant about was that Obamacare was the real deal,” Angstadt said. “I trusted him to at least take a look at it.”
Leinhauser went to Angstadt’s house, and in less than an hour, the duo had done the application. A day later, Angstadt signed up for the Highmark Blue Cross silver PPO plan and paid his first monthly premium: $26.11.
“All of a sudden, I’m getting notification from Highmark, and I got my card, and it was actually all legitimate,” he said. “I could have done backflips if I was in better shape.”
Angstadt’s plan kicked in on March 1. It was just in time. Surgery couldn’t be put off any longer. On March 31, Angstadt had life-saving valve-replacement surgery.
“I probably would have ended up falling over dead” without the surgery, Angstadt said. “Not only did it save my life, it’s going to give me a better quality of life.”
Angstadt faces a long recovery, but his conversion to ACA supporter is doneAnd his sobering judgment is worth citing: “The political storm around the ACA, he said, is the political parties “fighting each other over things that can benefit people.”
“For me, this isn’t about politics,” he added. “I’m trying to help other people who are like me, stubborn and bullheaded, who refused to even look. From my own experience, the ACA is everything it’s supposed to be and, in fact, better than it’s made out to be.” (Calandra 2014)
However, if one switches one’s perspective from that of the elusive middle class to one concerned with class in a socio-economic sense of the word, the above optimistic conclusion may turn out to be not that firm, after all.
A national union that represents 300,000 low-wage hospitality workers charged in a report that Obamacare will slam wages, cut hours, limit access to health insurance and worsen the very “income equality” Unite Here warned that due to Obamacare’s much higher costs for health insurance than what union workers currently pay, the result will be a pay cut of up to $5 an hour. “If employers follow the incentives in the law, they will push families onto the exchanges to buy coverage. This will force low-wage service industry employees to spend $2.00, $3.00 or even $5.00 an hour of their pay to buy similar coverage,” said the union in a new report.
Moreover, “only in Washington could asking the bottom of the middle class to finance health care for the poorest families be seen as reducing inequality,” according to the report from Unite Here. “Without smart fixes, the ACA threatens the middle class with higher premiums, loss of hours, and a shift to part-time work and lesss comprehensive coverage,” concluded the report, titled, “The Irony of Obamacare: Making Inequality Worse.” Based on government and private reports, polling and statements from administration officials, the report, to be sent to pro-union members in Congress, charges that low-wage workers are taking the hit under Obamacare, while wealthy insurance companies fatten up on government subsidies.
Union head Donald “D.” Taylor, in a note also being sent to Congress, demands changes and admits to being reluctant to bash a president his union supported.
This is a further irony: “Believe me; I enter this entire debate about the consequences of the ACA with a deep reluctance,” as he wrote. “Unite Here was the first union to endorse then-Senator Obama. We support the addition of health care to millions of Americans. Yet facts are facts, and Obamacare will cost our members the equivalent of a significant pay cut to keep their hard-won benefits.”
Unite Here’s document charges that the administration is putting union health care into a “death spiral.” It endorsed criticism that employers will move workers to part-time status to avoid the requirement that those working 30 hours or more a week be provided health insurance - or else the company pays a penalty. And it says the Affordable Care Act will shift workers from union insurance to the more expensive Obamacare health exchanges, costing them up to half of their pay to cover premiums.
“The information addresses the very unfortunate irony of Obamacare,” Taylor said in his letter about the report. “Namely, that it will inevitably lead to the destruction of the health care plans we were promised we could keep. And, as a result, it will lead to greater income inequality for the very segment of the population Obamacare should want to help most” (
2014).
Another Taylor’s observation concerns a class (negative) and (the political) estate bias (negative) in that he suggested that Democrats in Washington are telling unions to stop griping about the impact of Obamacare on their members. He quoted a Senate aide saying, “Labor needs to regress to the mean.” Said Taylor: “In other words, roll back what you have and take one for the team. Ironic, given that
Congress and the president carved out an exemption for staffers on the ACA. We cannot sit idly by as the politicians carve up our health plans while they carve out exceptions for themselves and every special interest feeding at the trough in Washington.” (Bedard 2014)
Be that as it may, it is difficult to avoid the conclusion that the decision-makers concerned would benefit from a radical shift in perspective-such concerns as those described above would be much better addressed if one would look at them through a class lens, instead of that of social stratification with its inherent middle class.
The above passage overlaps to an extent with the story told by a dissatisfied beneficiary of the health care reform: “Like myself, millions of other self-employed individuals have been forced into the healthcare exchanges, as they are called, with the promise of lower costs and better coverage. In reality, just the opposite has happened, especially if your annual income exceeds $46,000-the argument is sound, and is returned to below.
That is the income level at which premium-lowering subsidies are no longer available. Without those subsidies, health insurance costs soar. The middle-class working stiffs are the real losers here, as they experience crushing increases in their health insurance premiums” (Friedrich 2014).
Those remarks allow one to see where the crux of the matter actually is. To reiterate, the reform would be served by an overhaul of its social-structural apparatus. The above cited grumblins are voice by a person who is a member of a definite socio-economic class, after all. Furthermore, in introducing by the legistlator to the act concerned of the aformentioned upper income limit one can easily discern an attempt-whether successful or not, it is another issue-at a class policy. Nevertheless, such purposes are fully legitimate and at least in theory practicable. If Obamacare is being received as not quite a resounding success, this circumstance may well has something to do with its misplaced target-instead of openly named socio-economic classes, the addressee is the elusive middle class. Friedrich goes on to list his concerns, which mostly are genuine, but from our standpoint particularly one point is pertinent:
“If my previous and affordable “Chevy” policy served me well for years, why am I now being forced to purchase a “Mercedes” policy with all kinds of bells and whistles that at my age I do not need? Sure my “Chevy” policy did not have child dental care, maternity benefits or access to “free” birth control, all requirements of ACA policies.
But my old policy allowed me to keep my doctors and access to all hospitals. Given the choice, I suspect most would choose a plan with the doctors they have trusted for years, a choice of hospitals and affordable deductibles.
If you receive your health insurance through work, you have probably escaped the turmoil of this law, but your day of reckoning is coming soon as the implementation delays of the law expire and the employer mandate kicks in.
Employers will find the cost of employee health coverage so expensive that the only affordable alternative will be to move their employees onto the healthcare exchanges. That is when the rest of the middle-class families will experience the Obama-shock that self-employed individuals are now confronting.
If you are lucky enough to find a healthcare exchange policy that you like with a doctor you are happy with, you are still not out of the woods. I was shocked to learn that many of New York’s finest hospitals, such as Memorial Sloan Kettering, Weill Cornell and others, have opted out of most if not all of the healthcare exchange plans.
How disturbing is it that at the most vulnerable moment of your life your hospital of choice does not accept your insurance. This scary scenario is not imaginary and the ramifications are even more frightening. Losing access to top-quality hospitals means more patients will be pushed into fewer and less-desirable hospitals, at a time when specialized care is needed most.
The glaring failure of Obamacare is in its one-size-fits-all approach to healthcare, a system imposed upon us by Washington bureaucrats who in their hubris have exempted themselves from the provisions of the Affordable Care Act” (Friedrich 2014).
These are in fact two apposite points: a sound criticism of the U.S. political estate an a hint at the over-generalisation committed by the reformers, which corresponds to the over-inclusiveness of the concept under examination.
“On March 23, 2010, President Barack Obama signed into law a health care reform bill that had as its centerpiece and expansion of coverage to the uninsured.
So, it is important to bear in mind the background to the reform: 45 million people in the U.S. had no health insurance.
It is important to clear up some other misunderstandings connected with the controversial bill as well. The serious bone of contention was, among other things, the extension of federal authority over the health care system. Republican critics charged that the Democrats’ reform proposals were “socialism,” would create “death panels … that give the government the power to deny care based on budgetary concerns,” and would lead to a “massive government takeover of health care.”
Again, this judgment was ideologically motivated rather than evidence-based.
In fact, the law did little to directly increase federal power over the health care system. Building upon the existing system of employer-sponsored insurance, “the law subsidizes coverage for the uninsured through private insurers or state Medicaid programs, and many of the latter already contract with private managed care firms to provide insurance. State governments will set up health plan exchanges for individuals and small businesses and are responsible for enforcing new federal standards for insurer policies. Beyond paying the bills, the role of federal agencies is to write regulations, oversee the actions of state governments, and serve as a fallback if states fail or refuse to perform their assigned tasks. Clearly, while not denying that the 2010 health care bill was a major piece of social legislation, it did not move the United States any closer to socialized medicine or federal government domination of the health care system.
Instead, the law followed a well-established pattern in American social policy-making of delegating responsibility for publicly funded social welfare programs to private entities and state governments-“variously labeled in the literature as third party government,” “government by proxy,” “privatization,” or “the hollow state” (Cf: Salamon 1981, Starr 1989, Brinton 1986, Kettle 1988 ). From the viewpoint of policy-makers such a policy might satisfy social needs without seeming to expand the size of the federal government. It also allows them to establish public-private partnerships of sorts, whose advantage lies in the ability of policy-makers to shift potential conflicts away from the public arena, letting private actors and market arrangements resolve questions about the distribution of scarce resources. (cf. Morgan, Campbell 2011: 4)
The flip side of the coin is convoluted lines of authority and accountability, and a blurring of boundaries between public and private” (Morgan, Campbell 2011).
The aformentioned authors concentrate in their book on the delegation of governing authority over U.S. social programs to the private sector”, with special reference to the 2003 Medicare Modernization Act (MMA), which added a prescription drug benefit to Medicare that is delivered by competing, private insurance companies.
The authors argue that the MMA also augmented the role of commercial insurers in providing overall Medicare coverage. Placing the MMA in broad historical and cross-policy context, they show that “delegated governance is a long-standing phenomenon, one that predated the rise of the free market reform movement in the 1980s. “The characteristics of delegated governance have changed over time, however, shifting from an initial emphasis on nonprofit organizations to delegation to for-profits and consumers themselves. The recurring use of delegated governance results from attitudinal and institutional constraints in the United States: ambiguities in public opinion about the role of the state in American society; the often powerful role of interest groups in the policy-making process, and the pre-eminence of Congress in crafting social programs. Delegating governance to private actors has been a way to pass social policies in a process fraught with obstacles and hemmed in by the conflicting signals sent by the mass public. These governing arrangements have a variety of consequences, from how individuals actually fare under delegated governance to how scholars should think about the nature of the American state” (Morgan, Campbell 2011).
The researchers concerned explain the key concept of Delegated Governance:
“Delegated governance refers to the delegation of responsibility for publicly funded social welfare programs to non-state actors. In contrast to directly governed programs—in which bureaucratic agencies assume full responsibility for distributing benefits or providing public services—collective goals are realized through private entities that include nonprofit organizations and profit-making firms. This is both a long-standing phenomenon in American politics and one that changes form over time, although we utilize a single term to refer to the larger phenomenon both for the sake of parsimony and because each form of delegation arises from a similar set of factors. Students of bureaucracy and public administration have long noted the existence of delegated governing arrangements, labeling them but have paid less attention to how these arrangements have evolved over time” (Morgan, Campbell 2011).
They also add that the stress of the analysis is on the social welfare arena, though the analysis could certainly be extended to other policy areas, including the pervasive contracting out of federal environmental policy, reliance by state governments upon private firms to manage prisons, and the growing use of private security firms to supplement conventional military forces. The interested reader will be able to find such an analysis in (Tittenbrun 2014).
Finally, their study takes account of cases in which “similar political dynamics have been at work in the intergovernmental shifting of responsibilities, and that this shifting (and inadequacy of accompanying federal funds) often produces further delegation to private actors.“ (Morgan, Campbell 2011; Wargas 2013).
One year of functioning enables the observer to assess the benefits of the the Affordable Care Act; indeed, despite years of unremitting partisan opposition and continual legal challenges, it’s unassailable that it is working. The facts speak for themselves: thanks to the ACA, “one in four uninsured Americans — about 10 million people — have gained the financial security of health insurance in less than one year” (Potter 2014a). The uninsured rate in the United States has been cut by 26 percent. And as those states where Republican governors who initially rejected federal funding start instead to embrace expanded Medicaid, the number of uninsured will plunge even further.
The aformentioned benefits are not only social but also economic in nature.
When the last century drew to a close, uninsured patients placed a significant strain on the U.S. economy. Absorbing treatments for uninsured patients is a huge stumbling block to the U.S. economic growth and the attempts to balance the budget. Before this year, America had the most expensive health care of all: the emergency room, where legally mandated costs of treating the uninsured were passed along with higher medical costs.
However, since Obamacare kicked in, emergency room admissions of non-payees are on the decline. During 2014, hospitals saw fewer uninsured patients, saving the U. S. health care system, thus far, an estimated $5.7 billion in uncompensated care, according to a Department of Health and Human Services report published in September. Approximately $4.7 billion of the $5.7 billion in savings comes from the 27 states that implemented the entirety of the Affordable Care Act, which includes an expansion of Medicaid.
Implementing ACA and expanding Medicaid does not have to be a partisan battle, as some Republican governors have made it. Arizona, Ohio, New Jersey, and Pennsylvania, where Republican governors hold office today, reviewed the matter and decided to join in expanding their medical coverage in 2014. As other Republican governors themselves awake to the advantages falling to those states who embraced Medicaid and health exchanges – and decide to reverse their opposition – it’s only a matter of time until the rest of the Republican governors join them.
The Affordable Care Act also sought to limit the huge costs of American health care that make the system the most expensive in the developed world. Just one year into Obamacare, the costs of medical care in the U.S. are increasing at historically low rates.
There is even more to this than that. Before 2014, an accident or extended illness often resulted in bankruptcy for tens of millions of uninsured and/or underinsured Americans.
Ninety-four percent of workers in 2014 have health plans that limit their out-of-pocket costs because of Obamacare provisions.
Representatives, through the legislative process, tried over “50 times to undo, revamp or tweak Obamacare, according to The Washington Post. They failed each time, and the U.S. population now has at its disposal “an affordable health care system that allows millions the access they need to preventive care – without the costs falling on the consumer” (Brazile 2014).
For this reason, it seems doubtful whether the new, post-election balance of power in Washington will lead to the repeal of ACA, which has achieved some measure of institutionalisation in the above sense.
This is the case in spite of any shortcomings to the new mechanism. While research on the effects of the latter is sparse, one survey of “ 147 respondents, 61% of whom represented higher education, 25% were nonprofits, and the remaining 14% were private businesses in the construction, health care and government industries. Overall, the study shows that the act in question might have some palpable negative impact, but not so substantial, as painted by its opponents.
The For example, only fewer than 40% respondents reported that the higher level of costs entailed by the reform actually affected their hiring plans. “About one-quarter indicated the law prompted them to change their benefit plans, for example by increasing cost-sharing with employees” (Amato 2015).
But those data need some comment. “a strategy incubated at the National Center for Policy Analysis, a Dallas-based libertarian think tank that advocates for fewer government regulations and more individual responsibility. The strategy that emerged in the early 2000s was what the insurance industry called consumer driven health plans — CDHPs for short. These plans are superficially appealing because the premiums are lower. But that obscures a defining and central feature of CDHPs: a requirement that folks enrolled in them, regardless of income, pay a substantial sum from their wallets for medical care every year before their insurance coverage kicks in. In some ways at least, CDHPs are about less insurance. With every passing year, under the industry’s strategy, insurance companies would be paying a smaller percentage of medical claims while their customers would be paying more because of the high deductibles.
Fast forward to 2015 and the effects of that strategy are playing out – but not to the benefit of consumers. Instead, ever-increasing numbers of Americans are finding themselves in the ranks of the underinsured.
The latest evidence came last Thursday in a study released by the left-of-center Families USA. Using data collected by the Urban Institute’s Health Reform Monitoring Survey, the group found that more than one of every four adults enrolled in these CDHPs went without needed care because they didn’t have the cash to pay for it.
The most common types of care they skipped, according to Families USA’s report, were medical tests and treatments and follow-up care.
Some critics of high deductible plans have characterized them as “blunt instruments” because they typically are not adjusted to take an individual’s or family’s income into consideration. Someone making $50,000 a year has to pay the same amount out of his or her own pocket before insurance kicks in as someone making $250,000.
So it should come as no surprise that Families USA’s study found that lower- to middle-income adults were the most adversely affected by the steady growth of CDHPs, with almost one out of three (32.3%) Americans reporting they skipped needed health care because they couldn’t afford it.
“Too many lower- and middle-income consumers face deductibles that are likely unaffordable relative to their incomes and that could create barriers to them getting the care they need,” the authors of the Families USA study noted.
Other studies have found that the average deductible in CDHPs has been increasing every year and that the rate of increase has exceeded the growth of household income. There is no reason to think that trend won’t continue. So future studies undoubtedly will show that the percentage of American families skipping needed care will be even higher.
Already, 30 percent of American adults enrolled in CDHPs had what Families USA called “exceedingly high” deductibles of $3,000 or more. It is not at all unusual for individual and family deductibles to exceed $5,000. Many people enroll in such plans because they can’t afford the premiums of plans with lower deductibles. Others likely pay scant attention to the deductibles or enroll in CDHP’s and then pray they won’t get sick or injured.
As Families USA Executive Ron Pollack noted, while the Affordable Care Act has enabled millions of Americans to find health insurance with premiums that won’t bust their budgets, many of the newly insured unfortunately are finding themselves poorly insured because of the high deductibles.
Pollack, whose organization was a leading advocate of health care reform, called the Affordable Care Act “a huge, historic success in expanding health coverage.” But the fact that increasing numbers of Americans are in plans that make care unaffordable because of high out-of-pocket obligations is something Pollack said “needs to be fixed.”
Among the fixes Families USA is proposing: a requirement that some of the silver plans insurers sell on the health insurance exchanges have lower upfront cost sharing for primary care, outpatient services and prescription drugs.
That would mean, of course, that insurers would have to cover more of their enrollees’ medical claims than they are currently required to do. If they did, it would, of course, cut into profits. So while it’s a worthy idea, and one that would mean that fewer Americans would have to skip on needed care, it is not one that the small group of wealthy corporate insurance executives that gave us CDHPs in the first place will likely agree to” (Potter 2015c).
And even this is not the end of the story. “Many Americans, according to various polls, blame Obamacare for every hike in premiums despite the fact that the rate of increase for most folks was actually greater before 2010, the year the law went into effect.
Health insurers are delighted that many folks blame Obamacare for rate increases because it deflects attention away from them and, according to documents made public in a recent lawsuit against a big Blue Cross plan, the questionable activities they’ve been engaging in for years to boost profits.
It turns out that one of the reasons workers have been paying more for their coverage is allegedly a common practice among insurers: charging their employer customers unlawful hidden fees.
The fees came to light when Hi-Lex Controls, an automotive technology company, took Blue Cross Blue Shield of Michigan (BCBSM) to court in 2013 after becoming suspicious that the company had been systematically cheating it over 19 years. After reviewing evidence in the case, a judge ordered that BCBSM stop charging the hidden fees and pay Hi-Lex $6.1 million.
Documents filed in the case showed that in 1993 BCBSM implemented a scheme through which it would collect additional revenue by adding certain mark-ups to hospital claims paid by its self-insured customers. Most of the country’s largest employers self-insure, which means that they are on the hook for medical claims when employees and their dependents get sick or injured. Self-insured companies hire firms like BCBSM to do the paperwork. It is the employer’s money—not the insurance company’s—that is “at risk” in such arrangements.
After suing and getting documentation from BCBSM, attorneys for Hi-Lex were able to show the court that BCBSM marked up hospital claims by as much as 22 percent. BCBSM didn’t disclose the markups, however. As part of the scheme, regardless of the amount BCBSM was required to pay a hospital for a given service, it reported a higher amount to Hi-Lex and pocketed the difference.
The hidden fees were listed in internal BCBSM documents under a variety of names: provider network fees, contingency/risk fees, retiree surcharges, and—my personal favorite—other-than-group subsidy fees. Internal company emails showed that BCBSM knew customers were unaware of the markups and that the company actually trained its employees to downplay the hidden fees should customers suspect they were being gouged.
One of the documents that came to light was a survey BCBSM conducted that found that 83 percent of its self-insured customers were completely unaware of the fees. Other documents revealed a course of conduct designed to conceal evidence of the company’s wrongdoing. For example, after rumors began circulating in the early 2000s that BCBSM was charging hidden fees, the company told insurance brokers, falsely, that its customers got 100 percent of the hospital discounts it negotiated” (Potter 2015a).
This kind of evidence is doubly ironic given the fact that the big for-profit insurers were perhaps the most important single interest group engaged in the aformentioned anti-ACA campaign. “Although the insurers stood to gain financially from a law that would require Americans to buy coverage from them, many Wall Street financial analysts and investors worried that some provisions of the law might cut into insurers’ profit margins.
Analysts and investors in particular didn’t like the section of the law that would require insurers to spend at least 80 percent of their premium revenues on health care. Before the law, many insurers routinely spent 60 percent or less of their revenues on patient care. The less spent on care, the more available to reward shareholders.
Wall Street also didn’t like the provision that would have created a government-run public option to compete with commercial insurers, and they didn’t think the penalties on Americans who refused to buy coverage were harsh enough” (Hemsley 2015).
A related irony lies in the fact that two of the most important provisions of the law the Republican opponentts of the reform profess to hate “were actually Republican ideas the Democrats embraced in hopes of getting bipartisan support for reform. The first such provision is the requirement that all Americans not covered by a public plan like Medicare or Medicaid must buy coverage from a private insurance company. The second provision: establishment of state health insurance marketplaces (called exchanges in the law) where private insurers compete online for customers.
One of the first states to set up such a marketplace was Utah, among the reddest of states, which had its exchange up and running months before ObamaCare was enacted” (Potter 2013b).
Still, the effects of this kind of political wrangling have taken their toll and the CBO estimates that 31 million of Americans will still be uninsured 10 years from now.
“The Supreme Court bears some of the responsibility on that front. It ruled in 2012 that even though Congress intended for all the states to expand their Medicaid programs to include more low-income individuals and families, states could opt out of that requirement. And many with Republican governors and legislatures did.
The other main reason for the sobering estimate of uninsured 10 years down the road: many people still can’t afford to buy health insurance, even with financial help from the government.
Back in 2010, the CBO predicted that 13 million people would have signed up for coverage by the end of this year through the Obamacare exchanges—which have been operating in every state and the District of Columbia since the fall of 2013. The CBO revised its projection downward to 12 million, but the actual number very likely will be less than that. The Obama administration’s enrollment target for 2015 is just 9 million.
The CBO projects that health plan enrollment on the exchanges will jump to 21 million next year and that an additional 16 million previously uninsured Americans will be covered by either Medicaid or the Children’s Health Insurance Program by the end of 2016.
The vast majority of the people who have enrolled in exchange plans so far have had incomes so low they were eligible for federal subsidies to help them pay their premiums.
But millions of other people earn just a little too much to qualify for financial help from the government, and many of them are choosing to remain uninsured.
Although the Obama administration and Congressional Democrats who voted for the law don’t talk much about it, a significant percentage of the population will always be in a kind of no-man’s land. They earn too much to quality for either Medicaid or federal subsidies, but they also earn too little to be penalized for not buying it (Potter 2015b)”. The law states that most people who remain uninsured have to pay a penalty, but many people are exempt from the latter for various reasons.
As noted, the project promoted by Barrack Obama has many merits to it, notably compared with the previous state of affairs, but also a number of shortcomings. That is why the enactment of the aformentioned act may well be only a beginning of the process of reforms to the U.S. health care rather than its end. This much follows from what Bernie Sanders is saying; apparently being not afraid of this holy cow of American politics, he declared he would be willing to raise taxes on the middle class in order to guarantee universal healthcare. When asked which of his big-ticket proposals would cost the middle class more in taxes, the presidential candidate said “I think if we can guarantee healthcare to all people, comprehensive healthcare, no deductibles, and if we can cut people’s healthcare bill substantially” (Frizell 2016), thus disagreeing that his plan would amount to a middle-class tax hike, saying it would ultimately save taxpayers money by cutting out private health insurers. According to some other estimates, the Sanders Medicare For All proposal would save the average family more than $5,000 per year.
It also would increase, not lower, incomes for 95 percent of Americans, according to Professor Gerald Friedman, Professor of Economics at the University of Massachusetts at Amherst.
Professor Friedman writes that if Medicare for All was enacted “we would, as a country, save nearly $5 trillion over ten years in reduced administrative waste, lower pharmaceutical and device prices, and by lowering the rate of medical inflation.”
Meanwhile, former Labor Secretary Robert Reich notes that
Bernie’s proposals would cost less than what we’d spend without them. Most of the “cost” ... would pay for opening Medicare to everyone. This would be cheaper than relying on our current system of for-profit private health insurers that charge you and me huge administrative costs, advertising, marketing, bloated executive salaries, and high pharmaceutical prices.
Paul Waldman recently wrote in the Washington Post that “Every single-payer system in the world, and there are many of them of varying flavors, is cheaper than the American health care system. Every single one. So ... you can’t say (Sanders’ proposal) represents some kind of profligate, free-spending idea that would cost us all terrible amounts of money” (Hickey 2016).
CHAPTER 4. THE SPECIAL RELATIONSHIP
This kind of mutual relationship is said to exist between two nations epitomizing stockholder capitalism, as distinct from stakeholder capitalism-exemplified by such countries as Japan or Germany. The two systems are discussed in several publications by the author, e.g. (Tittenbrun 2011a). Whilst sharing some elementary features, the said capitalist systems represent in point of fact two distinct capitalist mode of economic activity, which distinction implies a corresponding distinction in their class structures. The flip side of the coin is what can be regarded as a far-ranging similarity in the respective class configurations pertaining to each of those capitalist modes of economic activity. The existing evidence for the notion of two notably distinct capitalist systems will be here cited only with reference to one question of prime interest to us. Just as the USA, although the two concepts concerned have a geographical connotation, there is more to the aformentioned notion than that; thus, in the U.S. industrial history Fordism and post-Fordism, or-in macroeconomic terms-Keynesian and neoliberal era correspond to the two respective modes of economic activity, as also-semi-explicitly- noted by Greene (2014) “We’ve moved from an idea of stakeholder capitalism, where the leaders of GM and Boeing and General Electric believed back in the ‘50s, ‘60s and ‘70s in sharing the wealth. That a prosperous American middle class helped the American economy and helped the country to a notion of capitalism where the idea is maximum return to shareholders, boost your dividend, buy back your stock at the same time you’re cutting workers’ pay and workers’ benefits. I mean that’s a very different motion. Both of those are American capitalism” (Green 2014).
Another expression of the trend reported above has been the fact of losing by the U.S. middle class in April, 2014 its previous position of the world’s richest. The Luxembourg Income Group study compared the incomes of nearly 20 countries across income distributions, with the data going back five decades; it’s the last two, however, that reveal the most remarkable developments.
Namely, what the study found was that “the wealthiest Americans are still outpacing their peers around the world-“Americans at the 95th percentile of the distribution — with $58,600 in after-tax per capita income, not including capital gains — still make 20 percent more than their counterparts in Canada, 26 percent more than those in Britain and 50 percent more than those in the Netherlands. For these welloff families, the United States still has easily the world’s most prosperous major economy” (Leonhardt, Quealy 2014).
However middle and lower income earners in the U.S. have seen their income advantages shrink or disappear completely” (Jason Jenkins 2014). While “pretax incomes of middle-class households in the United States, the United Kingdom, and Japan have experienced declining or stagnant growth rates in recent years, resulting in a shrinkage of the income share accruing to the middle 20 percent in many advanced economies, Australia, Canada, and Sweden are important exceptions, as well as some large emerging market economies (Autor, Katz, and Kearney 2006; Figure 7).
What needs to be underlined is that “the earning power of the U.S. middle class has fallen behind its counterpart in Canada for the first time despite the fact that Canadians must pay higher taxes to support universal, state-sponsored health care, the Canadian middle class worker now averages a higher real income, after taxes, than does the American middle class worker, who, after taxes, very likely still must pay for his health insurance and at least some of his health care!” (Corrigan 2014)
It should be also pointed out that one should not look to a slower pace of economic growth as the reason for that degradation. On the contrary, “the U.S. economy in recent years grew as fast, or faster, than those of many other nations” (Kilgour 2014); but the thing is that a much smaller percentage of its households benefited than in Canada and Europe. For example, American families in the lowest five percentile saw their incomes decline in 2010, whereas those of the lowest fifth in Canada rose the same year by more than US$ 1000” (Kilgour 2014).
One should keep in mind the said socio-economic disparity lest the troubles of the U.S middle class be blown out of proportion-“Thirty-five years ago, an American family of four in the 20th percentile of the income distribution made significantly more than their respective Canadian counterparts. No longer is this true. The US median family income after taxes in 2010 was up 20 per cent since 1980, but it has remained flat since 2000 after adjusting for inflation” (Kilgour 2014).
Thus, even though they were pretty far behind fourteen years ago, middle class Canadians now take home a higher disposable income than Americans. The study also noted that Britain, the Netherlands and Sweden have made significant strides to close a once sizable gap. “Median per capita income was $18,700 in the United States in 2010 (which translates into about $75,000 for a family of four after taxes), up 20 percent since 1980 but virtually unchanged since 2000, after adjusting for inflation. The same measure, by comparison, rose about 20 percent in Britain between 2000 and 2010 and 14 percent in the Netherlands. Median income also rose 20 percent in Canada between 2000 and 2010, to the equivalent of $18,700 [...] LIS counts after-tax cash income from salaries, interest and stock dividends, among other sources, as well as direct government benefits such as tax credits.
The findings are striking because the most commonly cited economic statistics — such as per capita gross domestic product — continue to show that the United States has maintained its lead as the world’s richest large country. But those numbers are averages, which do not capture the distribution of income. With a big share of recent income gains in this country flowing to a relatively small slice of high-earning households, most Americans are not keeping pace with their counterparts around the world.
How big a factor the economic divergence tends to be is shown by the juxtaposition of the figures below. Americans’ average wealth tops $301,000 per adult, enough to rank them fourth on the latest Credit Suisse Global Wealth report.
But that figure need not be a tgood basis on which to understand how the middle-stratum or “class” American is doing.
The truth of the matter is, Americans’ median wealth is a mere $44,900 per adult. That’s only good enough for 19th place, below Japan, Canada, Australia and much of Western Europe. Median wealth is about 20 percent lower today, in inflation-adjusted dollars, than it was in 1984.
Both the Great Recession and the not-so-great recovery have contributed to this decline, with stocks and houses composing its main ingredients. The middle class doesn’t have much of the former, but it does have a lot of the latter. And that’s bad news, because, even though the crash decimated both, real estate hasn’t come back nearly as much as equities have. So the top 1 percent, who hold more of their wealth in stocks, have made up more of the ground they lost. But, as the Russell Sage Foundation points out, the slow housing recovery means that, in 2013, median households were still 36 percent poorer than they were a decade earlier.
In fact, the housing bust was big enough to erase all the gains the middle class had made the past 30 years—and then some. As has been stated above, median households didn’t add much wealth between 1984 and 2007. That’s what happens when real wages do not increase, and the cost of a middle class lifestyle—housing, healthcare, and higher education—does. So, as Dean Baker points out, when the crisis did come, it devoured these meager gains and left the middle class with 20 percent less wealth than they had when it was “Morning in America.”
Source: Russel Sage Foundation
But there is a caveat here, in fact already touched on earlier. “Households don’t necessarily stay in the same percentile from one year to the next, let alone for 30 years. There is a life-cycle to it all. People start off with little, or negative, wealth when they take out loans to go to school or buy a house. Then they gradually build it up as they get bigger paychecks and pay back what they owe” (O’Brien 2014).
Whilst later the American national myth No. 1, i.e. “American dream” will be investigated, there is yet another myth cherished by Americans: “Americans tend to think of their middle class as being the richest in the world, but it turns out, in terms of wealth, they rank fairly low among major industrialized countries,” said Edward Wolff, a New York University economics professor who studies net worth.
The answer to the puzzle why there is such a big difference between the two measures is not hard to find.
“Super rich Americans skew average wealth upwards. The U.S. has 42 percent of the world’s millionaires, and 49 percent of those with more than $50 million in assets.
This schism secures the U.S. the top rank in one net worth measure - wealth inequality.” (Morelli 2014).
What may be particularly damaging in terms of the aformentioned myth is the further truth- “there’s one main reason why the average Spaniard or Italian has more to his name than the typical American: real estate.
Home ownership rates are higher in many European countries than in the U.S., giving Joe European more assets to his name than his American counterpart. Moreover, it is easier for Americans to borrow money, which eats away at their net worth, said Jim Davies, an economics professor at Western University in Ontario, Canada, and co-author of the Credit Suisse report-which trend, highlighted earlier, could be indeed regarded as one of the characteristic features of the Anglo-Saxon capitalist system; by contrast, in Germany, credit cards are far less popular.
Middle-class Americans were also hurt greatly by the housing collapse at the end of the last decade. “The median wealth of families was $77,300 in 2010, a nearly 40 percent drop from 2007, according to Federal Reserve statistics.
‘Changes in home prices have a big effect on the wealth in the middle’, Davies said.
Middle-class Australians, by comparison, are leading the pack. The country’s residents have the highest median net worth, coming in at $219,500. Australia also has low wealth inequality.
This is in part because Australians have a strong tradition of home ownership, though escalating prices have made it tougher for young adults to secure the Australian Dream. Those down under also have a mandatory retirement savings program, where they must squirrel away more than 9 percent of their income for their Golden Years, and they carry relatively low credit card and student loan debt.
Americans, meanwhile, are having trouble building wealth because wages have stagnated for more than a decade. Median household income was $51,017 in 2012, compared to $56,080 in 1999, according to the Census Bureau’s statistics” (Luhby 2014).
There are many reasons why middle class incomes are suffering, including the emasculation of trade unions discussed in a separate section, the shift of jobs overseas and the increasing use of technology in the workplace, according to Kenneth Thomas, professor of political science at University of Missouri, St. Louis.
Moreover, Americans have to pay more out of pocket for the essentials, such as health care and higher education, reducing their ability to build their nest egg.
“Middle-class families haven’t been able to save anything,” Wolff said” (Morelli 2014).
According to the report by David Leonhardt, median per capita income in 2010 was US$18,700 in the United States, which meant about US$75,000 for a family of four after taxes. This was virtually the same as in 2000 after adjusting for inflation. In Canada, however, after-tax incomes rose about 20 per cent between 2000 and 2010 to an equivalent of US$18,700.
During 2013, this shift in Canada’s favour on real income growth probably increased generally and even more so in most resource-rich provinces” (2014).
However the reader could be forgiven for thinking that this becoming the pick of the litter should simply lead to a universal enhancement of subjective well-being; far from it,professional mourners cannot resist complaining: “ Current inflation is killing off the Canadian middle class:
Some recent research finds that while inflation remains relatively low, the benefits of rising prices are going to business and the top one per cent while everyone else gets poorer” (Pittis 2014b).
And indeed, “the share of Canadians who identified as middle-class declined to 47 per cent in 2012 from 68 per cent a decade earlier” (Jakubowsky 2015).
The idea that the median American has so much more income than the middle class in all other parts of the world is not true these days, summarised Lawrence Katz, a Harvard economist who is not associated with LIS. “In 1960, we were massively richer than anyone else. In 1980, we were richer. In the 1990s, we were still richer.
That is no longer the case, he said.
Three broad factors appear to be driving much of the weak income performance in the United States. First, educational attainment in the United States has risen far more slowly than in much of the industrialized world over the last three decades, making it harder for the economy to maintain its share of highly skilled, well-paying jobs.
Whilst Americans between the ages of 55 and 65 have literacy, numeracy and technology skills that are above average relative to 55to 65-year-olds in rest of the industrialized world, according to a recent study by the Organization for Economic Cooperation and Development, an international group, Younger Americans,by contrast, are not keeping pace: Those between 16 and 24 rank near the bottom among rich countries, well behind their counterparts in Canada, Australia, Japan and Scandinavia and close to those in Italy and Spain (cf. Luhby 2014).
The subsequent factor goes to the heart of the distinction between shareholder and stakeholder models of capitalism. The truth is that companies in the U.S. economy distribute a smaller share of their bounty to the middle class and poor than similar companies elsewhere. Equally, it is an outgrowth of a specific class/property structure that top executives make substantially more money in the United States than in other wealthy countries. “The minimum wage is lower. Labor unions are weaker.
And because the total bounty produced by the U.S. economy has not been growing substantially faster in recent decades than in Canada or Western Europe, most American workers are left receiving meager raises” (Chadha 2014).
Most relevantly, the aformentioned trend should be viewed not in misleading middle-class terms, but in genuine class terms, which entails, at least implicit, drawing on the theory of surplus value.
Unemployment of such proportions as has surfaced in the aftermath of the recent recession could only precipitate “a long-term decline in the relative power of the working class, with capital increasingly gaining the upper hand” (Magdoff, Foster 2013). This shift in the balance of class power has been manifested, inter alia, in the stagnation or decline over decades of real wages (corrected for inflation).
For a while workers’ lost ground with respect to wages was compensated for by more women entering the labor force so that households increasingly had two earners, helping to maintain household income, and from a theoretical standpoint testifying to a highly significant alteration of the concept of value pertaining to labour power. However, over the last decade there has even been a downward trend in median family income—decreasing from
$54,841 in 2000 to $50,054 in 2011 (both in 2011 dollars).
The financial impact of the Great Recession has had a devastating effect on many people—with millions declaring bankruptcy, losing homes to foreclosure, or being forced “underwater” (owing more than the worth) on their homes.
Although there were numerous other factors at work, (some of them being touched on in the relevant section) President Reagan’s 1981 firing of striking air traffic controllers, and replacing them with nonunionized workers, was a turning point in the class war, leading to the decline of workers’ power. This action set a tone for private business that made it “acceptable” to break strikes by bringing in scab labor. Labor legislation protecting workers’ right to organize was weakened. The various campaigns against both private- and public-sector labor that took place helped reverse the generally favorable view of unions on the part of the public. Consequently, with the capitalist owners gaining the upper hand, the number of unionized workers has decreased dramatically, with public-sector workers providing now most of the total union membership, and attacks on unions increasingly focused on the public-sector. Total union membership dropped by 2.8 percent in 2012 to 11.3 percent of the workforce, the lowest in the entire post-Second World War period, with more than half the union-membership loss occurring in government jobs. Both the number of strikes and the workdays lost due to strikes have plummeted over the last four decades, which, sure enough, is closely related to the weakening of the working class as a class for itself- i.e. the decline in its level of organisation, and thereby industrial power.
Among the arsenal of tools at capital’s disposal that added to the decline of working-class power, perhaps the most important was the ability of corporate managements to outsource a portion of the work or actually move entire factories—first to low-wage parts of the United States and, more recently, offshoring jobs to Asia and elsewhere to take advantage of low wages and lax environmental laws. Even the mere threat to move factories and jobs to lower-wage areas by such labour-power arbitrageurs has often been enough to subdue labor—and understandably so. With employment growth anemic at best, workers have been concerned that if they lost their jobs they might not be able to find new ones—or ones as good. In the words of a recent New York Times headline, the “Majority of New Jobs Pay Low Wages.”
Another long-term trend that has weakened labor has been the increasing use of part-time employees—anyone working from 1 to 34 hours per week is officially considered part time. Since the 1970s there has been a general increase in the use of part-time labor, which now makes up approximately 20 percent of all employed workers. During the Great Recession when more than 11 million full-time jobs were lost, there was actually a gain in part timers—so that the reported net loss of jobs, 8.7 million, did not give a full picture of what was happening.
Many part-time workers find themselves in especially difficult work environments, with new neo-Taylorist computerized scheduling programs able to tell bosses the number of workers needed during different days of the week—and even at different times during the day. As a result, many part-timers, especially in retail sales, do not have fixed schedules that they can count on, the so-called zero hour contracts being an extreme case in point. This makes it more difficult to work at a second part-time job. An additional problem for labor in the current environment is that, of the workers hired during the “recovery” from the Great Recession, over 750,000 of these jobs were supplied by temporary help services, leaving these employees with a precarious hold on their jobs.
Let us focus on the crucial issue alluded to above.
James K. Galbraith examined the “squeeze on wages from the 1950 s–1990 s,” discovering that the wage and salary share of personal income declined every decade on average throughout this period.
Recently, a number of studies by quite “reputable” sources have appeared—especially one by staff at the Cleveland Federal Reserve Bank and one by the Congressional Budget Office—showing the decline in the share of the economy going to labor seen in the last half of the twentieth century has continued into the present century.
Using different assumptions and approaches they developed three different calculations, all of which indicated that labor’s share has been declining for some time.
Determining labor’s share of the pie obviously raises a number of methodological issues, as it can be calculated in many various ways.
Let us stop for a moment: to begin with, the very term being used is inappropriate, it comes from the neoclassical list of production factors, whereas labour is labour power put in motion, and it is the latter concept that ought to be used in any comparisons to capital as the other end of the spectrum. So, if one speaks the orthodox economists’ language, at least one should realize this not necessarily desirable fact.
Labor’s share of income can be estimated on the basis of either (a) wages and salaries received by workers or (b) total compensation. The latter includes, in addition to wages and salaries, benefits provided by employers—both legally required insurance entitling the employee to benefits in the event of ill-health, unemployment, disability, and old-age retirement, and also voluntary benefits such as paid leave and life insurance. These benefits differ considerably. Some, such as Social Security and Medicare, are genuine social insurance programs. Others, such as the Health Management Organizations (HMOs) in which workers are enrolled by their employers, are private insurance programs, where workers are required to pay a large and increasing portion of the cost, generating high profits to insurance companies and offering diminishing use-value per benefit dollar to employees.
It is important to recognize that benefits received by employees—distinguishing total compensation from mere wages and salaries—are very unevenly divided in the U.S. economy. They vary by (a) whether the worker is full time or part time—benefits represent 31 percent of total compensation for private sector full-time workers but only 21 percent for part-time employees; (b) union or nonunion—benefits are approximately 41 percent of all compensation for unionized goods-producing employees versus 31 percent for nonunion employees doing similar jobs; and © job type—for example, benefits represent 34 percent of total compensation for full-time “information” employees versus 29 percent for full-time service employees.
Depending on the nature of the question, then, one may wish to emphasize either total compensation or wages and salaries in analyzing labor’s share, comparing them alternately to GDP (or some other national-income indicator) or to private-sector output. In all cases, however, the general trends are very similar. It is, however, necessary to take consideration of class differences distinguishing notably public-sector and private-sector employees, although at a higher level of aggregation all the classes involved may be framed as one mega-class.
Thus, after a brief rise inthe late 1960s a plateau emerges in the labor share of GDP for all employees, persisting through much of the 1970s, followed by a downward trend to the present. By contrast, the labor share of GDP for private sector employees alone exhibits no increase in the 1960s, and a decline from the 1980s to the present. The slight rise in the labor share for all employees in the late 1960s along with the plateau for much of the ‘70s must therefore be attributed almost entirely to the increase in government and non-profit-sector employment in these years. This corresponded to the Vietnam War, the Great Society, and the Nixon Family Assistance Program, and to state and local government hiring to staff new schools and expand police and fire departments in the burgeoning suburbs. In the second half of 1966, during the big buildup of the Vietnam War, military expenditures accounted for half of the total increase in GDP.
Overall, there was a huge increase in civilian government employees—federal, state, and local—in this period with civilian government employment as a percentage of all nonfarm employment rising from 15.6 percent in 1960 to its post-Second World War peak of 19.2 percent in 1975.
Not surprisingly, this period was one of relative prosperity for workers. The average rate of real growth of the U.S. economy was higher in the 1950s and ‘60s than in the ‘70s. But even in the 1970s the economic growth rate exceeded that of the three decades that were to follow.
Total compensation of both all employees and private sector employees as a percent of GDP continued a downward slide for most of the 1980s, ‘90s, and the first decade of this century. However, a brief bump up was experienced in the second half of the 1990s. The temporary rise in the compensation share at that time was mainly a product of the dot-com financial boom, which turned into a bust in 2000. The bursting of the dot-com bubble led to a sudden drop in the compensation share, which was given an added downward push by the Great Recession less than a decade later.
Wages and salaries, as distinct from total compensation, are especially important for workers at the lower-income levels, since this is the basis of their everyday consumption, constituting their means of subsistence. As with total compensation—only more so—wages and salaries exhibited a strong downward trend as a percentage of national output of goods and services. Similar to what we observed in the case of the total-compensation share, a brief, cyclical increase in the wage share is evident for all employees in the late 1960s and early ‘70s. But just as we saw with respect to total compensation, this short-term increase in the wage share disappears once we look at the wages and salaries of private-sector employees as a percent of GDP. Hence, the rising wage share for all employees in these years is once again explained primarily by the expansion of government and non-profit-sector employment, and subsequently eroded along with the decline of government consumption and investment as a percent of GDP beginning in the 1970s.
It was not until the late 1990s dot-com bubble that one again sees significant employment gains, as well as modest increases in wages and salaries, resulting in a very brief increase in the share of wages and salaries in GDP—though never approaching its previous peaks (and calling for a closer analysis of its class composition, as the most typical employees of the IT sector represent a separate conceptual class of producers of intellectual means of production, or otherwise performers of pre-material work), ofand plummeting thereafter.
Overall, the decline in real wages (corrected for inflation) since the 1970s has been sharp. As David Gordon observed in 1996 in “Fat and Mean”, by the early 1990s the real hourly spendable earnings of private nonproduction/nonsupervisory employees in the United States had fallen “below the level they had last reached in 1967… Referring to these trends since the early 1970s as “the wage squeeze” is a polite understatement. Calling “it the ‘wage collapse’ might be more apt” (Magdoff, Foster 2013).
To be fair, some most recent developments cast different light on the trends in the area under investigation. The essential and perhaps formerly underrated impact on the statistical data cited below has been exerted by the low rate of inflation. The aformentioned data concern the real wage rate in the private sector (focusing on the production and non-supervisory employees) through April, which indeed can give some idea of the economic prospects of “middle- and lower-income workers” (Grimes 2015). This category, which in a way is as good an approximation of the mega-employee class as one can get accounts for 82% of all private sector employees, who on average earned US$20.91 an hour in April. So conceived real wages are now the highest since 1979. What lies behind this at first glance surprising outcome is the shape of the trend-the average hourly real wage did decline during the “Great Recession” and again in 2011 and 2012, but since falling to its recent low of $20.17 in October 2012 it has increased, first at a modest pace and then more rapidly since September as price inflation disappeared.
As a result, the average real wage for these employees is now at the highest level since March 1979, although-it must be borne in mind- it is still 8.2% below the all-time peak ($22.27) reached in January 1973.
The economist commenting on those statistics states: “The average real wage for middle-class workers declined during the second half of the 1970s, the 1980s and the first half of the 1990s, reaching a low of $17.97 in April 1995 (data go back to 1964). Since then, wages have tended to slowly increase, with the largest gains when price inflation disappears and the greatest losses occurring when it spikes upward. [...]
That brings us back to the most recent figures. During the 12 months through April, average hourly real earnings for production and non-supervisory workers increased by 2%. These wage gains are fairly widespread among industries In other words, “real wages are up across the board over the past year through April” (Grimes 2015). What is more, the positive fact in terms of the overall income inequalities is that “the greatest wage gains occurred in some of the lowest-wage industries: in retail trade (up 2.3%), accommodations (4.6%), full-service restaurants (4.7%) and fast food restaurants (3.7%). Clearly some of the lowest-paid workers in America have enjoyed some very substantial real wage gains during the past year” (Grimes 2015).
But reading the economist’s concerned claims, one cannot but think: not so fast. Let us look at the statistics in question from the standpoint of the group called in by the author cited above as well. Consider an instructive MassINC poll, in which about one of every four Massachusetts respondents who self-identify as “middle class” said they were in danger of falling into poverty. “That’s nearly twice as many as said they were likely to rise up” (Horowitz 2015). While one might attempt to explain this proportions by such factors as consciousness lagging behind by the real-world developments and other such factors mentioned above by Grimes. The most crucial of those factors responsible for the disjunction between the real trends of employee earnings and their reflection in the consciousness of given persons is, according to Grimes, inflation, moreprecisely, low inflationYet, there are various measures of inflation,and the differences concerned are largely conditioned by the location of a given group in the structure of social differentiation..
Therefore, there is much to be said for the explanation of the middle-class pessimistic mood: “One possible reason is that while some of the staples of middle-class life have gotten much cheaper over time notably consumer goods like food, clothing, TVs, and appliances — others have gotten more expensive, particularly long-term investments like health care, child care, and higher education. When families can’t invest in the education of their kids, or face the hovering threat of a medical bankruptcy, then their hold on the middle class can feel very slippery” (Horowitz 2015).
Moreover, there is another important caveat to the above-mentioned favourable trend in employee wages. “Real wage gains have also far outstripped productivity gains. From the first quarter of 2014 to the first quarter of 2015 (most recent data), labor productivity in the non-farm business sector increased by only 0.3%, compared with real wage growth of 1.9% for private sector production and non-supervisory workers over the same period” (Grimes 2015).
And this anemic productivity growth has not been accidental, occasional, or transient trait of the last economic cycle; “the poor rate of productivity growth has been a feature of the current economic recovery. Over the past five years, from the first quarter of 2010 to the first quarter of 2015, output per labor hour has increased by only 2.8%, or 0.6% per year. And while some short-term deviations from this pattern are surely possible, “over the long run, productivity growth puts a cap on the maximum rate of growth in the real hourly wage rate – meaning if productivity doesn’t start rising, neither will wages” (Grimes 2015).
The economist concerned does not deny that people are [...] convinced that middle- and low-wage workers have been losing ground. His explanation is the following: “many people point to the fact that the real hourly wage is less than it was in 1973, but that reflects the decline that occurred between 1973 and 1995. Since then, the average hourly wages have been on a slow upward trend, averaging 0.76% per year – not much, but positive all the same.
Thus, it can be seen how much depends on what points of reference one adopts for comparison. What appears as a slight modification of the variables can produce a significantly different outcome. For instance, a commentator whose ideological propensities are manifestly clear argues that one needs to Compare mean hourly compensation (not median compensation, and not wages net of fringe benefits or household income) to productivity, which shows that “hourly compensation is almost exactly where it should be if we expect it to rise with productivity” (Winship 2015). But this result is an artifact, by-product of adopting such metrics that cannot but inflate the seeming employee pay, as this a-class notion abstracts from the fundamental class divisions between workers and executives, who both are combined in a spurious unity measured by the aformentioned mean. And the issue of benefits has already been considered in the context of another attack on the argument on an increase in inequality.
Concomitantly to the real hourly wage for all nonfarm private workers, which has declined depending on the starting point of calculation, weekly (or annual) wages and salaries have fallen even faster. In the early 1970s the average earnings of nonfarm private workers amounted to over $340 per week (in 1982–1984 dollars). Earnings of these workers declined rapidly to less than $270 per week in the early 1990s, rebounding somewhat to $294 per week by 2011—still close to 15 percent less than in 1973.
The decline in real income per week was the result of two trends: (1) stagnating and declining real hourly wages and (2) the decline of hours worked per week. As more people worked part time, the average hours worked in private sector nonfarm jobs declined from 38.6 hours in 1965 to 33.6 hours in 2011. (Magdoff, Foster 2013).
It was this combination of declining real wages and fewer hours worked that left workers poorer and in more precarious positions.
The labor share of income as depicted above in terms of both total employee compensation and wages and salaries as shares of GDP is of course a very crude indicator of what is happening to the working-class income, downplaying the actual fall in working-class wages and salaries as a share of GDP. This is because the aggregate data also includes the compensation going to CEOs and other upper-level management, which ought to be counted as income to capital rather than labor. This fact alone distorts statistics to such an extent that the above trends, miserable as they were, ought to be lowered still further. The wages and salaries (and benefits) of higher management positions have been rising in leaps and bounds in recent decades while workers’ wages at the bottom have lost ground. Consequently, the actual decline in wages as a share of GDP is much sharper where the working class itself is concerned.
An examination of real hourly wages 1979–2011 by income decile (up to the 95th percentile) shows that the real hourly wage of the bottom decile shrank in absolute terms over the period, while that of the top decile increased by more than 35 percent.
Thus, although the wage share of income has sharply dropped in the U.S. economy, this decline has not been shared equally, and applies mainly to what can be very roughly defined as the working class, i.e., the bottom 80 percent or so of wage and salary workers (which,of course, is anything but a scientific definition of the class in question).
The reader should be informed-if she is not aware of this-that the term “working class” is hardly used in the dominant discourse in the United States today. Many workers conceive of themselves as part of the “middle class” because they have come to think of their income as providing them with a “middle-class lifestyle”—and because they consider themselves above “the poor,” who have been converted in the ruling ideology into the entire lower class (or underclass), leaving out the working class altogether. Ideological aspects aside, this absence expresses thus also the mesmerising power of stratification framework, which has completely superseded a class perspective, the confusing language notwithstanding.
The closest that the official statistics come to the concept of the working class is in the standard private-sector reporting category called “production and nonsupervisory” workers, which includes “production workers in the goods-producing industries and nonsupervisory workers in the service-providing industries-which, however, should be viewed in terms of a discrete employee class, distinct from the industrial working class.
Not only for this reason the aformentioned category, comprising some 90 million employees (about 80 percent of private-sector workers),is thus very inaccurate, leaving out some who should be counted on the one hand and overstating the numbers on the other. The drop in the wage income of production and nonsupervisory workers has been even sharper than for the class categories considered above. Private-sector production and nonsupervisory workers have remained a fairly constant percentage of all private employment from the mid–1960s to the present-these workers represented around 83 percent of all private sector workers in both 1965 and 2011. Nevertheless, the share of production and nonsupervisory workers in the total private sector payroll dropped from over 75 percent in 1965 to less than 55 percent during the Great Recession, and has only risen slightly since.
The implication of this, of course, is that the management, supervisory and other nonproduction employees at the top, representing around 17 percent of private employees, receive more than 40 percent of private sector wage and salary income—and this share is rising. (Magdoff, Bellamy Foster 2014)
Put another way, wages and salaries received by the upper levels of private employees actually increased from 1965 to the present as a share of GDP. At the same time, those of the over 80 percent of private-sector workers in the production and nonsupervisory worker category saw their wages and salaries decline dramatically, from over 30 percent of the GDP to about 20 percent in 2011. Hence, the rapidly declining wage share period since the mid–1970s, the costs of slower growth fell entirely on the backs of working-class employees.
Given this background of high unemployment, lower-wage jobs, and smaller portions of the pie going to workers, it should come as no surprise that, according to the U.S. Census Bureau, nearly 50 million people in the United States live in poverty (with income in 2011 below $23,021 for a family of four) while another 50 million live between the poverty level and twice the poverty level—one paycheck away from economic disaster.
Thus, the poor (those in poverty or near poverty), most of whom belong to the working poor, account for approximately 100 million people, fully one-third of the entire U.S. population.
Writing more than a decade ago, Bill Moyers commented on the plight of labor as follows: “Our business and political class owes us better than this. After all, it was they who declared class war 20 years ago, and it was they who won. They’re on top.”
However, the sad truth is, the way the capitalist system works, the ruling class does not owe workers anything aside from wages and salary earned and legally required benefits. And
the attack on labor—its unions, wages, working conditions, social programs, and even legally required benefits—continues to this day.
Undeniably, wage repression and high unemployment are the dominant realities of our time. A vast redistribution of income—Robin Hood in reverse—is occurring that is boosting the share of income to capital, even in a stagnating economy.
Many of the above-mentioned facts can be accomodated also by more enlightened members of the ruling class, but there is definitely a class limit to such knowledge. “The problem with our economy is that the once-powerful middle class has been impoverished by decades of cost cuts and wage stagnation, while Hanauer and his friends have captured an ever-greater percentage of the country’s income. Unlike Hanauer and other 1%-ers, middle class people spend almost every penny they make, and this spending becomes revenue for companies started and owned by people like Hanauer. But right now, thanks to shortsighted greed, wages are at record lows as a percent of the economy, and the middle class is hurting. And that hurt, in turn, is holding back the revenue growth of companies owned by Hanauer. Unlike most successful entrepreneurs and investors, Hanauer understands-what follows from the approach to ownership of capital espoused here-accentuating how immense is the range of free benefits (or what economists call positive externalities ) accruing to the class of owners-that his success is in large part the result of having been born in the right place at the right time. Had he been born in Africa, Hanauer points out — where the potential customers for his entrepreneurial efforts would have barely enough money to survive — Hanauer would likely be selling fruit by the side of the road. And so would the rest of his rich, successful entrepreneur and investor friends.
Happily for him, Hanauer was born in America, land of the (formerly) well-off middle class, so he was able to build and invest in companies whose customers could afford to buy their products. And the buying power of that affluent middle class made Hanauer’s companies prosper and his family rich.
To anyone reared on the political orthodoxy of the moment — “rich people create the jobs,” “higher wages cause higher unemployment,” etc. — Hanauer’s views sound like lunacy.
But upon reflection, it will be crystal clearhow sensible in fact they are.
Take that first phrase, the one that has been repeated so often that “people regard it as fact: “Rich people create the jobs.”
By starting and directing America’s companies, this story goes, entrepreneurs and rich investors create the jobs that sustain everyone else.
But entrepreneurs and investors like Hanauer (and I) actually don’t create jobs — not sustainable ones, anyway.
Yes, we create jobs temporarily, by starting companies and funding losses for a while. And, yes, we are a necessary part of the economy’s job-creation engine. But to suggest that we alone are responsible for the jobs that sustain the other 300 million Americans is the height of self-importance and delusion.
So, if rich people don’t create the jobs, what does?
A healthy economic ecosystem — one in which most participants (especially the middle class) have plenty of money to spend. This ecosystem starts with the company’s customers.
The company’s customers buy the company’s products. This, in turn, channels money to the company and allows the company to hire employees to produce, sell, and service those products. If the company’s customers and potential customers go broke, the demand for the company’s products will collapse. And the company’s jobs will disappear, regardless of what the entrepreneurs or investors do.
In this surprisingly sober view, there is no denying that entrepreneurs, just as capital investors, are an important part of the story of company-creation process.
But, ultimately, whether a new company continues growing and creates self-sustaining jobs is a function of the company’s customers’ ability to pay for the company’s products, not the entrepreneur’s vision or risk-tolerance or the investor’s capital.
Saying “rich people create the jobs” is like saying that seeds create trees. Seeds do not create trees. Seeds start trees. But what actually grows and sustains trees is “the combination of the DNA in the seed and the soil, sunshine, water, atmosphere, nutrients, and other factors in the environment that nurture them. If you think seeds create trees, try planting seeds in an inhospitable environment. Plant a seed in a desert or on Mars, and the seed won’t create anything. It will die.
So, then, if what creates the jobs in our economy is, in part, our companies’ customers, who are these customers? And what can we do to make sure these customers have more money to spend to create demand and, thus, jobs?
The customers of most companies are ultimately American’s gigantic middle class — the hundreds of millions of Americans who currently take home a much smaller share of the national income than they did 30 years ago, before tax policy aimed at helping rich people get richer created an extreme of income and wealth inequality not seen since the 1920s” (Blodget 2014).
Thus, even the above discussion has been able to highlight some differences within those countries that come into the camp of shareholder capitalism. This issue can be probed a little deeper, using one important example. “Australia’s Fair Work Commission increased the national minimum wage to AUS16.87 an hour from 1 July, 2014. The usual suspects rolled out theusual arguments denouncing this initiative, and Treasurer Joe Hockey joined them, arguing it will cost jobs and hurt employment growth. The Australian Financial Review led on the argument Australia would become “entrenched as the most expensive labour market in the world” making a headline of the long established fact that Australia sets one of the highest rates of pay for the most vulnerable in the workforce” (Oliver, Buchanan 2014).
The two aformentioned rsearchers hasten with a rebuttal of this sterotypical criticism. “It is -they point out-a curious argument to make: cite the lower headline minimum wage rate in the United States, the United Kingdom and other developed countries as a sign that Australia is pursuing a flawed economic approach, as if Australia were not the OECD country with one of the world’s lowest unemployment rates” (Oliver, Buchanan 2014).
This is but one link in the long chain of facts that “do not support simplistic arguments about wages policy.
The AFR’s comparative analysis put Australia at the top of the list of “global” minimum wages by US dollars per month.
By comparison, it’s worth considering two fundamental points:
(a) The three countries with lowest minimum wages currently have the highest unemployment (i.e. Greece, Spain and Ireland).
(b) Amongst the industrialised countries, those from the English-speaking world (Canada, UK, USA, NZ and Australia) have some of the lowest unemployment rates. The big difference amongst them, however, is proportion of low paid workers. As a general rule low minimum wages nurture high levels of low paid employment (defined by the OECD as those earning less than two-thirds of median earnings). Australia and New Zealand, with among the highest minimum wages in the world, have both low levels of unemployment and significantly lower levels of low paid employees” (Oliver, Buchanan 2014), which circumstance flies in the face of the received wisdom on allegedly catastrophic consequences of paying decent wages to those at the bottom of occupational hierarchy.
At the same time, the pair of economists concerned are careful enough to point out that “these facts do not mean that high minimum wages are necessary to reduce unemployment and low pay. What they highlight is that the connections between wages policy and labour market outcomes are more complex than assumed by most critics of the FWC. This is something of which the FWC is acutely aware. It and its predecessors have spent over a century devising principles on how best to manage the complexities. Its decision last week was the latest development in its thoughtful and appropriate response to the complex matter of wages policy” (Oliver, Buchanan 2014).
And from such a praise it is only a step to a principled defence of the ppolicy concerned, combined with distancing themselves from other members of “the pacck” who do not subscribe to such principles: “First, why should Australia, given its strong economic fundamentals, see a high minimum wage as a source of shame or embarrassment? It is a policy that defends the value of hard work, encourages self-reliance by workers and their families, and that provides incentives for business and the economy overall to become more productive.
From that perspective, the United States and the United Kingdom provide plenty of evidence for what happens when minimum wages are too low for workers to support themselves and
their families. “At some point government steps in to prevent the entrenchment of social disadvantage and the educational, health and criminal justice costs that come with it. The burden of administering policies to help working families below the poverty line – such as food stamps or earned income tax credits fall on government bureaucracies or the not for profit sector, can carry a social stigma for the affected families, and do nothing to affect the root cause” ) (Oliver, Buchanan 2014).
Finally, the authors appeal to the enlightened bourgeoisie, making the business case for the policy concerned:
“Low minimum wages are not just socially damaging. Low minimum wages also harm other local businesses, by reducing the spending power of a community. This argument is transforming the debate in the United States and is one factor behind a number of successful initiatives at state and city level to increase the minimum wage well beyond the current US Federal rate of US$7.25 an hour. Recently, Seattle City Council voted to increase the minimum wage in its zone to US$15.00 an hour. It follows other areas, including the Washington D.C. metropolitan area, which has agreed to increase its minimum wage to US$11.50 an hour. “In fact, more than a quarter of all states raised their minimum wage for 2016” (Dickerson 2016a).
In the United Kingdom, where the current adult minimum wage rate is GBP 6.31, a living wage movement has successfully campaigned for public sector, local councils and other prominent employers to pay a higher “living wage” rate (GBP 7.65 outside London and GBP 8.80 in London).
Among the living wage’s supporters is Conservative Mayor of London Boris Johnson, who has said ‘“Paying the London living wage is not only morally right, but makes good business sense too’. Higher minimum wages are a stimulant to work smarter, encouraging innovation, investment in technology and reorganising jobs and tasks to make the most of the capability of the workforce. As evidence, FWC cited the recent increase in labour productivity as one of its grounds for reaching its decision” (Oliver, Buchanan 2014).
Relatedly, the researchers cited above do stress the need to avoid simplifications in an analysis of the matter: “When trying to compare countries it is worth remembering that price should not be blind to quality. Even among low paid workers, the proportion of Australians with post-school qualifications is growing and, although there is room to improve, workplace literacy and numeracy standards are high comparatively. The recent OECD Survey of Adult Skills found that Australia combined above-average adult literacy scores with a high level of equity. Why shouldn’t Australian employers pay more when they are getting a higher quality product?” (Oliver, Buchanan 2014)
And unconventionally for economists, they stress that “the real reason wage rates are so low in other countries is politics, not economics. In the United States, where the federal minimum wage is set directly by legislation, there have only been 29 increases since 1938.
Individual US lawmakers are too fearful of campaigning by corporate interests, even when they have the cover of a supportive president such as Barack Obama, who has endorsed an increase to US$10.10. A number of US states have adopted measures to automatically index minimum wage rates to resolve this problem.
In the United Kingdom, there have been steady increases in the minimum wage since the Low Pay Commission was established in 1997.
These are precisely the factors that the Fair Work Commission takes into account each year in its minimum wage case and they are the reasons why the latest increase is entirely justifiable on economic as well as social grounds. Far from being ashamed or embarrassed by our wage rates, Australians should be proud of our minimum wage and the institution we as a nation have nurtured for over a century” (Oliver, Buchanan 2014).
From a theoretical viewpoint, such facts mean that the distinction between shareholder and stakeholder capitalism is not so clear-cut, as it might appear at first blush. But in point of fact, this is fully consistent with our general theoretical perspective, framing the said modes of economic activity as analytical rather than geographical entities.
To return to the explanation of recent shifts in global income rankings, “what should also be taken into account is that “governments in Canada and Western Europe take more aggressive steps to raise the take-home pay of lowand middle-income households by redistributing income.
Janet Gornick, the director of LIS, noted that inequality in so-called market incomes — which does not count taxes or government benefits — “is high but not off the charts in the United States.” Yet the American rich pay lower taxes than the rich in many other places, and the United States does not redistribute as much income to the poor as other countries do. As a result, inequality in disposable income is sharply higher in the United States than elsewhere.
Thus, there are many factors that have led to the rise in Canada’s middle class, in particular differences in access to education and healthcare, as well as “differences in the housing markets in both nations have resulted in the Canadian middle class superseding the U.S. middle class.
The housing market has played a large role in the national middle class prosperity. The U.S. suffered a housing market crash in 2007, which led to a deep recession until 2009. In contrast, Canada is currently experiencing a housing boom. While the U.S. economy has grown in the aftermath of the recession, a majority of Americans are not experiencing increases in their household income. Thus, the U.S. middle class is still paying a large price as their wealth is not increasing in proportion to the increasing wealth of the nation overall.
It should be noted, though, that the landscape of the Canadian housing market is also changing and becoming more unaffordable for middle-class citizens.
According to findings from Huffington Post Canada, middle class Canadians are finding it increasingly difficult to own detached homes in desirable suburban areas in previously affordable cities” (Chadha 2014).
Whatever the causes, the stagnation of income has left many Americans dissatisfied with the state of the country. Only about 30 percent of people believe the country is headed in the right direction, polls show” (Leonhardt, Quealy 2014).
But it is important to point out that it is not the celebrated middle class that appears to be the biggest loser in recent years. It turns out that the “picture is even bleaker for the working poor in the United States. A family earning in the lowest one-fifth, or 20th percentile percentile of income in the U.S. makes a lot less than that same group that lives in Canada, Sweden, Norway, Finland or the Netherlands. This was not the case 3 to four decades ago.
Considering that the plight of the above social category has a qualitatively different nature from that of the notorious middle class, it seems incredible to how great lenghth a right-wing defense of the latter can go: “In this country the rich and the poor have their supporters. So they are taken care of. The poor now get free healthcare, food, heat, daycare without having to lift a finger. Many are living off of 35,000 of free stuff, while some family striving to find middle-class status is working for that money. The rich understand money. They have studied it. The poor know the system, but haven’t a clue of respect for money because they didn’t earn it. “The middle class is so busy keeping up with rising costs they haven’t had the mentors they needed to help them learn about investing money“ (Tracker).
The argument is not only vicious and biased, but plainly wrong-it fails to take into consideration the existence of a wide multitude of those who work and yet remain poor.
The most recent year of data collected for the LIS study was 2010, however other government studies since then have shown that pay in Canada and some other European countries has risen at a faster “ (Jason Jenkins 2014)pace than in the U.S.
It is likely that the pattern reported above, alongside a Protean-like quality of the concept under consideration has contributed to the fact that at least in Canada the tale of the purported crisis of the middle class fails to be supported by evidence. As Laval University professor Stephen Gordon points out on his blog for Maclean’s, real income for middle-income families has increased by about 30 per cent since 1997. In the five years since 2006 including the recession years – it went up by 10 per cent.
The cliché of the collapsing middle class has been hammered so hard into our anxious brains that virtually everyone believes it. And maybe the middle class will start collapsing any day now. But it hasn’t yet. Statistics Canada released its first comprehensive report on family finances since the beginning of the recession. It found that median net worth for Canadian family units reached a record high of $243,800 in 2012 – 44.5 per cent higher than seven years before. These families experienced the largest percentage gain in net worth of any income group.
The study also looked at how the wealth was spread around. In 2012, the wealthiest 20 per cent of families held 67.4 per cent of all the net worth. But their share was less than it was in 2005, when they held 69.2 per cent. Their median net worth was $1.38-million – up 40.6 per cent from 2005.
To be fair, it should be mentioned that this growth in wealth has been mostly driven by real estate holdings.
And the fact is, among economists, there is a long tradition of questioning the extent to which housing wealth should be treated as equivalent to cash in hand. Harvard economist David Wise
Wrote a series of papers with Steven Venti arguing that housing wealth was not fungible, since people simply didn’t want to use up housing equity and prefered to keep living where they were. [...] research suggests people don’t typically sell their house until there is a major negative health event for one member of the couple. Other economists have challenged these arguments, and it’s also true that today’s homeowners may be more willing to draw on housing equity through home-equity lines of credit compared to those of earlier generations. Still, if people typically don’t sell their house when prices rise, paper gains won’t matter much” (Milligan 2014). On the surface, this sounds perfectly true, but this argument fails to take account of several ways in which a house owner can monetise the value of her property. In addition, this very fact sheds new light on the issue of that seemingly crushing debt. In point of fact, debt loads were up only slightly since 1999. While mortgage debt is higher, house values are too. About 40 per cent of families carried an outstanding balance on their credit cards in 2012 (the same proportion as in 1999) and the median amount they owed was a not-so-crushing $3,000. The median student debt was $10,000, lower than in 2005. Seniors had the lowest debt by far of all age groups” (Milligan 2014). Below some data are presented which cast light on the aformentioned issue of property owned by those belonging to the category in question. The first sentence of the argument obviously refers to the “leaping” nature of the concept concerned, as it is stated that:
“ one definition Trudeau offered was people living from paycheque to paycheque — which most commentators observed a) seemed more descriptive of poor people than the middle class and b) might also apply to people who weren’t at all poor but had chosen for whatever reason to live at the limit of their means.
Thanks to a new study from the Boston-based National Bureau of Economic Research, we now actually have some data on people living paycheque-to-paycheque or, more graphically, hand-to-mouth. Written by two economists at Princeton and one at New York University, it argues that lots of people are in this situation and most of them are affluent or wealthy. Not necessarily Frank Stronach wealthy. But they have substantial assets, whether in the form of a home, car or a retirement account, and therefore qualify as “The Wealthy Hand-to-Mouth,” which is in fact the title of the research paper.
The economists even use fancy 21st-century shorthand for this group: HtM. (Note how it embraces modern typology by mixing upper- and lowercase characters and eschewing spaces, as in JPMorgan, BlackBerry or eBay.) In fact, they distinguish between WHtm and PHtM, with W and P signifying “wealthy” and “poor.”
To figure out who’s actually living HtM you’d like to track families day to day, purchase by purchase, to see how many reach payday with their debit card empty or their credit card maxed out. Unfortunately, data that rich isn’t readily available so what the economists do instead is look at the average cash balances families keep, when that’s what the survey asks about, or their cash balance on the day of the survey, if that’s what’s polled for.
If you are living HtM and every payday you get $1,000 clear, then you end up with $0 on the next payday. If you’re spending steadily through the pay period, your average cash balance is $500. If you’re not spending steadily, your average balance could be different. And if the survey catches you at a different stage of the pay cycle, you’ll be more or less flush. So figuring out exactly who is HtM isn’t easy.
But, after working through different cases and making plausible assumptions about what level of cash balances or credit card debt qualifies a person for which category, the three economists are able to draw what seem reasonable conclusions about who’s HtM and who’s not.
What they find is that more than 30 per cent of Canadians and Americans qualify, with the split being roughly 2-to-1 WHtM vs. PHtM, that is, there are roughly twice as many HtM people who own non-liquid assets as there are who don’t. So the WHtM make up about 20 per cent of the population.
“Who are they? The highest rate of WHtM is among 40-44-year olds, about a quarter of whom qualify. The lowest rate, under 10 per cent, is among people under 25, which makes sense: Except for the occasional Bieber type, people that young haven’t worked long enough to acquire a house, car or RRSP. Perhaps surprisingly, the WHtM rate among people 65 and older is only between 15 and 10 per cent and declines with age in that group. Many people that old presumably do have illiquid assets — we certainly hope they do — but seem not be living hand to mouth.
By contrast, the rate of PHtM — people living hand-to-mouth but owning no illiquid assets — is highest among young people. Over 35 per cent of 22-24-year-olds qualify. That falls sharply to roughly 10 per cent among 35-39-year-olds and then falls more gradually to about five per cent among 75-79-year-olds.
In total, a little under 40 per cent of 40-44-year-olds are living HtM, while only about 15 per cent of people over 70 are — which is pretty good news.
And in both those groups the division is 2-to-1 wealthy to poor. Again, “wealthy” doesn’t mean rich as Buffett or Gates but we are talking about people who have assets” (Watson 2014).
Overall, “since 2000, almost every income group in Canada has gotten richer, while the people at the very top have gotten filthy rich[...] Meantime, this being Canada, “rich” means something different than it does in the United States.
In Canada, individuals who earned $80,400 in 2010 were in the top 10 per cent of all income earners, and those who earned $191,100 qualified as one-per-centers. [...] There is, however, one group of Canadians that really is doing worse: lower-income, lower-educated men. Their job prospects have dwindled dramatically, and their net worth is zilch to negative. On top of that, they make poor marriage material and women can increasingly get along without them” (Wente 2014). The commentator in question adds sarcastically: But these guys weren’t at the Liberal convention. They’re not half as sympathetic as Nathalie. And no one is going to get elected by promising to rescue them, especially if that might involve the redistribution of middle-class entitlements.
The crisis of the middle class is an irresistible political message, even if it isn’t true. And if the facts don’t fit the narrative, good politicians know what to do: Change the facts. (Wente 2014) other so-called Anglo-Saxon countries—Australia, Canada, and the United Kingdom—all show a strong asymmetric U-shape of income distribution . This is not to say that the rises were equal in all those societies. Over the period 1980 to 2007, when the top 1 percent share rose by some 135 percent in the United States and the United Kingdom, it rose by some 105 percent in Australia and 76 percent in Canada (and by 39 percent in New Zealand. The experience is markedly different in continental Europe and Japan (both areas epitomising stakeholder capitalism), where the long pattern of income inequality is much closer to an L-shaped than a U-shaped curve. (Sweden and other Scandinavian countries such as Norway are in some ways intermediate cases.
While it is true that there has been some rise in recent years in the top shares in these countries, but “the top 1 percent shares are not far today from their levels in the late 1940s, whereas in the United States the share of the top 1 percent is higher by more than a half” (Alvaredo et al. 2013).
Other sources also confirm an essential role of the distinction between two given capitalist modes of economic activity (and corresponding economic formations of society) in accounting for the distinctive inequality patterns in the respective countries. While the share going to top earners increased dramatically between 1981 and 2006 in the U.S., it was basically flat in these other countries until very recently. There is evidence of some increase in top income shares in Japan and France since the late 1990s, but the changes are far less pronounced than what has occurred in the U.S. Various authors (Atkinson, 2007; Atkinson and Salverda, 2005; Saez and Veall, 2005; and many other studies cited in Atkinson and Piketty, 2007, Saez 2006 and Roine, Vlachos, and Waldenstrom 2008) have constructed top income shares for other countries as well, and have shown that top income shares have grown sharply only in English speaking countries. Like France, other continental European countries have had flat top income shares in recent decades, with moderate upward trends beginning to emerge only after the late 1990s in countries such as France and Spain where very recent data is available.
The international data on top income shares seems inconsistent with some of the theories for rising income inequality cited above, and only partly consistent with others (Piketty and Saez 2006). For example, it is hard to see why globalization and skill-biased technological change would raise top income shares sharply in English speaking countries but not in Continental Europe or Japan where the degree of globalization and technological advancement is presumably similar. Regarding the tax hypotheses, Figure 2 shows that there were much larger and earlier cuts in top marginal income tax rates in the U.S. than in France, and in general English speaking countries had much larger reductions in top marginal income tax rates than did Continental European countries. So the fact that top income shares went way up in the English speaking countries but not in Continental Europe seems to support the theory that marginal income tax rates are an important part of the explanation for surging top income shares in English speaking countries. However, [...] Japan had similarly large reductions in top marginal income tax rates to the U.S. since 1981, yet no increase in top income shares happened there, which is highly inconsistent with the tax-based theories.
Theories about executive compensation, financial market asset prices, social norms, and institutions seem to fit the data better, but have been hard to prove. While Japan and the U.S. had similar changes in tax rates, an important difference between them is that it was illegal to compensate executives with stock options in Japan until 1997 (Bremner 1999). Executive stock options are legal in France, and stock prices went up in France too; but average executive compensation in France is less than half of what it is in the U.S., which might be explained by social norms (The Economist, 2008, and Alcouffe and Alcouffe 2000). This could explain why top income shares seem largely unaffected by stock prices in France.
“the heterogeneity in income growth rates across professions within the top one percent, and the divergence in incomes within professions in the top one percent, both suggest that the causes of rising top income shares cannot just, or even primarily, be factors that are changing in similar ways over time for everyone within the top one percent, such as federal marginal income tax rates. There is some variation in time paths of federal marginal income tax rates within the top one percent, especially before 1986, but since then most of the independent variation within the top one percent has come from factors, such as the AMT and state of residence, which are not simple increasing functions of income, and so can’t explain why income grew so much faster at the top of the top 1 percent than at the bottom. Those facts, together with the very non-linear patterns of income growth exhibited in the data for some professions, suggest year dummies or linear time trends will do a poor job of controlling non-tax influences on income growth, so that more flexible methods are clearly called for.
Second, the fact that executives, managers, supervisors, and financial professionals can account for 70 percent of the increase in income going to the top 0.1 percent of the income distribution, the fact that financial professionals in the top 0.1 percent had substantially faster income growth than almost all other professions, and the fact that incomes of financial professionals, executives, and managers move in tandem with stock market prices during the period, suggest that some combination ofcorporate governance issues, the stock market, and entrepreneurship are probably a key reason for rising top income shares. The fact that the incomes of top earners in fields such as medicine and law appear to be not very sensitive to stock market prices might make it possible to separately identify the effects of factors such as taxes from the influence of the stock market in data that has information on occupation. It will also help to use data that includes large non-linear movements both up and down in stock prices, as occurred with the bursting of the Internet bubble and subsequent recovery, as well as data that includes large changes in tax rates in both directions, in order to distinguish the effects of stock prices and taxes from the effects of other influences on income that are hard to measure and might be changing in a smooth fashion over time.
Third, the fact that top income shares are not rising in Continental Europe and Japan suggests that skill-biased technical change and globalization are probably not very good explanations for rising top income shares in the U.S. As previously suggested by Kaplan and Rauh, the fact that top earners in occupations where country-specific human capital is important, such as law, have been experiencing fast income growth further weakens globalization as an explanation for what is happening at the top of the income distribution. But unlike Kaplan and Rauh, we find that professions where high pay is associated with asset market prices (finance and real estate) and superstardom (arts, media, sports) had much faster income growth than lawyers, and were three of the four professions with the fastest income growth among those in the top 0.1 percent. This bolsters both the asset price and “superstar” theories.
It is unclear, however, whether occupations to which the superstar phenomenon applies comprise enough of the top of the distribution to account for much of what is going on. The superstar phenomenon could apply broadly in a number of different occupations. For instance, technology and globalization now enable the best management consultants to sell their services to a much broader audience, and notably their occupational category (business operations) experienced the fastest income growth of all in the top 0.1 percent between 1979 and 2005. But if superstars are so important, it is hard to explain why superstars in Continental Europe and Japan have not been causing top income shares to rise there (perhaps social norms prevents this from ocurring).
Finally, given this set of facts, it is hard to think of any factor at all that might be particularly important in explaining growth and top income shares and that is evolving in a smooth linear way over time and would be captured well by a different linear time trend for each income class, except for perhaps social norms, which we arguably can’t measure at all: (Bakija, Heim 2009:25-7). Notice that this extremely broad term of social norms alludes, inter alia, to our own explanation in neopatrimonial terms. At the same time, the authors’ comment about their inability to quantify the weight of the factor in question goes some lenghts toward explaining why mainstream representatives of the most mathematised discipline among the social sciences, by and large, have left out the topic of neopatrimonialism, whose role in the U.S. economy and society is scarcely amenable to standard econometric tools.
A comparative international perspective on the second principal economic parameter of social stratification generates findings akin in some respects to those reported earlier for the U.S. There is no simple link between high wealth inequality and high income inequality, according to a new study by researchers at the London School of Economics.
They examine data on cross-country differences in household wealth, and in household wealth inequality, for five countries – the UK, Italy, Finland, Sweden and the USA.
Key findings could be reduced to the following:
list of 4 items Wealth holdings in the USA are ‘unambiguously’ more unequal than in the UK, followed by Finland and Italy. But surprisingly there is a very high level of wealth inequality in Sweden – only the USA has more.
In all the countries examined, housing equity is the dominant asset in households’ portfolios. It accounts for about 81 per cent of total net worth in the UK, about 86 per cent in Finland and Italy, and 57-61 per cent in the USA.
The differences between countries’ wealth distributions cannot be wholly explained by differences in age, working status, household structure, education and income. In fact the largest share of the differences reflects ‘strong unobserved country effects’.
In The researchers in question reckon that to explain the case of Sweden, one must take account of the level of home-ownership and the strength of the Swedish welfare state. Home-ownership is lower in Sweden, and the need for Swedes to hold assets of any kind is greatly reduced by state provision of health, education, pensions and income during periods of hardship. This reflects different relative roles of private and collective consumption, reducible in the last instance to the peculiar property structure. Hence average gross wealth is comparatively low, in a society with a very high standard of living. (cf. Cowell et al. 2013)
Focusing on income, from the above data it follows that one can expect to find that in countries of stakeholder capitalism, such as France, which is used here for illustrative purposes, their higher level of income redistribution implies a relatively higher degree of taxation. A recent study conducted by the French Research Center for the Study and Monitoring of Living Standards (Lomas 2013).
Based on 2012 data, found that the lower middle class in France, namely households with monthly individual income of between EUR1,200 (USD1,628) and EUR1,600, pay the equivalent of 43 percent of their available income in compulsory levies, for example, individual income tax, value-added tax (VAT), other indirect taxes, and social contributions.
In exchange for their fiscal contribution to the country’s social welfare system and to public services in France, lower middle class taxpayers receive 42 percent of their available income back in the form of welfare support, such as unemployment benefit, retirement pensions, and illness cover. In this regard, the French socio-fiscal system is “neutral” for lower income households, the body stressed.
By comparison, the lower middle classes and low-income earners in Sweden, Finland, Ireland, and the UK, receive better financial support than those in France.
In the UK, for example, the lower middle class contributes the equivalent of 34 percent of their income in taxes, while recovering 49 percent in the form of welfare support, marking a net gain of 15 percent.
As regards the French upper middle class, notably households with monthly income of between EUR1,600 and EUR2,700 per person, taxpayers contribute 43 percent of their available income in taxes, receiving the equivalent of 33 percent in monetary transfers in return, representing a 10 percent loss. (cf. Lomas 2013)
To turn to the other end of the equation, in many countries belonging to the stockholder-capitalist area, a number of class processes akin to those present in the U.S. can be observed.
An article in “The Economist” whose author announces in the title that “the middle class is ailing”, contains a catalogue of symptoms of that illness, such as: “since 2007 five fee-paying schools in Merseyside have converted to state-funded academies, or announced their intention to do so […] In December 2013 the Liverpool Post, a local paper dating from 1855, published its final issue. Carrying a mix of politics, sport and serious business news for the middle classes, it no longer sold enough copies or carried enough advertisements to survive.
Lewis’s, a once-glamorous department store, closed in 2010. […] affluent Merseysiders are trading down. In the car park of an Aldi discount supermarket in Kirkdale, regular shoppers note the growth in “posh” cars” (2014).
Last summer, the British middle class went from being temporarily “squeezed” to officially terminally ill—an observation made by historians, politicians and pundits across the political spectrum.
One of those politicians, Ed Miliband, argued:
If there was a single undisputed truth in Britain in the decades after the Second World War, it was that there was going to be a rising middle class. This view was fuelled by a sense of optimism and fulfilled aspiration in our country: a belief that if our children worked hard they could have a better life than we enjoyed.
It was the Promise of Britain. And it is a promise that is in danger of being broken as we come to the end of a long period during which the middle class grew stronger and larger.
In the post-war years, more people from different backgrounds went to university and most people expected to find a steady and well-paid job. Families saw that if they saved, they would be able to buy a home in which to raise their children. And our parents could look forward to retiring in security with a decent pension.
But today, the British middle class is being squeezed by a cost-of-living crisis as never before – and people grafting to join it find that the obstacles in their way are getting bigger. The motors that once drove and sustained it are no longer firing as they used to. Access to further education and training, good quality jobs with reliable incomes, affordable housing, stable savings, and secure pensions: they have all been undermined. (2014)
Notice that, wittingly or not, the politician concerned makes use of very broad terms, as a matter of fact-generalities. Only this high level of abstraction allows him to make such extremely general and thereby hard, if not impossible to verify claims.
Anyway, the category concerned enjoys among the U.K. chattering circles no less popularity than amongst their American counterparts.
For instance, in the Guardian, the columnist Suzanne Moore observed that class had been recast as a generational issue, with anyone born after 1985 denied access to what their parents had, “the traditional tools of social mobility—education, housing, steady income.” In the Daily Mail of all places, the historian Dominic Sandbrook declared that Karl Marx was right: Capitalism had begun to devour the middle class that made it seem so great in the first place. Thanks to soaring food and energy costs, disappearing pensions and lack of jobs, he predicted ominously that “in a few decades time it is perfectly plausible that the old-fashioned professional middle class will have virtually ceased to exist.”
This shift, which is occurring both in Britain and the United States (and to a much lesser extent in Canada), is the most profound and disturbing social and economic trend of our time and will undoubtedly dominate the psyche of the West for generations to come. (McLaren 2013)
Whilst there can be no doubt that the diagnosis outlined above is true in its broad outlines, this does not necessarily refer to all its particulars. For instance, it appears that the rift between the USA and its northern neighbour as regards the condition of their middle classes has been overstated, as evidenced by a recent poll, according to which “in addition to the lowest-ever score on national direction and the lowest-ever scores for trust in government and the health of our democracy, we are seeing the lowest-ever number of Canadians describing themselves as ‘middle class’. Mirroring a similar (perhaps even steeper) decline in the United States, only 47 per cent of Canadians now consider themselves middle class — down from over two-thirds when Mr. Harper took office. The shifts are all downward — to the burgeoning ‘working class’ and the poor.
The longer-term outlook on the future is even darker. The crisis of the middle class — and the spectacle of rising privilege at the top income echelons, while most Canadians feel they’re stagnating or falling backward — has become the most important issue of the day” (Graves 2013). And indeed, “Middle class incomes haven’t kept up with the pace of economic growth. It’s a phenomenon observed across industrialized countries, and here in North America it has become a flagship issue for both Justin Trudeau’s Liberal Party and the second-term Obama Administration. [...] Canadian middle class family incomes today are slightly lower than they were in the mid-1970s, in inflation adjusted terms, even though the size of the Canadian economy more than doubled since then” (Econowatch 2013).
But it is important to see the matter in due proportions: “It’s not that median family incomes in Canada have flatlined for 30 years. Rather, they’ve plunged in the late 1980s and early 1990s, and then came back up, regaining almost all ground lost” (Econowatch 2013). “Canada is among the worst countries in the developed world in terms of the widening income gap between top earners and others in society, according to the Organization for Economic Co-operation and Development.
The analysis shows income inequality is on the rise in most developed economies, but the trend has particularly taken hold in the United States and Canada.
The OECD report shows the top one per cent of Canadian pre-tax income earners captured 37 per cent of the overall income growth between 1981 and 2012, and now swallow up 12.2 per cent of the country’s income pie.
In the U.S., the top one percenters captured 47 per cent of income growth in the country during the period — and now take in one-fifth of the country’s pre-tax annual income.
Meanwhile, incomes among the poorest households have not kept pace with overall income growth, the OECD says. In fact, stripping away the top one percenters would leave overall income growth considerably lower in many countries.
This is why the majority of the population cannot reconcile their countries’ economic growth rate with improvements in their incomes” (Beltrame 2014). Accordingly, a leading Canadian politician could echo his American counterparts in his speech that even his political opponents could hardly deem too rosy: “Today, our country faces levels of income inequality not seen since the Great Depression, and the middle class is struggling like never before. Middle-class wages are consistently on the decline” (Payton 2013). To add a statistical background to those claims, “Inflation-adjusted figures from Kenney’s department show that median after-tax family income in Canada fell during the 1990s, before bouncing back and then rising to a peak of $51,100 in 2008.
Median family income then dipped to $50,700 in 2011. A family right in the middle is doing better now than it was in 1989 but worse than when the recession first hit” (Walkom 2014). Furthermore, “inequality — as measured by income groups — is increasing. Figures from Kenney’s department show that the richest 20 per cent of Canadians are outpacing everyone else, including the middle class.
The richest fifth saw their after-tax family incomes rise by 37.2 per cent between 1995 and 2011. By contrast, family income for the middle class rose by just 23.2 per cent” (Walkom 2014).
It is quite another issue, of course, whether the triad employed by the aformentioned commentator is any better than some other schemes reported in the book.
A researcher from another Anglophone country goes some way toward arguing, even if implicitly, that this is really the case. The name of the country involved is redundant, as the researcher in question begins by calling in the inimitable three of John Cleese, Ronnie Barker and Ronnie Corbett representing upper, middle and working class in their famous comedy sketch about class.
In deciding who are the middle class one crucial source of information is the Office for National Statistics data on household incomes. This shows that in 2011-12, the top 10th of households with the highest incomes received 27% of all income both gross and after tax. (The UK has for households what amounts to a flat tax system other than for the poorest tenth of households who pay a higher proportion of their income in tax than any other decile.) This was far more than the next 10th down, who received about 16% of all gross and net income. The decile below that, the eighth highest, received about 13% of gross and net income. From the lowest 10th to the ninth decile, the difference in income levels rises in a smooth line, but between the ninth and 10th deciles incomes rise by nearly 70%. It is precisely these very much higher incomes, post-ftax as well as pre-tax, which fund most private education in the UK, the main route by which the privileged pass on privileges to their offspring. So if we think about household incomes, then we have an upper class of plutocrats who do not really appear in the relevant data set and who by the way pay very little tax because of their systematic use of the tax avoidance industry, a middle class of those in the top decile of households we know about, although they also often legally avoid tax, and the rest of us below them.
This is very much a return to the way in which the 19th century thought about a middle class, not as a statistical average but as a group between the great owners of property and the rest of the population. These days the middle class understood as the 10th of households with the highest incomes we know about contains those who assist the plutocracy by managing the rest of us on lower pay and conditions in work, and pensions and benefits when out of work, across the whole of the public and private sectors. Byrne, Ruane 2013).
Indeed, the notion outlined above is superior to the most commonly held view of the middle class as simply a statistical average. But on the other hand it simply substitutes one statistical category with another, with the additional inconvenience of being non-intuitive (“the middle class” as incorporating those of highest incomes).
Either way, the face of British capitalism is in many respects strikingly similar to that of the U.S. model; a recent report points out that the overall wealth share of the top tenth of the population in 2008-2010 was more than 850 times the share of the bottom tenth, and that the distribution of wealth is much more unequal than the distribution of income.
Frankly, a handful of common-nonsensical platitudes reproduced below does not point to the academic origin of the authors; the reader is told that • “Wealth inequalities occur in different ways. Some people have higher incomes than others; some choose to accumulate wealth rather than spend; some receive higher levels of inheritance/lifetime gifts from parents; and some invest in housing or other assets just before they increase substantially in value.
Low levels of income reduce the ability to avoid debt and/or accumulate saving. The report does not expand on this issue (which has been explored above), noting, however, that “Levels of problem debt have been increasing in recent years and look set to increase still further” (Birmingham Commission 2014). [...]
Those at the very top of the income distribution have seen huge increases in their incomes in recent decades, which have subsequently fed through into wealth inequalities. Those on high incomes are also much more likely to receive an inheritance and/or lifetime gift, and much more likely to receive one of high value” (Birmingham Commission 2014).
What effect on the overall structure of social differentiation does have the last factor, may be deduced from a new paper from the LSE’s Centre for Analysis of Social Exclusion, according to which inherited wealth has started to increase as a percentage of national income since the 1970s, reversing the long-term decline going back at least as far as the nineteenth century; Tony Atkinson has examined the transmission of wealth in the form of estates and, insofar as it is possible, lifetime gifts – starting from 1896, when the modern estate duty was introduced.
Key findings of his study are as follows:
Before the First World War, total transmitted wealth represented some 20 per cent of national income. This gradually fell to around 10 per cent after the Second World War, eventually dipping below 5 per cent in the late 1970s.
“Since then, the long-term trend has been reversed, with a rise from 4.8 per cent in 1977 to 8.2 per cent in 2006.
Personal wealth has grown since the 1970s about twice as fast in real terms as national income.
Until the Second World War a UK citizen was, statistically, more likely to pay estate duty at death than to pay income tax while living. But today that situation has been completely reversed: income tax is paid by a large majority of the population, whereas the percentage liable for inheritance tax has fallen below 10 per cent” (Atkinson 2014).
And a more recent report provides some further evidence on the staggering class divisions:
The five richest families in “the UK are now wealthier than the bottom 20 per cent of the entire population, according to a briefing drawn up by Oxfam.
That means just five households have more money than 12.6 million people put together –almost the same as the number of people living below the poverty line.
More specifically, the report argues that:
“While austerity measures continue to hit the poorest families hardest, a wealthy elite have seen their incomes spiral upwards. This is exacerbating income inequality that has grown under successive governments over the last quarter of a century.
Since the mid 1990s the incomes of the top 0.1 per cent have grown almost four times faster than the incomes of the bottom 90 per cent of the population.
In real terms, that means the richest 0.1 per cent have seen their income grow by more than £461 a week, the equivalent of over £24,000 a year, thereby encapsulating the St. Matthew’s effect mentioned earlier.
By contrast the bottom 90 per cent have experienced a real-terms increase of £2.82 a week, equivalent to just £147 a year.
The most affluent family in the UK (Gerald Cavendish Grosvenor and family), have more wealth than the poorest 10 per cent of the entire population, or6.3 million people (£7.9 and £7 billion respectively)” (Oxfam 2014).
Sharp class divisions have, according to many observers of the British scene, consequences akin to those observed in America.
As compared to the report mentioned above, a recent study by two British sociologists provides definitely more food for thought. The year 1979 is indicated as the key moment when income and asset inequality in Britain started to increase markedly, a trend that peaked around 2008 at the beginning of the recent recession. Policies such as a more regressive taxation system, the “Right to Buy” and the end of the link between the state retirement pension and earnings are indicative of the historic switch from collective to individual risk and responsibility. It is argued that the growing gap between the rich and the poor fuels a sense of unfairness, reduces social cohesion, and has a negative impact on the majority in terms of health, subjective well-being, and social mobility. The claim that the opportunity to amass great wealth is an incentive to work hard is given short shrift by Rowlingson and McKay (2011) on the grounds that there is little evidence to support this view and that countries with less inequality are as successful economically as those with greater inequality. Rowlingson and McKay offer a useful-though rooted exclusively in a stratification framework -taxonomy that “distinguishes between the ‘rich’ (top 10 per cent defined as ‘those with sufficient financial resources to establish private lifestyles and modes of consumption’), the ‘richer’ (top 1 per cent defined as ‘those with sufficient resources to establish highly exclusive lifestyles and modes of consumption), and the ‘richest’ (top 1,000 or the ‘super rich’ defined as ‘those with the very highest level of financial resources) (Rowlingson and McKay 2011:74, italics in original). The financial ability of the wealthy to ‘exclude themselves from certain elements of society’ (Rowlingson and McKay2012:115) applies not just to education and health but to paying income tax via various avoidance schemes. Unsurprisingly therefore between 1992/3 and 2007/8 median income increased by 61 per cent, but for those in the top 10 per cent their income increased by 76 per cent and for those in the top 1 per cent it increased by 137 per cent (Rowlingson and McKay 2012: 127, Table 5.9:). It is worthy of mentione that given that the distribution of wealth is even more unequal than that of income and that surveys tend to underestimate its extent, the conclusion that in the recent past the rich got richer and the gap between the rich and the rest became wider is an understatement.
The issue of massive inequality has risen up the political agenda since the Conservative/Liberal Democrat Coalition government came to power in 2010, arguably in large part due to the high profile activities of various protest movements such as Occupy London who have focused on the increasing wealth of the 1 per cent and the decreasing wealth of the 99 per cent. Rowlingson and McKay argue that the current gap between the rich and the rest is too wide and characterize Coalition policy towards the rich as a very “softly-softly” approach which contrasts with its “hard-line policies towards those on benefits” (Rowlingson and McKay 2011:127-205).
Polarisation pertains also to the country’s labour-power market, just like in the U.S. This phenomenon is most emphatically apparent in the country’s capital in which “an ever widening gap is developing between job offers at top levels and ones that require minimum skills, to the detriment of middle management (-13% since 2008). This is also having a negative effect on the social mobility and income of [...] the middle class. [...] the number of jobs which pay less than the so-called London Living Wage, now at about £9.40 per hour, compared to £7,25 in 2008 (£8.25 is the current national rate)” (Truiba 2016). As a result, 20% of the jobs available in London today pay less than the standard rate, which may be rendered as underpaying the labour power relative to its value. The deterioration of conditions in the market concerned is manifested in such facts as an increase in the number of part-time employees, often women with temporary contracts, from 25% in 2008 to 29% today; the upshot being that “57% of Londoners classified below the poverty threshold are working families” (Truiba 2016).
In another British commentary it is stated that as the ladders of social mobility crumble, the middle-class values that are the foundation of modern democracy are also destabilized. “What’s the point of thrift, hard work, patriotism and common decency if the system is stacked against you? Conversely, Moore writes, “the values that have actually enriched the wealthy, the bankers and the baronets, appear almost as opposites: greed, lust, ostentatious consumption, arrogance, dishonesty” (Harding 2014b).
The author argues further that:
“Despite its iconic class system, Britain is a country that has long and rightly prided itself on social mobility. The rise of the middle class in the 20th century is this country’s greatest social achievement—one that is being swiftly eroded by a new and disturbing economic reality” (Harding 2014b).
The above turns out to be just an introduction to what at this point of discussion should have become a well-known narrative:
“Just look at the numbers:
According to government statistics, the average British earner has seen her income drop by an average of 10 per cent in real terms since the 2008 downturn—a setback that has taken the middle class back to the mid-’90s in terms of earning power. Household spending has dropped five years in a row. A recent survey found that two out of three British families stayed at home this year for their summer holidays. The reasons for this, of course, are that energy, fuel and food prices have soared and unemployment remains high. Britain has the highest child care costs in Western Europe. Real estate, particularly in the nation’s capital, is some of the most expensive in the world. Interest rates remain historically low, so even if you had anything to save, why bother?
It’s a bleak new reality in which many educated, hard-working young people are having to readjust their basic economic expectations. As Spectator editor Fraser Nelson recently put it
in an editorial, ‘The lifestyle that the average earner had half a century ago”—reasonably sized house, dependable health care, a decent education for the children and a reliable pension—is becoming the preserve of the rich” (McLaren 2013).
The prospects have apparently become this gloomy that a popular newspaper can trumpet that “Soaring house prices ‘will kill off middle class within 30 years’: Britain to be left with ‘tiny elite and sprawling proletariat’ [...] by 2045, the average British house will cost £1.2million” (Harding 2014b).
And, equally customarily, as a context to those grumblings an increase in class disparities is being cited:
“Meanwhile, for the super rich the good times just keep on rolling. The top 0.1 per cent of British earners now take home an astonishing 7.5 per cent of national income, and that will hit 14 per cent in 2035. As Bank of England governor Mark Carney continues his policy of quantitative easing, the wealthiest citizens will stand to benefit most—for they are the ones who own the assets being inflated to speed economic recovery. Chancellor of the Exchequer George Osborne’s strategy to fix the economy has so far made the rich far richer at the expense of the vast majority—a fact presumably not lost on the many millionaires in his cabinet.
While the U.S. pollster Rasmussen Reports early this year found that a whopping 65 per cent of working Americans still optimistically consider themselves middle class, Britons seem to be seeing things more clearly. According to a poll released last January, almost 60 per cent still define themselves as working class—a notion that flies in the face of New Labour’s declaration in the late ’90s that “We are all middle class now”.
The sad truth is, “fewer and fewer of us are middle class now, a trend that shows no signs of abating. The Great British Class Calculator must be recalibrated.
The future of democracy depends upon it” (McLaren 2013).
Nevertheless, whilst the facts cited seemm undisputable, also in this case it turns out that all depends on one’s point of view. The following comment is definitely a case of “a glass half full” rather than empty. The reader of a leading British journal is thus told that “we have experienced a coup d’etat of sorts […] the middle classes did take untrammelled control of the levers.
It always was a force; but now there is hegemony […] According to the Sutton Trust thinktank– which focuses on social mobility – 68% of “leading public servants” went to private schools. It says 63% of leading lawyers were privately educated, as were 60% of the upper ranks of the armed forces. Independent schools produce more than half of the nation’s leading journalists, diplomats, financiers and business people. Policy Exchange says just 4% of MPs previously worked in manual trades” (Muir 2013).
Well, this kind of judgment is rather risky-it assumes that there are only two social classes: the working class and the middle class. One does not have to be a rocket scientist to sense that something is missing here. In addition, it is unknown what characteristics, apart from attending private schools, could be ascribed to that new ruling class.
As has been implied above, the category of shareholder capitalism refers in fact to a whole group of Anglophone countries rather than simply Britain.
Australia is one of such societies:
It’s estimated that 30 % of the world’s population are middle class and in the next few decades this figure could climb to 60%. But while increasing levels
of prosperity are being experienced in China and other emerging economies it’s a very different story in the West where technology and globalisation are killing jobs – especially for low and semi skilled workers.
For this group the prospect of well paid secure employment, an affordable home and family life is becoming more of a middle class dream than reality.
It’s a shift that’s been felt in the US and Europe for some time but has only recently touched Australian society and it’s this erosion of middle class opportunity that has some commentators worried. (Salt 2013)
Amongst those commentators is also Veronica Sheen, whose article in the Conversation (https://theconversation.com/rudd-abbott-bring-on-the-plan-for-more-middle-class-jobs-17597) discusses the absence of any engagement in the election campaign on “middle-class” jobs growth.
She reckons that the situation in her country is even worse than that in the U.S.As pointed out in the article, “President Obama at least showed some breadth of vision on the need for expansion of middle class jobs - and the middle class in his State of the Union address but it seems that in Australia, there is a deafening silence on this issue. Of course, the remedies lie in contested
and difficult areas such as labour law, social policies, expensive industry support and public sector expansion - in addition to overall economic and employment growth - so it is not surprising that the issue of ‘middle class’ jobs was assiduously avoided in the election campaign”.
Note that the argument cited above adds some new criteria for the middle class determination, which will be returned to below.
And to continue with the Australian theme, let us cite an excerpt from an article, indicating a close affinity to the American case-in accord with the aformentioned conception of two capitalist modes of production: “there is a widespread view that the middle class in Australia is doing it tough, that they are finding it increasingly difficult to maintain a decent standard of living and are suffering from mortgage stress. Indeed, some media reports have announced the end of the middle class dream” (Hamilton et al. 2007).
Other comparisons also underscore structural affinities among the nations colloqually and collectively included in the anglo-Saxon category. The biggest single change in the American society over the last five to ten years has been the dramatic decline of the middle class. And the factors that caused that reduction are being duplicated in Australia. (Houses and Halls 2014).
While the evidence cited later on in order to substantiate the argument at first blush may be frown upon, as it is based on subjective data, this is at least partly corrected by some reference to real working and living conditions that engender given opinions. Analysis by Michael Snyder shows that six years ago, some 53 per cent of all Americans considered themselves to be “middle class”. Now it’s only 44 per cent – and falling.
In 2008, a quarter of all Americans in the 18-29 year old age bracket considered themselves to be “lower class”. In 2014, that doubled to an astounding 49 per cent of youngsters, who believe they are in the lower class. The movement to lower incomes is worst among young people, who can’t gain employment. Retailers like Sears and JC Penney, which relied on the middle class, are now struggling. There is a very similar pattern in the UK, where retailers who service the middle class are in decline, which obviously results from similar factors as in the U.S.-“ “according to the DWP, the average household income in 2012-13 was £440, unchanged on the year before. It represents the third consecutive year of stagnation or decline (depending on how one cuts the figures). As the IFS have noted, in real terms this leaves median household income in roughly the same place as it was in 2002, and comes off the back of painfully slow wage growth from the start of the 2000s.
In the same week the increase in the price of homes reached an all-time high. Add in that a majority of people on typical incomes now have less than one month’s income as savings, plus the slow hollowing-out of middle income jobs, and a pretty clear picture emerges. The foundations of middle class life – a decent income, assets, savings, and pensions – are getting harder and harder to attain, especially for those just starting out. In many cases, debt has filled the gap” (Akehurst 2014).
And later on the aformentioned author has some fresh insights, usefully broadening the perspective:
“This goes beyond just failures of the private sector. The welfare safety net has also become residualised. People on reasonable incomes can work their whole life and receive only paltry amounts when they lose their job. When it comes to both work and the state, people in the middle have been putting more in than they’ve been getting out for a long time” (Akehurst 2014).
It comes as no surprise that the author mentioned above asks: “Why should Australia duplicate what has taken place in the United States and the UK? Put simply: because we have adopted the same policies and strategies.
The US transferred much of its manufacturing operation to China and, in doing so, it decimated a vast amount of middle-class workers…the US believed manufacturing jobs would be replaced by the service sector, not realising that just as many of those jobs would go offshore on the back of internet technology” (Houses and Halls 2014).
Australia’s economy is already dominated by services, with 75% of jobs being in service related industries. The era of lifelong employment in skilled manufacturing has been over for many years.
The author of an article under the tellling title:”The end of the middle class” asks a rhetorical question: “Can you have a middle class without a manufacturing sector? [...] finance and the City dominates the economy of the UK. The middle class gets wiped out. Property prices in the big cities soar. You have very, very rich people…and then pretty much everyone else.
The same thing is going on in America” (Denning 2014).
It is fitting that another Asiatic country should be presented at this point. The account in question is interesting for a class breadth of vision manifested by its author as compared with other students of the middle class who tend to focus exclusively on its fortunes and misfortunes:”Singapore’s working class wages stagnated in 2012. Median household incomes rose by 2.7 percent even after factoring in inflation; still many working-class families have seen their wages stagnant in recent years. The Ministry of Manpower has acknowledged that from 2000 to 2012 the wages of the bottom 20 percent of Singaporeans only rose 0. 55percent in real terms. During that same period incomes for the middle class grew by respectable 11 percent. Singapore also has the highest percentage of millionaires: with seventeen percent of its citizens having a disposable Private wealth at least one million dollars.
The unemployment rate in the country has regularly come in at below three percent. (Goswami 2013)
In turn, Korea’s Middle Class has been shrinking over the last 20 years while the ranks of the poor have swelled. Won Jong-wook of the Korea Institute for Health and Social Affairs said in a report that the middle class accounted for 74.47 percent of Korean society in 1990 but had shrunk to 67.33 percent by 2010, down 7.14 percentage points in two decades.
In contrast, the low-income bracket, which accounted for 7.34 percent in 1990, had grown to 12.24 percent by 2010, up 4.9 percentage points.
Researchers at the institute analyzed the change in the proportion of middle-class households in urban areas based on data provided by Statistics Korea. (Kim Hee 2014).
Looking at age groups in different wage brackets, those in their 30s accounted for 39.32 percent of low-income earners in 1990, falling to 15.91 percent by 2010.
By contrast, those in their 60s or above accounted for 40.57 percent of low-income households in 2010, up from just 7.95 percent in 1990, demonstrating the effects of the aging society.
Those in their 60s also accounted for 13.51 percent of the lower middle-income bracket in 2010, up from just 2.14 percent in 1990.
“A surge in high-wage earners over the last 20 years spearheaded the rise in the median wage, but struggling owners of small stores and other businesses did not see their income rise and ended up falling into the low-income bracket,” Won said.
He added an increase in the number of people in their 60s or above who work part-time or in low-paying jobs to make ends meet in retirement led to the rise in their proportion of the low-income bracket.
And, as the preceding might suggest, this is but one instance of a broader trend which is being contrasted with the situation in the developing world.
The period between the fall of the Berlin Wall and the Great Recession saw the profoundest reshuffle of individual incomes on the global scale since the Industrial revolution.
This was driven by high growth rates of the populous and formerly poor or very poor countries like China, Indonesia and India, and, on the other hand, by the stagnation or declines of incomes in Latin America and post-Communist countries as well as among poorer segments of the population in rich countries.
[…] These results come from a detailed work on household survey data from about 120 countries over the period 1988-2008.
[…]
For example: people belonging to the top Chinese urban decile moved from being in the position of the 68th global percentile in 1988 to being at the position of the 83rd global percentile in 2008, thus leapfrogging in the process some 15 percent of the world population or almost 1 billion people.
When we line up all individuals in the world, from the poorest to the richest (going from the left to right on the horizontal axis, and display on the vertical axis the percentage increase in their real income over the period 1988-2008, we obtain an S shaped curve, indicating that the largest gains were realized by the people around the global median (50th percentile) and among the global top 1%.
People around the median almost doubled their real incomes. Not surprisingly, 9 out of 10 such “winners” were from the “resurgent Asia”.
For example, a person around the middle of the Chinese urban income distribution saw his or her 1988 real income multiplied by a factor of almost 3; the one in the middle of the Indonesian or Thai income distributions by a factor of 2, Indian by a factor of 1.4 etc.
But after the global median, the gains rapidly decrease, becoming almost negligible around the 85th-90th global percentiles and then shooting up for the global top 1%. It is perhaps less expected that people who gained the least were almost entirely from the “mature economies”, OECD members that include also a number of former Communist countries.
But even when we take the latter out, the overwhelming majority in that group of “losers” are from the “old, conventional” rich world.
But not just anyone from the rich world. Rather, the “losers” were predominantly the people who in their countries belong to the lower halves of national income distributions. Those around the median of German income distribution have gained only 7% in real terms over 20 years; those in the United States 26%, those in Japan lost out in real terms. (Milanovic 2014)
CHAPTER 5. BRICKS, MINTS AND SUCHLIKE
The current condition of, and the outlook for the middle class are, by and large, very different in the group of rapidly growing countries.
The very wording of the relevant appraisals is radically different: “the explosion of Asia’s middle class, named by the World Economic Forum’s Global Agenda Councils as one of the ten most significant trends for 2014, is stunning. the middle class in Asia is expected to more than triple from 1525million today to 11.7billion in 2020 – which will be half the world’s middle class” (Salmon 2014).
The world has never seen anything like this before; it’s probably one of the biggest seismic shifts in history. “New research by economists Christoph Lakner and Branko Milanovic shows the fastest income growth since 1988 has been for those around the global median income and the super rich. Income growth has been negligible around the 85th-90th global percentiles, a group largely populated by the developing world’s middle class” (Livament 2014), which by the way shows that the situation in China (since India has been far less successful in that regard), where the greatest masses of the population have been pulled out of poverty must not be prematurely generalised. Anyway, “the rapid rise in incomes in Asia has been accompanied by stagnation in the Western middle class. So the overall global trend is towards better income distribution but it could have come at the cost of the middle class in the developed countries” (Livement 2014).
It’s little wonder that people all across Asia expect a bright future for their children – according to Pew data, a massive 82 percent of Chinese respondents expect today’s children to grow up to be better off financially than their parents (Mahbubani 2013). Little wonder that some commentators wonder whether we should replace the famous “American dream” with “Chinese dream”. Such are also unstated conclusions of one commentator, who argues that “The middle class in China will drive the economic engine of the country, unlike what we are seeing in America with the declining spending prowess of the middle class. In fact, what we are seeing in China is similar to the power of the U.S. middle class that drove the Industrial Revolution in the late 1800s and early 1900s.
If China can emulate what happened in the U.S. then, there could be some golden years ahead for the Chinese economy”. (LEONG 2013) Some others are more outspoken, though: “The “Chinese Dream” proposed by President Xi Jinping depicts a blueprint for an expanding middle class in China, which is crucial for China’s economic transition and will boost the global economy. Li, who wrote books about China’s emerging middle class, said that the Chinese Dream is the rejuvenation of the Chinese nation as a whole, much the same as its better known counterpart was in America. It is an opportunity to have upward social mobility and a middle-class lifestyle, said the scholar” (Gao Pan 2013).
In light of our hypothesis outlined above it is, though, at least as interesting to note that even advocates of the notion under consideration can entertain doubts as to its substantive status: “He said that he chose not to use the term “middle class” in his first book in the 1990s about the rise of middle class in Shanghai, a coastal city in eastern China, as the U.S. publishers didn’t believe it exists.
However, the size of China’s middle class is growing so rapidly that the group changed the global economic landscape in terms of their huge purchasing power, Li said” (Gao Pan 2013). Indeed, according to ZenithOptimedia “its members are enthusiastic consumers. The luxury watches they buy each year are worth an estimated 49 billion yuan. They reportedly consume 2.7 billion cups of coffee and buy 5.1 million cars a year. And the amount they spend on travel will soon reach 300 billion yuan annually” (Jing 2013).
Small wonder that the agency in question subscribes to the notion suggested above: “Andrew Leong, head of strategic resources for ZenithOptimedia Greater China, believes it is a dream many aspire to. ‘About one-tenth of China’s population belongs to the middle class, but many are working hard to reach that kind of lifestyle soon. Although the middle class is a relatively new concept in China, it has already grown into a dream that a lot of people look up to. We have seen that quite a large number of people are working hard to attain that goal,’ he said” (Jing 2013).
Other data on the same topic are not that enthusiastic, however. At about 500 million and growing, China’s middle class consumers may look like the most bankable market for advertisers, but “they are actually poorer than their American counterparts.
Their highest average annual disposable income is just over US$4,500, compared with nearly US$37,000 in the US.
Official data also show that the Chinese, especially those born in the 1980s, save up to a third of their income for healthcare, property and future uncertainties. Most relevantly, in their efforts to seek a middle ground between aspiration and affordability, the post-80s generation also tends to spend more time window shopping rather than actually spending, which “Fussy spending-experts on China argue-dispels China’s middle-class myth” (Tan 2013).
Overall, China’s middle class is being defined along standard lines, although there appear also some new traits: “apart from the income, middle class is more of lifestyle or a sense of what you have […] Middle-class people usually desire more in their lives, and they are very ambitious.”
According to the Discover China’s Emerging Middle Class survey released by ZenithOptimedia, China’s emerging urban middle class totaled 125 million in 2012, and the number is expected to reach 356 million by 2020. According to A report by McKinsey & Company, “the consumers in this more affluent segment tend to live in China’s higher-tier cities and coastal areas and enjoy household incomes between 106,000 and 229,000 renminbi ($16,000 to $34,000) a year” (Souza 2014).
Other sources show even more explosive growth-“as recently as 2000, only 4% of urban households in China was middle class. By 2012, that share had soared to 68%. Today, urbanites account for 52% of the entire Chinese population; by 2022, their share is likely to rise to 63%, with 170 million new urban residents. By then, China’s middle class could number 630 million – that is, 76% of urban Chinese households and 45% of the entire population. China is fast becoming a middle-class nation. Central to this huge surge in middle-class consumers has been the country’s urbanization, and with it, the creation of higher paying jobs” (Orr 2014).
It’s a group with great potential to boost the country’s consumption, and in the long term, the economy.
“The Chinese middle class is not necessarily the richest, as a large number of young people are put into this category, but they definitely promise more wealth with a bigger purchasing power in the near future”, said Steven Chang, CEO of ZenithOptimedia Greater China.
The report is based on a survey of about 17,700 respondents in 150 cities, the largest study of its kind so far. Definitions of China’s middle class vary among the different research firms and institutions. But as Gerry Boyle, chairman of ZenithOptimedia Asia Pacific explained, middle-class families in the West have about 30 percent of their income left over after all their basic expenditures have been made, with the lion’s share of that leftover income devoted to healthcare and their children’s education. […] ZenithOptimedia believes that the Chinese middle class includes those with an annual household income of at least 72,000 yuan ($11,815) in tier-one and tier-two cities, and 48,000 yuan in tier- three and -four cities.
Among the respondents, 57 percent reported an average annual household income of 179,000 yuan, with most of these possessing higher academic degrees. About 70 percent of this wealthy group was above 35 years old.
It is, however, National Bureau of Statistics that quantified for the first time the middle class as the groups from 60 thousand to 500 thousand juan average annual income (3 persons per a family). Even more significantly, The report from the aformentioned investigation arrives at a conclusion that is at odds with this just cited finding, as “Eventually, it probes into the reasons of the absence of the middle class in our country” (ure 2010).
It should, therefore, be borne in mind that the data reported in the subsequent paragraph may well be, at least to an extent, the result of Western preconceptions being superimposed on the actual facts. Anyway, the researcher who investigated some aspects of social differentiation in China at the beginning of the century, is surely correct pointing to the historicity of the data being presented: “What is the annual income of the middle class?
It is hard to define because the economy is so fluid in China that today’s definition may be inappropriate for tomorrow. However, the best estimate out of a consensus among friends is probably 20,000-80,000 yuan [This character cannot be converted to ASCII text]. “Yuan” is the currency unit of RenMinBi
(RMB)[This character cannot be converted to ASCII text] at about 8.3 to 1 ratio to the US dollar. Thus, the Chinese middle class earns about $2,400-$9,600 annually in the Greater Shanghai [This character cannot be converted to ASCII text] area of 16 million people. Of course, Shanghai is the Chinese equivalent of New York city in the U.S. The middle class of a lessor city or a small city will be proportionately less. Yet, the term ‘middle class’ is still appropriate in terms of the local economic conditions for those cities.
Compared to the middle class income, the well-known college professor’s salary is 10,000-20,000 yuan ($1,200-$2,400) per year. The low end of labor wages are about 2,500-5,000 yuan ($300-$600) per year, and the high end of entrepreneur’s earning can be 1,000,000 yuan ($120,000) or more per year.
There are not many super-rich people around, but recent indications are that the number can be in the hundreds, even in the thousands. 1). For many, both spouses work and often have extra income from the side jobs.
In addition, people employed by private business, especially a business jointly owned by Chinese and foreign investors can usually double or triple their wages for the same level of skill. This provides a convenient partial solution for many laid-off skilled workers from the downsizing state-owned-enterprises” (Peng 2001).
Logically, the next question to be posed is: “What is the percentage of the middle class in terms of the income-earning people as a whole?
It has been estimated that the middle-class percentage is 20-30% in the Shanghai area. Again, this number can vary, sometime significantly, from region-to-region and from time-to-time” (Peng 2001). “and the new private ‘public’ spaces of the shopping mall. All this productivity in the realm of representation suggests that a new kind of subject has been called into being—one whose consuming behaviour [...] drives the momentum of the reform-era economy. the different estimates put it at somewhere between 4% and 15% of the total population, depending on how this status is defined), it nonetheless figures no less powerfully as a ‘dream image’ for a much larger aspiring segment of Chinese society through advertising, televisual fantasy, the housing market, and so on.
“’true facts’ that marked out middle-class identity were listed as follows:
Income: $10 000-15 000 or 80 000-120 000 RMB. They spend about 1500-4000 yuan per month, although this average differs from city to city.
Employment trends: lawyers, representatives of foreign firms, foreign investment bankers, media people, private entrepreneurs, computer engineers, SOHO [in English, a term popular in Japan referring to office at home], securities traders” (ANAGNOST 2008:501).
To revert to more recent data, Huang Haibo is a well-known actor who has had frequent appearances on the TV series We Get Married. Playing a civil servant on the show, Huang learned that a person earning a monthly salary of 8,000 yuan or an annual income of around 120,000 yuan, roughly the income of a civil servant, is qualified to be called middle class.
“Working as an actor in China helps me to live quite well. To be honest, I think my income is way beyond the entry level of the middle class,” Huang said at a news conference held by Zenith Optimedia.
In addition to having a comfortable income, members of China’s middle class also own their own cars or at least have the intention of purchasing one soon. That is reflected in ZenithOptimedia’s survey, in which 71 percent of the respondents said they own a car, while 50 percent plan to buy one within the next six months.
In tier-four cities, 75 percent of those identifying as middle class are more anxious to buy a car than a luxury watch.
In addition, the Chinese middle class seems drawn to modern technology, such as the Internet, smartphones or tablets.
Daily use of the Internet among the Chinese middle class is 34 percent higher than the general public, the survey said” (Jing 2013).
Interestingly, according to some commentaries, this purportedly flowering “middle class” experiences simultaneously some woes typical of its counterparts in the advanced capitalist countries, which stem from that ultra-fast economic growth which could not but create some grave social problems-above all, socio-economic disparities. But at least equally legitimate appears to be an interpretation pointing to the inherent over-inclusiveness and fuzziness of the term concerned.
A report on those socio-economic issues takes as its starting point the contention that “the income gap between the middle class and the grass-roots is usually the most apparent indicator to show society’s income distribution pattern. China’s expanding middle class has encountered unprecedented challenges after the 2008 financial crisis. How to ensure the well-being of this social class is the key factor that determines whether China can maintain stability”.
Now, it may well be that this widely shared view is misplaced,the reason being simply the key term employed is so ill-defined that it can be incorporate into a wide variety of claims on a range of processes and phenomena within the society concerned. Further parts of the text under consideration only add new evidence confirming our point.
“Right now, China’s middle class is having a hard time. They consider themselves under-privileged, and their resentment has become a major source of the complaints that dominate public debate”.
So far, so (relatively) consistent.
But the subsequent assertion outlines an altogether different crucial line of social divide than the contention mentioned above:
“Chinese society has been wary about the gap between the rich and the poor. Now the issue has drawn close attention from both the top leadership and the grass-roots. Measures from both the government and the market are taking effect”.
It turns out, however, that the rationale for the aformentioned dissatisfaction is not that clear-cut as one would be led to believe by some media commentaries. China’s National Bureau of Statistics announced the nation’s Gini coefficient of 2013, which is 0.473, slightly lower than that of 2012. The indicator has continued to decline since 2009, but remains high according to the measurement. It shows that the inequality of income distribution in China is still substantial.
The Gini coefficient has become the most popular indicator to measure Chinese economic and social development. The large gap in terms of income has been widely accepted, and how to narrow it is a major focus of China’s national strategy. While some people deny the authenticity of the latest data, saying it under-estimates the real income divergence, from a sociological point of view the most salient fact about this situation is that “having suspicions about China’s Gini coefficient will cause a bigger stir among the public than suspecting China’s GDP growth figure, because the former is more closely connected with social equality. Most ordinary people in China consider themselves to be the victims of inequality of income distribution instead of beneficiaries, [which stems from “Valuing equality the most”.
Clearly, the roots of this kind of value system are to be sought in the former, socialist regime rather than in the present-day rampant capitalism. And secondly, these are not values usually attributed to the so-called middle class; the label “ordinary people” in the case of China refers most of all to the peasantry.
In actuality, the gap between the rich and poor in China is being narrowed. Facts, such as the obvious rise of labor costs and the income increase of the grass-roots, are more convincing than the simplistic voices which advocate that the gap is enlarging.
As far as South-East Asia is concerned, it is Vietnam’s Middle Class that is apparently growing the Fastest. A recent survey conducted by the Boston Consulting Group (BCG) has found that the middle and affluent class (MAC) in Vietnam will greatly increase in size between now and 2020, from 12 million to 33 million.
In order to project the growth of consumers and their spending, BCG’s Center for Consumer and Customer Insight (CCCI) analyzed population and income trends in nearly 1,400 areas and surveyed 2,000 urban consumers in the country.
The Boston Consulting Group (BCG) reported that the middle and affluent class in Vietnam will double in size between 2014 and 2020 from 12 million to 33 million, adding that those consumers whose income is from VND15 million (US$714) or more a month are spreading out to other provinces and cities.
By 2020, with an average per capita income of $3,400 per year, the population of Vietnam’s middle and affluent class will be two-thirds the size of that in Thailand. Furthermore, average per capita income will rise from $1,400 to $3,400 a year.
According to Unilever Vietnam’s chairman, Marijn van Tiggelen, what really makes Vietnam a distinctive case is how quickly consumers are “leapfrogging” up the ladder. (Shira 2014)
From our standpoint, of interest is chiefly the term used in the final sentence, confirming our general point laying stress on the ladder-like nature of that particular analytical framework-it will be argued-the category of the middle class is part and parcel of. Otherwise, it is unknown to what extent the figures given above are simply a function of a particular definition of the group concerned applied in that case, which another study might like to frame differently. The same question mark applies to the following cases of other three rapidly developing countries “In 2012, Indonesia’s middle class numbered around 75 million people (out a total population of 240 million). Research firms the Boston Consulting Group (BCG) and McKinsey both expect that the country’s middle class will expand to between 130 and 140 million people by the period 2020-2030.
This expanding middle class is the result of robust economic growth in Southeast Asia’s largest economy. Although currently slowing, the country’s annual gross domestic product growth has reached an average of almost 6 percent since 2005.
Moreover, as domestic consumption accounts for around 55 percent of GDP growth, increased consumption by the middle class will safeguard continued economic growth” (Carrasco 2013).
The president of Philippines boasted, purportedly on the basis of a study which found that “by 2030 four out of five Filipinos would join the middle class” (BACASMAS 2013).
Just as in other cases, all such calculations hinge upon the definition of the category concerned. And since scholars have problems defining the elusive “class”, no wonder that this constitutes a knotty problem also for politicians. The government of another country in the region “is in the process of revamping its fuel subsidy mechanism and it wants to ensure that subsidies are more ‘targeted’ to the deserving group.
It is unclear what income bracket would entitle one to take advantage of the subsidised fuel but many people currently enjoying the blanket subsidy would be paying more than RM2.30 per litre for their fuel come June 2015.
The subsidy saving would be channeled to the lower income group in the form of cash aid or better known as Bantuan Rakyat 1 Malaysia (BR1M). In Budget 2015, it was announced that households earning less than RM3,000 per month would be entitled to a one-off BR1M payment of RM950.
“The government has not defined what middle class is but going by the BR1M definition, middle class could be anything in excess of RM4,000 per month to RM10,000 per month,” said Suhaimi Ilias, Group Chief Economist at Maybank Investment Bank Berhad.
The middle class category could be further separated to lower middle class and higher middle class.
[...] But the burning question is, what about the middle class? How are they going to face cost escalations i.e higher fuel prices? [...]
With more cuts in fuel subsidies which free up national cash flow, the Government can then consider other forms of targeted subsidies to those in need.
But the question that arises is what about the needs of the middle class? It is evident that a clear definition of the middle class is crucial to ensure that additional burden from cost escalation to a large segment of society can be avoided” (Singh 2014).
Finally, in Mexico “growing middle class population […] accounts for approx. 39% of the country’s total population.
About half a century ago, 80% of Mexicans were poor. In the past decade, the country’s middle class population has risen by 17%” (Report 2014). The acronym MINTS denoting a newly discovered group of emerging economies, among others includes two countries considered above: Mexico and Indonesia, whilst the third one is dealt with below. It is stated that:
millions of black South Africans have advanced into the middle-class category since apartheid ended in 1994.[…] Indeed, South Africa’s black middle classes have surpassed their white counterparts in number over the past eight years and are now seen as the driving force behind the country’s economic growth.
[…]
Although it is difficult to quantify their exact number, the Unilever Institute – a nonprofit organisation based at the University of Cape Town – recently estimated the black middle class had grown from just under 1.7 million in 2004 to 4.2 million in 2012.
Of the 8.3 million adults it classified as middle class that year, 51 per cent were black, compared with 34 per cent white, 9 per cent “coloured” and 6 per cent Indian. In 2004, the proportions for the two main groups were much different, with 52 per cent white and 32 per cent black.
The report, Four Million and Rising, said the black middle class was growing rapidly and collectively had 400 billion rand (€27.5 billion) to spend annually in an economy increasingly reliant on consumer spending for growth.
“The growing interest in understanding the black middle class in post-apartheid SA is a result of the socio-economic and political changes that resulted from the end of apartheid and the enactment of legislations to address past inequalities like affirmative action, and Broad Band Black Economic Empowerment.
With these changes SA saw for the first time an exponential growth in the black middle class from 1,7 million in 2004 to the current (2013) 4,2 million.
Although this change has been recorded as positive by many it has nevertheless been accompanied by “growing inequalities with South Africa’s gini coefficient, “increasing from 0.64 in 1995 to 0.72 in 2005” (Phadi,, Ceruti 2011).
These increasing levels of inequality have been more intra-racial and they illustrate a shift from the historical inter-racial inequalities known for apartheid SA. This should not however be read to mean that racial inequality has been completely eroded, but that growing numbers of black people are in the middle class with a few more in the upper class.
With an official unemployment rate of close to 25% and a reputation as one of the world’s most unequal societies, South Africa faces unique challenges” (Chriso 2014).
How research organisations define what qualifies a person to be a member of the African middle class varies dramatically from study to study, as well as in relation to the determinants used to measure an individual’s status.
But in the South African context, Unilever has said someone can be considered middle class if they meet three of the following four requirements: they own a car, have a third-level qualification, earn between €1,000 and €3,600 a month, or have their own business. (Corcoran 2014)
Notice that as distinct from the most common definition of the middle class, based on income, the above excerpt offers a multi-layered approach that includes also lifestyle, educational and what in our view constitutes real class characteristics.
By contrast, economist Justin Visagie describes the middle class as a household of four persons with a total income of between R5,600 and R40,000 per month after direct income tax, relying thus on the most common income criterion.
Visagie said in a research paper in 2013, that in South Africa, thinking about what it means to be middle class is complicated by the low average and median levels of incomes in the country and the very wide distribution of income.
According to BankservAfrica, the largest automated clearing house and payments system operator in the country, the average monthly take-home salary in SA in 2015 was R12,715.
Unilever Institute consultant Paul Egan said, toning down the optimism of the former assessment, that the country’s middle class is still very small – “70% of the population still live in households earning less than R6,000 a month” (Staff Writer 2016).
A Nigerian researcher cites, to be sure, a broader definition, underlining non-economic aspects, nevertheless the thrust of his argument hinges on a traditional approach in terms of income. Conventional in form, his findings are, however, rather unorthodox in content.
When it comes to the situation in some other Asiatic countries, it is interesting to note, e.g. that “Pakistan has continued to offer much greater upward economic and social mobility to its citizens than neighboring India over the last two decades.
Everything is first class for Mumbai’s top movie stars and business leaders. They live in luxury apartments, dine in world-class restaurants, and enjoy fine entertainment. Their families receive excellent educations and high-tech health care. For the rich, Mumbai is marvelous.
Yet Mumbai (formerly known as Bombay) also has huge, miserable slums. People living (here lack basic necessities, such as sufficient food, decent shelter, education, and basic health care. One third of Mumbai’s 18 million-plus people don’t even have clean drinking water.
And such facts do not constitute any anomaly as far as the nation at large is considered.
Conversely, “the contrast between rich and poor is repeated throughout India, as manifested in the extreme degree of concentration of the nation’s wealth whose one-fourth belongs to just 100 families. Between the extremes of the socio-economic spectrum, India’s middle class has roughly 330 million people — more than the total population of the United States. That group is growing thanks to, by and large, rapid economic growth. The government can take part of the credit. For example, relaxed licensing laws, low taxes, and few trade restrictions made it easier to do business in India than in other countries. Earlier reforms on food production, public education, and technology also helped. Nothing epitomises India’s economic success better than Bangalore businesses that offer round-the-clock computer support and other technical services to people around the world. These businesses take advantage of time differences and modern telecommunications. India’s manufacturing sector has also moved into high-tech areas, in addition to creating traditional products, such as textiles. And it is important to bear in mind that “India’s people provide the power for its economic growth. Indian universities produce millions of well-educated, English-speaking graduates each year. More than half the country’s 1.1 billion people are under 25. So the country should continue to have a huge skilled workforce.
Costs for India’s highly trained labor are lower than in many Western countries. That difference in costs attracts businesses and provides jobs for many people in India’s middle class. With earnings from such jobs, Indians can buy more cars, electronics, and other consumer goods. That stimulates further economic growth.
[...] Nevertheless. India’s economic boom has left behind millions of poor people. “We admit that poverty is still a problem,” says Chowdhury. The percentage of people below the poverty line has dropped from 55 percent in 1973-1974 to 22 percent in 2006. But,” as Chowdhury notes, that still leaves “more than 220 million people below the poverty line-People below the poverty line do not earn enough to buy a minimum amount of food” (Kowalski 2007).
Since 1990, Pakistan’s middle class had expanded by 36.5% and India’s by only 12.8%, according to an ADB report titled ‘Asia’s Emerging Middle Class: Past, Present And Future’” (Haq 2012). However, “In India, the current number of middle-class households stands at 50 million and is estimated to grow to 583 million by 2025 according to an article in “Business Week”. This will be around 41 per cent of the population, with the combined households’ income growing to around $1.1 billion” (Alshaali2013). This pronouncement is interesting from our standpoint insofar as it provides some information on the way the concept of the middle class is defined: “The study divides the middle-class into two groups.
They are the ‘Seekers’ who could be university graduates with annual incomes of $4,376 to $10,941. By US standards this falls below the poverty line, though it fully utilises India’s lower cost of living.
The second group are referred to as ‘Strivers’, who are the upper end of the middle-class spectrum and made up of categories such as government officials and annual incomes between $10,941 to $21,882” (Alshaali 2013). Note that apart from the well-known income criteria there has been introduced a new way of looking at the class in question-through the prism of occupations considered to be characteristic of that class, which point will be expanded on in the next chapter.
Before turning to the latter, however, it may be pointed out that other Estimates of the size of the middle class range from a low of 70 million (by Christian Meyer and Nancy Birdsall of the Centre of Global Development) to 153 million (by the National Council for Applied Economic Research), “and these definitions of the middle class are not about people above the poverty line of USD 1.25 a day. The Indian middle class- defined by Meyer and Birdsall as households that are ‘reasonably secure in material terms’ and earning in the range of USD 10-50 per head per day (Rs 600-3,000 at an exchange rate of Rs 60 to the US dollar) Whether one thinks they constitute 70 million or 153 million, they would be anywhere between 3-6 percent of the population” (JagannathanFirstpost 2013).
Still more recent figures reported by Media Business Asia suggest that the proportion of South and Southeast Asia’s population fitting Nielsen’s definition of middle class people with enough money to choose what they buy, equating to at least US$16 in daily disposable income – will roughly double between 2012 and 2020.
Some 210m people will have been added to the middle class consumer pool over this period, taking it to 400m and making it the majority across the region, as it will account for 55% of the total population, compared with just 28% in 2012.
The increase is even more dramatic in India, where the middle class is expected to grow 157%, from 210m to 540m. This increased affluence means that the middle classes will make up 39% of India’s population in 2020, up from 17% in 2012.
China has already taken major steps towards raising living standards and the 800m-strong middle class there will grow rather more slowly, at just 25%.
That still means a total of 1bn people will be classified as middle class by 2020.
Over all three regions, the middle classes will therefore grow 62% in the eight year period to a total of 1.94bn.
The picture elsewhere is not quite so bright, however, as food giant Nestlé recently made clear when announcing a 15% cut in its workforce across 21 African nations “We thought this would be the next Asia, but we have realised the middle class here in the region is extremely small and it is not really growing,” Cornel Krummenacher, chief executive for Nestlé’s equatorial Africa region, told the Financial Times.
And SABMiller, the world’s second largest brewer has just cut its growth forecasts for Latin America, relating a similar tale. Randy Ransom, svp/ marketing and innovation in Latin America, told investors that while the middle class had grown, it was “not to the degree that we would have liked, nor to the degree that we had forecasted a few years back”. Data sourced from Media Business Asia, Financial Time For comparison, in another country included in the BRICKS group, Russia, according to the World Bank, 60 percent of the population belonged to the middle class in 2010. [...]
People working in the private sector — particularly employees of globalized companies —in Russia’s middle class are a minority — an expert put the business-related middle class at 4.5 million and state-employed wealthy consumers at 14 million people. Russia’s total population stands at 143 million, of which 75 million people are economically active, according to official figures” (Eremenko 2014).
That the above figure is likely to be over-estimated, is evidenced by the next datum to the effect that “by the beginning of 2014, Russia’s middle class made up 42 percent of the population” (Gimpelson 2014), marking at that significant growth from earlier years.
However, there are problems with the inference from the above to the effect that “this growth suggests that Russia is catching up with its Western counterparts, the middle classes of which generally makes up between 50 and 60 percent of the population” (Gimpelson 2014).
The numbers of the category concerned in Western societies is one controversial issue, as this work has amply documented. But our main interest at this point is in the meaning of Russian data.
Consistent with the ffigures reported immediately earlier, the study concerned confirms the decline of entrepreneurs among Russia’s middle class. In 2013 alone, the number of individual entrepreneurs fell by 13 percent, leaving the estimated number of those engaged in entrepreneurial work at a mere 3.5 million people.
In the words of the principal investigator, “to many sectors of the economy were simply being swallowed up by the civil sector”.
“The civil sector we have is simply huge … and somehow or another, it is predominant in many social spheres: it has drowned the middle class. …”
Ogonyok was told by the latter scholar. The study, published by the academy of Sciences’ Sociology Institute, states that most people who comprise the category classified as “the middle class” are on the state’s payroll”.
Longer-term prospects may be more worrying for the state-employed segment of the middle class, with mass job cuts on the cards if the oil prices plummets, which is exactly what happened in 2014. The government has to cut expenditure, said Nikolai Kashcheyev, head of analysis at Promsvyazbank — ‘Some of these people are unproductive, lack experience and skills and may struggle finding good jobs outside the public sector’.
But state employees will remain the backbone of the Russian middle class for a long time, analysts said. And even if this or any other sector of the middle class shrinks, global trends still favor this social group, even as it becomes more complex and more widely differentiated by income” (Eremenko 2014).
This prediction only underscores the fact that the classification used above does not refer to any “middle classes” in the sense of the definite income strata, but to some socio-economic classes, as employees of the two respective sectors constitute exactly two different classes in the sense of their place in the structure of property relations, while the estate of state functionaries should, of course, be considered seprately.
The need to split the umbrella category in question is also corrorobated by some further data available. “According to the Economic Development Ministry, in 2013 the public sector accounted for 50 percent of the Russian economy and, according to the State Statistics Service, employed 25.7 percent of all economically active citizens, up from 24.6 percent in 2009. That is 19 million people[...] State officials at all levels are especially pleased by the fact that their salaries are two to three times higher than the national average, and they receive pay increases two to three times faster than other citizens.
And to make sure those rank-and-file state employers remain satisfied, Deputy Prime Minister Olga Golodets has promised that salaries for doctors, teachers, librarians and social workers will grow 1.4 to 1.5 times faster than the average.
Immediately after returning to the presidency in 2012, Vladimir Putin signed the “May decrees,” which strengthen support from his main social base by requiring annual salary increases for state employees. [...]
In 2013, salaries for doctors, teachers, college professors, scientists and social and cultural workers rose 10 percent in less than a year, surpassing 30,000 rubles ($880) per month for the first time.
Russian state-owned companies and corporations also offer significantly higher-than-average salaries. In fact, former Finance Minister Alexei Kudrin recently proposed a three-year salary freeze on all state corporations, including Gazprom, to reduce the burden that those monopolies place on the national economy” (Ryzhkov 2014).
The reader might be forgiven for being slightly bored by the refrain about low analytical value of the category featuring in the title of the book, but indeed it must be emphasised again that the key theses of the above argument are based on a misunderstanding. For instance, the author’s claim on the middle class as “the main social base” of President Putin is tangled in a petitio principii falllacy, since it hinges upon an earlier identification of the former with the estate of state officials to which the contention concerned in fact refers. Likewise, even the author himself, mentioning “monopolies” on the one hand, and the local governments (as employers of officials at a given level) admits that estates and classes should be considered separately.
The aformentioned malpractice returns with a vengeance in the concluding remarks in which the author tacitly equates the middle class with the state employees: “The nearly 20 million state employees are better off than the great majority of their fellow citizens and comprise the main beneficiaries of the current socio-political and socio-economic system.
According to research by ISRAS, the middle class is the most content segment of modern Russia’s population: 61 percent of its members, or 16 percent of the total population, enjoy their jobs. About 78 percent favor stability, and only 22 percent want change” (Ryzhkov 2014).
Finally, to round off the present chapter it is well to cite recent studies on developing countries in general and the large emerging economies in particular, which purportedly lead to the claim that “50% of their population had now reached a “middle class status” (Ravallion, 2009; Wilson and Dragesanu, 2008; Bhalla, 2002).
Let us examine a little closer what hides behind such numbers.
“There are two main ways to define a middle class: in relative terms, as the middle income range of each country; or in absolute terms, using a fixed band for all countries. An influential exponent of the first approach was Lester Thurow of the MIT’s Sloan School of Management, who took as his reference point the median income in America—where there is an equal number of people above and below the line—and defined the American middle class as the group with incomes lying between 75% and 125% of the median. Nancy Birdsall of the Centre for Global Development applied the same idea to developing countries. Bill Easterly of New York University selected those who were in the three middle quintiles of income (leaving out the poorest 20% and the richest 20%). The problem with this approach is that each country has a different median income, so the definition of what is middle class shifts from place to place.
An absolute definition avoids that problem. The question is what level to choose. In a paper in 2002, Branko Milanovic and Shlomo Yitzaki used the average incomes of Brazil and Italy as the respective floor and ceiling. That translates into roughly $12-50 a day per person, using household-survey data at 2000 purchasing-power parities (PPP).
On that definition, the middle-class population of emerging markets was about 250m in 2000 and 400m in 2005. The World Bank says it will be 1.2 billion by 2030. But despite that rapid growth, in 2005 this global middle class accounted for only 6% of the world’s population and in 2030 it will still make up only 15%”.
But there are many parties to the debate who would like the percentage to be higher. Therefore, they object to the above definition by pointing out that it excludes many people in China and India who are recognisably middle-class but earn less than $12 a day.
India’s National Council for Applied Economic Research found that between 1995 and 2005 the number of Indians earning $12-60 a day rose from 2% to only 5% of the country’s population, but the number of those earning $6-12 a day rose from 18% to 41%.
An unpublished paper by Martin Ravallion at the World Bank uses a range of $2 to $13 at 2005 PPP prices. Two dollars a day is a commonly accepted definition of the poverty line in developing countries; people above this line are middle-class in the sense that they have moved out of poverty. Thirteen dollars a day is the poverty line in America, so this category might be described as people who are middle-class by developing-country standards but not by American ones. It is the developing world’s own middle class” (Parker 2009).
Small wonder that such periodicals as “The Economist” praise the above-mentioned researcher, pointing out that “Ravallion’s range captures the staggering growth of the emerging-market middle class. Between 1990 and 2005 the total almost doubled, from 1.4 billion to 2.6 billion, rising from one-third of the developing world’s population to half. It also gives due weight to China, where the numbers living on $2-13 a day rose from 174m to a jaw-dropping 806m in just 15 years. In India the numbers rose from 147m to 264m, impressive in any other context. But Ravallion’s definition excludes people living on slightly above-average incomes in Brazil, who would generally be considered middle-class, too.
John Hewko of the Millennium Challenge Corporation, part of America’s aid-giving system, points out that there is no single best definition; it all depends on what you want it for. If you need to know whether America’s middle class is declining, for example, you use Mr Thurow’s relative approach. To find out how many people in emerging markets might be, or become, customers for Western brands-the global middle class—you need something like the Milanovic-Yitzaki range: this is what McKinsey and Goldman Sachs use.
And if you want to measure how many people in developing countries have moved out of poverty and into the middle class recently, the Ravallion/Banerjee-Duflo range is just the job.
So, provided “right criteria” are deployed, one arrives at the conclusion that as many as 50 per cent of the world’s Population are living on $2-13 a day (the U.S. poverty line), which can be dissected as follows:
Region - 1990 - 2005
East Asia and Pacific - 315.5 - 1,117.1
of which China - 173.7 - 806.0
Eastern Europe and Central Asia - 355.3 - 347.8
Latin America and Caribbean 276.7 - 362.1
Middle East and North Africa - 170.2 - 240.1
South - 192.7 - 380.2
of which India - 146.8 - 263.7
Sub-Saharan Africa - 117.7 - 197.1
Total - 1,428.1 - 2,644.3
Source: Martin Ravallion
It should be cautioned, however, that all claims about the necessity of relativisation as regards the definition of the middle class notwithstanding, the number given above is likely to be an over-estimation, as to set the lower limit of the middle class to start at US$2 per day (in purchasing power parity) seems to be a low base for what traditionally is considered middle class status.
As if taking notice of this shortcoming, some other definitions took a more modest approach. “Between 1980 and 2011, per capita income in the developing countries like Senegal, Vietnam and Tunisia on average grew 3.3 per cent each year, which is far faster than the 1.8 per cent growth seen in advanced economies, the report said.
Today, more than four in 10 workers in the such countries are considered to be in the so-called ‘developing middle class’ - meaning that they earn more than $4 a day -up from fewer than two in 10 two decades ago” (Oman Tribune 2014). The above approach even uses a special term in order to point out that in the case of the so-called previously Third World countries peculiar measures obtain. The report cannot be charged with over-optimism also because it at the same time does not hide that “more than half of all workers in the developing world - some 1.5 billion people - are in precarious positions, without contracts and social protections and often wallowing in poverty.
Around 839 million of them - a full third of all workers in such countries - earn less than $2.00 a day” (Oman Tribune 2014).
On the other hand, the optimistic news is that the above figure “is down from more than half of all workers in such countries in the early 2000s” (Oman Tribune 2014).
Returning to the previous example, that the share mentioned above is almost certainly a gross over-estimation is suggested by many data dispersed throughout the study, so at this point just one instance of a terminological misrepresentation connected with the social category under consideration will be cited.” outgoing President Sebastián Piñera’s term was marred by student protests, representing one of the first “middle-class revolutions” (2013). Now, it is a bad journalistic habit to dub pretty everything more serious than a single rally or another grassroots action as “revolution”. In the case of Chile, our concern however is above all with considering students as middle-class, again as purportedly self-evident truth, left out without any supporting theoretical argument. And the latter would be indeed indispensable if the above-mentioned claim is to possess any validity. In any case, from our theoretical perspective, students in only rare cases-as will be explained at more length below-can b classified as holding any class position in the real sense of the word.
A mixed case, i.e. overlapping partly the topic of the subsequent chapter is represented by the pronouncement to the effect that “it is now imperative that something is done for those stuck in the middle.
There has been a startling lack of help to date for those hardworking middle managers, supervisors and mid-ranking public servants paying income tax at 40 per cent. Aggressively lowering the threshold for paying tax at 40 per cent in order to drag in more people, as the coalition has done, is deplorable.
The Conservative Party in particular forgets about the middle classes at its peril. They are the backbone of the nation” (Express comment 2014 ).
What needs to be said about this statement is first and formost that the positions listed refer both to the economy (class) and the polity, i.e. an extra-economic structure (estate), which however are frequently interpreted in the literature (cf. a well-known EGP scheme) as occupational positions. Be that as it may, it by any means does follow that this specific segment of-in this case British-society-should constitute its backbone, as there may be many candidates for that title, depending on one’s ideological persuasion.
For such and related reasons, it is difficult not to remain sceptical regarding such revelations as that which predicts The total amount of people in the middle class of societies globally to rise to 4.2 billion by 2029.
The President and Chief Executive Officer, Wincor Nixdorf (a German-based firm that provides retail and retail banking hardware, software and services globally), revealed this […] at the opening ceremony of the firm’s 2014 exhibition tagged: “Wincor World,” in Rheda-Wiedenbruck, Germany.
No more credible is another datum provided by the firm, according to which the total number of middle class globally amounts currently to two billion (Rheda-Wiedenbruck 2014). The notion comes also in handy for the institution which may have a vital interest in seeing a bright outlook to the global labour force: “ TWO decades ago the extremely poor accounted for more than a third of all workers in developing countries, around 750m people. Today their numbers have halved. The fastest-growing group are those considered ‘middle class’: they now represent-according to the ILO report-40% of the labour force in poor countries. For the first time in history, over the next several years, most new jobs in the developing world are likely to be of sufficient quality to allow workers and their families to live above the equivalent of the poverty line in the United States’, states the ILO. Even so, the progress is not evenly spread. Most middle-class job growth occurs in Latin America, East Asia and central and southern Europe. Across south Asia and sub-Saharan Africa most growth is expected among the ‘near poor’—those at the fulcrum between middle class and poverty” (The Economist 2014). And even the organisation itself calls attention to some facts that may temper this optimism, such as Unemployment in developing countries that “still sits at an average of 8.5 percent, which figure, it is important to point out, excludes anyone not actively seeking employment, which would greatly increase the number of jobless individuals.
And finally, it is difficult to comprehend why the meta-union organisation should employ stratification categories rather than strict scientific concepts such as the value of labour power, which is much more informative than the notorious “middle class”.
On top of that, being part of the developing middle class doesn’t mean that workers will be rich or even rise above the U.S. poverty line: ILO predicts that a full 85 percent of the workforce in developing countries worldwide will still make wages below the U.S. poverty line as of 2018”.
Let us take a closer look at those commonly repeated statistics.
More than one in three Africans have entered the middle class in the past decade, and their numbers are set to swell thanks to rapid economic growth, a recent study showed.
At least 370 million Africans, or 34 percent of the continent’s 1.1 billion people, are now middle class, according to a survey by the African DevelopmentBank.
By 2060 the group should represent 42 percent of the population, according to the study launched in Johannesburg nearly 20 years ago.
The study, which defined the middle class as having a purchasing power parity of between $2.20 and $20 (15 euros) a day, found that the middle class is strongest in countries with a robust and growing private sector. North Africa leads the pack with at least 77 percent of its population counted among the middle class, surprisingly followed by the central African region with 36 percent of its people falling in that category- though many are considered to be vulnerable.
The southern African region, home to the continent’s most developed economy, South Africa, is in third place, level with west Africa with around 34 percent of their people classified as middle class.
East African countries are at the bottom of the ranking, having just a quarter of their nationals in the middle class” (Njanji 2014).
It is not altogether clear whether the next set of criteria listed by the ADB should be seen as an auxiliary or an alternative one: Consumption and ownership of items such as a television set, car and refrigerator, and the type of flooring in dwellings were among the yardsticks used to define the class. Other measurements included access to electricity, sources of drinking water and types of toilets.
Based on a survey of 37 African countries, the study polled nearly 800,000 households and concluded that most of the countries saw a rise in the size of the middle class over the past decade.
Ownership of cars and motorcycles has jumped by 81 percent in Ghana.
“Africa’s middle class has increased in size and purchasing power as strong economic growth over the past two decades has helped reduce poverty,” said the report titled ‘The Emerging Middle Class in Africa’.
But many in the new middle class struggle to save for the future amid the consumption boom. According to Johannesburg-based author and development activist Tsitsi Musasike, called attention to the so-called “middle class syndrome” of people who are “perpetually broke living from pay check to pay check”
The AfDB report also revealed that South Africa’s black middle class has surpassed the white middle class thanks to government’s affirmative policy to empower blacks who were discriminated under apartheid.
Even countries ranked among some of the poorest, such as Sierra Leone, do boast of a “small but growing” middle class composed of mainly the educated elite.
Nigeria’s middle class is growing especially alongside the expanding banking and telecommunications sectors, it said.
similarly, defining middle class as anyone living on more than $2 per day, the Asian Development Bank claims that the percentage of Asians in the middle class jumped from 31 percent to 82 percent over the past two decades” (Keating 2014). Finally, the aformentioned recent report by the International Labor Organization boasted that 40 percent of workers in the developing world are now middle class, meaning in this case that they live on $4 per day. This prompted the Economist to proclaim that ‘workers in poor countries have never had it so good’, which, again, is technically true though a bit misleading to readers used to a developed-world definition of middle class.
Not surprisingly, one can get a very different picture of the world depending on which definition of middle class one uses. A 2009 analysis by economist Martin Ravallion, then at the World Bank, now at Georgetown, found that between 1990 and 2002, 1.2 billion people in the developing world became middle class as defined by the $2-a-day threshold, while only 80 million, or 7 percent, became ‘Western middle class’, meaning they would not be considered poor by U.S. standards” (Keating 2014). Recall that the current U.S. poverty line is $11,490 per year for a single person.
To continue our above musings, it is not surprising that countries—and the multilateral bodies that represent them or take credit for helping them—are eager to use the most generous numbers. “’Developing countries that are growing fast take pride in that they’re getting richer and contributing more to growth at the global level’, Nancy Birdsall, president of the Center for Global Development, told Slate. “Part of the discussion for them is, ‘We also have now a middle class. We’re not just poor countries.
You’ve crossed the line when you no longer have to worry about falling back into poverty.
But the world, as a whole, is still a poor country. The standard way to identify the middle class is to find the number of people whose income is between 25 percent above and 25 percent below the median income. For the United States that gives you about 27 percent of the population. The rest of the population is either much richer or much poorer.
Looking at the world as one country, you find a statistical middle class of about 13 to 15 percent of the global population, a group living on between $4 and $6.50 per day.
‘The world, if it were a single entity, would have a middle class about the size of Guatemala’s or El Salvador’s, and their average income would be one-half of the U.S. poverty line’,” says Branko Milanovic, an expert on global inequality and senior scholar at the CUNY Graduate Center. That implies that the world is not really a middle-class society.”
Of course, you can stretch a dollar a lot further in some countries than others: Someone making $5 a day in Namibia is in relatively better economic shape than someone making the same amount in Belgium. Differences in purchasing power between countries and currencies make it difficult to come up with a common definition for what makes someone middle class.
Some have even argued we should ignore income entirely and look at purchases instead. Shimelse Ali and Uri Dadush of the Carnegie Endowment for International Peace say the ability to buy a car is the best indication of middle class-ness. (Using this method yields a much larger middle class than Milanovic’s preferred method—almost twice as large in the case of India.) Mexican pundits Luis de la Calle and Luis Rubio base their argument that Mexico has become a middle-class society on people’s access to technology such as cellphones” (Keating 2014).
Such approaches represent in fact escape hatches from the pitfalls of income-based definitions of the middle class. However, the factor of material living standards stubbornly lurks behind:
“Birdsall argues that a sense of economic security is what makes someone middle class: You’ve crossed the line when you no longer have to worry about falling back into poverty. She notes in a recent blog post that Mohamed Bouazizi, the Tunisian street vendor whose self-immolation set off the Arab Spring, lived on about $5 a day at the time, making him middle class according to a number of traditional definitions. While he was not living in what’s generally considered abject poverty, his situation was precarious enough that he was facing economic oblivion after the police confiscated his cart.
This sense of security may be possible to quantify. Having looked at household survey data for Latin America, Birdsall argues that a rough but more reasonable standard for that region would be $10 a day.
‘When you get to $2, you are still really poor’, she says. ‘You are not secure at $2 even in really poor countries. At least in Latin America, it’s only when you get per person something like $10 that you’re reasonably secure from being thrown back into poverty. Until you get to $10, you’re kind of bouncing around’.
Her research found that at $10, people had only about a 10 percent chance of falling below the poverty line within three to five years. At $5 a day, there’s a 40 percent chance.
Changing our standards to something close to this line would force us to adjust our expectations for global growth. ‘In the developing world, for the next 20 years, most people will still be below $10,” Birdsall says. ‘They won’t be middle class except in the mythology that $2 is middle class’” (Keating 2014).
And indeed, The Times of India has pointed out that going by Birdsall’s definition, India—one of the most-touted economic growth stories of the past 20 years, after all—has literally no middle class: “everyone at over $10 a day is in the top 5 percent of the country” (Keating 2014), which could be contrasted with the common references to “India’s vast middle class” (FpJ 2014).
It is owing to such ambiguous data and “leaping” methodologies that sweeping claims regarding the incidence of the middle class can be made: “ “For the first time, the number of people in the middle class surpasses those living in poverty,” says World Bank President Jim Yong Kim. ‘There is a class of nations in the middle that barely existed 50 years ago, and it includes more than half of the world’s population’, opines Bill Gates, who also predicts there will be almost no poor countries left in the world by 2035” (Keating 2014). And yet another assertion of that sort reads as follows: “the middle class has traditionally been the largest socio-economic class in most countries, and the most influential in all aspects” (Ylagan 2014). Obviously, the said grouping’s purported political clout can be explained by its ostensible size-what a [politician would dare to neglect the interests and desires of this numerous group? However, suffice it to take a closer look at the definitions of that supposed “ruling class”, and it becomes crystal clear that claims concerning its social and political standing are heavily exaggerated.
The size of the category concerned is scaled down under those definitions that adopt a more realistic approach, such as one also mentioned above; indeed, most studies agree that earning $10 a day is the minimum threshold to qualify for middle class status, “but there’s much more debate over where to set the upper limit. The Pew Research Center puts it at $20 a day, the World Bank often uses $50, and the Organization for Economic Cooperation and Development (OECD) sets it as high as $100” (Bremmer 2016). While this diversity points to the inherent ambiguity of the concept concerned, as argued throughout the book, a more favourable perspective would refer to the underlying regional differences in cost of living, although it is unlikely that the aformentioned definitional diversity emerged simply as reflecting the latter differences.
On the basis of the $10-50 bracket, the number of middle class people around the world rose to 1.4 billion in 2011, a 70 percent increase in just a decade. As noted, however, the situation in just one country has contributed to this outcome in an uncomparable degree. Between 2001 and 2011, 203 million Chinese broke through the $10 barrier to officially join the middle class ranks. Latin America has also pulled its weight, with 63 million people passing the $10 threshold. But not all regions of the world have benefited from globalization in an equal degree. Whilst Africa has seen some of the most substantial declines in poverty rates since 2001, the low incomes of those people in the vast majority of cases still do not qualify them as the middle class. (Bremmer 2016).
It is also important to bear in mind that a lot depends on what angle we are looking at the available data from.
“While the gap between some regions has markedly narrowed — namely, between Asia and the advanced economies of the West — huge gaps remain. Average global incomes, by country, have moved closer together over the last several decades, particularly on the strength of the growth of China and India. But overall equality across humanity, considered as individuals, has improved very little. (The Gini coefficient, a measurement of inequality, improved by just 1.4 points from 2002 to 2008.)
So while nations in Asia, the Middle East and Latin America, as a whole, might be catching up with the West, the poor everywhere are left behind, even in places like China where they’ve benefited somewhat from rising living standards.
From 1988 to 2008, Mr. Milanovic found, people in the world’s top 1 percent saw their incomes increase by 60 percent, while those in the bottom 5 percent had no change in their income. And while median incomes have greatly improved in recent decades, there are still enormous imbalances: 8 percent of humanity takes home 50 percent of global income; the top 1 percent alone takes home 15 percent. Income gains have been greatest among the global elite — financial and corporate executives in rich countries — and the great “emerging middle classes” of China, India, Indonesia and Brazil. Who lost out? Africans, some Latin Americans, and people in post-Communist Eastern Europe and the former Soviet Union, Milanovic found.
The United States provides a particularly grim example for the world. And because, in so many ways, America often “leads the world,” if others follow America’s example, it does not portend well for the future.
On the one hand, widening income and wealth inequality in America is part of a trend seen across the Western world. A 2011 study by the Organization for Economic Cooperation and Development found that income inequality first started to rise in the late ’70s and early ’80s in America and Britain (and also in Israel). The trend became more widespread starting in the late ’80s. Within the last decade, income inequality grew even in traditionally egalitarian countries like Germany, Sweden and Denmark. With a few exceptions — France, Japan, Spain — the top 10 percent of earners in most advanced economies raced ahead, while the bottom 10 percent fell further behind.
But the trend was not universal, or inevitable. Over these same years, countries like Chile, Mexico, Greece, Turkey and Hungary managed to reduce (in some cases very high) income inequality significantly, suggesting that inequality is a product of political and not merely macroeconomic forces. It is not true that inequality is an inevitable byproduct of globalization, the free movement of labor, capital, goods and services, and technological change that favors better-skilled and better-educated employees.
Of the advanced economies, America has some of the worst disparities in incomes and opportunities, with devastating macroeconomic consequences. The gross domestic product of the United States has more than quadrupled in the last 40 years and nearly doubled in the last 25, but as is now well known, the benefits have gone to the top — and increasingly to the very, very top” (Stiglitz 2013).
In 2012, the top 1 percent of Americans took home 22 percent of the nation’s income; the top 0.1 percent, 11 percent. Ninety-five percent of all income gains since 2009 have gone to the top 1 percent. Recently released census figures show that median income in America hasn’t budged in almost a quarter-century. The typical American man makes less than he did 45 years ago (after adjusting for inflation); men who graduated from high school but don’t have four-year college degrees make almost 40 percent less than they did four decades ago.
“American inequality began its upswing 30 years ago, along with tax decreases for the rich and the easing of regulations on the financial sector. That’s no coincidence. It has worsened as we have under-invested in our infrastructure, education and health care systems, and social safety nets. Rising inequality reinforces itself by corroding our political system and our democratic governance.
And Europe seems all too eager to follow America’s bad example. The embrace of austerity, from Britain to Germany, is leading to high unemployment, falling wages and increasing inequality. Officials like Angela Merkel and Mario Draghi, president of the European Central Bank, argue that Europe’s problems are a result of a bloated welfare spending. But that line of thinking has only taken Europe into recession (and even depression). That things may have bottomed out — that the recession may be “officially” over — is little comfort to the 27 million out of a job in the E.U. On both sides of the Atlantic, the austerity fanatics say, march on: these are the bitter pills that we need to take to achieve prosperity. But prosperity for whom?
Excessive financialization — which helps explain Britain’s dubious status as the second-most-unequal country, after the United States, among the world’s most advanced economies — also helps explain the soaring inequality. In many countries, weak corporate governance and eroding social cohesion have led to increasing gaps between the pay of chief executives and that of ordinary workers — not yet approaching the 500-to-1 level for America’s biggest companies (as estimated by the International Labor Organization) but still greater than pre-recession levels. (Japan, which has curbed executive pay, is a notable exception.) American innovations in rent-seeking — enriching oneself not by making the size of the economic pie bigger but by manipulating the system to seize a larger slice — have gone global.
Asymmetric globalization has also exerted its toll around the globe. Mobile capital has demanded that workers make wage concessions and governments make tax concessions. The result is a race to the bottom. Wages and working conditions are being threatened. Pioneering firms like Apple, whose work relies on advances in science and technology, many of them financed by government, have also shown great dexterity in avoiding taxes. They are willing to take, but not to give back.
Inequality and poverty among children are a special moral disgrace. They flout right-wing suggestions that poverty is a result of laziness and poor choices; children can’t choose their parents. In America, nearly one in four children lives in poverty; in Spain and Greece, about one in six; in Australia, Britain and Canada, more than one in 10. None of this is inevitable. Some countries have made the choice to create more equitable economies: South Korea, where a half-century ago just one in 10 people attained a college degree, today has one of the world’s highest university completion rates” (Stiglitz 2013).
Besides, many, if not most statistics ignore what could be dubbed the China effect, which has a an overwhelming influence on comparative income and other figures; the fact of the matter is, trends in China are the dominant factor in global inequality trends since the late 1980s, as, inter alia, a study by academics at the Center for Global Development in Washington (USA) found. As if in response to the aformentioned claims, the study proposes an alternative approach to measuring global inequality based on consumption patterns, which suggests that progress in reducing inequality has been slower than often depicted.
Key findings of the study are the following: A slow but steady rise in within-country inequality has in recent decades been largely offset by a gradual decline in between-country inequality. Since 2005 between-country inequality has been falling more quickly than before, and as a result total global inequality has also started to fall – quite quickly in the last few years.
But there is a pronounced ‘China effect’ in the statistics. In the last 20-30 years, falls in total global inequality and between-country inequality, as well as rises in global within-country inequality, are all predominantly attributable to rising prosperity in China.
Most of the ‘structural’ change in the distribution of global consumption is confined to the upper middle-income countries, notably China. If those countries are omitted from the calculations (which elimination of extreme cases is a standard methodological procedure in similar economic and sociological investigations), “the long-standing bipolar world of two highly differentiated clusters persists largely unchanged.
Out of extra global consumption of $10 trillion from 1990 to 2010, an estimated 15 per cent went to the richest 1 per cent of the global population.
At the other end of the distribution those under $2 a day in 1990 (53 per cent of the population at that time) collectively benefited from less than an eighth of the global consumption growth. And the 37 per cent of the world population on less than $1.25 a day in 1990 collectively benefited by little more than a twentieth of global growth” (Edward, Sumner 2013).
Conventional statistics may be misleading in yet another way; if overall economic progress is not to “leave the poorest behind”, then it must, in due course, raise the lower bound to the distribution of permanent consumption levels in society. “That lower bound can be called the consumption floor. A consumption floor today that is about half of the international poverty line of $1.25 a day. This is probably close to the consumption of essential foods for those living on around $1.25 a day. [...] while the counting approach shows huge progress for the poorest, the Rawlsian approach of focusing on the floor does not. The distribution of the gains among the poor has meant that the expected value of the consumption floor has risen very little over the last 30 years” (Ravaillon 2015).
At the other end of the spectrum, measures of global income inequality—adjusted for OF INEQUALITY top incomes which tend to be underreported in most household surveys—appear to be broadly stable since the early 1990s” (Dabla-Norris et al. 2015), thus nullifying the aformentioned “China and India effect”. The following single, but spectacular fact epitomises that world trend as perhaps no other one: “Today, 62 individuals have the same wealth as the poorest half the people on our planet” (Haroon 2015).
This kind of staggering facts has prompted Pope Francis’s recent condemnation referring to “the dark side of capitalism”, which predictably has caused some upset in business and financial circles.
Prominent US political commentator Keith Farrell responded by accusing Pope Francis of being overly influenced by Marxist ideas that “the rich have only gotten rich at the expense of the poor”, as if there were no evidence speaking to precisely this mechanism as standing behind such inseparable from capitalism inequities.
In his ideologically motivated counterattack, Farrell argues that “the inequality gap simply doesn’t matter”. He wrote that “capitalism has produced unrivalled economic growth” and is “chiefly responsible for halving of world poverty rates over the past 20 years”.
Sure enough, this is anything but a fair assessment, given that most of the recent global improvement in living standards is occurring in China, hardly a model capitalist country, whose leadership continues to insist that China should be regarded primarily as a socialist market economy (with Chinese characteristics). What the afomentioned Pope’s critic fails to ignore, too, is that the global financial system is fragile; and that globally two billion people still struggle in severe poverty.
Furthermore, Pope Francis acknowledges the progress already made to improve living standards in many countries, after all, but is at the same time urging that priority be given to lifting living standards for the rest of the world. He is stressing how extreme economic inequality is harming millions of people.
And it has to be acknowledged that Francis does not speak as an armchair philosopher, moralising from afar. “He personally experienced the devastation in Argentina when it defaulted on its debts in 2001-02, driving half the population into poverty and crippling the country economically. Banks failed and many people lost their life savings.
Even in Italy Francis sees the prolonged economic depression, with unemployment at over 12%, but youth unemployment at 40%. In Europe as a whole, 25 million (11.5%) are unemployed, including 5.3 million young people (10.2%), while in Greece and Spain over 25% are unemployed, with over 55% for youth” (Duncan 2014), and Europe, despite its distinctiveness, is surely as capitalist as America in terms of basic private property relations.
Recall also that Francis repeated his strong attack on such economic inequality during his recent visit to South Korea, where On the first day of his visit he urged Koreans to show “special concern for the poor, the vulnerable and those who have no voice”, and to be “leaders in the globalisation of solidarity”.
Francis’s charisma does not arm him with any magical bullet, which leads to some scepticism regarding the efficacy of both his and all others’ moral appeals.
CHAPTER 6. CLASS AND OCCUPATION
As hinted above, there is, further, a group of definitions that frame the middle class in occupational terms.
The first example could be discussed also within the previous chapter, to be sure, yet it appears here, as its author lays stress on an occupational aspect of Jesus’ social position. “Jesus was middle class, probably upper middle-class, on a level comparable to an accountant or an architect in today’s society. O’Reilly allows that Jesus probably worked in the Sepphoris building boom in its later years, yet thinks Jesus rarely ate fish or meat. If Jesus worked on-site building houses, he spent a lot of time around wealthy Greeks. He could afford to eat hearty, would dress suitably for a worker visiting an upscale community, and would maintain good relations in business with rich people” (Moseley 2013). Seldom one can come across musings this instrumental, clearly motivated by a recent Pope Francis’ attack on capitalism as leading to inequality and poverty, and secondly, marked by such a degree of ahistoricity- amongst other things, the author should consult biblical studies according to which the word”carpenter”stems from mistranslation; Jesus Christ should be in fact called a construction worker rather than simply carpenter.
This type of definition has quite a long tradition; in its modern usage, the term “middle class”, dates to the 1913 UK Registrar-General’s report, in which the statistician T.H.C. Stevenson identified the middle class as that falling between the upper class and the working class. Included as belonging to the middle class are professionals, managers, and senior civil servants. The chief defining characteristic of membership in the middle class is possession of significant human capital (MedLibrary 2013). In point of fact, there are several problems with this approach, though. The aformentioned enumeration of occupations purportedly making up the middle class includes in fact social groups that have rather little in common-civil servants constitute a typical social estate, while managers are a socio-economic (mega)class, and the so-called professionals encompass a number of classes and estates. And the purported common denominator in the form of human capital does not withstand theoretical scrutiny (Tittenbrun 2013a; 2013b; 2014), as it has been demonstrated to be a misnomer, referring in facct to labour power.
The two terms introduced above require clarification. Within the framework of socio-economic structuralism, alongside social cllasses proper there exist aggregated mega-classes-concepts capturing common characteristics of a number of those ground-floor classes. Thus, in the case of managers, one can divide this mega-class along horizontal and vertical lines. In the former instance, one can distinguish the class of industrial managers, one of commercial managers, financial managers, those employed in the service sector, and in transport-as a separate entity. Another type of horizontal division refers to the kind of ownership sector-private, public, communal, co-operative, to name but a few. In addition, vertically such classes as top and middle managers, etc. could be distinguished; the common denominator of all those categories-which permits us to aggregate them into a single concept-is the possession of a definite type of labour power, which makes it possible for its bearers to perform managerial work. Mutatis mutandis, cognate divisions exist with reference to capitalist, employee and other classes.
Turning to the second category mentioned above, the term “Soziale Stünde,” used by both Marx and Weber, is, as a rule, mistranslated into English as “status groups,” or even “status classes.” Meanwhile, the term has an altogether different connotation, and its association with feudalism or the old epoch of the Middle Ages is, rather than a drawback, the merit of the concept, as it allows us to pinpoint such contemporary social groups that bear similarity to their conceptual forebears in important respects. Social estates may be conceived of as based on the relations of non-economic property, as opposed to the relations of economic ownership the socio-economic classes are grounded in.
Thus, non-economic property is manifested in various aspects of the social situation of military officers, clergymen, police officers, lawyers, judges, professional politicians etc. Namely and more specifically, the relations of non-economic property appear as definite material and immaterial goods enjoyed by the representatives of particular estates. As will be seen, in plain language our key concept has much in common with such phrases as privileges, perks, special advantages etc. In order better to comprehend the content of the term “non-economic ownership” a list of respective relations is presented below:
(1) Appropriation, on a monopolistic basis, of certain lucrative positions in the social division of labour, and thereby the benefits tied to them. The monopoly in question is most frequently secured by the regulation of supply of prospective candidates to privileged occupations. A case in point is a variety of professional associations or corporations, acting, as a rule, to bring down or limit the inflow of new lawyers, or physicians, to mention but a few. These professional associations play, in fact, a role of old-time guilds, just as their historical antecedents influence, too, professional practice of their members, including its moral side.
A case in point is the early 20th-century extinction of half of the medical schools in the United States, as it resulted from actions intended to serve estate interests by achieving social closure. Analyses reveal closure intentions in the school ratings assigned by the American Medical Association, according to the 1910 Carnegie-sponsored Flexner report-with predictable effects. Medicine, viewed by many sociologists as a paradigmatic profession (Wilensky 1964; Abbott 1988), paid no better than skilled manual labor in the United States during the latter years of the 19th century (Markowitz and Rosner 1973). Over the first decades of the 20th century, however, physicians’ relative income rose to where it stands today— more than four times that of the average worker (Friedman and Kuznets 1945; England 2007). From another angle, physicians in the United States even now earn approximately twice the income of peers in other advanced economies (Angrisano et al. 2007). A study analyzes previously unexploited data to identify the causes of what Brown (1979) characterized as the “most effective tool” in medicine’s collective mobility process: a precipitous drop in the number of medical schools operating in the United States, from 161 in 1900 to just 74 in 1920. The resulting 40% reduction in graduates, over a period in which the U.S. population increased by approximately the same percentage, initiated a systemic constriction in the supply of medical practitioners, currently reflected in a dependence on graduates of medical schools outside of the United States to fill nearly one in four residencies (National Resident Matching Program 2009). Among other researchers, Light (2004) concluded that the aforementioned decline had been the result of a “systematic campaign” by the AMA intended “to reduce physician supply”. Likewise, Larson (1977) attributed the elimination of schools to actions of the American Medical Association, especially its 1906 school inspections and subsequent ratings of schools Other mechanisms employed in that estate action included the state licensing boards’ exams, as suggested by Weber’s contention, written contemporaneously, that such tests served as a closure strategy intended “to limit the supply of candidates for these positions and to monopolize them for the holders of educational patents” ([1922] 1978:1000). The AMA appears to have used these exams as a tool for reducing the number of, not only holders, but also dispensers, of educational patents. What also applies to the developments concerned is Weber’s observation that a common component of a profession’s closure strategy is the establishment of regulated curricula ([1922] 1978). Evidence supporting closure was found in given researchers’ analyses of the AMA’s ratings, which reflected clear biases favouring all-male and high tuition schools, and against black schools and those in states producing physicians at high rates. The ratings also appeared to reflect an inten¬tion to achieve occupational closure through alliances with other parties. Our analyses revealed that the AMA favored the traditional sectarians—former competitors, who had joined them to combat upstart medical sects” (Weiss, Miller 2010).
And, to come back to the starting point of this argument, Larson (1977) observed that the aformentioned measures were the cause of the dramatic improvement in the average physician’s income as well.
This possession in the case of many professions takes an even hereditary form. “For almost two years leading up to the November 2000 elections, expectations focused on Vice President Albert Gore Jr. and Texas Governor George W. Bush.
Both were the sons of important political families. Their rivalry sparked an immediate interest in the ‘return of political dynasties’.
Gore, an able and hardworking politician, was described as a child of privilege whose public career had begun literally at birth, when his father persuaded the local paper to carry the news on its front page.
After twenty-four years of government service Gore had compiled an impressive record. Bush, too, was a talented politician, a two-term governor who had smoothly assumed control of his father’s political network. Yet he suffered even more from the “silver-spoon” label. Following closely in his father’s footsteps without equaling his accomplishments, Bush seemed derivative, uncertain: a bad copy of his father. For many, he was aptly described by a comment aimed at the senior Bush in 1988 by the Texas commissioner of agriculture, Jim Hightower, now a radio personality: ‘He is a man who was born on third base and thinks he hit a triple’.
Many people were offended by the idea that the presidency could be claimed as a birthright, as though it were family property” (Bello 2003).
What these and many other estate positions often give is:
(2) Special social connections, which are transferable into economic advantages.
In this context it is pertinent to draw attention to a study, according to which “a lawyer with the right connections—conceptualized in terms of communication networks with colleagues— benefits from better quality work-related information that ultimately translates into higher economic attainment. In addition, a lawyer also benefits from the endorsement by high-status network partners given that a lawyer’s exact performance quality is highly uncertain, even unknowable, from the viewpoint of prospective clients. In other words, the prestige of one’s network alters serves as a market signal to help reduce the infor¬mation asymmetry confronting prospective buyers. In this way, the process of status transfer by affiliation with prominent others enhances the focal actors’ (lawyers’) repu¬tation that, in turn, increases their earnings” (Kim 2013).
(3) Access to insider, privileged information. This refers, among others, to the police. Their occupational position gives them a higher salary, social benefits, and some other advantages, which are named below but, frankly speaking, often the chief appeal of the occupation lies in the fact that it creates many opportunities of extra earnings. These, in turn, are linked to the ability to take advantage of the spy ring and information they collect. This information has often very high monetary value, and can be sold to, for example, private detectives, parents of lost children, journalists, owners of vehicles that have been stolen from them by professional thieves, acting, as a rule, on behalf of car dealers, mechanics or smugglers with whom the police often co-operate, as they do with other criminals.
(4) The ability to enter into short-term relations of lumpenproperty. This applies in particular to bribes received in many countries, notably those of immature capitalism by police officers, and bribes and kickbacks obtained by government officials.
(5) Appropriation of advantages listed under the previous two items can be facilitated and strengthened by the use of exclusive professional languages, jargons or codes. Among the social estates there are a lot of examples of the use of language or speech in order to create appearances of high knowledge seemingly enjoyed by this or that member of the social estate, whereas put in the plain language it would in all likelihood turn out to be quite comprehensible for the laymen, but it is precisely their ignorance that is the point.
(6) Privileged access to various consumer goods, new auto models and brands tried by journalists, mobile telephones and notebooks or tablets given to the journalists and politicians, special policy offers submitted by insurance companies. Below the reader can find a couple of concrete examples illustrating both the present item and the subsequent one. “Couturier Fred Hayman, ex-owner of Giorgio Beverly Hills, has paid house calls to stars like Jay Leno and Pat and Vanna to dress them for their T.V. shows. Adrian Khashoggi and Imelda Marcos, as holders of the 1984 dud-venture American Express Black Card, were entitled to private after-hours shopping at posh stores like Neiman Marcus.
[...] artists would not be seen dead in the same experiences and settings as their audiences; members of Congress avoid their constituents in anything but the most formal settings. House Speaker Tom Foley pays Jhoon Rhee Tae Kwon Do to send grandmaster Jhoon Rhee himself for regular lessons in the House gym. Music industry lawyer Alan Grubman gets his shoes shined while he sits at his desk. Lobbyists from Burson Marsteller hire messengers at $36 an hour to wait in line for seats at congressional hearings. John Malkovich and Branford Marsalis have their feet massaged by an office-caller at $38 a half hour. Salomon Brothers partners have their own barber on their corridor. Dan Quayle would leave his office to get his hair cut at the Senate barber shop, but he took a dozen Secret Service men with him and emptied out the salon. While at Vanity Fair, Tina Brown got her sensible coif done at home several times a week by a stylist from the pricey Upper East Side salon Ayervais. The important thing is not simply ease and comfort — but distance, distance, distance, from the people with whom ordinary citizens are forced to live their lives.
Simple, common experiences, such as reading a newspaper or seeing a play, are turned into singular privileges. John Reed, the chairman of Citibank, actually employs someone to read the newspaper for him and deliver a brief synopsis (washing the newsprint off your hands is such a hassle). And to keep smartly abreast of the theatrical scene, Alec Baldwin sends his personal assistant to view shows for him (in Los Angeles and New York), requiring a detailed synopsis and critique upon return. Important journalists employ research assistants who relieve them of the painful chore of actually reporting their own stories and columns themselves. They are then left with the Olympian task of “news analysis.” But they are also robbed of the sudden insight or lead that the hassle of practicing journalism might provide them.
Does anyone employ an assistant to think for him? To breathe for him? To cut his own food? Some come close. When being interviewed by Rolling Stone in 1990, thirtysomething heartthrob crooner Daryl Hall stared longingly at a pitcher of water on the table in front of him, until an assistant manager who’d entered the room happened to notice and quickly poured him a glass. Carrie Latt Wiatt, a Hollywood dietician who tells people what to eat and sends them ready-made food, told Vanity Fair that she no longer had John Landis’s business because his meatloaf wasn’t pre-cut. Michael Jackson apparently fed himself but travelled with a personal cook. At a 1990 black-lie gala for Tommy Mattola on the Columbia Pictures lot, Jackson (arriving with several bodyguards and staying for less than one hour) was prepared a special meal by his mystic Sufi chef, who appeared at the table much to the surprise of the other guests — including Mattola, Jay Leno, Gloria Estefan and Sony-USA CEO Mickey Schulhof — who made do with the house fare.
Oh, to be David Geffen, and not have to pack one’s belongings, or even concern oneself with luggage, flying from Los Angeles to New York with no bags and merely arranging through an assistant for a new wardrobe to be bought and delivered upon your arrival. White House staffers are powerful enough to travel on Air Force I or II need not put up with checkins, baggage claims or even red lights once they’ve rolled into town; presidential cavalcades roar right through.
Even more prestigious are those privileges that, like Tyson’s instant passport, allow for more than mere comfort or luxury and actually put one above the law.
It’s easy to slip out of jury duty with a crafty enough excuse, but one would assume that even the mighty have to go downtown to get a driver’s license.Well, maybe not. Katherine Graham used to send a Washington Post police reporter to renew her license. Hollywood mogul Robert Evans boasts that he’s still got enough clout to renew his by merely sending his chauffeur down to the DMV, without taking the driving or eye test. (Some cities are more perk-accommodating than others. No one in Beverly Hills has to stand in line at the DMV, which allows you to make an appointment for your test.) Recently Representative Phil Crane and his daughters raised such a ruckus at Washington’s Zei nightclub that a bouncer told the Post, “If he wasn’t a congressman, I’d have had them arrested.”
When the voters go into one of their periodic fits about corruption in Washington, they might occasionally focus on the subtler byways of corruption found in hassle-free living rather than the big conflicts of interest. There’s nothing more distancing for a politician than to be divorced from the mundanities of the lives of his constituents. (Ron Brown didn’t pay his help’s Social Security, not because he couldn’t afford it, but because he couldn’t be bothered.)
And it’s instructive, perhaps, that the most egregious examples of hassle-avoidance are invariably found in the lives of those who don’t have to give a fig about public accountability. Some even buy out of the hassle of decision-making, What to eat at Café des Artistes? According to James B. Stewart’s Den of Thieves, Ivan Boesky used to order eight entrees on the menu, taste them all and then decide. Saudi Prince Bandar bin Sultan, that staunch democrat, was vacationing in Aspen recently and purchased one of every item in stock at the local Banana Republic.
But even that effort of civic decision-making was too much of a strain. He wasn’t even in the store. He’d sent an assistant” (Konigsberg 2011).
(7) Special, often exclusive participation in various cultural or sporting events.
(8) The right to live in official, often luxurious apartments.
(9) The ability to take advantage of special recreational centres and facilities.
(10) An access to special, exclusive medical services of high standard.
(11) The ability to a shorter occupational expenditure of own labour power, be it in the form of longer holidays, or earlier retirement.
Items 8 to 11 express, in fact, a positively privileged capacity for reproduction and renewal of one’s own labour power.
(12) The ability to take advantage of various reliefs and reductions, e.g. in transportation and communication, such as lower internet or cell telephone charges.
(13) Distinctive attire available to given social estates: police officers, firemen and customs officials’ uniforms, professorial togas, gowns of clergymen.
(14) The right to hold definite official titles which refer to professorships, police officers, military officers, lawyers or doctors.
(15) The right to exercise power and control over the behaviour of other people. This applies, naturally, not only to the police, but also to, for example, the confessor who, within the mechanism of expiation is able to mete out punishments to the believers.
(16) The right to command special esteem or respect, which pertains to military officers, court judges, teachers and the academia. It follows that social respect is here understood as necessarily manifested in concrete behaviours.
(17) Diplomatic immunity which may take the form of an agreement between sovereign governments to exclude diplomats from local laws, immunity from prosecution (international law), exclusion of governments or their officials from prosecution under international law, judicial immunity, i.e. immunity of a judge or magistrate in the course of their official duties, parliamentary immunity or immunity granted to elected officials during their tenure and in the course of their duties, qualified immunity in the United States, immunity of individuals performing tasks as part of the government’s actions, sovereign immunity, the prevention of lawsuits or prosecution against rulers or governments without their given consent.
(18) Copyright or intellectual property relations (scholars, columnists, etc).
Particular social estates are characterised by peculiar configurations of the non-economic- property relations listed above. It could be argued, therefore, that the notion in question is theoretically grounded, which more often than not is missing in those conceptions that could be regarded as alternative to our estate approach inasmuch as they overlap with the latter in terms of their subjects. Thus, for instance, two Australian social scientists define their basic concept of political class as “The group of professional politicians” or “those who have gained election to national office in the federal
Parliament, or election to one of the six state or two territory assemblies. While this definition covers a large number of people—just over 800, at the present time”—in practice their account focuses on the group of national representatives, who currently number 224” (Borcherd, Zeiss 2003:27). It can be only surmised that the noun “class” has been picked up by the authors as a springboard to its reputedly higher scientific status.Alas, this can only be attained by means of solid analytical work rather than simple labelling; and the truth is, the former is missing in their descriptive, empiristic approach.
Having clarified the research tool by which to draw a map of social differentiation in the non-economic domain, we can also return to our “occupational“ thread mentioned above. From this standpoint, Marshall’s definition stands out insofar as he uses the term “middle stratum” in relation to what the mainstream opinion couches as the middle class, pointing to-stressed repeatedly in the book-the over-inclusiveness of the term:
“The middle stratum of industrial societies has expanded so much in the last hundred years that any category which embraces both company directors and their secretaries must be considered somewhat inadequate.
In popular perception, all white-collar work is middle class, but sociologically it is necessary to sub-divide this class into distinct groups sharing similar market, work, and status situations. For example, John H. Goldthorpe (Social Mobility and Class Structure in Modern Britain, 1980) distinguishes the service class of senior managers and professionals; the junior or subaltern service class of lower professionals such as teachers, junior managers, and administrators; routine non-manual workers such as clerks and secretaries; and owners of small businesses (the traditional petit-bourgeoisie). Conventionally, the service class is referred to as the upper-middle class; the junior service class as the middle class proper; and the others as the lower-middle class. Thus defined, in Britain the upper-middle class comprises some 10 per cent of the population; the middle class accounts for around 20 per cent; and the lower-middle class takes in a further 20 per cent. Taken together, therefore, the middle class is the largest single class in the overall structure.
However, some sociologists (especially those of a Marxist persuasion) would not accept that most routine white-collar workers were middle class, on the grounds that their employment situation is generally equivalent (or even inferior) to that of many working-class people. They prefer to call this group the new working class.
This is not a view which most white-collar workers themselves share, nor one which is substantiated by sociological evidence. Equally, the term ‘middle class’ is now often used by journalists and politicians to refer to what might better be called the ‘middle mass’ of those earning somewhere close to average incomes. Evidence from Gordon Marshall et al.’s national study of Social Class in Modern Britain (1984) shows that ordinary people are somewhat more discriminating.
For example, 35 per cent of the sample defined the middle-class as professionals; 11 per cent mentioned managers; only 7 per cent talked of the middle class as being all white-collar workers.
As with the term upper class, distinctions can be made between the “old” and “new” middle class. The former generally refers to the petite bourgeoisie and independent professionals (whose existence as distinct groups pre-dates the twentieth-century expansion of the class as a whole), while the latter refers to all other elements of the middle class: that is, salaried professionals, administrators and officials, senior managers, and higher-grade technicians who together form the service class, and routine non-manual employees, supervisors, and lower-grade technicians who form a more marginal middle class (or, in Marxist terms, a new working class)” (Marshall 1988).
However, our praise does not include some other aspects of Marshall’s exposition, such as the allegedly Marxist term of new working class, as well as Goldthorpe’s, whose distinction of two distinct “classes” as composing the middle class is no big deal from our perspective, which, it is believed, offers much superior and precise tools of class determination. In addition, it is unknown why the composite concept of middle class should include what Marshall names the petty bourgeoisie, but apparently exclude small capitalists, whereas, as is discussed in ch. 7, the term “middle class” is commonly being tied to that of the bourgeoisie.
Another heterogenous definition whose analysis is pertinent at this point is the following one: “The middle class may be said to include the middle and upper levels of clerical workers, those engaged in technical and professional occupations, supervisors and managers, and such self-employed workers as small-scale shopkeepers, businessmen, and farmers.
At the top—wealthy professionals or managers in large corporations—the middle class merges into the upper class” (Encyclopeedia Britannica 2013).
This is in fact a hopeless hodgepodge, encompassing a veriety of socio-economic classes whose ownership foundation may be very different from case to case (e.g. owing to certain peculiarities of their principal property, farmers constitute a distinct class compared to small business owners, be they industrial, commercial or service.
One of the concepts employed in the aformentioned definition is picked up by the subsequent middle-class scholar: “The middle class, according to THC Stevenson (1913), is a class between the poor working class and the upper class. It comprises professionals — academics, managers, lawyers, doctors and senior civil servants” (Chinodya 2013).
In a leading British periodical a journalist tells about his trials and tribulations, implicitly defining the middle class along the way: “…middle-class rules of decorum forbid this. Instead, I say: “You really love cooking shows, don’t you?” hoping she will get the implied subtext. She doesn’t. I seethe inwardly.
The broader problem for many young professionals is simple: squeezed by static incomes and crippling rent rises, having one’s own flat in a big city is out of reach” (Jacques 2013). The trouble is, the term “professionals”, equated here with that of the middle class suffers from over-inclusiveness-it may refer, as will be illuminated below, not only to a number of socio-economic classes, but also to a series of social estates.
No wonder that it is stated that “The middle class has splintered, with ‘uber-middles’ (mostly doctors and bankers who rank in the top five per cent of earners) surging ahead, their incomes rising faster than those of formerly well-paid professionals such as engineers, scientists, accountants and architects. The Financial Times has dubbed the later sub group the ‘cling-ons’ – middle class but only just, with vast numbers struggling to maintain a normal standard of life. Their incomes have fallen in real terms by 8.7 per cent (whereas the poorest ten per cent of families have seen their incomes drop by just 2.4 per cent)” (Milliard 2014). Evidently, the remedy does not lie in a simple multiplication of income divisions inside the category under consideration, as this procedure does not affect the very criterion by which to construct the categories in question. This can happen only with superseding the aformentioned stratification perspective with class theory under which given individuals’ socio-economic status can be determined with a degree of analytical rigour supposed to be present only in the hard sciences.
This, however, does not necessarily detract from the factual validity of the story being told: “artists, photographers, writers, we were all OK – I am still working but I can see the abyss.’
[...] We meet Suzy, who runs a book festival, and Anna, who works at a local literacy development organisation. They are, as they put it, all ‘skint’.
‘When we go out, we usually have to decide between the cinema and a restaurant,’ says Suzy cheerfully. ‘Never both.’ [...]
‘The whole point is to buoy each other up.’ So they have each other round for home-cooked meals, or meet to discuss books borrowed from the library. This situation isn’t going to go away fast, this much they know.
‘We are in it for the long haul,’ announces Anna. ‘All those benefits we used to enjoy are not going to be reinstated. Child benefits, university grants, cheaper petrol…’ Everyone laughs. Nobody is saying that they are impoverished, that they can’t afford to put food on the table, but there is nothing to spare.
Last year, the Ipsos Mori Social Research Institute (SRI) put out some questions of its own in a survey called Understanding Families in an Age of Austerity.
Researchers worked closely with 11 families across the country, all of whom were in the low- to middle-income bracket. They visited them often with the aim of illustrating the delicate balancing act necessary to sustain household budgets and keep family life on track in austerity. The research [...] found out about the four Cs, for a start. These are the things we are finding tough to cope with in the recession: car, childcare, cost of living and credit. The four Cs are particularly difficult as they reduce financial resilience and the ability to deal with the unexpected. [...]
‘Even in the case of our well-off families, we were struck by the fragility of people in the recession,’ says SRI researcher Chris Perry. ‘They are only ever two financial shocks away from external borrowing. It’s the big things that happen, such as the arrival of an unexpected tax bill or the breakdown of the car, that can plunge them into debt,’ agrees research director Suzanne Hall. ‘Their day-to-day existence is so precarious that they have no space to think.
Something they are probably thinking about a lot, however, is their mortgage, which for many is interest only. Lots of middle-class families simply can’t afford to buy a home in places such as London, Cambridge or St Albans, for example, and so are being pushed into cheaper areas, but they still have enormous loans that they are simply not paying off. And many won’t have the capital to pay off their loans at the end of the term and will be relying on cashing in their equity. Everyone will then start selling their houses, which will cause a crash in prices.
The Financial Conduct Authority estimates that nearly four million homeowners could be facing an armageddon similar to the collapse of endowments 20 years ago. Plus, because of these worries, most interest-only deals have disappeared – meaning that when the interest-only sector of the market comes to remortgage, their household budgets will be unable to make the repayments.
What Suzanne Hall and her team also noticed is that families don’t have a financial buffer for disaster. People simply don’t have any savings. This seems to be a constant. [...] Benefit changes (including loss of family tax credits and also the arrival of university fees), the steep rise in the cost of living and, of course, unemployment are the things that have affected the famously unshakable confidence of the middle class. (Milliard 2014)
Its members “were anxious, worried about the future, unsure how they were going to cope, particularly if the dreaded interest rate goes up” (Milliard 2014)
To add insult to injury, the term in question is marked with the same flaws as other middle-class concepts discussed above. The following comment reveals its ambiguity: “The professions have been captured by the privileged class (which is not the same as the middle class” (Wilson 2013).
There are some parallels between the notion discussed above and the term used in the following pronouncement: “figures released by the Government’s Health and Social Care Information Centre reveal alcohol-related admissions for so-called ‘white collar workers‘ has doubled in the last decade.
The increase is much lower among young adults, indicating that liver disease and alcoholism are much bigger problems among middle class baby boomers than previously thought” (Hay 2014).
“Over time, as office employment expanded, the social prestige and material advantage conferred by the white collar declined. At the bottom of large bureaucracies, routinized jobs began to approximate assembly-line employment. The wage gap between average white-collar and blue-collar employees shrank. Of course, the better-trained professionals and managers earned salaries well above blue-collar wages. But the line between blue collar and white collar was no longer the critical boundary in the class system, clearly separating working class and middle class” (Gilbert 2011). To simplify, if a pay hike may be sufficient either to erase or institute class barriers then the theoretical status of such class concepts cannot but appear suspect., The conceptual property identified above also shows up in another contexts, such as: “As the Thai protests continue, these too are labelled middle class: office workers staging flashmobs in their neat, pressed shirts” (Mason 2014).
This usage of the concept concerned makes it clear that it is far too under-specified to qualify as part of any scientific theory of societal differentiation, let alone class theory-as its peculiarities will become apparent later in the work. Suffice it to say that from the perspective of socio-economic structuralism adopted in the present study, the constitutive characteristic of the working class is not simply wages but ownership of their (material and abstract) labour power. In addition, the category “office employees” may refer both to, say, bank clerks and civil servants, which terms denote, respectively, a class and an estate.
Squeezing what actually is a social estate into the middle-class straightjacket can lead to paradoxical results, as the story below shows. “Justin Barringer, a seminary graduate, [...] despite applying to nearly a hundred jobs over the course of two years, [...] could not secure a full-time, salaried church position.
[...] So he splits his time among three jobs, working as a freelance editor, an employee at a nonprofit for the homeless, and a part-time assistant pastor at a United Methodist Church.[...] Barringer’s story is becoming increasingly typical as Protestant churches nationwide cut back on full-time, salaried positions. Consequently, many new pastors either ask friends and family for donations (a time-honored clerical tradition) or take on other jobs. Working two jobs has become so common for clergy members, in fact, that churches and seminaries have a euphemistic term for it: bi-vocational ministry.
Working multiple jobs is nothing new to pastors of small, rural congregations. But many of those pastors never went to seminary and never expected to have a full-time ministerial job in the first place. What’s new is the across-the-board increase in bi-vocational ministry in Protestant denominations both large and small, which has effectively shut down one pathway to a stable—if humble—middle-class career.
For example, the Episcopal Church has reported that the retirement rate of its clergy exceeds the ordination rate by 43 percent. And last year, an article from an official publication of the Presbyterian Church wondered if full-time pastors are becoming an “endangered species.”
This trend prompted the Religion News Service to report that, in the future, clergy should expect to earn their livings from “secular” jobs. Pastors who don’t want to go that route might have to ask friends and relatives for money, or perhaps serve more than one congregation.
“There is certainly a growing trend towards bi-vocational ministry in both mainline and evangelical churches,” says Kurt Fredrickson, a professor of pastoral ministry at Fuller Theological Seminary in Pasadena, California.
[...] Those lucky enough to get a full-time job as a pastor will join a profession whose median wage is $43,800, according to the U.S. Department of Labor” (Wheeler 2014).
Meanwhile, in actual fact the trend reported above goes in the reverse direction-the clergy as such are a social estate rather than a social class, but the fact that in the new circumstances some of them may engage in a gainful work, on their own account means precisely that they turn into members of the autocephalous class, and it is to be recalled that the latter, commonly called the petty bourgeoisie is usually considered as one of the mainstays of the middle class.
How the concept under investigation is murky may be seen from the following pronouncement, clearly excluding from the ranks of the middle class large chunks of managerial and professional groups that above, conversely, have been included into the former: “A startling number of middle-class jobs may be headed toward extinction.
More than any other job class, mid-level positions have struggled to recover from the recession, and only a quarter of jobs created in the past three years are categorized as mid-wage. There are high-skilled professional jobs that require college degrees and low-skilled service jobs for less educated workers, but the middle is getting squeezed.
We took a look at data from the Bureau of Labor Statistics to see just how anemic the middle-class job market is in America. While there’s no one definition of “middle class,” economists generally agree that mid-level jobs require between a high school diploma and a bachelor’s degree, earn on average $13.84 to $21.13 an hour, and are non-supervisory office or production roles.
From the BLS data, we identified these 15 middle-class jobs that are expected to shrink by 5% to 25% over the next 10 years:
Mechanical drafters
Projected 10-year decline: 4.9%
Average annual salary: $50,360
Education requirements: Associate’s degree
Insurance appraisers, auto damage
Projected 10-year decline: 5.3%
Average annual salary: $58,610
Education requirements: Postsecondary non-degree award
Insurance underwriters
Projected 10-year decline: 6.5%
Average annual salary: $62,870
Education requirements: Bachelor’s degree
Mail clerks and mail machine operators, except postal service
Projected 10-year decline: 8.8%
Average annual salary: $26,900
Education requirements: High school diploma or equivalent
Prepress technicians and workers
Projected 10-year decline: 12.9%
Average annual salary: $37,260
Education requirements: Postsecondary non-degree award
Telephone operators
Projected 10-year decline: 13.1%
Average annual salary: $32,850
Education requirements: High school diploma or equivalent
Switchboard operators, including answering service
Projected 10-year decline: 13.2%
Average annual salary: $25,370
Education requirements: High school diploma or equivalent
Reporters and correspondents
Projected 10-year decline: 13.8%
Average annual salary: $35,870
Education requirements: Bachelor’s degree
Reservation and transportation ticket agents and travel clerks
Projected 10-year decline: 14.0%
Average annual salary: $32,400
Education requirements: High school diploma or equivalent
Embalmers
Projected 10-year decline: 15.0%
Average annual salary: $42,240
Education requirements: Postsecondary non-degree award
Door-to-door sales workers, news and street vendors
Projected 10-year decline: 15.3%
Average annual salary: $21,470
Education requirements: High school diploma or equivalent
Computer operators
Projected 10-year decline: 17.0%
Average annual salary: $38,390
Education requirements: High school diploma or equivalent
Postmasters and mail superintendents
Projected 10-year decline: 24.2%
Average annual salary: $63,050
Education requirements: High school diploma or equivalent
Data entry keyers
Projected 10-year decline: 24.6%
Average annual salary: $28,010
Education requirements: High school diploma or equivalent
Word processors and typists
Projected 10-year decline: 25.1%
Average annual salary: $35,270
Education requirements: High school diploma or equivalent. (Griswold 2014)
As will be seen, a host of analytical criteria by which to determine the social location of a person allow the user of the framework in question to avoid any arbitrariness and indeterminacy inherent in the notion of the middle class. Under the framework, any anti-structural views are by default precluded; using the above case for illustration, as opposed to conventional approaches not only a link between education, skills, wages, occupation, occupational mobility, or-in other terms-between ascriptive factors (seniority, sex, race, etc.) and those based on achievement (performance) can be pinpointed and explained theoretically.
As distinct from the above variegated list, the author cited below focuses on a sinngle type of jobs when she points out that “Assembly line jobs are exactly the kind of middle-skill jobs that women and men have lost since the 1970s. Getty Images Assembly line jobs are exactly the kind of middle-skill jobs that women and men have lost since the 1970s.
A recent article from the Dallas Federal Reserve Bank rounds up the top research on this trend, called job polarization. Whilst women in middle-skill jobs took a much bigger hit, getting booted out of those jobs far more often than men, women as a whole also managed to find better jobs after this. Over the course of this period, the simplest measure of the gender wage gap also shrank, from around 40 percent to 22 percent, where it has mostly stalled since 2007.
And it seems likely that this kind of polarization played some role in that.
Of course, when people talk about closing the wage gap, they probably have in mind women doing better, rather than men doing worse. The extent to which gendered job polarization has driven the trend is a sign of what a generally lousy time the past several decades have been for the American working class” (Kurtzleben 2014).
The researcher has a point, but the content and notably the ending of her argument all the more clearly enables one to see that the term “the middle class” is in that argument utterly out of place. Also another question taken up by the researcher being cited is concerned with class in the standard, socio-economic sense rather than any social stratum: “Do childless women have a smaller wage gap?”
The answer is in affirmative- numerous studies have confirmed that childless women tend to make more money than mothers. A 2001 study by researchers from the University of Pennsylvania, for example, found a wage penalty for mothers of around 7 percent per child. And a 2003 study published by Cornell University found a gap between these two groups of around 3 to 5 percent that could not be explained by controlling for measurable factors like mothers’ skill levels” (Kurtzleben 2014). . This unequivocally suggests that the gap must be explained by discrimination, which can be couched in theoretical terms thanks to the typology of labour power-sex or gender could be treated as an ascriptive characteristic, or more precisely, forming a key dimension of an ascriptive labour power-where either job hiring or promotion takes place on the basis of those ascribed personal attributes rather than-as in the case of an achievement-based labour power-with reference to work effects, etc. This presumption supported by some other evidence as well: “There is also evidence that employers tend to discriminate against mothers but not fathers. A 2007 study found that in a lab setting, study participants evaluated mothers as less competent and less committed than childless women, while the same effect did not happen among men. Participants also recommended a lower starting salary for mothers than for nonmothers” (Kurtzleben 2014).
Whilst in this instance the working-class referent of the term under consideration made its interpretation easy, the previous enumeration includes primarily, but not exclusively different employee classes, but also other classes and social estates, whose distinguishment gives us a far richer and at the same time more precise picture of social differentiation than commonly offered.
Below a statement is cited, which is not as clear-cut as some of those mentioned above, since it, to be sure, lists a number of definite societal positions, but it appears that those are just secondary criteria of membership in the middle class, as the emphasis on the word “status” suggests: “in a market society, a middle class has always required some little artificial help to keep going. There’s always academic tenure, or a taxi medallion, or a cosmetology license, or a pension. There’s often some kind of license or some kind of ratcheting scheme that allows people to keep their middle-class status” (Worstall 2013). In other words, whilst the initial part of the argument might suggest that from the standpoint of the author the mmiddle class is composed both of some classes we term autocephalous (corresponding to what in a traditional marxist parlance is couched as the petty bourgeoisie), as well as some non-economic units termed under our socio-economic structuralism social estates, the middle-class status emphasised at the end of the above statement leaves no doubts what is most important for the author, the only question being how that status is to be understood – in terms of income, living standard, lifestyle, prestige or otherwise.
Similarly, the following argument, concerning Britain, despite its being couched in class terms, assumes ultimately a definite income level as determining the middle-class membership, thereby mixing up class, stratum, and indeed occupation: “For generations, they made up the bedrock of the nation’s middle classes.
With their sought-after qualifications and healthy pay packets to match, teachers, scientists and engineers were virtually guaranteed a lifestyle of comfortable respectability.
Fast-forward four decades, however, and these traditional professionals are barely clinging on to their place in the financial pecking order.
Surging ahead is a new elite – dubbed by experts the ‘uber-middle class’.
Made up largely of City workers and doctors, its members can earn twice as much as their counterparts in other white-collar jobs which once commanded similar salaries” (Harding 2014a).
It can be seen that definitions discussed in this chapter share with their counterparts in other chapters their repeatedly stressed flaw-indistinctness. To illustrate, the following argument begins with usual grumblings: “More and more wealth is accruing to the very rich, the median income of the middle class is down, and millions of U.S. families live paycheck to paycheck — or welfare payment to welfare payment. Most new jobs that are being created are lower income. A smaller percentage of able-bodied adults are working than at any time since the Depression (U-T San Diego Editorial Board).
But then the argument takes on not so usual twist: “for 40 years we have been moving inexorably toward an economy in which elite skill sets are highly rewarded while improving technology and automation steadily thin out jobs in which those with average job skills used to be able to make middle-class wages. Instead of the 1 percent vs. 99 percent divide, this is the divide that matters most. New York Times economics columnist Tyler Cowen pegs this gap as the 15 percent of working adults with elite job skills vs. the 85 percent without” (U-T San Diego Editorial Board).
What is problematic, is what-if any-notion of the middle class is implied in the aformentioned distinction meant as a replacement of a well-known opposition employed by the Occupy movement: does the middle class encompass 15 per cent of the nation? 85 per cent? Or still other figure? The reader may choose the version she like-the authors are self-styled methodological agnostics, being in no position to offer us any cues in the matter concerned-conversely, anything goes, to borrow Paul Feyerabend ‘s saying.
The next case shows how misleading implications the concept concerned can involve.
Governor Christie insisted the implementation of his plans of reforms that were designed to make New Jersey a better place for everyone hinged upon one condition —[…] public workers have to pony up more or take less — some form of additional sacrifice to allow New Jersey to grow and thrive. It’s on their heads.
A local commentator was less than impressed:
“Really? New Jersey’s financial plight has to be fixed by a bunch of middle-class teachers and firefighters?
this unequivocal identification of the category under consideration with what are in fact members of social estates highlights the redundancy of the term “middle class”, which is part of a distinct framework, that of social stratification raather than theory of social differentiation based on (economic and non-economic)ownership relations, which will be discussed at more length later in the book.
“So Christie wants to blast the middle class again” (Tabula 2014).
Therefore, the whole topography of social conflict outlined by the aformentioned commentator is misconstrued: “It’s also appalling that Christie started beating the reform drums again while pledging not to raise taxes — as if the impact on public workers wouldn’tbe the same thing. Christie is also letting us know that he will continue to protect his most important constituency — the wealthy — by refusing to restore the millionaire’s tax. (Tabula 2014)
Now, to be really useful as tools of grassroots mobilisation the above claims would have to be recast as referring to genuine social groups rather than statistical aggregates-socio-economic classes (hiding behind “millionaires”) and social estates, as such conflicts may involve only real groups as distinct from terminological fictions.
As it happens, the same two social estates in the contex of the tax issue as well figure in the next politician’s case: “The second campaign issue for Boyle is reforming the federal tax code.
’It is completely unfair that a teacher or a firefighter pays a higher tax rate than a hedge fund operator’,” he said. ‘I would reduce the gap so the hedge fund manager was taxed at the same rate as the middle class’” (Rotenberg 2014).
It is apparent that an adoption of an incorrect conceptual framework makes it difficult, if not impossible, to reach well-founded conclusions. In the aforementioned case, a far better tool with which to analyse tax issues are not-as it would seem on the surface-income categories (such as the misnomer “middle class”)-but class categories, as capturing the all-important source of livelihood and thus income.
Both estates andd classes, too, come up as constituents of the middle class in its another conceptualisation-it will be seen that the sociodiversity, so to speak, of the concept in question is impressive, workers and owners are magically joined in one single “class”, which additionally encompassess a number of non-economic groupings. “Stuyvesant Town-Peter Cooper Village has 11,231 apartments sprawled across 80 acres between 14th and 23rd Streets, east of First Avenue in Manhattan. [...]the average condominium price is over $1.5 million and rents are soaring.
But Sen. Schumer, Mayor Bill de Blasio, tenants and an overwhelming majority of local elected officials are determined to maintain the complex as a place where teachers, nurses, construction workers, firefighters and small-business owners can raise their families.[...]
Mr, de Blasio[...] praised Mr. Schumer for pushing the two agencies to ensure ‘that the city and tenants have a better shot at [...] protecting this community for middle-class New Yorkers’” (Bagle 2014).”
Another author repeats the same errors, putting in one bag groups engaged in very diverse property and work relations, again of both economic and non-economic character: “Among those we place in the middle class are lower-level managers, insurance agents, teachers, nurses, electricians, and plumbers. Our working class includes unskilled factory workers, office workers without specialized training, and many retail sales workers” (Gilbert 2011). For a change, the concept of the working class deployed above is completely ahistorical. Why should the possession of llow or no skills be the eternal hallmark of the proletariat? On the basis of under-specified concept of skill, the aformentioned author extends the boundaries of the working class to include some other employee classes, which, however, are characterised by different types of labour power held.
Again, as it has come to constitute the rule rather than the exception, a similar in its “genotype” but differing in its “phenotype”, i.e. specific composition of categories making up a given class-estate mix is the following exemplification of middle-class San Franciscans: “a freelance designer, bartender, massage therapist, decently paid non-profit worker, or copy writer” (Nema 2013).
The subsequent example concerns also San Francisco, where even progressive politicians like former Mayor Art Agnos, admit that as far as housing projects are concerned, the target group has shifted. No longer are the poor the main topic.[…]
The struggle for poor people is over,” he said, “because we don’t have a place to build for them. They were priced out a long time ago. […] we need to focus on the next category up.”
But not everyone agrees who those people are. There’s a lot of talk about the middle-class teachers, firefighters and workers in service industries, but that covers a lot of economic ground. (Nevius 2014)
Indeed, but below we will see if this economic diversity is understood in the fashion adopted here-namely, the above category puts in one bag very different social groups-non-economic ones, such as teachers or firefighters, and possibly some economic classes in the form of those employed in the service industries.
Meanwhile, the aformentioned author focuses on social strata rather than classes or estates:
Doug Shoemaker, president of Mercy Housing California, is overseeing an affordable building in the trendy Mission Bay area. He says it will have 150 family apartments, 20 percent of which will be available to the formerly homeless. He says incomes will range from roughly $13,000 to $50,000. The problem is, by some measures, that’s the working poor in San Francisco.
“Middle-income housing is notoriously hard to figure out,” Shoemaker says. “The idea is that as the market grows, there will be more opportunities, some affordable. The problem is those opportunities are dwarfed by the fact that gains in the market push those units out of reach.”
“According to a report by mortgage resource site HSH.com, an annual salary of $115,510 is needed to purchase a house in San Francisco where the median home price is $682,410” (O’leary 2014).
Meanwhile, moderates say the increase in building can only be a good thing. New construction will encourage current renters and homeowners to move up, clearing space at the lower rungs for others. Everyone moves up, creating room at the bottom.
“Oh, come on,” says Agnos. “There is no trickle-down effect. There may be short periods of time when the market leveled out, but overall it goes nothing but up. This area is too small for those normal market rules to work over time.”
That may be true, say moderates, but the progressives end up taking the position of fighting new construction regardless. The obvious example was the 8 Washington project that went down at the ballot in November. It might have been a building of high-end condominiums, but it also would have sent millions to the affordable housing fund.
“They’re just trying to play defense and block things, and I don’t see it,” said political analyst
David Latterman. “This idea that these evil capitalists are going to build for millionaires and sell all the rest of us into indentured servitude, c’mon, that ship sailed 15 years ago. (Nevius 2014)
Evil or not, it is precisely capitalists that come up as one of two key actors in the narrative the subsequent chapter offers.
But the capitalist class also comes up, alongside a few others, in an argument that could be placed in the subsequent chapter, though it fits equally well here, for it implies a wildly over-stretched treatment of the social category that forms the main subject of the present book. This fallacy shows up from the very start: “a nation’s middle class - the group of capable, ambitious, and rising people who were called a few centuries back by Europe’s landed old aristocracy ‘the new men’” (Chuckman 2014). Assuming that the initial words constitute the author’s definition of “the middle class”, this would lead to a psychological approach, extremely broad at that. But the rest of the first sentence clearly alludes to the bourgeoisie, only that without employing that label.
Paradoxically, the author then turns to a critique of a common definition of the category concerned on account of its above named defect: “By ‘middle class’, I certainly do not mean what the average American Congressman encourages, in boiler-plate speeches, the average American to believe: that every family with steady work is middle class, all other classes having been eliminated from the American political lexicon” (Chuckman 2014). But the truth is that his own approach is not immune to the very fallacy he himself seems to have criticised: “No, I mean the people of significant means - and, although not wealthy, of considerable talent and education - who hold as a group an important set of interests in society through their holdings and valued services. It was the gradual growth of this class of people over centuries of economic growth in Western societies that eventually made the position of monarchs and later aristocracies untenable: the middle class’s interests could no longer be represented by the old orders while their importance to burgeoning economies had become indispensable. They provided the indispensable force for what we now think of as democracy in their countless demands that their interests be represented” (Chuckman 2014).
There are a few problems with the above approach. Again, it appears to be contradictory-on the one hand it could be read as a portrait of the bourgeoisie whose role in a series of political revolutions surely entitles this class to the title of the godfather of modern democracy. This, to be sure, does not sit well with the content of the first part of a given sentence in which talent and educational attainment are being emphasised as the defining features of the class under consideration. Now, neither the latter nor the former constitute the necessary attribute of each and every capitalist.
And the continuation of the argument under consideration adds yet another social groupings-those of managers and specialists-to the ranks of the middle class (while the bourgeoisie, previously construed as the core of the middle class, now turns into somewhat indistinct “modern elites”,, to be sharply distinguished from the middle class):
“But there is evidence, in America especially, that something altogether new is emerging in human affairs. The real middle class, at least a critical mass of it, has been folded into the interest of the modern elites, the relatively small number of people who own a great portion of all wealth just as they did in the 17th century, wealth today being generated by great global enterprises rather than the ownership of vast national estates. Great enterprises cannot be operated without much of the cream of the middle class: they serve in computer technology, finance, engineering, skilled management, the military-officer class, and in intelligence. Their futures, interests, and prejudices have become locked-in with the interests of America’s corporate-military-intelligence establishment. They are indispensable to the establishment’s success, and they are accordingly rewarded in ways that bind their interests - health care, pension-type benefits, privileges, working conditions, opportunities for promotion, etc.
This marriage of interests between elites and the talented middle class effectively removes many of the best educated and most skilled people from being political opponents or becoming critics of the establishments for which they work. At the same time, America’s middle class in general - its small store owners, small factory owners, modest bankers, and even many professionals - has been under attack from economic competition in a globalized world for many years and has little to look forward to but more of the same. America’s legendary working-class “middle class” - that brief postwar miracle of auto and steel workers and others who through unionized, unskilled labor earned long vacations, handsome pensions, home ownership, cars, and even small boats - has been battered beyond recognition, every year for decades seeing its real income fall and long term having absolutely no prospects” (Chuckman 2014).
CHAPTER 7. BETWEEN THE BOURGEOISIE AND THE PROLETARIAT
A littel bit of history. The term “middle class” is first attested in James Bradshaw’s 1745 pamphlet Scheme to prevent running Irish Wools to France (1745: 4–5).
The term was once defined by exception as an intermediate social class between the nobility and the peasantry of Europe. While the nobility owned the countryside, and the peasantry worked the countryside, a new bourgeoisie (literally “town-dwellers”) arose around mercantile functions in the city. Another definition equated the middle class to the original meaning of capitalist: someone with so much capital that they could rival nobles. In fact, to be a capital-owning millionaire was the essential criterion of the middle class in the industrial revolution.
In France, the middle classes helped drive the French Revolution (Lefebvre 1962).
The point is that this kind of usage is by no means confined to historical works. A case in point is the following commentator, who argues that “In most countries, it is the middle class – the bourgeoisie – who form the bulwark against radicalism because of their vested interest in property, business and the country’s institutions” (Shaikh 2013). Under the same rubric one could mention the title of E. Franklin Frazier’s book “Black Bourgeoisie: The Rise of A New Middle Class in the United States” (New York, 1962).
Pertinent as it is for our purposes, the following statement is another example of the perils haunting the middle-class analysts-the author cited below sort of killed two birds with one stone, as he managed to frame the middle class as both the bourgeoisie and the working class: “Today’s bourgeoisie is composed of laborers and skilled workers, white collar and blue collar workers, many of whom face financial challenges.
[...] 50 years ago, the largest employer was General Motors, where workers earned an equivalent of $50 per hour (in today’s money). Today, the largest employer — Wal-Mart — pays around $8 per hour. The middle class has certainly changed” (Rawes 2014); it changed indeed, but, as could be seen, this in no way did alter the autor’s labelling usage.
A related story talks about the small bourgeoisie, as those capitalists can be termed, who employ some staff, who is however too limited for the business owner to be exempted from work. “Justin Trudeau’s attempts to appeal to the middle class have come under fire […] after he was forced to apologize for making disparaging remarks about Canada’s used car salesmen” (McParland 2013).
The liberal leader, asked about his party’s trustworthiness, invoked a well-used comparison by with used car salesmen. The whole affair was summed up by the postmedia columnist, Andrew Coyne with two tweets:
‘I’m not middle class. I don’t pretend I am’: Justin Trudeau discloses $1.2M inheritance. […]There are almost 25,000 registered salespeople in Ontario alone.
These are the women and men represented, through their employers, by the Used Car Dealers Association of Ontario. Over 4,700 registered Ontario motor vehicle dealers are part of our organization” (McParland 2013). While above the substance of the concept of bourgeoisie has been invoked, but without employing the name itself, in the following case it is the reverse-the term has been used that is a misnomer: the “new commercial middle class was (and is) called the bourgeoisie.
As stated by the great historian Henri Pirenne, “Never before had there existed, it seems, a class of men as specifically and strictly urban as was the medieval bourgeoisie” (Smith 2012). As though the aforementioned author did not behave badly enough, organizing his statement around a misnomer, he additionally misconstrues the quotation of Pirenn, who, after all, writes about the bourgeoisie, true, but not about the middle class.
The French historian is not the only one scholar falling the victim of a fallacious reading. The Thus, the reader is told that “Marx, who admired Malthus, was equally astonished by the emergence of the middle class. As he wrote in the “Communist Manifesto”:
Historically it has played a most revolutionary part. The bourgeoisie, wherever it has got the upper hand, has put an end to all feudal, patriarchal, idyllic relations…” (Parker 2009).
Now, the economist concerned reads into Marx’s words his own theoretical, and perhaps also ideological views-the significance of given sentences is distorted inasmuch as the latter refer expressis verbis to the bourgeoisie rather than “the middle class.”
Anyway, this kind of interpretation enables the aformentioned author to discover “Two billion more bourgeois”, owing to “The rise of a new middle class [that] has changed the world”. Mainstream Chinese scholarship would sure enough concur with that opinion, as they tend to identify “middle class with middle bourgeoisie,middle-level class,middle-level bourgeoisie and middle-income group” (Ure 2010), which enumeration, needless to say, should use “or” rather than “and”-the categories listed by no means refer to the same thing.
More prudent is therefore another author, who locates this period of purported identity of the two social categories concerned in the historical, if very recent, past: “At times, as in England in the nineteenth century or India in the first half of the twentieth, the term middle-class referred pejoratively to upstart bourgeois, the uncultured and frequently migrant nouveaux riches, who attempted to mimic upper-class practices and manners” (Pandey 2009).
By contrast, the following judgment refers to today’s societies: “Countries in South America’s Southern Cone have performed the best in terms of the last two decades of social mobility. Among those in the Southern Cone, Brazil excelled, adding 50 million people to the country’s bourgeoisie” (Sabatini 2014). But The very liberal “measure it uses (those who earn more than $10 per day)” (Sabatini 2014) demonstrates that the virus of over-inclusiveness is highly contagious -the concept of bourgeoisie as conceived above suffers from the same flow as many definitions of middle class do. And the argument concerning the fortunes of the latter in Latin America in general may be juxtaposed with both the above and below paragraph on Brazil as yet another illustration of an unsatisfactory conceptual state of the field of inquiry concerned-“ Of the Brazilian fans attending round of 16 match between the host nation and Chile at the World Cup, 75 percent were men, 67 percent were white and 90 percent were middle-class or wealthier, pollsters Datafolha found.
[...] there was little sign in the stadiums of the rising middle class that has emerged under Rousseff and her predecessor, fellow leftist Luiz Inacio Lula da Silva. Only nine percent of Brazilian fans were from the so-called “C Class,” the lower-middle-class income bracket defined as monthly earnings of $500 to $2 000 - which now covers 49 percent of Brazil’s population.
Sixty percent of those interviewed said their incomes were more than 10 times the minimum wage of 724 reals ($320) per month, Datafolha said” (van Schalkwyk 2014).
According to Market Research Company Euromonitor International’s white paper titled, “From the Bottom of the Pyramid (BoP) to Emerging Middle Classes in Latin America,” highlighting why companies should focus marketing strategies beyond Latin America’s low income consumers to the rapidly growing emerging middle class of the171 million households in Latin America in 2013, 36.4 million had an annual disposable income below US $5,000 and 64.1 million had an annual disposable income below US $10,000, according to Euromonitor data. Although the individual spending power of these households is small, the lowest-earning 10% of households in 13 Latin American countries have a combined spending power of US $77 billion in 2013, making them a lucrative marketing target.
Despite the BoP remaining a large segment, it is not the fastest growing market in Latin America. There are more than 87 million middle class homes with household incomes between US$10,000 and US$45,000- 60% of which are in Brazil and Mexico” (Benedict et al. 2014).”
And returning to the latter-it is due to the inherent vagueness of the concept under investigation that one cannot say whether authors such as Parker and Pandey have in mind also what in Marxist sociology is defined usually as the petty bourgeoisie, which class, alongside other small and middle capitalists, may be also included under the term “owners”: “the ladder rungs widen, and the little guy can never become an owner himself because the cost of doing business is too high” (Watt 2013).
Another commentator openly frames “a petit bourgeois family “as belonging to the lower-middle class (Sharma 2016).
Similarly, though in his Forbes’ article, Laura (2013) points to a definite income bracket, this is not the ultimate criterion of his notion of the middle class: “people who make between $70,000 and $100,000”, the preponderant factor being however that they are self-employed”, which refers to what in our terms is defined as the autocephalous class.
Along similar lines, Louis C. Fraina (Lewis Corey) defined the middle class as “the class of independent small enterprisers, owners of productive property from which a livelihood is derived”. So far, so (relatively) simple-the above category is bound to encompass both the autocephalous or petty-bourgeois class and a class of small capitalists. But the Marxist theoretician in question added some comments to his definition.
Included in this social category, from Fraina’s perspective, were “propertied farmers” but not propertyless tenant farmers and salaried managerial and supervisory employees but not “the masses of propertyless, dependent salaried employees.
Fraina believed that the entire category of salaried employees might be adequately described as a “new middle class” in economic terms, although this remained a social grouping most members of which “are a new proletariat” (Corey 1937).
Now, there are some problems with Fraina’s extended definition. First of all, while pointing to a common characteristic of his “entrepreneurs” and farmers in the form of them both being owners of the means of production, this putting them in one bag blurs peculiar attributes of property relations in which farmers are engaged. These are related to the special qualitty of land. On the other hand, the division of the category of smallholders into “propertied farmers” and tenants may be misleading, if treated as a determinant of their class distinction, for this would mean an adoption of legal rather than economic treatment of property-from the latter standpoint a tenant farmer may be an owner of the means of production to a greater extent than a fully fledged owner of his land, when her leased property brings her a bigger income than that yielded by the land fully owned. Strictly speaking, this category of farmers is to be designated as semi-owners, as they are excluded from one of the two basic relations composing economic ownership, since she cannot sell or otherwise alienate the land in question (in order to monetise it, of course). The following statement is somewhat different inasmuch it is safe to assume that the category of medium enterprises refers surely to capitalists rather than the self-employed: “The middle class and operators of small and medium-sized enterprises were disappointed by the lack of immediate measures in the policy address to help them raising concern that tensions between the poor and the middle class may worsen.
“The words ‘middle class’ and ‘small and medium-sized enterprises’ were not even mentioned. […]
Middle-class advocate Alvin Lee Chi-wing said many were worried that the increasing amounts of public money being spent on social welfare might bring higher taxes.
[…]
Manfred Lau Man-fung, Asia-Pacific business consulting director with talent-management firm Graval, also noticed the absence of measures to help middle-class people like him. Lau, who makes HK$60,000 a month, said he wanted the government to offer subsidies for small and medium-sized enterprises.
(Siu et al. 2014)
As in many other cases, the above statement is an example of the “apples and oranges” fallacy-it seeks to compare genuine socio-economic classes to groups defined in income, i.e. stratification terms.
Another approach is a bit more specific in that regard, but it is at the same time more revealing, underlining-as it does-the divergence between class and strata categories: “the vast majority of small employers themselves are middle class. In fact, Small Business Majority’s recent polling found only 5 percent of small business owners reported earning more than $250,000 a year, and
research conducted by the Ewing Marion Kauffman Foundation reveals that seven in 10 entrepreneurs come from a middle class background” (Arensmeyer 2014). If the word “background” is to mean a given individual’s class origin, then this factor merely adds to the state of conceptual confusion repeatedly stressed in the book.
The next example is doubly relevant to our purposes, as it additionally reveals that the term of the middle class is a misnomer-for the bourgeoisie is a class in its own right rather than a derivative from the underlying “middle class”.
The cognitive value of the statement in question is all the more debatable that its ideological motivation is striking. The author of the article draws on “Revolt Against The Masses: How Liberalism Has Undermined the Middle Class “, the latest book by Fred Siegel of the Manhattan Institute. The ideological bent is apparent even in the title-appropriating, as it does, the term “the masses”, traditionally reserved “for Earth’s downtrodden and oppressed” (William Cullen Bryant, freedom).
The author of that book claims that as opposed to some other Democratic politicians of the past, who wished to see the middle class thrive and enjoy their prosperity, Barrack Obama allegedly “comes from a dissident strain that finds this unnerving”. While most conservative critiques of the Left blame the big government-drift, from the progressives to the New Deal to the Great Society, for most of present-day problems, but Siegel points to an alternative point of dissension: a contempt for the middle class, for commerce, and thus for most of the American culture, that predated the New Deal by more than a decade, and poisons our waters today.
From this angle, the road to perdition (and/or Obama) was paved around 1920, when the best and the brightest, depressed by the Great War and the funk that came after, decided all was not well in the world and the nation, and the great middle class was to blame. In rant after rant, book after book, play after play, H.G. Wells, George Bernard Shaw, Sinclair Lewis, and the editors of The Nation and The New Republic heaped scorn on the bourgeoisie and on business as peasants unworthy of those who would lead them and who always knew better than they.
“In the 1920s ... what looked like freedom and progress to most white Americans was an affront to liberals and intellectuals,” as Siegel tells us. He quotes Malcolm Cowley as saying much later, “It wasn’t the depression that got me. It was the boom.”
The role of the leader was not to lead and/or shape public opinion but to govern against it, fighting the crassness that governs the herd. […] those with the middle-class taint — such as the failed merchant from Independence, Mo., named Harry Truman came in for a roasting. (Emery 2014)
This ideological manipulation has been made possible by the lack of a clear definition, allowing for the above game of musical chairs to be played with impunity.
Interestingly enough, there are also approaches to the middle class, which distinguish it from the capitalist class, but still couch it in well-known Marxist terms. It is useful to compare 20th Century American Marxist theoretician, Lewis Corey’s clear definition of the middle class as “the class of independent small enterprisers, owners of productive property from which a livelihood is derived” with an alternative approach of Lanoui et al. (2001), who in their essay on Europe, adopting, as they are, the lifestyle criterion of class determination,point out “features that emerged full-blown after World War II–spatial and social fluidity, a willingness to experiment with ‘traditional’ social arrangements, a rejection of older (19thcentury) status markers, a wary attitude towards tradition, a belief that individuality is affirmed by transformations of the Self, and embracing (and even creating) ‘popular’ culture in the 1950s and ‘60s as a celebration of middle class status that thumbs its nose at ‘tradition’. Nonetheless, many of these traits were seen as secondary. It is as if the attention directed towards middle class culture never went beyond reacting to Thorstein Veblen’s turn of the century formulation (1953 [1899]), that the middle class is merely an ‘in-between’ category whose members are continually seeking to emulate ‘higher’ bourgeois status to which they aspire and distance themselves from the ‘lower’ working class from whence they came. […] Whatever its alleged position in a ‘traditional’ status structure, post-World War I American middle class’ social mobility and alleged freedom were admired by urban middle class. Europeans, especially in Germany, Italy and France (Ben-Ghiat 2001), who saw American popular culture (as they interpreted it) as a legitimate means of escaping ‘tradition’.”) In brief, some elements of the Western European middle classes that would later dominate the urban landscape after World War II were ‘Americanizing’ themselves by the 1930s in order to contest bourgeois hegemony- ‘Hegemony’ is a sensitive word and a greatly-discussed condition. We use it here in its Gramscian sense of the domination of subaltern classes by bourgeois values and norms”. “ The aformentioned ambiguity is even exacerbated in the further discussion, which on the one hand sticks to the framework of stratification (“status”, etc.), while on the other not only continues to draw on the traditional Marxist framework, but even adds a new component of that theoretical tradition (“petty bourgeois”)to characterise the middle class: “most middle class urbanites seem to have implicitly accepted ‘tradition’ (bourgeois values) as one of the natural terms that defined one pole of the opposition that dominated their lives. […] the European middle classes have never been as open to the idea of cultural experimentation and cultural mobility as their American counterparts. They seem to have been driven to augment their social capital to define new spaces from which negotiations with hegemonic power could proceed while not sacrificing petty bourgeois ‘respectability’ gained by outwardly conforming to ‘tradition’.
This struggle was perhaps the most important factor in explaining the historical ambiguity and weakness of the European middle classes after World War I: eager to embrace American-style ‘individualism’ (as they saw it) when it helped them step up the social ladder, yet paradoxically willing to preserve their status by appealing to an older (and ‘traditional’) caste-like system of values – the ‘right’ address, the ‘right’ schools (at least for the children of people making a jump up the social ladder), ‘polite’ manners, ‘refined’ tastes in music, literature and art (cf. Elias 1983). Between ‘American’-inspired individualism and a struggle to acquire bourgeois and aristocratic traits, it is not surprising that its traits are hard to define” (Lanoui et al. 2001).” That final conclusion is not surprising either, given the aformentioned eclectic hodgepodge, which cannot be expected to engender anything like a consistent analytical framework or definition. In the case of the notion under investigation the aformentioned factor constitutes an additional reason for what normally accounts forthe the inadmissibility of talking about values, attitutes, etc. of any social grouping in general terms, outside of particular historical time-space. That such contextualisation is vital, is epitomised by an example of another “middle class”, whose behaviour, however, is not viewed as anything like paragon of virtue: The sociologist Seymour Martin Lipset once celebrated the middle class as paragons of democracy. But in recent years, middle-class Thais have transformed into supporters of an elitist, frankly antidemocratic agenda” (Bello 2014). Obviously, to render this argument as a generalisation would be equally misleading as to ascribe that status to the rose-coloured portrait of the category concerned, and the author himself makes it clear that his ruminations refer in fact to a particular society: “today’s middle class is no longer the pro-democracy middle class that overthrew the dictatorship of Gen. Suchinda Krapayoon in 1992. What happened?
[...] “The Bangkok middle class called for democratization and specifically the liberalization of the state with the political rights to protect themselves from the abuse of power by the elites. However, once democracy was institutionalized, they found themselves to be the structural minority. [...] Ignorant of the rise of a rural middle class demanding full participation in social and political life, the middle class in the center interpreted demands for equal rights and public goods as ‘the poor getting greedy’… [M]ajority rule was equated with unsustainable welfare expenses, which would eventually lead to bankruptcy.
From the perspective of the middle class[...]], Never has any social contract been signed which obligates the middle class to foot the tax bill, in exchange for quality public services, political stability and social peace. This is why middle classes feel like they are ‘being robbed’ by corrupt politicians, who use their tax revenues to ‘buy votes’ from the ‘greedy poor.’ Or, in a more subtle language, the ‘uneducated rural masses are easy prey for politicians who promise them everything in an effort to get a hold of power.”
Thus [...] from the viewpoint of the urban middle class, policies delivering to local constituencies are nothing but ‘populism,’ or another form of ‘vote buying’ by power hungry politicians. The Thai Constitutional Court, in a seminal ruling, thus equated the very principle of elections with corruption. Consequently, time and again, the ‘yellow’ alliance of feudal elites along with the Bangkok middle class called for the disenfranchisement of the ‘uneducated poor,’ or even more bluntly the suspension of electoral democracy” (Bello 2014).
Apart everything else, the above argument demonstrates again the chameleon-like nature of “the middle class”, which in its rural guise has been equated with the poor who generally come up as a class lower to the middle stratum (cf. Bello 2014).
To come back to our earlier criticism of the concept concerned as ambiguous, it obviously is not made any clearer by the use of the lifestyle as a determinant of “the middle class” qua this time around bourgeoisie. Singer (2014) takes issue with the common perspective framing “problems of the middle class — its growth, diminution, even survival [...] —in purely economic terms; however, this kind of focus is too narrow. Yes, the middle class seems threatened, but not simply due to dollars and cents, or the lack thereof. One can’t simply “grow” this supposedly beneficial status via infusions of cash.
For being bourgeois (aka middle class) is really an attitude, and it’s one that people formerly yearned for and carefully cultivated. Becoming middle class was in most cases, synonymous with becoming something of a gentleman or lady, and not only dressing the part, but naturally convincing people in those sartorial choices. Not to mention in how one spoke, and in what one did with an education or manners (with only time-outs to whoop it up at New Years’ parties or don bathrobes Sunday mornings).
Now? It’s a constant dress-down Friday? You can paint a jalopy, but it remains a jalopy? That sounds strong, but at the same time, anyone who thinks grunge can simply be turned off at some point and be quickly transmogrified upward is possibly deluded.
To become authentically middle class, there has to be a certain deference from the get-go, i.e., from childhood; and that deference, fear, respect, whatever you want to call it, has diminished. Even if it’s a cliche, people who lose respect early on for authority end up more basically losing respect for themselves.
In fact, grunginess you see in large towns and small towns, too, seems a kind of how-low-can-you go critique of conventionality — and we think money alone will somehow make such people “middle class”? It ain’t going to happen. Being bourgeois is again, a feeling that most-of-the-time respectability has value. Money? No question that many want to score the dough putatively necessary for a leap into the bourgeoisie; but the discipline to clean up language, looks, deportment and the rest to go with it? Nope, it’s basically “gimme the fish, but hold the fries” in this domain, which doesn’t create true middle-class status.
To be bourgeois you don’t have to be full of yourself, and obviously complete self-esteem — that once ballyhooed concept during the Me Decade and aftermath – has never been easy to attain; but you at least have to try and respect yourself as best you can. You can’t willfully present a constant, waif-like look of anything goes, a getting-through-the-day, pajama-like, this-will-do aura. True, few will be attired anymore like Ward Cleaver and wife were, nor the father who knew best (Robert Young) and TV wife (Jane Wyatt); nor as originally poor boys like Sinatra or Dean became with the Rat Pack — Sinatra especially impeccable in suits or tux on virtually all occasions. But aiming higher does seem necessary for a leap into the middle class. And so does a certain gratitude...
Then comes the not insignificant little matter of widespread drug use. I don’t want to delve deeply into that searing debate here, and would certainly have to bite my tongue even more in Colorado or Washington State; but this ubiquitous penchant also helps feed into widespread, come-as-you-wish dress and deportment styles, the “score it today” attitude, the pretense (i.e., no one will notice), etc.
And then maybe once in a while get spiffed up for an important function, such as a wedding? What you then get is ersatz middle class — much of that going down these days in many other realms, ersatz this, ersatz that. But it’s not the real article, it isn’t automatic or easy to attain, and the result is less and less of an authentic bourgeoisie about.
Which even includes what we used to call with a certain derision “nouveau riche” types, who born poor and maybe with immigrant parents, moved upward and outward to Amherst or Scarsdale, recent arrivals to higher status. But who still seemed convincing...
In sum, money alone won’t cut it, yet too often, people in high positions seem to think cash is the sole answer to all societal problems. Unfortunately, it’s not.
Most astonishingly however, the middle class is being framed as not only the bourgeoisie or the petty bourgeoisie, but also the working class, which rounds off the picture, as far as the traditional Marxist triad is concerned.
To that end, any of the criteria mentioned above could be employed, as evidenced, inter alia, by the following argument: “No one living in present-day Jamaica, for example, would need to look far in order to notice that the middle class is in retreat, as a result of the deepening native crisis of capitalist production and distribution. It is retreating from its traditional values and ideology, from its historical sense of mission to lead the national movement, and from its class position between the ruling class and the working class.
[…] like their counterparts in other jurisdictions faced with a similar social reality, members of the local middle class can no longer be characterised by their fierce propensity for social mobility.
[…] what we are observing in Jamaica is that members of the middle classes are struggling to maintain their standard of living, despite their best economic efforts. In the process, their status, independence and values are being eroded either through redundancy, permanent job insecurity, or business failures” (PRYCE 2013).
The above argument may be juxtaposed with the claim of historical nature: “within capitalism, ‘middle class’ initially referred to the bourgeoisie and the petite bourgeoisie. However, with the impoverisation and proletarianisation of much of the petit bourgeois world, and the growth of finance capitalism, ‘middle class’ came to refer to the combination of the labour aristocracy, the professionals, and the white collar workers” (MedLibrary 2013).
“The scions today of ambitious working-class parents of the post-independence era have been raised on the belief that education and professional qualifications were compensating attributes for not being owners of the means of production on a mass scale.
However, they must resign themselves to facing a life of such grave economic uncertainty and threat to their standard of living that they can no longer look to public service employment to guarantee a safe haven of respectability and mobility up the class ladder.
The middle classes want to be able to maintain their living standards by supportive policies that would allow them to keep much of their money in their pockets. They want to feel more prosperous than members of the working class, but are unable to do so as a result of wages not keeping pace with persistently rising inflation and commodity and energy prices.
[…] members of the middle classes are […] worried that they are not dissimilar anymore from members of the working class. […] Many who are current or former public sector employees or workers in a very insecure private sector worry that not only will they be unable to provide a proper education for their children, but that many of their sons and daughters will never be able to afford the purchase of a home. Like members of the working class, they are becoming accustomed to confronting great challenges to make ends meet in an economy struggling to achieve growth. Some, after a lifetime of work, are terrified of the prospect of facing poverty in their senior years.
I have chanced upon proud professional and own-account men and women who, years ago, were proud to regard themselves as members of the middle class, but whose consumption patterns and lifestyles today increasingly resemble those of the working class.
As an example, they go to great lengths to source bargain-priced petrol for their motor vehicles and to find comparatively cheap food in the markets downtown.
Those living in upscale dwellings have even substituted gas stoves for electric ones, and are moved to impose very strict discipline in the use of electricity and water within their homes.
For the well-suited middle-class women and those who are calorie-starved but accustomed to being expensively dressed, the ritual weekend shopping sprees to Miami and elsewhere, as well as their weekly trips to their hairdressers and manicurists are things of the past. Middle-class men, for their part, are faring no better under the circumstances.
[…] The proletarianisation of the Jamaican middle class is a trend to watch very closely” (PRYCE 2013).
Notice that As evidence for this purported proletarianisation of what appears to be a very heteregenuous category, comprising both public and private sector employees, as well as the self-employed) changes in living standards rather than shifts in the source of income (which would be closer to what should be regarded as socio-economic class determinants) are being cited. In another case this very process is being seen as engulfing a group of the same name but a distinct composition: “The biggest issue facing the American economy, and our political system, is the gradual descent of the middle class into proletarian status. This process, which has been going on intermittently since the 1970s, has worsened considerably over the past five years, and threatens to turn this century into one marked by downward mobility. [...]This group, what I call the yeoman class — the small business owners, the suburban homeowners, the family farmers and skilled construction tradespeople — is increasingly endangered. Once the dominant class in America, it is clearly shrinking” (Kotkin 2014a). The term seems to be a misnomer in that upon scrutiny the actual conditions on the basis of which to include particular subgroups in the broader category concern-tacitly-income, since beyond income and consumption levels there is very little in common between the groups in question-these comprise construction workers, farmers, as well as both small capitalists and what will be proposed to couch as a autocephalous class -and thus quite a diverse mixture.
The extent of confusion in the area under consideration may be gleaned from an example, suggesting-as it does-that the identification of the middle and working class is taken for granted: “Decisions made inside the state Capitol in 2013 have not been kind to Wisconsin’s working, middle-class families” (Barca 2013).
A Iowa commentator makes her case doubly stronger by not only using the working-class label, but listing relevant occupations: “In the current minimum-wage debate going on in Congress, we need the voices of Americans who will fight for working class families.
Rep. Bruce Braley is that voice. He knows what it’s like to have a middle-class upbringing. [...] worked on road construction, in grain elevators, and as a dump truck driver to help pay for his college education. He is uniquely suited among elected officials to understand the issues that affect middle-class families” (Saver 2014).
In still another context, the reader is told that “accidental drug overdoses have long been seen as problems more common in neighborhoods that are poor and troubled. But prescription opioids have brought overdose deaths to the middle class, a study in New York City finds. Opioid overdoses were more common in higher-income neighborhoods than heroin overdoses. [...] People in stable, middle-class neighborhoods are also dying from opioid overdoses, a study in New York City finds” (ideastream 2013). But in what follows a shift in class terms occurs: It turns out that “The heroin deaths were mostly in low-income neighborhoods where many people struggle with crime, fractured families and untreated mental health problems. The prescription painkiller deaths were more common in areas where you don’t see much heroin — solid working-class neighborhoods in Staten Island and parts of the Bronx. ‘We were very surprised to see these very different patterns for heroin and analgesic,” Magdalena Cerda, a Columbia epidemiologist and lead author of the study, tells Shots.
That may be because people in those neighborhoods are more likely to be prescribed painkillers, Cerda says. “There you see a higher percentage of policemen, firefighters, construction workers,’ she says. “They may have a higher percentage of back pain as a result of work-related injuries.’
It’s also easier to get an OxyContin prescription filled at pharmacies or physicians in middle-class neighborhoods, she adds. That’s backed up by earlier studies that found that pharmacies in low-income, minority neighborhoods in the city don’t have enough prescription painkillers to meet legitimate demand.
The findings were published in the American Journal of Public Health. (Ideastream 2013)
The above passage exemplifies what in fact is the irreconcilable opposition between two different axes of social differentiation-stratification and class. In other words, contrary to what is being suggested above, when one passes from the concept of the middle class to that of the working class, one shifts one’s level of theoretical discourse.
Even more evident is the aformentioned contradiction in the case of the following statement, invoking both stratification and class terms, with the term of middle class appearing in the context of the notion of a definite earnings level, which refers to stratification-despite its purported association with the middle class: “despite claims that the industry provides middle class wages for blue-collar jobs, a recent study finds that warehouse workers in the Inland Empire area of California average $23,000 per year for men and $19,000 per year for women” (Good 2013).
In a similar vein, commonly used data on income distribution, and thus primarily on stratification rather than class have been employed in a discourse making use of both concepts at stake. The author of an article under the title “The New Working Class: Wage Slaves” argues that “the insidious problem of wage inequality can be seen throughout the lower and middle class” (Kirkham 2013), which is supported by evidence: “n 2000, the median household income in America was $54,841, as reported by the U.S. Census Bureau (numbers reported in 2011 constant dollars). By 2011, the median household income had fallen to $50,054. Part of the static state of wages can be attributed to the recession and limping economy. But the resulting rise in unemployment and fall in pay did not create the problem — they just exacerbated a pattern of flat wages for the bottom two-thirds of wage earners that has existed for the last three decades.
President Barack Obama addressed the issue in a July 24 speech, acknowledging that though postwar America enjoyed a boom in the middle class, “over time, that engine began to stall.”
“The link between higher productivity and people’s wages and salaries was broken. … So the income of the top 1 percent nearly quadrupled from 1979 to 2007, but the typical family’s incomes barely budged,” Obama said.
Wages Remain Static while Productivity Soars
A report from the Economic Policy Institute found that from 2002 to 2012, wages have remained largely flat for 70 percent of Americans. The same report, however, found that workers’ productivity over the same period of time had risen significantly.
“The weak wage growth over 2000-2007, combined with the wage losses for most workers from 2007 to 2012, mean that between 2000 and 2012, wages were flat or declined for the entire bottom 60 percent of the wage distribution (despite productivity growing by nearly 25 percent over this period),” Lawrence Mishel and Heidi Shierholz wrote in the report”.
(Kirkham 2013). And more recent data fully confirm that trend; Obama’s deputy acknowledged in his October speech that “whilst the gross domestic product means the nation grew over the last ten years by over 25 percent, and productivity went up over 30 percent,” middle class wages went up by only 14 cents. Hear me? 14 cents. You know it. You don’t have to know the number, but you know. The middle class has been left behind” (Lifson 2014).
Not questioning the significance of the data reported above, to be sure, from our perspective the former passage attracts a lot of attention, since the author invokes a veritable hodgpodge of socio-economic indicators and lables pertaining to both broad approaches to social differentiation, which cannot but result in a conceptual chaos that through the media and other channels of dissemination pollutes the public’s minds. To illustrate, an unquestion member of the working class tells his story through the middle-class lens:
In 1982 I finished my last day as a production worker at the Sioux City Wonder Bread bakery. My hourly wage at that time was $10.50. More than three decades later, far too many people are still making wages less than that. (By the way, my dad supported our family for 26 years, working in various positions at this same facility.)
When I tell people this, their typical response is, “$10.50 must have been pretty good money back then!” Actually, it was not considered a great wage in Sioux City. In fact, most of the local packing plants were paying $3 to $4 more per hour. But I was grateful; the wage helped feed a young family and put me through Morningside College.
Back in those days the middle class was still strong, or should I say there was a middle class. (Sturgeon 2014 ).
The reader could be forgiven for taking for granted what in point of fact ought to take her by surprise, had she been a historian of the working class, for instance, who would be surely stunned why at a certain point one switches gear and accordingly a new class actor appears on the scene in a narrative whose historical shorthand might look like this: ” manufacturing created a middle class that strengthened our communities and provided opportunity for countless Americans” (Brown 2013).
“Not only were wages much stronger in terms of purchasing power, but employment usually meant two additional benefits - health insurance and a pension.
When I was young, I remember plenty of my friends and classmates had parents who worked in packing plants and local factories. Many had stay-at-home moms like mine. Through hard work, those blue-collar parents made a respectable living, and most bought their own homes. More importantly, they gave their children a fighting chance at the American dream.
The decline of the middle class since the late 1970s has been nothing short of stunning. Health insurance is no longer synonymous with employment, leaving many full-time workers uninsured or with policies that are woefully inadequate. Many of these policies require substantial employee contributions and co-pays.
This trend is one of the key reasons for the spiraling number of uninsured, leading to the need for Obamacare.
Pensions have become a historic relic you might encounter in a museum. Most workers are “lucky” to have a 401k.
Again, the above exposition offers a good description of changes in the value of labour power, which is a class concept and its association with “the middle class” is misleading, as “class” in both those cases does not refer to the same thing.
Which does not detract from the broad soundness of his further remarks:
At the same time, it couldn’t be a better time to be rich in the United States. In 2012 the gap between the richest one percent and the remaining 99 percent was the widest since it has been since the 1920s. Incomes rose nearly 20 percent for the wealthiest one percent of Americans, whereas the income of the remaining 99 percent rose only one percent.
There are several reasons for the decline of the middle class, including the decrease in union membership over the past four decades. In 1970 the percentage of the U.S. population that belonged to a union was 28 percent while today it is down to 11.3 percent (6.6 percent in the private sector). The rise of the labor movement helped usher in the era of the middle class and its decline has produced lower wages and fewer benefits.
[…] Originally established to provide a minimum level of security for workers, the minimum wage has fallen hopelessly behind the cost of living. No one can survive on minimum wages without additional assistance in the form of food stamps and housing and energy assistance. Minimum wage was never meant to be a poverty wage, but it is.
Obviously, if we are to reduce dependency on welfare, a minimum wage needs to be a survivable wage. Many states have given up on the federal government to do the right thing. As of Jan. 1 of this year, 21 states will have higher minimum wages then the federal $7.25. This is shameful.
[…] Although there is no panacea for the decline of the middle class, increasing the federal minimum wage is a good place to start. President Obama’s proposal would lift the federal minimum wage to $10.10 an hour in three steps over two years and then index it to inflation. Congress should act quickly.
(Sturgeon 2014 ).
Likewise, an apt criticism of ideological foes is intertwined with a hopeless confusion of class (commercial employees) and stratification (“the middle class”) levels of analysis:
For conservatives, one of the central arguments against a minimum income or even a minimum wage is the notion that employment is a value in and of itself.
Taking a low-paying job, no matter how menial or “dead-end” is supposed to be an exercise in character that builds self-worth and places a person on the ladder toward upward mobility. Therefore, anything that prevents someone from working is contributing to sloth and moral decay.
Research is starting to demonstrate the nature of the depth of this fallacy. Those who take low-wage, menial labor in service industries or fast food at any point in their careers tend to have depressed incomes throughout their lifetimes. If you ever work at Wendy’s, you have roughly a 5% chance of ever earning $70,000 a year. Working at Ford, by contrast, suggests a 50% chance of eventually earning a median income. Lousy jobs are a gateway to lousy jobs.
This matters because the myth of the gateway job is blocking policy choices that might open up greater access to opportunity and enable America to more productively develop our vast pool of human potential. Because we believe that work is a value in and of itself, we push people into the labor force too early, depriving them of the opportunity to learn how to do something that might reward them and enrich the economy as they proceed through life. We close off otherwise promising opportunities to convert labor to capital and leave the entire economy poorer for it. (Ladd 2014)
It should be also noted that high marks given above to the article in question do not refer to the final sentence, echoing-as it does-the very myth the author otherwise strives to take exception to. Not only owing to its ideological connotation the said contention is in fact non-scientific in nature-holders of some jobs are remunerated on the basis of the (ascriptive)labour power they own, while in other cases –where the achievement-based labour power predominates-pay does depend on the effects of labour.
Likewise, the definitions cited below refer to some employee classes, and the term “middle class” in that context obfuscates the matter rather than elucidates, as it misleadingly suggests that alongside industrial, commercial, service, etc. employee classes. There exists some distinct elusive “middle class”:
“If you have to worry about being laid off because you don’t have company stock options or a golden parachute, you’re Middle Class.
If you’ve never received a company bonus, you’re Middle Class. (A little flash - Hostess wants 19 people who were part of the brilliant management team that lead the company into 2 bankruptcies to be paid a total of $1.75M in bonuses while handling the company liquidation. That’s in addition to their salary)
If your raises haven’t kept up with inflation for the last 10 years, you’re Middle Class.
If you have a job where people who don’t work 8 hours per day make sure you do, you’re Middle Class” (Kiplinger 2012).
Analogous critical comments apply to similar grumblings, attempting –as they do -to show that “the superrich no longer need a middle class” (Hartmann2013).
According to that narrative, “here was once a time in America when the super-rich needed you, and me, and working-class Americans to be successful.
They needed us for their roads, for their businesses, for their communications, for their transportation, as their customers, and for their overall success.
The super-rich rode on the same trains as us, and flew in the same planes as us. They went to our hospitals and learned at our schools.
Their success directly depended on us, and on the well-being of the nation, and they knew it.
But times have changed, and the super-rich of the 21st century no longer think-complains the afomentioned commentator- that you and I are needed for their continued success” (Hartmann 2013).
What is paramount for our purposes, is not so much the substantive correctness of the above claim, as its purported implication, wherein it is factory workers who are qualified as a key fraction of the middle class: “As they accumulate more and more wealth, the very rich have less need for society. At the same time, they’ve convinced themselves that they made it on their own, and that contributing to societal needs is unfair to them. There is ample evidence that this small group of takers is giving up on the country that made it possible for them to build huge fortune” (Hartmann 2013). The final part of the above-cited argument needs to be underlined, as it refers to the essence of economic ownership, as explained in (Tittenbrun 2011b). Hartmann not only again associates the factory with the middle class, but explicitly refers in its connection to the working class:
“The rich have always needed the middle class to work in their factories and buy their products. With globalization this is no longer true… They don’t need our infrastructure for their yachts and helicopters and submarines. They pay for private schools for their kids, private security for their homes. They have private emergency rooms to avoid the health care hassle. All they need is an assortment of servants, who might be guest workers coming to America on H2B visas, willing to work for less than a middle-class American can afford”
Unfortunately, these millionaires and billionaires who have given up on America and on the working class are in control of the political process in this country. (Hartmann 2012)
Thus, the above passage shows again the messy character of the literature under investigation, which employs both the term middle and the working class, and additionally makes use of the notion of income as a precondition for membership in the class under examination. Another example of such a statement in a more condensed form: “someone was talking about what a terrible thing it was that well-paying blue collar jobs - “middle-class jobs” - were vanishing from our country” (Rapoport 2013).
The measure of income or living standard, in conjunction with the term the “middle class” has been also applied to depict a quintessential fraction of industrial workers-Boeing machinists negotiating a new contract. The reader is told that “the union, which has more than 30,000 members, is split about 60-40, with the majority rejecting the contract because it will cut benefits they have fought very hard to get over the years. […] contract represents “another nail in the coffin for middle class America” (Campanario 2013).
And indeed, the outcome of the ballot has been depicted in gloomy terms: the key issue […] was whether Boeing was bluffing about moving a big new airliner construction program out of state if the contract vote failed. Those who thought the firm was bluffing voted against the deal; those who thought its threat was real voted “yes.”
“Yes” took it, by a razor-thin majority of 51% to 49%. Supposedly this means that Boeing is committed to building its new 777X airliner in the Seattle area.
But you probably won’t lose money betting that the firm will find a way to outsource some of the work to non-union locales.
That brings us to the real impact of the contract vote, which is that it continues-even accelerates the hollowing-out of America’s once-thriving middle class. (Hiltzik 2014)
The account outlined below refers to the core section of the working class, which is additionally underlined by highlighting by the commentator in question of the nature of a class equation in which they stand at the opposite end to that of the firm’s management and shareholders:
Boeing executives maintained that major concessions were needed from the machinists’ union to guarantee the 777X program for Seattle. They said the intense competition in the aircraft industry and price discounts demanded by customers made the givebacks essential.
But what’s really happening is that Boeing, which is as financially healthy as it’s been in years, is aggressively steering the fruits of its success to its executives and shareholders and shortchanging the workers who got it there.
[…]
Let’s start at the bottom, with the contract. Actually, it’s an eight-year extension to a pact that doesn’t expire until 2016. Under its terms, Boeing will abandon its traditional defined-benefit pension plan, substituting an expanded 401 (k). The old plan will be frozen, meaning that accruals to pension benefits from worker longevity and wages will shortly cease. (Pension values that workers have already earned they’ll keep, as is required by federal law.)
As is true of all 401 (k)-style defined contribution plans, the new system places more of the risk of retirement security on the workers, leaving the company largely risk-free. It will match employee contributions up to a certain level, but there’s no guarantee that it won’t seek to cut that commitment in the future.
The contract limits general pay increases to 1% every other year through 2023, outside of cost-of-living raises and a quality incentive program that could add up to 6% of pay, but could also yield nothing. And it shifts more of the cost of health insurance to the worker, raising deductibles and the workers’ share of premiums. Workers who pay $66 a month for family coverage now will be paying $234 by the end of the contract.
Any way you cut it, the workers are getting squeezed. A Boeing machinist job, once the reliable foundation of a middle-class lifestyle, will be much less of one in the future. It won’t be exactly hard time-with average pay about $70,000 “it’s still one of the best deals you can get for a blue-collar worker without a college degree,” observes Leon Grunberg, a labor relations expert at the University of Puget Sound-but it shrinks the workers’ economic horizons considerably, especially for younger workers.
Most significant, Grunberg says, is Boeing’s attack on the defined-benefit pension. These have been disappearing all over corporate America, but until now companies with strong unions haven’t shared in the trend.
“This is a harbinger of what’s going to happen in the unionized sector,” Grunberg told me. Boeing thus achieved a double-barreled victory-it shed its pension obligations and made the union less relevant to its workers’ lives with one stroke.
So if Boeing is gaining so muich with this deal, where are the gains going? The answer, as is true throughout corporate America, is to shareholders and executives. Under Chairman and Chief Executive James McNerney, who took over in 2005, the company has increased its dividend every year but one, from $1.05 to $2.92 in 2014. That’s a total increase of 178%, including a huge bump of 51% this year alone.
At the same time, the company has authorized $17 billion in share buybacks. That’s just another way of shoveling money out to shareholders, and surely accounts for a good portion of the company’s handsome run-up in share price over the last year, when it has appreciated by more than 80%.
McNerney has done well by doing so good for his shareholders. In 2012, the last year reported by Boeing, he collected $27.5 million in cash, bonus, stock and option awards, and other pay. That was a 20% raise over the previous year, in which he got a roughly 16% raise over 2010. He must be a superman to be so uniquely responsible for the company’s success-his 2012 pay was almost as much as that collected by the next three highest-paid members of his executive team combined.
[…] the company’s real quest is to determine how tightly it can squeeze its own workforce. In that field it’s among the trendsetters, though it has a few advantages. At the moment it’s one of only two major manufacturers in its industry worldwide, and the only one in the U.S. It takes a hardy politician to resist the lure of a major aircraft plant, and in fact the state of Washington shoveled out a record $8 billion in incentives to Boeing to keep this one. And Boeing has jobs to offer in an economy where they’re scarce; why should it care that its workers are ticked off?
That’s the landscape of the new world. “Research used to tell us that you want a workforce that’s committed and happy,” Grunberg says. “But Boeing’s been doing very well with a workforce that’s unhappy.”
Only time will tell us if Boeing’s strategy is wrong, and by the time we learn the answer, it may be too late for the middle class. (Hiltzik 2014)
Thus, the “middle-class” label has been superimposed in the above description upon as much working-class class as you can get. In a similar vein, another commentator states that “It is no accident that during the heyday of union membership in the 1950s there was an economically viable middle class. Unions have taken some severe hits over the years as a result of corporate opposition, court rulings and the passage of right-to-work laws in Indiana and Michigan. This has had a negative economic impact and the eminent Harvard economist Richard Freeman has estimated that the decline of union membership has resulted in middle class income dropping by at least 20 percent” (Vegan 2013).
Trade unions show up in another argument, TOO, by default proletariatising the middle class. Its author argues that “the 2000s have gone down as “The Lost Decade of the Middle Class,” but the hollowing out of the middle class has gone on for decades. Inequality in America has reached record heights not seen since the 1920s or the late 19th-century Gilded Age. The United States is now more unequal than almost every other economically advanced country, with its middle class getting smaller” (Formisano 2013). So far, so familiar; but next the argument gets an unexpected twist, as the author argues that “A prime cause has been the decline of labor unions.
Unions in their heyday from the 1940s through the 1960s contributed greatly to building the middle class, but an unfortunate amnesia and anti-union propaganda has obscured that history for too many, even though Gallup reported that 54 percent of adults 18 and older now approve of organized labor” (Formisano 2013).
While the commentator being cited is aware of conflating correlation with causation, his statement does not make clear whether all or merely certain section of the employees in question who benefit from the activities of the labour movement are to be included under the rubric of the middle class: “The rise of inequality in the U.S. over the past four decades parallels the decline of unions. The correlation is not accidental because unions not only raise the pay and gain benefits (pensions, health coverage) for their workers but also for nonunion workers who profit from the presence of unions in their locale or industry — call them collateral benefits. Any effort to hurt unions is a blow struck against the middle class” (Formisano 2013).
His further comments also are worth citing, if only to show that the U.S. political and ideological spectrum is far wider than the uninformed reader might think. Kentucky Sen. Mitch McConnell has long waged class warfare against unions. Now he and Sen. Rand Paul have proposed an amendment to a workplace discrimination bill to create a national right-to-work law. Such laws have been pushed by reactionary businessmen and Republicans in two dozen states and are helping to perpetuate middle-class decline and inequality. They should be called right-to-work- for-lowest-or-minimum-wages-with-no benefits.
McConnell claims, “’Big Labor’ has come to care more about its own perks and power than workers.” ” (Formisano 2013).
This anti-union rhetoric prompts an angry response:
Big Labor? One has to wonder what planet McConnell inhabits. Oh, that’s right, he has been in that bubble removed from reality known as Washington, D.C. for about 30 years. And speaking of “perks and power”.... but that is a subject for another day.
Union membership in 2012 was 11.3 percent of the work force, down from 11.8 in 2011. Private-sector membership stands at a mere 6.6 percent, so just what
McConnell is talking about is not clear. At their height in the 1950s, unions enrolled 35 percent of the work force, but have declined ever since. Maybe the good senator’s head is still in the 1950s.
According to a study by the Center for American Progress Fund, in states with more union members the middle class earns significantly more income than states with low union membership. In the 10 most-unionized states “households in the middle class received 47.4 percent of total state income... in the bottom 10 states, households in the middle class received only 46.8 percent,” according to the report.
That seemingly insignificant difference of 0.6 percent amounts to real money: in 2012 0.6 percent of Pennsylvania’s aggregate income amounted to over $2 billion, about $700 per middle-class household. Bottom line: more unionized states have stronger middle classes. Making war on unions makes war on the middle class” (Formisano).
Those statistics are, again, interesting, but their worth is limited, as the term “middle class” in the above context hides more than it reveals.
Likewise, the following passage might well have been written by a labour historian or a industrial sociologist whose knowledge of class theory would on average be far more sophisticated than that deployed below, which also includes a capacity to discern terms that are utterly out of kilter with the rest of the exposition, i.e. the celebrated middle class:
If the middle class is to get higher wages and its fair share of our economy’s wealth, it will have to find a way to do so on its own. But, the lack of meaningful bargaining power possessed by middle class workers today has hobbled their ability to do so.
In past years, workers banded together in labor unions and fought collectively for higher wages, helping to create a healthy middle class in our country.
Our post-WWII manufacturing economy, employing workers in factory settings performing similar tasks and sharing common interests, was ideally suited for unions to achieve improved working conditions, wages and benefits simultaneously for large numbers of workers. More recently, the off-shoring of manufacturing jobs, the development of technologies that have eliminated many jobs, and our economy’s conversion from manufacturing goods to providing services, where workers perform a wide variety of tasks and no longer share common interests, have fundamentally changed this labor-friendly landscape. The ability of unions to achieve benefits for large numbers of workers, despite their relatively meager resources, has been undermined by these changes in the workplace.
Today’s workers, saddled as most are with mortgage and credit-card debt, are no longer willing to endow unions with the ability to call strikes, the only real leverage they ever possessed to secure higher wages and benefits.
Moreover, a sizable portion of workers in the service sector tend to think of themselves as white collar, rather than blue collar workers and are no longer predisposed to look to the labor movement for help. (Fox 2014)
Though the ultimate conclusion is correct, the premise used as the basis of the reasoning leading to the latter is not-the main reason why service or commercial employees are less unionised than the industrial working class lies in in the difference in their respective working conditions: the former are less concentrated, to a lesser extent engaged in the relations of co-operation (with all its implications for mutual solidarity and organisational capacities of a given class )-consciousness can be here at best an intervening variable rather than the prime cause.
The incessant drumbeat of anti-labor rhetoric used to promote right-to-work laws and other anti-union legislation has drowned out most sympathy for the labor movement. For many in the dwindling middle class and even among the poor today, words such as “corruption,” “bosses” and “extortion” are more associated with unions than their struggle for higher wages. The Great Recession has further undermined organized labor.
The layoff of huge numbers of employees, as well as bankruptcies and the wholesale reduction or loss of pension benefits for many in the private sector has enabled anti-union politicians to play them off against unionized public sector employees with relatively rich pension plans funded by their tax dollars. (Fox 2014)
Similarly, the contours of the middle class are somewhat indistinct in the following argument, which is nevertheless interesting for what it reveals about the mainstream public opinion in the U.S., that, it will be seen, irrespective of official political and ideological persuasion, increasingly displays in effect, well…left-wing leanings. Thus, the “Washington Post”’s commentator notes that “The manufacturing sector has experienced a modest renaissance since it hit bottom during the Great Recession. The number of manufacturing jobs […] has raised every year since 2010”. But perhaps more significantly, “profits are soaring — in 2012, after-tax profits of manufacturing firms hit a record high of $289 billion. Share values have soared with them. The Standard & Poor’s 500 Industrials Index has risen 59 percent more than the overall 500-stock index since 2009” (Meyerson 2014a). So far, so familiar. But then the argument takes on an unexpected twist. The above-mentioned commentator argues-without invoking the word itself-in class terms, contrasting-as he does-the prosperity of the bourgeoisie with the opposite trends at the other end of the class spectrum: “wages, however, are falling. Although the average wage for all workers, adjusted for inflation, has declined by about 1 percent since May 2009, Bloomberg reported, it has declined by 3 percent for workers in the more-profitable-than- ever manufacturing sector” (Meyerson 2014a).
Not only did thus the author being cited choose as the basis for his comparisons the allegedly defunct –according to some-the industrial working class, but going further, he even makes his task more difficult by focusing on the case of the firm that otherwise has been discussed above.
What is described below is a rather typical story of labour-power arbitrage, or, as the author concerned calls it, “the epic drama playing out in Washington’s Puget Sound region, from which Boeing, long the area’s dominant employer, has threatened to at least partially decamp. Several weeks ago, with the reluctant blessing of union leaders who feared the company might relocate production, Boeing presented its workers with an ultimatum: Either they had to agree that the new hires who would build the company’s new 777X passenger jetliner would have to work for 16 years, rather than the current norm of six, to bump up to full union scale, or Boeing would build the plane elsewhere. Instead of making roughly $28 an hour to build one of the world’s most sophisticated pieces of machinery, workers would make roughly $17 an hour, or less, until they’d put in a decade and a half on the job.
By a 2-to-1 margin, the workers rejected their leaders’ recommendation and voted down the offer. Boeing then initiated a bidding war to see how much in tax breaks it could wring from states that wanted the work. More than a half-dozen states have sent in bids, some with side agreements from local unions that members would work at reduced rates, some with no such agreements because unions barely exist in their states” (Meyerson 2014a).
It is telling, of course, that the author underlines nothing other than the weakness of unions as a key factor accounting for the shape of industrial relations with their vast socio-economic ramifications. But he goes even further than that precluding the industrial structure as a possible justification for the behaviour of the firm. “It’s not as if Boeing is a clothing manufacturer scrambling to meet the price competition of rivals that make their goods in Bangladesh. Boeing’s sole competitor in the large-scale passenger-plane market is Airbus, the European conglomerate whose workers’ wages are comparable to those in the United States. But Boeing has already located one major plant in South Carolina, where workers make about $10 an hour less than their Puget Sound counterparts. It’s through such moves, and the threat of further such changes, that U.S. manufacturers have increased their profits at the expense of their workers’ paychecks” (Meyerson 2014a).
Whether the reader concurs with Meyerson‘s views, matters less in that context than the fact that the middle class issue has come to be associated to the issue of minimum wage, which again underscores the inescapable ambiguity of the concept involved. None of the workers at either end of Boeing’s pay scale makes anything like the federal minimum wage, but I suspect the anxiety instilled by these kinds of stories is one reason there is wide, and growing, support for raising the minimum wage. It takes no great imaginative leap to see a time in the not-too-distant future when the incomes of all but a fortunate, talented tenth of the U.S. workforce are reduced or held stagnant. Indeed, the median inflation-adjusted salary for American men is already lower today than it was in 1969. “ in 1964 American men in their thirties had a median income of $31,097 (controlling for inflation) while thirty years later their son’s generation was making 5% more, $32,801; in 1974, American men in their thirties had a median income of $40,210 while thirty years later the median income for men in their thirties was $35,010-a 12% decline” (Sawhill, McMurrer). Tyler Cowen, a heterodox libertarian economist, has written that the U.S. economy is morphing into one in which 10 to 15 percent of the workforce will be wealthy and the remainder will resign themselves to making do with less. He foresees little likelihood that the eradication of the broad middle class will lead to a United States “torn by unrest” (Meyerson 2014).
Now, the view of the libertarian economist cited above is surely interesting, but no less so is one laid out by our commentator, extending the former -again without using the term itself-into the arena of open class conflict:
I am not sure that the docility of the American people can be so readily assumed. The adoption of minimum-wage increases and living-wage ordinances throughout increasingly liberal cities and blue states suggests that where workers have the capacity to rebalance the economy through legislation, they’ll do just that. With the near-elimination of unions from the private-sector economy, legislation remains the sole means available for workers to bargain for their fair share of their company’s revenue, particularly in sectors, such as retail, that can’t really relocate. That’s why the victories of those workers demonstrating at Wal-Mart and fast-food outlets have taken the form of legislated increases in local minimum wages, rather than resulting in union contracts.
The fight for higher minimum wages may be just the beginning of a long battle to rebalance the economy. If laws are not changed to enable workers to form unions without fear of being fired, the battle for higher median, not just minimum, wages will eventually be fought in the legislative arena as well. Profits that come at the expense of downwardly mobile workers may find little honor —or legislative support — in their own country. (Meyerson 2014a)
Indeed and even more expressly, the issues of industrial relations and union power overlap that of class struggle, which turns out to be relevant also to the middle class (replacing the proletariat as the pivotal actor on this arena): “We’re called the United States of America, but we don’t seem very united these days. Competing visions of centralized power in Washington versus individual and states’ sovereignty has little middle ground.
They’ve sucked us into their class warfare scam. It’s the old rich, white moustache-twirling racists and their greedy big-business buddies versus the benevolent guardians of women, minorities, kids, the sick, the elderly and the middle class.
It’s the centuries-old proletariat-bourgeoisie two-step without the guillotines or gulags; but with the current level of vitriol in political rhetoric, I wouldn’t rule anything out.[…]
Majority opposition to the idea of Big Brother is the kiss of death to its proponents.
[…] Class warfare will go on. Our voices will continue being ignored. They’ll keep doing whatever they please and tell us we’re going to like it. To paraphrase journalist H. L. Mencken, we’ll be getting the government we deserve and getting it good and hard” (Belisle 2013).
The statement below shows that within a political arena one could come across at least two main visions of the said relation:
The median household income in America fell from $51,100 to $51,017 in 2012, more than 8 percent below its pre-recession high in 2007, according to the Census Bureau. Meantime, from 2009 to 2012, the incomes of the top 1 percent jumped 31 percent.
This is what Democrats mean when they talk about income inequality; if you’re at the top, you’re doing well; if you’re among the other 99 percent, notso much.
“American inequality began its upswing 30 years ago, along with tax decreases for the rich and the easing of regulations on the financial sector. That’s no coincidence,” explains Nobel Prize-winning economist Joseph Stiglitz. “It has worsened as we have under-invested in our infrastructure, education and health care systems, and social safety nets.”
We’ve “underinvested” because the 1 percent, whose interests are tirelessly advocated by House and Senate Republicans, don’t need infrastructure, education, health care or social safety nets. They have private limos, private jets, private schools, private colleges, private hospitals and piles of private cash.
This simple logic often draws the charge of “class warfare” from the right. What’s ironic is that many who parrot this popular conservative prevaricationare themselves in the middle of the middle class, watching their own incomes stagnate or fall.
In the run-up to 2014 midterm election, voters heard a lot about income inequality. President Obama has lately been ripping nonexistent “trickle down economics” while blasting the absurd notion that godly “job creators” will selflessly look out for the interests of the middle class and poor.
“The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American dream, our way of life, and what we stand for around the globe,” Obama said last month, calling on Republicans to act.
“You owe it to the American people to tell us what you are for, not just what you’re against,” the president added.
We know Republicans were against Obama’s 2011 jobs bill that would have put a million or more unemployed Americans back to work and be fully paid for in 10 years, according to the non-partisan Congressional Budget Office.
In addition to cutting payroll taxes for small businesses, Obama’s jobs bill would have funded critically needed infrastructure projects important to the middle class and poor including schools, highways, and bridges.
It would also have provided funding for more firefighters, police officers and teachers, the latter of which Cobb County could sorely use today.
But Republicans protected their wealthy patrons, refusing to pass the jobs bill because it would have added a 5.6 percent surtax on those earning over $1 million per year.
So instead of finding jobs, 1.3 million unemployed Americans had their Emergency Unemployment Compensation cut off just in time for Christmas by Georgia Reps. Phil Gingrey, Tom Price, Jack Kingston, Paul Broun and the rest of the Republican Scrooges.
“The government destroys wealth,” growled Rush Limbaugh some time ago. “El Rushbo,” who makes $70 million annually and benefits from Republican obstruction, would be in no danger of going on food stamps if he had to pay the 5.6 percent surtax.
Likewise, Las Vegas gambling tycoon Sheldon Adelson, who blew more than $100 million on Obama attack ads in 2012, is worth nearly $30 billion. The surtax on Adelson’s income would represent a rounding error.
To the extent there is any class warfare today, it’s being viciously waged by the GOP on the middle class and poor, not on Rush Limbaugh and Sheldon Adelson.
Cobb County voters who say they’re conservatives should ask themselves if their continued support of Republican candidates is hurting their own pocketbooks. (Foley 2014)
However, the notion of class struggle has come to be linked with a definite political doctrine, and by the same token with other unpleasant, even Cold-war associations, as a consequence of which it has become kind of taboo, which if it is considered at all, this does happen at the expense of serious distortions. A case in point is the contention that “t’s not about class warfare when the middle class try to earn a living wage. More education does not guarantee a better job as there are many MBAs and PhDs out of work. Since the rich earn 90 percent of the income they should pay higher taxes” (Koehler 2014). The author apparently understands the term “class war” quite literarry, as a physical fight or something. Meanwhile, regardless of the kind of instruments being used-peaceful or not, if a class or its sections fights to improve its working conditions or raise wages, this epitomises the notion of class struggle.
For a change, in another case there is a clear reference to the notion of exploitation, only that its link to the middle class is not that explicit, which once again shows the concept’s ambiguity: Vice-President Joe Byden in his recent speech “painted a picture of a middle class still struggling while the nation’s top earners continue to line their pockets. He said ‘we have some of the most productive workers in the world, but corporations are more concerned about their stockholders than they are about their employees’, said one prominent Democrat who attended the fundraiser. He talked about how the fruits of labor go to stockholders, rather than to the people who are producing it. That the ‘people making the money in this country are the corporations’.
Another Democrat in the room said the vice president “talked about how the system was rigged against the middle class. He said the economic realities of the middle class are diminishing, and that the average middle-class family is finding it hard to make it economically” (2014).
Interestingly enough, in an account of the same class war, only that concerned with another country, the middle class comes up at the other end of the spectrum, for all intents and purposes that of the bourgeoisie – At the very outset the reader is told that “most issues that have convulsed urban India these days ultimately get fought on class grounds. […] Whatever the individual details - the overarching narratives, according to me, are both of class wars.
[…] It is almost as if India’s new and uneasy middle class seizes on the opportunity to train its most vicious arsenal on its softest targets in a bid to flagellate itself for its imagined or real sins.[…]
So great is this yawning chasm between the haves and the have-nots in today’s India that not only are the haves the first to be blamed in public perception for everything that goes wrong, their own guilt and unease compels them to turn against themselves and others in their class to make amends. This is where things begin to go pear-shaped and the course of real justice gets thwarted.
Has any one noticed how in the Tejpal case, the term ‘cosy Lutyens Delhi club’ has been used with such suspicion and disdain by so many?
‘Lutyens Delhi’ and ‘Malabar Hill Mumbai’ have come to represent the mount of all that is wrong with the country. You only have to mention them and scenes of corruption, complicity and nepotism are conjured up in the listener’s minds.
The outrage for Tejpal and his alleged heinous act - without for a moment undermining his victim’s stand - has risen like a groundswell from many of those who felt unwelcomed in the charmed circles of his Thinkfests and social arenas. “Take him down” is the battlecry, “him and all those like him who represent what has gone wrong with the country.” This rage, fury, anger and resentment has reached such a level that no one in the middle class can escape its torrent or remain unsigned by its flame. Especially, not people who realise that they have secured their better seats in unideal circumstances, and often with unfair means or just by the happenstance of good luck.
With such thoughts undermining their confidence, is it any wonder that the first people to pull down one of their own will be members of the same class, people of the same social order?
And whether they do this out of self-preservation, self-hate, or a great fear of being the next targets themselves, who will know?
Yesterday a middle-class professional dentist couple, today the icon of the chattering classes, tomorrow it could be you. Ask not who the crowd bays for it bays for you. And you. And you.
The great Indian Class War. A snake eating its own tail“ (Malavika 2013).
Notice the word “order”, purportedly synonymous with that of “class”, while its far closer association seems the concept of estate; the ostensible example of that category mentioned in the next sentence is ambiguous, however – “the professional dentist” may be indeed a member of a social estate – in the case of her employment in a public hospital or clinic; whilst her self-employed peer belongs to a social class rather than to any non-economic estate.
In another country of the same region, however, there is also a war being waged against the middle class, only that the latter turns out to have little in common with its ostensible Indian sister: the Grade 5 Scholarship Exam has played a socially-progressive and politically-stabilising role as a key enabler of intergenerational social-mobility. The Scholarship Exam was one of the few ways in which intelligent children from underprivileged/rural backgrounds could take the first critical step away - and up - from their natal-state. It enabled the cleverest children of each generation to gain admission to well-facilitated national schools. This gateway to a better education provided a much needed strand of equalisation of opportunities to an unequal land. The Scholarship Exam imposed a measure of plurality on ‘top-grade’ national schools by preventing them from becoming the exclusive preserve of children from affluent backgrounds. De facto ethno-religious apartheid (the literal meaning of which is apart-hood) is one of the major unattended problems in our education system. The Scholarship exam marginally reduced class apart-hood in our top public educational establishments by making it compulsory for them to admit the brightest students from less-privileged schools every year. Without that gateway, many a talented student may never have escaped the trap of lack of opportunity. And the country would have been poorer without the utilisation of their intelligence and capacities. All that will change from 2016. The Rajapaksa regime has taken one more step to mire Lankan society in a state of rut by abolishing the Grade 5 Scholarship Exam.The Siblings seems to have an inborn genius in presenting something as its opposite. A war was turned into a ‘humanitarian operation with zero-civilian casualties’, open prison camps into ‘welfare villages’ and a witch-trial into a legal-impeachment. Similarly the abolishing of Grade 5 Scholarship Exam is being presented as a student-friendly
[…]The societal sector most affected by this retrogressive step will be the middle/lower-middle classes, especially from rural areas. (Gunasekara 2013)
However, views that could be included under the present rubric are ambiguous in yet another sense; while the working-class membership of manufacturing workers is beyond any doubt, the same does not necessarily refer to other categories considered in that context. There were nearly 700,000 fewer middle-income households since the beginning and during the economic crisis, according to new Census Bureau data. The economy has grown more top- and bottom-heavy in 2010 through 2012 as compared to 2007-2009, the data show.
Most of the erosion came at the bottom end of the middle-income range. At the same time, the ranks of both upper- and lower-income people swelled by hundreds of thousands. […] The decline of the middle class and increasingly extreme distribution of income and wealth in America is a long-standing pattern that helped define the economic policy debate between the two presidential candidates in 2012. The new Census data show that the steady, slow economic recovery of the past three years didn’t arrest that slide.
But middle-class shrinkage has dangerous implications for the country’s future success. A smaller middle class reduces future generations’ economic mobility— the process of moving up the economic ladder compared to one’s parents — according to research by the Center for American Progress. Furthermore, the most effective policies for spurring economic growth and broad prosperity tend to be those that focus public resources on boosting the middle class” (Pyke 2013b).
Whilst the above argument does not indicate in what regard, if any, Pyke differs from other economists or sociologists cited in this chapter, his further assertion makes it clear, as it moves beyond the income terms to include class considerations, referring to what we would call the mega-employee class: (and possibly even some non-economic social estates) “While the recovery’s failure to staunch the middle-class bleeding is worrisome, it should not be surprising. The strength of the middle class is closely tied to the strength of working people — states with larger and stronger unions have larger and stronger middle-class populations and working people’s rights have been under concerted attack by conservative organizations and lawmakers in recent years. The gains from the recovery have mostly accrued to the rich, who regained their lost wealth relatively quickly even as working people saw their wages decline despite ever-rising productivity” (Pyke 2013). This extension is even more evident in the case of the following assessment of India’s middle class: “This class has been reluctant to abandon the cloak of super-respectability and to move with the times, in the realisation that work in the fields and factories is just as dignified as working at a desk……It is the class which provides our clerks, our soldiers, our technicians, politicians and administrators” (FPJ 2014).
In a similar vein, “this spring, a prominent Democratic pollster sent a memo to party leaders and Democratic elected officials advising them to speak and think differently.
The nation’s economy had deteriorated so drastically, he cautioned, that they needed to abandon their references to the “middle class,” substituting for those hallowed words the phrase “working people” (Meyerson 2014b).
From a pragmatic standpoint, such a shift indeed makes a lot of sense, as both objective and subjective evidence testifies.
“In today’s harsh economic reality,” he wrote, “many voters no longer identify as middle class.”
How many voters? In 2008, a Pew poll asked Americans to identify themselves by class. Fifty-three percent said they were middle-class; 25 percent said lower-class. When Pew asked the same question last January, it found that the number who’d called themselves middle-class had shrunk to 44 percent, while those who said they were of the lower class had grown from 25 percent to 40 percent.
Americans’ assessment of their place in the nation’s new economic order is depressingly accurate. [...]
Median household income has declined in every year of the recovery. The share of the nation’s income going to wages and salaries, which for decades held steady at two-thirds, has in recent years descended to 58 percent the lowest level since the government began its measurements” (Meyerson2014b).
“The waning of America’s middle class presents a huge challenge to the nation’s oldest political party. The Democrats’ ability to improve the economic lives of most Americans has been their primary calling card to the nation’s voters ever since Franklin Roosevelt became president. Since the 1940s, however, the Democrats’ preferred method of helping working- and middle-class Americans has tilted more toward spurring economic growth than aggressive redistribution.
So long as the growth in the nation’s economy registered in the pocketbooks of most Americans, there was little need to adopt policies that put a high priority on, say, redirecting profits into wages.
And that was fine with the Democrats. When John F. Kennedy observed that “a rising tide lifts all boats,” he was not only accurately describing how the highly unionized and not-yet-globalized economy of the 1960s worked; he was also describing how the economy enabled the Democrats to establish a political framework in which they could seek and win support from both business and labor—from both Wall Street and Main Street” (Meyerson 2014b).
The author of the article points to the necessity of viewing matters historically: “the kind of economy that once allowed the Democrats to be the world’s leading cross-class party has almost completely disappeared. American economic growth today goes to a relative handful of its wealthiest citizens—indeed, since the recovery began in 2009, 95 percent of the income growth has accrued to the wealthiest 1 percent, as University of California, Berkeley, economist Emmanuel Saez has shown.
While the economy has grown by 20 percent since 2000, the median income for households headed by working-age Americans has shrunk by 12 percent.
And as wages have sunk to a record-low share of the nation’s economy, the share going to profits has reached a record high” (Meyerson 2014b).
The above argument thus again implicitly deploys the notion of the economic structure as a body of its own, ruled by internal economic mechanisms or laws, whose consequences must be therefore embraced, and the only issue remaining is an effective adjustment to those self-regulating forces. Naturally, this economically determinist picture, convenient as it may be from a political point of view, is substantively incorrect-the economy is embedded in a wider society and concomitantly is subject to all kinds of societal influences, including on the part of the political structure. So, inequality is not any effect of some mysterious natural laws-although the phrase “economic universe” is fairly current, it does not imply that the economy is a macrocosm in miniature whose movements are independent of human action to the same extent as the motions of the heavenly bodies.
The Democratic Party has been the principal architect of an American model of welfare state. Medicare and Obamacare affirmed the nation’s responsibility for the health care of its citizens. Medicaid and a raft of other programs targeted various forms of public assistance to the poor. The point is, however, none of these programs—nor any of the party’s signature civil-rights legislation—specifically sought to advance workers’ interests against their employers’. That had been taken care of by the National Labor Relations Act and minimum-wage legislation. That was a fait accompli. Furthermore, as American capitalism changed, what the Democrats had done had come undone. As reported above, corporations steadily weakened their workers’ bargaining power by shifting work abroad and breaking their unions at home, thanks to which the link between productivity and workers’ income was severed. If the following facts do not confirm the mechanisms of exerting surplus value are at work, nothing does: since 1979, the nation’s productivity has risen by 65 percent and its workers’ compensation by just 8 percent.
Another powerful trend, mentioned earlier, consisted in the fact that businesses have changed the forms of employment they offer. Workers who formerly would have been full-time employees have been labeled as independent contractors or listed as working for temporary-employment agencies—changes that have stripped from them the right to unionize and the protections of wage-and-hour laws. The number of part-time employees has ballooned.
It is only fair to point out, of course, that the Democrats haven’t been insensible to working Americans’ concerns during these years. When they had the votes, they raised the minimum wage, increased the funding for college grants and loans, and initiated public-works programs during recessions. At the same time, however, they largely failed to grasp the full extent of the erosion of middle-income jobs, the decline in worker bargaining power, and the stagnation of Americans’ incomes (offset, until 2008, by the corresponding increase in Americans’ debt). The idea that the nation’s middle-class majority wasn’t a permanent axiom of American life, that it might one day cease to exist, simply didn’t occur to most party leaders, as it didn’t occur to most members of the country’s political and economic elites.
Rebuilding that middle-class majority requires Democrats to embrace ideas and find a voice as new to them as the cadences of the New Deal were to the Democrats of 1933.
“If the Democrats are to establish the enduring majority that many of them see in the offing, they will have to shift the rewards of economic growth from profits, dividends, and rents to the wages and salaries on which the majority of Americans depend” (Meyerson 2014b).
The single most helpful reform would be to restore workers’ bargaining power. With the rate of unionization in the private sector falling beneath 7 percent, the ability of workers to bargain collectively for improvements in their pay, benefits, or hours is effectively nonexistent. Efforts to shore up their power by strengthening their capacity to form unions without fear of being fired, however, failed during each of the four most recent Democratic presidencies (Johnson’s, Carter’s, Clinton’s, and Obama’s). Progressives cannot abandon this fight, but it’s time to open other fronts as well—particularly since years of polling show stronger support for such labor-backed causes as greater tax equity, higher minimum wages, and restrictions on corporate offshoring than they do for unions themselves.
One way to restore the link between the economy’s growth and most Americans’ incomes would be to enlist corporate tax reform in that battle. As William Galston, the onetime leading light of the centrist Democratic Leadership Council, has argued, lowering taxes on employers who give their workers a wage increase commensurate with the nation’s annual productivity growth, while raising taxes on employers who don’t, would go some of the way to reconnecting growth to income. The scope of such a reform would increase by requiring employers who misclassify their workers as independent contractors or “temps”—a wage-suppressing dodge that’s long been the norm in such industries as trucking, cab-driving, and warehousing and is now spreading to manufacturing as well—to cease such mislabeling and acknowledge that the workers are in fact their employees.
The conventional viewpoint within the economics and business establishments is that workers’ declining incomes are the inevitable result of globalization and the automation of work. This viewpoint neglects to consider how the structure of corporate decision-making affects workers’ experience in the face of these trends. In Germany, laws that require corporations to split their boards between management and worker representatives have led to the preservation of the highest-skilled and -value-added jobs at home—a key reason that country has become an export giant and boasts a far more secure and prosperous working class than ours. A law greatly reducing taxes on corporations that adopt this worker-management balance on their boards, and increasing them on corporations that don’t, could have a profound effect on the way corporations look at such matters as offshoring and the proper division between profits and wages” (Able, Deeds 2012).
The authors of those bold proposals cannot but realize that “these proposals would surely encounter massive opposition, but they have the virtue of appealing to Americans’ sense of equity and collegiality, as well as their skepticism about corporate managers, without raising the specter of big government” (Able, Deeds 2012).
Their further ideas are also remarkable, given how strongly the neopatrimonial system has become entrenched in the America’s reality.
“Democrats must also pursue policies with a more conventional pedigree: investing in public works both because we need to and because it’s impossible to foresee how we get close to full employment or environmental remediation without doing so; steeply raising the tax rates on the top income levels; raising taxes on capital gains and dividends (and perhaps devoting those revenues to a greatly increased Earned Income Tax Credit); regulating finance to the point that it can no longer dominate the economy; and diminishing the responsibility of students and their families for covering the costs of public higher education.
But the emphasis on increasing worker power and pay should be central to the Democrats’ concerns, both politically and economically. If the American economy is indeed descending into what economist Larry Summers terms a state of secular stagnation, the low pay of American workers, which has depressed their purchasing power and reduced the profits of all but the highest-end retailers, is largely to blame.
Like the other Democratic elected officials of her generation, Hillary Clinton came of age and (more than the others) thrived in an economic and political system in which Kennedy’s rising tide did lift all boats, cohabiting with both Wall Street and working people’s organizations was routine, and the pressure to take a side in a slowly emerging class war could barely be felt. Today, however, that pressure is palpable—and increasingly uncomfortable to a host of Democratic pols, Clinton most especially.
How this conflict affects the 2016 presidential race, the more-likely-than-not Hillary Clinton presidency, and the larger future of the Democratic Party remains to be seen. Despite its demographic advantages, the party cannot indefinitely retain its electoral edge if it fails to address the falling power and income of ordinary Americans—even if such policies cost the party the backing of financial elites at a time when elections are more driven by money than ever before. It’s time for Democrats to disenthrall themselves from their routine conciliation of interests that have become profoundly opposed. It’s time for them to welcome more hatred from the successors to Roosevelt’s forces of selfishness” (Able, Deeds 2012). This suggestion has been realized with a vengeance by Bernie Sanders, whose support by the mainstream Democrats may be due to a sober calculation that he is the only politician who can beat his equally populist (or so the story goes because in truth the populist label more obscures than reveals) right-wing counterpart, Donald Trump.A political commentator notes that “both candidates are fueled by voters’ angst and dissatisfaction. Each argues that the system is rigged against the middle class and they are appealing to voters who feel disenfranchised from the political cycle and who lack traditional loyalties to one party or another. Both have galvanized the largest crowds of the 2016 cycle, drawing thousands to massive rallies where each makes the case that dramatic, systemic change is needed to fix the country’s problems.
Despite their key differences on who is to blame and how to fix it, they may well be drawing from the same pool of voters” (Timm 2015). And indeed, both Trump and Sanders are aware of the similarity of their political profiles and electorates. The latter addressed this issue head-on: “Trump’s supporters are working-class people and they’re angry, and they’re angry because they’re working longer hours for lower wages, they’re angry because their jobs have left this country and gone to China or other low-wage countries, they’re angry because they can’t afford to send their kids to college so they can’t retire with dignity. …. Meanwhile, interestingly enough, John, this is a guy who does not want to raise the minimum wage. In fact, he has said that he thinks wages in America are too high. But he does want to give hundreds of billions of dollars in tax breaks to top three-tenths of one percent.
So, I think for his working class and middle class supporters, I think we can make the case that if we really want to address the issues that people are concerned about why the middle class is disappearing, massive income and wealth inequality in this country that we need policies that bring us together that take on the greed of Wall Street, the greed of corporate America, and create a middle class that works for all of us rather than an economy that works just for a few” (Illing 2015).
While in the above pronouncement the real socio-economic referent of the term “middle class” may be not that clear-cut, it is far less equivocal in the argument laid out by president of the United Auto Workers,otherwise similar in some crucial respects to the statements already cited above: “ many right-wing, extremely wealthy individuals and families want all workers to be low-paid, at-will employees.
The institutes and organizations they fund work every day to weaken and eliminate workers’ rights to organize and collectively bargain. They have successfully attacked and almost eliminated defined pension plans. Through the right-wing politicians they support, they have successfully suppressed the minimum wage below poverty level for years. They have withheld and reduced unemployment compensation when it has been most needed by good hardworking families.
These forces can only keep undermining the well-being of working families if we let them. Everyone in society who believes that we should all work hard and share in the wealth we help create needs to actively support workers’ rights to organize and collectively bargain. The higher percentage of workers in unions and covered by collective bargaining agreements, the greater will be the rise in middle class standards for all working families, both union and nonunion “ (King 2014).
But the next passage more explicitly refers to social estates rather than classes, as it is definite groups employed in the extra-economic domain that are at issue: “The tens of thousands of union members, faith leaders and community members who filled the state capitol understood that Gov. Walker’s legislation wasn’t about protecting workers or taxpayers. His real goal was the same as Pennsylvania Gov.Tom Corbett’s and his corporate allies’: to silence the voices of middle class workers.
As Vice President Joe Biden recently said, ‘Unions are the only guys keeping the barbarians at the gate.’
The barbarians at the gate in Wisconsin and Pennsylvania are the Koch brothers and other corporate interests who want to get unions out of the way so that they finally abolish the minimum wage, get rid of Social Security and Medicare and privatize public education. Their only concern is maximizing their profits and they will get rid of anyone, or anything, standing in their way.
In Wisconsin, these corporate interests even own many media outlets and exercise control of the message; attempting to dismiss nurses, firefighters and police officers as “union thugs” (Yves 2014).”
This is but one example of ambiguity plaguing the concept under investigation, which makes it –also in the present context-a frequent subject of ideological/political use/misuse.
An author whose political sympathies, or rather antipathies ar only too clear, argues that “the only group a tyrant can’t abide is the middle class. It has to go. […] the middle class doesn’t fit into the plans of a tyrant like Obama.
The middle class is not easily bribed. They actually believe in silly ideas like freedom, patriotism, capitalism, and upward mobility. They believe in personal responsibility and don’t want government dependency. They will stand and fight for things like God, country, American exceptionalism, and Judeo-Christian values. They are willing to die for those principles.
Obama knows that. Remember his own words during the 2008 Presidential primaries. Obama said that “working class people get frustrated and bitter, and cling to guns or religion…”. (Root 2014a)
Owing to its vagueness, the author concerned is in a position to use the term “the middle class” in the first part of his argument as referring purportedly to what is commonly regarded as its real-world referent, while in the second part speaking about the working class and pretending that he is referreing to the same group of people, which may on the one hand serve as an example of a rather unsophisticated ideological manipulation, corrorobating also-as it does-the aforementioned epistemological arbitrariness pertaining to the term concerned.
From this it is just a step to the aspect of the concept under consideration that shades over into the subsequent chapter.
What is at issue can be exemplified by the following pronouncement that seeks to bridge the past and present: “in two important aspects, the current discussion of the middle class is different from the twentieth-century debate about the historical role of the national bourgeoisie. In the last century, the aristocracy was the symbol of a cosmopolitan identity; the middle class, by contrast, was identified with the interest of the nation-state, and state nationalism was its customary political ideology. This is no longer the case. What is different today is an apparent schism within the middle class” (Krastev 2014). There exists a statist.
So far, so relatively uncontroversial, assuming that the term used at the end refers to the same bourgeoisie, which is imperative if the argument is to be consistent. However, logical coherence is precisely the trait the argument under examination lacks: “middle class (a national bourgeoisie), usually represented by government functionaries and low- and middle-level managers of public companies who aspire to be part of the government; and then there is a global libertarian middle class whose political ambition is not to be in government, but rather to control it. This global middle class is suspicious of any government. It believes that it has succeeded in life not because of anything the state has provided but against the attempts of the state to put its grubby hands on everything.
Those in the global middle class and those in the statist middle class often share similar income and educational levels, but they see the world very differently.
The state-dependent middle class is highly anxious about the shrinking of the state; the global middle class prays for it, and it is the latter that is at the heart of today’s protests in many parts of the world. The protesters in Moscow who labeled themselves ‘the creative class’ and the Bulgarian protesters who were dubbed ‘the smart and the beautiful’ are both representatives of the mobile and more cosmopolitan part of the middle class that trusts the market more than the state even when it subscribes to anti-capitalist, anti-consumerist slogans” (Krastev 2014).
One is reminded of a well-known adage: “too many cooks spoil the broth”-the author cited above put under one and the same umbrella a number of quite distinct social groupings; there is no justification for framing as a unitary “national bourgeoisie” both civil servants and executives of public enterprises, not to mention the fact that their grouping together is equally groundless. But, it turns out, “the middle class:” has even more faces or names-e.g. it shows up as a “creative class”, which may fit political ambitions of the author, but serves him much worse in his sociological cap.
Let us cite another example that fits in with both the present and the subsequent chapter-a special report of its February 142009 issue, “the Economist” (2009), based on the premise: “The middle class in emerging markets: Two billion more bourgeois“ and focused on that “Burgeoning Bourgeoisie” in developing countries in general and the large emerging economies in particular. Basing the analysis on a number of recently published studies by economists and sociologists on income growth and distribution in those economies, the analysis happily concluded that 50% of their population had now reached a “middle class status” (Ravallion, 2009; Wilson and Dragsanu, 2008; Bhalla, 2002 and 2009). However, the reader could be forgiven for not buying into this assessment. And indeed, it is important to add that such a conclusion is a direct function of setting the lower limit of the middle class to start at US$2 per day (in purchasing power parity), which only slightly surpasses the worldwide limit of poverty, set by the World Bank at $1.5 per day.
CHAPTER 8. THE “LEAPING” CONCEPT
Eclecticism and incoherence of the views analysed in the previous chapter are linked to the authors’ poor knowledge of the theories they presumably employ. “They argue that a new economy […] soon became unaffordable to ‘decent’ salaried people (teachers, engineers and technicians, small shopkeepers), but impacting on how these people saw themselves: once exemplars of successful jumps into middle class status but now doubly exiled to the suburbs and to the older pattern of struggling to get ahead by taking on two or three ‘demeaning’ jobs” (Lanoui et al. 2001). The thing is, the category of “salaried people”, as defined above, is an over-inclusive one; first, it includes the class of private owners, whose income cannot be classified as a salary. Second,however, and perhaps less apparent, the concept in question is too broad also by virtue of putting in one bag groups functioning in the economy (i.e. socio-economic classes) and those, such as teachers, whose jobs are non-economic in nature (elsewhere in the book the term “social estates” is proposed to describe this kind of groups).
Likewise, the following purported instance of the class under examination represents in fact a mix of class and estate locations: “Berea resident Phyllis Price says she could bring something to the U.S. Senate that incumbent Mitch McConnell could not: 57 years of middle-class living and experience living on a fixed income. […] She has worked at the Internal Revenue Service as a data transcriber and formerly owned a private income tax business. She also has worked as a teacher’s assistant” (Littrell 2013).
To concentrate on the aspect of over-inclusiveness, however, in the following definition it clearly stems from the latter’s common-sense character: “Whether you earn just enough to feed and clothe your family, or have something to spare to buy non-necessities, the thing that unites the lower middle, middle and upper middle classes” (2013), states the author, without delving into the nature of that purported common denominator.
Income data are presented throughout the book, as they obviously provide a key type of evidence in an investigation of what is argued to constitute a social stratum rather than class. As the reader surely will have noticed by now, on the basis of those data rather far-ranging conclusions are being drawn, so the quality of the data is obviously a crucial issue. Meanwhile, as the following passage shows, the former is not guaranteed at all; conversely, their construction may well suffer from the fallacy named in the head. The researcher in question quite rightly, to our mind, as suggested in another place in the bookk, criticises the much trumpeted about study, pointing out that “the income concentration estimates compiled by Piketty with his colleague Emmanuel Saez cannot be used to assess how the middle class has done over time. Incomes have risen strongly after taxes and federal benefits are taken into account and other improvements to the Piketty numbers are factored in. But I also showed that middle-class incomes have risen robustly among the working-age population before taking higher federal benefits and lower taxes into account.
Astonishingly, the latter result has been systematically ignored by a number of writers and researchers responding to my column. Most prominently, Jared Bernstein (in a response posted at the New York Times Upshot website) and Piketty himself (in an interview with The New Republic) claimed that middle class incomes have risen only because of government benefits and lower taxes. [...] rather than addressing the evidence I presented (or rather, presented again), Bernstein, Piketty, and others are simply ignoring it in their responses to my critique. By citing estimates that do not separate out the working and non-working populations, they obscure the strong gains in earnings that have accrued to working-age households.
You don’t have to look far to see this—you can scroll a few tabs over in the spreadsheet Bernstein uses. Bernstein turns not to Piketty’s data but to related estimates—I would say better ones for recent decades—from the Congressional Budget Office. CBO statistically matches people in the Department of Commerce’s Current Population Survey to tax returns in the IRS data used by Piketty, thereby attempting to leverage the strengths of both data sources. Bernstein notes that post-tax and -transfer household income for the middle fifth of Americans rose 36 percent from 1979 to 2010 before reassuring his audience that 90 percent of that increase came from transfers and lower taxes. Household wage and salary income declined by seven percent.
But the figures he is citing, like those of Piketty, combine retirees and members of working-age households. Retirees have lower pre-tax and –transfer incomes than everyone else, concentrated in—you guessed it—retirement benefits. More importantly, with the aging of the baby boomers, retirees have been a growing fraction of the middle class. Since Bernstein includes a rising share of non-working Social-Security-and-Medicare-receiving people in his trend analyses, it should come as no surprise to find that earnings growth was less important than the growth of transfers over the period” (Winship 2014).
The point is that the above-mentioned transfers imply a position in the structure of ownership relations very different from that held by the wage-earners. The beneficiaries of the former constitute a social estate, rather than a class.
It is necessary, we believe, to keep in mind that caveat when reading such revelations as one cited below:”rather than constituting 91 percent of income growth, taxes and transfers only account for 54 percent of income growth among nonelderly households. The growth of elderly households is the entire reason that wages and salaries detracted from income growth and that taxes and transfers accounted for nearly all of the growth. People in such households grew from 15 percent of all people in the middle fifth in 1979 to 26 percent of them in 2010. It is not just that the retiree population has grown—thanks to Social Security and Medicare, the number of retirees in the middle fifth specifically has grown much faster than their rate of growth in the general population.
Wages and salaries are the single biggest factor explaining income growth for those middle class families living in households with children. Wages and salaries are nearly as important for childless nonelderly households. The fact that when the two nonelderly groups are combined wage and salary growth looks less important than it does in either group individually is an instance of Simpson’s Paradox. The paradox is explained by the fact that among the nonelderly middle class, people in childless households became a much bigger group relative to those in households with children.
It is not entirely clear how to interpret the paradox. One possibility is that households with children that are also in the middle class are a more advantaged group today than in the past, in which case looking at their changes overstates the importance of earnings growth to overall income growth. The greater dependence on wages and salaries and lower dependence on transfers and taxes would reflect the fact that only higher-earning parents make it to the middle class today, which now includes more retirees and other childless households.
However, among the nonelderly, childless households have lower incomes than households with children, in part because they have fewer earners. Therefore, pooling nonelderly households may understate the importance of earnings growth because the group with fewer earners has grown so much bigger over time.
The ideal way to deal with this is to adjust incomes for the number of household members before computing averages and looking at changes in those averages.
However, while CBO determines who is in the middle fifth of households on the basis of size-adjusted household income, it then reports income averages that are not adjusted for household size.
A second issue is that older “nonelderly” households may be headed by a fully or semi-retired head. Workers become eligible for partial Social Security benefits at age 62, and private retirement savings can generally be tapped without tax penalties before age 60. The reliance on Social Security among retirees may be behind the greater importance of transfers among childless nonelderly households than among households with children. In addition, CBO puts households that have children but that also have an elderly head in this “nonelderly childless” group, further expanding the presence of retirees in the group.[...] let’s consider what the increases in wage and salary income look like, along with gains in a broader measure of labor income that includes worker contributions to 401k-type retirement plans, employer provided health insurance, and the employer’s share of payroll taxes (which is viewed by CBO and most economists as income received by workers that is then taxed away to pay for social insurance benefits). I also show the change in pre-tax and -transfer income, which includes other private sources such as business, capital, and retirement income.
Middle class households with children had earnings $7,000 to $13,000 higher in 2010 than in 1979 (after accounting for the rise in the cost of living), a gain of 14 to 23 percent. If one adds other forms of pre-tax and -transfer income, the increase was over $15,000, or 25 percent. Childless nonelderly households also saw significant gains in pre-tax and -transfer income ($8,000, or 20 percent). The gains for nonelderly households as a whole are smaller than for either group individually—a clear sign that grouping childless households and those with children understates improvement if incomes are not adjusted for household size. Only elderly households in the middle class saw declines in earnings and pre-tax and -transfer income. Don’t cry for them, though—their after-tax and -transfer income rose by 45 percent.
Overall, “that’s a $21,000 increase in household income among middle-class families with children before taking transfers or taxes into account. It’s a $13,000 increase for childless nonelderly households. Seniors experienced declines. Good thing Social Security and Medicare were enough to raise their after-tax and -transfer incomes by 48 percent (not shown).
Among both nonelderly groups, household income grew by about one-third—without any consideration of federal benefits or taxes. In fact, labor income also grew by about one-third among the nonelderly groups individually. Even if you are inclined to prefer the nonelderly figures when the two groups are pooled, we are talking about a $10,000 increase in earnings broadly defined” (Winship 2014).
The above argument shows that a flawed conceptual framework can lead to serious statistical distortions.
Polish philosopher of science, Leon Petrazycki, coined the term “leaping concept” to refer precisely to such concepts whose meaning is extended beyond what the name itself suggests.
A good illustration is provided by both the aforementioned figure cited by “The Economist” and an over-extension of a common definition, to which a whole later chapter is devoted: “economists often start with the middle 20% of the country – people earning between $39,000 and $63,000 a year – and work their way out. Some then stretch the definition to include the middle 60%, which has an income range of $20,600 to $102,000. Because that’s a wide range, other factors come into play: home ownership, savings, a college education. I would say those on the lower end of the spectrum are dangerously close to being “poor”, since the poverty line for a family of three is just shy of $20K.
Presumably, then, one of the above-named factors has been tacitly (and rather arbitrarily) picked by the author of the following comment: “ the middle class was almost entirely destroyed by the financial crisis given many had their net worth heavily linked to the value of their homes. In other words, there is an argument to be made the middle class no longer exists anyway” (Wright 2014).
However, this does not stop other researchers from repeating the same kind of error as one reported above. In Robert Reich’s view (to which we shall return in the next chapter), “the middle class income range should be 50 percent higher and lower than the median” (McDill 2014), which would-as of 2012-put the range between $25,000 and $76,500.
This has elicited such a reaction:
“But anyone making $25,000 annually would struggle to declare themselves as ‘middle class’” (McDill 2014). It is worth mentioning that Department of Health and Human Services defines a family of four living off $23,850 as poor.
In one commentator’s opinion, “the middle 50 percent of the range Reich offered would be between $40,000 and $64,000 annually, which probably has a better meaning as the middle class income range” (McDill 2014).
Symmetrically, however, the other end of the spectrum can be pushed unrealistically high; Republican presidential candidate Mitt Romney set the upper-end figure for middle class membership at a household income of $250,000 a year, which, sure enough, in great measure expresses his political views. President Barack Obama, whose ideology is rather different, set the bar lower, if only a little-at $200,000. And such over-inclusive concepts cannot but have harmful, even self-defeating consequences for certain policies promoted by the exponents of the former, as the case of Hillary Clinton for whom families pulling in $250k per year are definitively middle class manifestly shows: thanks to this definition, the “middle class” encompasses both the top 5 percent of earners and actual median earners, who make a mere $53,657 per year. “And, because Clinton has emphatically pledged not to raise taxes on ‘the middle class’, this means no Clinton-backed policy can result in a tax increase for these increasingly wealthy households.” (Bruenig 2016)
To come back to the other end of the spectrum, in some pronouncements the critical step over the lower bound of the concept concerned has been indeed made, as e.g. with the author who in one breath mentions the middle class, the poor and the working classs. (Surmick 2014). At the other end of the spectrum the Research conducted by online survey in Brazil, China, India, Singapore, the United Arab Emirates, USA and UK with 4,437 consumers within the top 10-15% income during August 2014” (Burch 2015), which by itself would not be especially noteworthy, were it not for its subject: the global middle class.
Such confusion is only possible because the term we are focusing in is itself confusing. However, those numbers are miles apart from the median – (arguably, the most widely used metric in that context) or “middle – household income in America, which the Census Bureau reported to be about $50,000 in 2011. The top 5 percent of American households had incomes of $186,000 or more” (pbs.org 2012), meaning that many of them would still qualify as “middle class” under the candidates’ definitions, which seems absurd. It comes as no surprise that the local commentator could not disagree more: “Actual income levels around the country make both of those figures high” (Tims 2013b). In point of fact, this could be deemed an understatement, as the aforementioned figures imply that 96 percent of Americans are middle-class. With this kind of definition, nothing could be more straightforward than joining the elite club of rapidly growing economies, at least according to Easterly (2001, who contends that countries that have a larger middle class tend to grow faster, at least if they are not too ethnically diverse (the little word “too” suggests in what way the impact of that factor can be minimised).”
A case in point is provided by Indonesia; Andrew Robb, Australia’s Minister for Trade and Investment recently argued, “Indonesia has a middle class twice the size of Australia’s population” (Conley 2013).
However, it is safe to say that putting the equation mark between Indonesia’s “middle class” and Australia’s population is profoundly misleading. The middle classes of Indonesia and other developing countries are in fact quite different animals than the entity described by that term in the West, putting aside-for the sake of argument-at the moment the ambiguity of the latter. Thus, the former “classes” do not match the consumption capacity of developed country middle classes or even those one would consider poor.
True, Indonesia’s economy has grown rapidly in recent years. Measured in US dollars, Indonesia’s GDP is smaller than Australia’s, although in terms of purchasing power parity it is slightly larger. In 2012, Indonesia’s GDP per capita was $3,592 (USD) or $4,977 (in Purchasing Power Parity (PPP) International dollars). Australia’s GDP per capita was US$67,643 (or $42,640 PPP). Most tellingly, Indonesia is ranked 121st on the World Bank’s Human Development Index (based on life expectancy, education, and income). Australia ranks second.
Recently, Indonesia has struck economic difficulties with slowing growth, increasing inflation and a falling rupiah against the US dollar. The latter could be a problem for Indonesia given that 68% of its US$259.54 billion foreign debt is denominated in US dollars. Thus, the argument that Indonesia is on an unstoppable path of never-ending economic growth is a blatant instance of Pollyanna economics. Also overly optimistic, therefore, is the assertion that Indonesia will develop an ever-expanding middle class.
Significantly, in its recent report, McKinsey doesn’t use the term “middle class”, instead it refers to the “consuming class”, which includes anyone with an income greater than $3600 a year on a PPP basis (based on 2005 exchange rates). The report argues that there were 45 million Indonesians in the consuming class in 2010 (out of a population of 240 million).
Based on an annual growth rate of 5-6%, it contends that the consuming class will grow to 85 million by 2020 (out of 265 million) and to 135 million (out of 280 million) by 2030. If Indonesia grows at 7% per annum until 2030, its consuming classes will grow to 170 million. That’s a big call. This kind of simple extrapolation is not scientifically grounded-A flattening of economic growth (or worse) would mean many of those included in a higher economic category would return to the ranks of the poor (Conley 2013).
And of course, societies numbered among those dubbed developing, undeveloped, less developed, or whatever are not immune to “the illness” discussed in the first chapter.” A declining middle class over the past five years in the Cayman Islands has been one of the major reasons the local economy has struggled to restart following the financial markets’ collapse of 2008-2009.
[...] the higher-paying jobs tended to be the ones vanishing during the five year period.
The proportion of individual workers earning in what government considers the “middle income” range, between $28,800 and $86,388 per year, went from 44.3 percent of the labor force in 2008 to 40.2 percent in 2013. Meanwhile, those earning less than $28,800 per year increased from 44.6 percent of the labor force in 2008 to 47.3 of the workforce in 2013.
[...] Cayman went from having roughly the same number of middle-income earners and lower-wage earners in the local economy just five years ago, to a significant disparity last year where low wage earners made up nearly half the workforce” (Fuller 2014).
It is owing to taking notice of such wildly disparate measures and definitions, and thereby unfounded claims built on their basis that some commentators tend to voice some serious reservations about the usefulness of the term in question: “ When the same term is used to describe an American household bringing in up to $100,000 per year (according to a recent poll; $250,000 if you’re Mitt Romney) and Laotians living on $2 per day (according to the Asian Development Bank), it may not be a very useful term” (Keating 2014).
And the reader will have known by now that this is by no means the end of the story. For instance, UC and California state universities offer “new middle class scholarships
[...] Families with incomes up to $150,000 are eligible. It’s open to all undergraduate students at the California public university system, including those students under the California Dream Act” (Finney 2014).
Returning to Asia, the reader is told that “middle class is by far the largest constituent of the Indian society: top two per cent are way above the rest, the bottom 30 per cent struggle for two meals a day. Everybody in between is the middle class” (Ghalib 2014).
Upon scrutiny this at first glance overblown concept appears to be sort of misnomer, referring in fact to a determinate socio-economic grouping that is to be couched in quite different terms, though, than its above label suggests.
The beginning of the argument put forward by the Indian researcher confirms our above observacion insofar as he is referring to “one class”, whose purported monopoly status cannot but be based on its numbers. “Within the so-called one class, there has been marked segmentation with sociologists throwing in terms like upper middle class, middle-middle and lower middle class, each term pointing to a level of aspiration and a state of achievement. In the centuries gone by, it was easier to recognise the middle segment: the Vaisyas, the trading community, provided the bulwark. In many ways they still do, except the caste hierarchy of yesteryears has been replaced by a class hierarchy. Hence we find Brahmins, Kshatriyas and in many cases Sudras too being part of the great Indian middle class. Of course, there are Syed and Ansari Muslims too, just like people from other religions. The driving mantra being the economic condition of the people; what is important for this class is not where you come from, but where you are headed.
The otherwise indefinable class is now beginning to be heard. And seen. Of course, much before our media announced the arrival of the middle class, Pavan Varma, never short of a word, seldom short of an opinion, had sought to unravel the phenomenon. His book then ‘The Great Indian Middle Class’ was a runaway hit; [...]
The first book was penned when the middle class was emerging from the shadows of Nehruvian socialism and getting comfortable, quite comfortable with Manmohanomics and a free market economy. Penned in the late 1990s, it portrayed a class that was happy with consumerism, no longer looked down about the need – dare I say, greed – to make money. This time, he says, ‘All of the middle class is caught in the thrall of a consumerist surge that values material success[...]; they are willing to work to earn more whatever the caste of the employer; they manufacture what sells, and buy what the market has on offer without a thought about hitherto sacrosanct caste taboos. [...]
Middle class is now a homogenous identity and not just a collation of castes. Not that caste wears thin. Yet the middle class, often self-obsessed, wants to play a bigger role on the national canvas.[...]
Like the Brahmins of the past, the middle class of the present, will have to try and take others along [...].
The middle class can play a decisive role in making the right choices for the nation” (Galib 2014). Now, what the author describes resembles a historical role played by the bourgeoisie;; whilst the bourgeois class has proven to be capable of playing a role of the ruling class, there is no historically demonstrated case of such a leading role played by the so-called middle class (unless, of course, it is in fact a misnomer referring to the capitalist class).
As if the above set were not enough, the top India’s politicians deemed it necessary to coin a neologism to refer to a newly discovered fraction of the category under investigation. “The Narendra Modi stamp on Arun Jaitley’s Budget manifested in the frequent use of the term ‘neo middle class’, which many saw as the BJP’s target audience, much like the Congress’ ‘aam aadmi’.
What exactly is the neo-middle class?
According to The Indian Express, the neo-middle class is ‘defined by the BJP as those who have risen from the category of the poor but are yet to stabilise in the middle class’.”
The term was first coined by Prime Minister Narendra Modi himself during his campaign as Gujarat chief minister when he prepared for the Assembly polls in 2012.
A Mint story published on 31 December 2012 said:
‘In the run-up to the state elections in Gujarat, chief minister Narendra Modi hit upon a novel strategy to woo his urban constituents, cutting across caste lines. Modi listed special measures for the lower middle class in his manifesto, calling them the ‘neo middle class’—recent beneficiaries of economic growth who are moving into an urban life and rising up the income ladder—and rode on their support to a thumping victory in the state elections’” (FT Staff 2014).
This kind of conceptual extension may prove very useful, given its political context:
“During an interview on CNN-IBN [...] Godrej Group, chairman, Adi Godrej observed that the Budget has unequivocally targetted the middle class.
‘This is certainly a budget which is particularly directed towards economic growth and increased investment. This will benefit the middle class in the long run. BJP’s budget caters to the neo middle class which is 60-65 percent of the population and also forms the largest part of the electorate’, Godrej said.
[...] The middle class is the largest part of the country. We must understand that the midddle class aspirations probably pervade as the voice of the country’, Kumar said” (FT Staff 2014).
Given the degree of latitute pertaining to the birth of this new term, it comes as no surprise that it appears to be the subject of controversy.
“Former Planning Commission member and Congress MP Bhalchandra Mungekar differed that neo middle class covers everyone in the country who cannot boast of a high income.
‘The Budget does not cater to agricultural labourers or people in below poverty line. It has a scattered vision and caters to the rich neo-middle class alone. Where is the land for affordable housing and smart cities? There is a whole nexus going on between politicians, traders and builders. Your existing cities are collapsing and you need to save them first’, Mungekar said.
Not going into the substance of the debate, let us note that the rebuttal onf the part of BJPspokesperson Shaina NC serves only to dilute the meaning of aformentioned concept still further: “It is a comprehensive budget which takes care of every section of the society. It is not a budget of freebies,” (FT Staff 2014).
It is also in the budget contest that yet another term to describe the category under consideration has been introduced, testifying to an inherent association of the latter with the common-sense hinking:
The author asks: “What has the common man gained from the recent budget? The common man is often loosely identified with middle-class, a section of society which in all countries is presumed to have the maximum clout with the government. This is particularly true of democracies. In India, for instance, it is presumed that the middle-class’s support for the BJP made all the difference” (Moulding 2014).
The loose term “the common man” does not fit in any scienttific typology, so that its translation into the supposed sociological “middle class” is bound to be futile. To make the matter even more confusing, the author adds in one breath kind of political definition of the middle class, failing to clarify its relation to the former one, though.
And there is more to his exposition:
A further division of the middle-class into the salaried class, wage earners and so on can also be made. But the most important segment of the middle-class which deserves far greater attention than what it gets now is the category of senior citizens.
The title is generally given to those above 60 years of age, retired from whatever gainful occupation they have had and in the current middle-class setting have children who have settled abroad. With vastly diminished disposable income post-retirement — and often too proud to accept monetary support from their children — even if offered, they will have to save every rupee to meet any crisis, the most important of which are medical emergencies.” Moulding 2014).
It is puzzling on what basis the above category has been distinguishe and counted among the middle class-how, if anything, do they obtain their livelihood? If this is not the state budget, what is apparently rejected, then the only option left is savings; but without any deeper analysis, we are still left in the dark as to the actual socio-ecconomic identity of those “senior citizens”-age as such is ademographic criterion only.
Another category that [is] considered to be part of common man or middle-class, [...] the pensioners- are slightly better placed than the senior citizens because they get pensions which, however, [is] inadequate” (Moulding2014).
With such proliferation of ddefinitions, one has a considerable latitude in cherry-picking one of those that fits the purpose at hand. That this could constitute -even if not entirely overt-the driving force of the conceptual undertaking reported above, the next paragraph demonstrates, where the author hits the nail in the head: “Quibbling over different nomenclatures is meaningful if only one understands some very similar problems. Can policy have a one-size fit-all approach to the middle-class?” (Moulding 2014).
The problem is, however, the most likely response to this all-encompassing category-as Moulding’s own article shows-is wholly dependent on one’s political philosophy, whether one does or does not like the government-an impressive collection of “middle classes” is at hand to enable one to justify almost every item in the budget.
While in the above cases the obvious exaggeration was concerned with a single country, in the next instance it is the world at large that is subject to the same distortion-“It’s estimated that 30 % of the world’s population are middle class and in the next few decades this figure could climb to 60%” (Salt 2013).
Popular vision of middle class is rooted in 1950s, when a generation found solid jobs, bought houses in the suburbs and took modest family vacations. Everybody loves the middle class.
President Obama mentioned it a half-dozen times in his State of the Union address this year, and House Speaker John Boehner recently told Obama to “stand up for middle-class jobs.”
Pundits cheer the middle class. Politicians praise its virtues. Google says it has been called the “backbone of the country” at least 2.3 million times.
From gridlocked Washington to cities and town everywhere, the middle class is far and away America’s favorite socio-economic group.
Yet no one can agree on what, exactly, the middle class is.
Economists and sociologists say that’s a big deal. Decisions are made, laws are written and elections are won or lost based on people’s beliefs about the middle class and what it means to the country.
A nation that so values the middle class, they say, really should be better at defining it.
A professor of law offers what may be called a residual definition: “When Americans think of ‘class’, they seem to divide people into three groups: the poor (lower-class), the really rich (upper-class) and everybody else (middle-class). Given these groupings, the middle class includes both the ‘near poor’ and the ‘not exactly rich’” (2015b), which, needless to say, is as over-stretched as one can get.
“It’s a strange thing,” said Jim Brock, a Miami University economist. “There’s a large difference between what our perception of a middle-class lifestyle is and what the statistics tell us the middle is.”
Economists often start with the middle 20% of the country – people earning between $39,000 and $63,000 a year – and work their way out. Some then stretch the definition to include the middle 60%, which has an income range of $20,600 to $102,000. Because that’s a wide range, other factors come into play: home ownership, savings, and a college education.
None of those calculations, however, generates a concrete description of what is – or is not – a middle-class household.
“There really isn’t a definition,” Heath said.
The popular vision of the middle class is rooted in the 1950s, when post-war America gave birth to a generation that found solid jobs, bought houses in the suburbs and took modest family vacations.
It’s still a powerful, iconic image. But whatever the middle class is today, Heath said, it’s being tested by profound changes” (Horn 2013).
Such an assertion is a platitude, which fits in many different contexts. Therefore, within the debate on the class in question it is imperative to differentiate between enpirical processes and theoretical issues that both may produce similar effects. It is interesting to know, for example, that among British social scientists one can come across such critical evaluations that are related to the argument propounded in the present chapter. Without using the word itself, the following criticism is levelled against the “leaping” notion of the middle class, for the specific argument goes as follows: “If the concept of middle class is seen as a broad amalgam of professionals, managers and industrialists, and ‘petite bourgeois’ employers and own-account workers, then much of the English and Welsh countryside, and indeed much of the urban area of these countries, does appear to be dominated demographically by this class. However, as both Hoggart (1997) and Abram (1998) have suggested, albeit employing quite different lines of argument, the value of such a practice might be questioned.
[...] For Hoggart the problem with the concept of middle class capture of the countryside lies with the theoretical validity of an aggregational view of the middle class which seems necessary to sustain such a perspective and also the repeated slippage within contemporary rural studies between this term and more theoretically specified concepts such as the ‘service’ or ‘new middle’ class” (Phillips 2007).
We beg to differ-it has not been explained why in order to study a given area one needs necessarily the notion of the midddle class, and the praise of those reputedly better middle-class offshoots has been just stated without providing any theoretical justification. This does not detract from the validity of the aformentioned researcher’s warning to the effect “that such aggregation risks creating superficial descriptions of the social character of rural areas and a neglect of spatial variability. More specifically he argues that whilst areas such as the rural South East do have rising proportions of ‘service class’ residents, this does not as yet equate to numerical domination and in many rural areas outside of South East England it is the ‘traditional middle classes’ that predominate. The analysis of NS-SEC data for the 2001 Census certainly seems to lend support to these arguments, it being revealed that whilst mapping an aggregative middle class does suggest a high middle class presence in most rural areas, analysis of particular middle class groups highlights major differences in spatial distribution, particularly with respect to constituents of the so-called service class and a traditional ‘petite bourgeois’ middle class.
At the very least this analysis, like that of Hoggart, seems to point to the presence of significant variations in the employment-related social relations performed in different parts of the countryside. Whether these variations warrant ascription as class variation is clearly a more complex issue involving theoretical reflection on the meaning of class and consideration of the relative significance of work-place-based relations vis-à-vis other relations” (Phillips 2007).
The commenntator cited above does not undertake such an analysis, which-in terms of socio-economic structuralism-can be found in Volume Two, in the chapter on the EGP class schema.
One reason the middle-class debate is so fraught in the UK is that the phrase means very different things to different people. Is it used in the snobbish sense – sharp-elbowed, privately educated, fee-paying parents? Or is it used in the American sense – anyone neither extraordinarily rich nor experiencing grinding poverty? And it certainly isn’t about private education (only 7% of schoolchildren are educated privately).
Most indicators suggest that the American definition is winning. The old definition – you are middle class if you have a “white-collar job”, paid monthly would apply to most people working these days. So when Ed Miliband or Nick Clegg talk about the middle classes, they do so as a way of are categorising the majority of people in the UK, if not the vast majority. (Boyel 2014)
As defined by Boyle, the concept in question surely qualifies as an instance of a leaping one. And the reference to the American context does help little, as Horn goes on to say that: Few workers today expect to finish their careers where they start. Layoffs and buyouts are now part of corporate culture. Family life is complicated by more single and working parents.
At first blush, things don’t look so bad. 84% of Americans have higher family incomes than their parents did, according to Pew. Dig deeper, though, and the picture gets murky.
Many of those families have higher incomes only because both parents are now working, and Pew found that about one-third of people born into its definition of the middle class fall out of it by adulthood.
Erin Currier, director of the Pew Economic Mobility Project, said stability is one of the biggest threats to the middle class today.
“Income can’t be the only metric for measuring if someone is OK,” she said. “Are we able to prepare for retirement? Do we have emergency savings if the car breaks down?”
Insecurity plays into the national conversation about the middle class and how it should be defined. (Horn 2013)
Whatever misgivings one might have about those assertions at a deeper theoretical level, the empirical evidence cited in this connection is wortthy of mention:
“Despite the national recovery, many families have experienced minimal wage growth, have few savings, and could not withstand a financial emergency. Key findings of the Pew research alluded to above: EARNINGS GROWTH 2% Total growth in earnings for typical U.S. worker from 1999-2009.
LIMITED SAVINGS
9 days Length those at the bottom of the income ladder can survive on liquid savings.
70% of U.S. households face financial strains on income, expenditures, or wealth.
6% growth in average household expenditures since 1984, after adjusting for inflation.
Nearly half of households experience an income gain or drop of more than 25 percent in a given two-year period, a rate of volatility that has been relatively constant since 1979” (Pew 2015).
The upshot is, family Balance Sheets Is Precarious” (Pew 2015).
Ridiculously broad is also the notion deployed in the report from the other continent: The self-evident, it would appear, contention that “no chief executive can be expected to please everyone with his annual blueprint”, (Tam 2014) does not apply in the case of Hong Kong for reasons relevant to our topic.
The reader is told that “Leung’s decision this year to make taking care of the working poor his top priority was well understood. So why does it appear to have backfired? It certainly isn’t as simple as a lack of instant goodies. Rather, it’s because many of those labelled as middle class see themselves as working poor” (Tam 2014).
And it is important to bear in mind that the middle class is also known as the “sandwich class” or, more relevantly, “silent majority”.
The author of the article under consideration admits that “regardless of the term, the academic argument can become very political, as defining the middle class has never been an easy task. That could explain why Financial Secretary John Tsang Chun-wah was subject to ridicule when he claimed to belong to the group - despite earning HK$302,000 a month - because he enjoyed French films and coffee” (Tam 2014).
Whilst it is regrettable that professional politicians should talk such nonsense, it is shameful that a professional social scientists contributed to this confusion:
Defining the middle class is not a new headache. Back in 2003, with the city recovering after the Sars outbreak and the economy in freefall, the usually complacent middle class found themselves not only poor but “poorer than the poor”; many ran up serious mortgage debts as their homes plummeted in value, while those in public housing remained debt free.
Under tremendous pressure, then chief executive Tung Chee-hwa felt the urgent need to tackle middle-class grievances. He tasked prominent social scientist Professor Lau Siu-kai with studying the problem. Lau later confessed it was not practical to draw up an official definition of middle class, but kept suggesting the government take their needs seriously. He pointed out one stark fact: in Hong Kong, the middle class could be anyone earning from HK$20,000 to HK$2 million a month and more. (Tam 2014)
Given the political context, the definition of the purported key electorate is of crucial importance, and accordingly its over-stretching can have perilous consequences:
Middle-class instability could […] lead to social friction and deepen conflicts between the government and the people. Over the years, many of those “poorer than the poor” gradually cleared their debts. Their political views, mentality and behaviour also changed as they became more vocal, if not more radical, in making demands, both political and economic.
Leung argues that far from ignoring the middle class, promoting steady economic growth, a cleaner environment and more affordable housing helps this group.
From a long-term perspective, he is right. But a remedy that takes effect so slowly might not be enough.
As a Chinese saying goes: water from afar cannot put out a fire nearby. The middle class, as wide as that spectrum is, is not unreasonable. All it wants is for the government to balance the search for water in the long term with dousing today’s fire. (Tam 2014)
Whether this kind of over-inclusive definitions could indeed be deemed reasonable, is extremely problematic, if not outright untenable.
And such approaches can lead to serious distortions-on a continental and global scale, as epitomised by a romanticized image peddled by media and marketing pundits regarding an African counterpart of the category under consideration– “a group awash with disposable income and an insatiable appetite for consumption.
In 2011 the African Development Bank estimated that Africa’s middle class had risen to 350 million; larger than the middle class in China, India and larger than the combined population of Canada and the United States of America. In 2013 Deloitte projected the Africa’s middle class will reach 1.1 billion, 42 percent, by 2060.”
But who is that middle class? The African Development Bank (AfDB) defines the middle class as those spending between $2 and $20 a day. According to AfDB about 60 percent of Africa’s middle class spend $2-$4 per day, subsisting just above the poverty line. Most of this group works in the informal sector.
They are highly vulnerable to shocks and easily slide into poverty. The relatively stable middle class, spending more than $4 a day is about 128 million by 2010 estimates.
Even assuming this liberal ADB definition, Africa’s realities act as a cold shower, necessitating a distance to the current over-enthusiasm of prospective investors. For instance, a recent survey of Kenya by the polling firm Ipsos found that 93 per cent of households in the country of 42 million have monthly incomes of under Sh40,000 ($450). A Standard Bank survey of 11 sub-Saharan African countries, which together account for about half of Africa’s gross domestic product, found that 86% of their households remain in the low-income band.
The classic qualitative (instead of merely quantitative )definition of middle class in the US implies the ability to fully enjoy the benefits of “modern life” - decent housing, good health care, affordable food and education, a car, public security and leisure. But few of those Africans who fit the African Development Bank’s definition of middle class would argue that they enjoy such lifestyles because-as popular argument runs-middle class does not mean the same thing in Lagos as it does in New York. So-called middle-class people like teachers in Nigeria “earn 10 times less than their US counterparts.
Comparable cars and decent housing are out of the reach of most teachers in Nigeria, since the cost of living in Lagos is only about 40% less than in New York City” (Wadongo2014).
Arguably, at the very least, middle class people should be able to afford decent and stable housing. However, according to UN-Habitat, sub-Saharan Africa currently has a slum population of 199.5 million people, 61.7% of its urban population.
The latest Human Development Index, a composite statistic that ranks life expectancy, education and income indices, puts the global HDI at 0.702.
Thirty-three African countries rank at 0.535 or below, the lowest is Niger at 0.337.
(Wadongo2014).
According to Global Pacific, a leading advisory firm, the proportion of Africans who occupy the global middle class is less than 5 percent and is scattered across the continent, concentrated largely in Algeria, Morocco, Tunisia, Egypt, South Africa, Botswana and Nigeria. Tiny pockets of the African middle class also exist in countries such as Kenya, Ghana, Ethiopia, Uganda and Senegal.
The above assertion is true, of course, unless one expands artificially the ranks of the category concerned, as in the case of Ghana below:
The reader could be forgiven for sharing an apparent irritation of the commentator: “Who says occupy the front lawns of Flagstaff House demo was middle class Ghanaians?
We were there in our numbers. I mean, we, the okada riders, the truck pushers, the street boys and girls, the Kayaye, the beggars, the prostitutes, the scrap dealers, the refuse collectors, the tricycle riders, et al. We defiled the rainstorm and strode barefooted to Afua Sundreland’ Park to grace the occasion because the economic turbulence is simply unbearable, it has reached the zenith of our nerves.
Some of us, the truck pushers had to switch our Samsung galaxy S4, and Apple phones off because we knew our customers would call us. They would need our services. They would want us to convey their boxes of imported tomatoes from Burkina Faso, from Tudu to agbogbloshie, they needed us to convey their bags of cassava to Kaneshie and Konkomba. But we mortified ourselves and sacrificed our jobs on that day to show how responsible and patriotic we are as Ghanaians despite our miniature and menial labour intensive jobs.” (Chibaro).
If one assumes all the occupations mentioned above are employed in the informal economy, then the whole misunderstanding embodied in framing them in middle-class terms comes to light-the classes concerned are in fact lumpenclasses, whose distinguishing feature is they-unlike those inside the official division of labour-do not pay taxes. This entails an important ownership peculiarity in that it is only those classes that represent private property pureand simple; all other owners of the means of production and labour power do not keep all the income earned for themselves but share it with the Treasury, acting as a proxy ffor the entire nation that benefits from state expenditures on the infrastructure, and so on.
More broadly, it is the ownership-based class framework that enables us to discern simplifications present in the following argument:”It is not only the middle class who have been afflicted with ailing economy that has now seen the Ghana cedi further depreciating at an astronomical rate.
The cedi which is persistently lagging behind the dollar as if unpaid Black Stars demanding their appearance fee before they rock shoulders with their competitors has brought untold hardship to every single Ghanaian and not a particular class of people. That animal called automatic adjustment formula doesn’t increase utility bills of only the middle class. We all pay taxes, we buy petrol, we board cars, we use electricity and water and pay utility bills.
So we came out and joined the demo to vent out our frustration to the government” (Chibaro).
Now, from the aformentioned perspective the claim that every member of the community has been afflicted by hikes in utility rates to an equal degree does not stand up to scrutiny-such raises can hit far more severely some classes than others, and it is likely that for the big bourgeoisie they constitute but a minor nuisance.
Because the author of the argument cited above has no such a framework, his concluding remarks are also in part ill-conceived: So how did the media project and camouflage the demo as media class one? What criteria did they use to conclude that the participants or protesters were middle-class citizens? If they considered all of us as middle class then it’s unfortunate. Some of us are not middle class Ghanaians, we are lower class citizens. [...] So who were the middle-class citizens? If the media spotted one or two CEOs of some reputable companies among the protesters, does that make the whole demo a middle-class one?” (Chibaro).
We have no problem with the above critique of labelling the category in question as a middle-class one, to be sure, but it does not follow that its definition as the lower class becomes correct-in fact, both terms involved belong in fact in the stratification framework.
The OECD believes Africa’s middle class comprises only 3.2 percent of the population.
Pundits have hyped the rapid expansion of Kenya’s middle class. For instance Aly Satchu Khan, an investment analyst believes that the mushrooming of malls is a sign of a growing middle class. But estimates of the size of Kenya’s middle class are all over the map.
The AfDB estimates that about 16.8 percent or 6.7 million Kenyans belong to the middle class, capable of spending $2 to $20 per day. The World Bank estimates that less than 2 percent of Kenyans belong to the global middle class, spending $10 and $20 a day. According to Kenya National Bureau of Statistics, 1 in 5 Kenyans is in the middle class, which includes individuals spending between $10 and $100 a day. That 1 in 5 Kenyans is the middle class is highly improbable because only 12.4 percent, about 5.1 million Kenyans, work for a wage, in the informal and the modern sector of the economy. This is according to figures computed by the World Bank, based on the 2009 census and the 2012 Economic Survey. [...] contrary to the exuberance, Kenya’s middle class is small, pretty broke, and is not growing as fast as the talking heads would have us believe.
Consider this. Just 6 percent of young Kenyans entering the labour force can find work in the wage paying modern sector of the economy. Unemployment is as high as 70 percent among school leavers and college graduates. What is growing rapidly is the rank of the educated underclass. It is growing faster than the middle class” (Awiti2014).
Another case in point is the notion f the middle class held by Mthuli Ncube, the Chief Economist and Vice-President of the African Development Bank.
He was challenged by the IMF Survey: Many commentators have argued that Africa is rising because it is led by a growing pool of middle class consumers. But other critics argue that the traditional concept of middle class does not exist in Africa. What do you respond to that?”
Ncube at first seemed to have no doubts that “there is a middle class in Africa, and it has been growing at a rate of 3.2 percent per annum since 1983. You have over 300 million people who are sitting in the middle of the pyramid as I like to call it” (IMF 2013). But then it turns out that there is a need for a distinction. “Out of those 300 million people in Africa, half are what you call the floating middle class. They could revert into poverty very easily because of a death in the family, or some other shock. At any given time, there is always a floating middle class. Then there is the more stable part of the middle class—about 150 million people, and they are ones who provide robust growth” (IMF 2013).
To complicate the matter further, he adds yet another element to the picture: “I think one element that is stimulating consumption from this middle class is the African diaspora. The diaspora now transmits more money into Africa than foreign direct investment, aid to Africa, and portfolio investment in stock market and bond markets. That supplemental income from the diaspora is enabling that floating middle class to consume more” (IMF 2013).
Now, while in terms of stratification it may not matter what the source of an individual’s livelihood are-what is relevant, is how high or low is her income; from the perspective of class theory it is the latter question that is of secondary importance, whilst the former is paramount. However, it can be seen that the aformentioned definition falls under the rubric featured in the head-the fact of the matter is, the IMF interviewee’s criteria of his two-tier middle class ar so loose that allow for a magical multiplication of its ranks, and by the same token, an inclusion of many social groups that in no socio-economic regard whatsoever could be conceived as “sitting in the middle of the pyramid”, however the latter should be conceived
In broader terms, even the title of the article being reported suggests that the reader could be forgiven for being surprised how not vulnerable to poverty-as the aformentioned example would have it-but poor pure and simple can the purported “new middle classes” in the developing countries be. What does middle class mean in the developing world? Fresh research by the International Labour Organisation (ILO) economists shows in detail what’s been happening to the workforce of the global south during 25 years of globalisation: it is becoming more stratified – with the rapid growth of what they term “the developing middle class” – a group on between $4 and $13 a day. This group has grown from 600 million to 1.4 billion; if you include around 300 million on above $13 a day, that’s now 41% of the workforce, and on target to be over 50% by 2017. But in world terms they’re not really middle class at all. That $13 a day upper limit corresponds roughly to the poverty line in the US in 2005. (Mason 2014)
On a global scale researchers generally define the middle class as the segment of society that earns between $10 and $100 a day. By that measure, for example, most Canadians are, at the very least, comfortably middle class. The reader could be forgiven for expecting an ensuing criticism of the term whose power of discrimination seems extremely low, which however is disappointingly replaced just by an admission that “But being middle class in New Delhi is not the same thing as being middle class in Winnipeg” (Mc Mahon 2014).
Only slightly less broad in scope concept is the basis for another optimistic assessment concerning a different region of the world: “The middle class in the countries of Eastern Europe and Central Asia swelled from about 33 million people in 2001 to 90 million in 2013, according to the latest available figures”, which, the reader is told, refers to “The share of people living on $10 and $50 dollars per day” (Deen 2016).
Let us consider yet another example of such a concept.
The idea that a high school teacher might resort to cooking meth to provide for his family isn’t that far-fetched in today’s economy […] what makes him believable in the first place is the depressingly unremarkable financial squeeze in which he finds himself at the beginning of the series: working a second job at a car wash, begging an ambulance driver not to take him to the ER because he “doesn’t have the greatest insurance”, fretting over the debt he’ll leave behind for his family when he dies.
Needing money is, of course, the reason lots of other people do illegal things. Breaking Bad is an unusual hit crime show, one that resonates – despite its small cast and relatively unfamiliar setting of Albuquerque – by not exoticizing its criminals, making them suburban, middle class, and (not incidentally) white. (Paarlberg 2013)
R. Gupta (2014) sets out to answer the question: “Who represents the Nigerian middle class? African Development Bank (AfDB) used an absolute definition of people whose daily consumption is between US$2 and US$20 (in 2005 PPP) daily to characterize the middle class in Africa. The definition is based on the average cost of living of about 1 billion people in the continent. Population spending between US$2 –US$4 a day is considered as ‘floating class’, vulnerable enough to slip back to poverty. The remaining population earning between US$4 and US$20 a day is categorized as ‘stable’ middle class.
Given the World Bank’s global absolute poverty line of US$1.25 per day, the minimum average of middle-class as defined by AfDB appears too low. Moreover, in the Nigerian context, the daily spends on all the essential needs including accommodation, food, transportation, health and education works out to be over US$12 a day. Thus, the middle class has to spend anything above that. More suitably, the Nigerian middle class consumes between US$12 and US$20 a day, i.e., their disposable income boils down to US$360 – US$600 a month, which translates to N57, 600 – N96,000 a year.
AfDB estimates that close to 123 million Africans fall in the category of stable middle-class, i.e., people earning US$4 -US$20 a day and Nigerian middle class accounts for 12.9 million or 10.5 per cent of the continent. Nigerian middle income class accounts for 8.1 per cent of the total population of Nigeria.
The floating class in Nigeria is estimated at 9.9 million or 6.2 per cent of the total population (Gupta 2014) of the nation.
Curiously enough, Gupta himself plays down the value of the above data, scornfully labelling it as “this overdose of statistics [which] leads us […] nowhere. He substantiates his judgment by citing an easy, one would say-populist, but hollow attack on this common scapegoat and whipping boy of tabloids: “As rightly said by Ron DeLeggeII, “99 per cent of all statistics only tell 49 per cent of the story”; so, is the case with Nigerian middle class”.
Whether it follows logically from the above claim or not, the fact of the matter is, he insists that one should “not myopically restrict the definition of middle class to the middle third of the country. In socio-political terms, middle class is that segment of the society which is economically secured, upholds the rule of law, invest and desire stability.
Interesting and by no means Africa-specific is Gupta’s elaboration on the above definition:
“Economic security implies that a household is cushioned against the catastrophic spell of downturns of the normal business cycle. The household is either secured through savings or by virtue of formal insurance. The household is equipped financially to see through a brief period of unemployment without having to sell its house or withdraw its children from school”.
Below there is evidence that his criterion works as well in the case of the richest nation on earth: “A minimum-wage hike would keep millions of people in generations X and Y in the middle class. It’s the best time in modern history to raise the minimum wage[…] With millions of baby boomers exiting the workplace, younger people will find jobs. But the middle class will suffer if the available jobs don’t pay a livable wage. According to a recent commentary by CNBC, the White House proposed raising minimum wage to $9 from $7.25 and indexing it to inflation. If I lost my job like many of my peers in publishing industry, I might end up getting paid minimum-wage for some time. I could fake it for a while by using credit cards, but eventually I’d lose my house and car. Boosting the minimum wage to $9 or $10 and allowing the wage to keep pace with inflation would ultimately save the middle class. It would mean people who get laid off from careers could keep up with their car and house payments while working on new opportunities” (Quinn 2014).
Returning to the Nigerian researcher, he produces one more turn, abandoning his, it would seem, deep-rooted distrust in statistics and accordingly “falling back on statistics, World Bank estimates that over 80 per cent of Nigerians live in informal housing structures in major urban areas or traditional villages on which they have no ownership rights. Is there still room for selling of houses in dire needs when the Nigerian middle class does not own one?
As per media sources, the country has a housing deficit of 17 million units as investment in housing accounts for only 0.4 per cent compared to the global average of 15 per cent – 35 per cent” (Gupta 2014).
Moreover, he finds other statistical data useful for his purpose as well, adding that the list of such reservations is even longer “with Nigeria being home to the highest number of school dropouts of 10.5 million. Adult illiterates are estimated at 35 million or close to 22 per cent of the population. The sadder part is that illiterate adults have increased by 10 million over the past two decades as per World Bank.
Economic security according to Dr. Nancy Birdsall, founding President of Center for Global Development, is associated with individuals getting entrepreneurial and exploring business opportunities since they are comfortably taking care of their basic needs. With the rising unemployment rate to 23.9 per cent in 2011 from 21.1 per cent in 2010, as revealed by National Population Commission (NPC), economic security appears a far cry for the nation […] Nigeria “middle class” is a myth. Nigeria lacks basic infrastructures upon which middle class anywhere rides on. Most of the Nigerian “middle class” are civil servants and some from the banking sector. These as a whole is not up to 18% of the entire work force. Most of their spending comes from corruption,money collected in the form of bribe, i.e diverting money from government into their accounts, collecting penalties, agency levies and submitting less or non at all. The worst is that these Nigeria Middle Class are the least productive no matter how you measure it. Once they leave their job, they fell to the worst bottom in poverty within a month. In Nigeria, you have about 2% super corrupt rich and the rest wriggle in and out of survival struggle” (Gupta 2014).
However one would judge Gupta’s rather shaky attitude towards statistics, his indirect critique of the established notion of the middle classes is well-founded.
Given how over-stretched the concept concerned according to the author cited below becomes, his conclusions regarding the numbers to which it refers in Italy’s context are no surprising at all. As of 2015, the Italian middle class (defined as having assets between 50,000 and 500,000 US dollars) has numbered “29 million individuals: one of the most numerous in Europe, more than 1 million than that of the UK. As a matter of fact, their levels fell to 38.5% of the total population compared to 57.1% recorded in 2007” (Truiba 2016).
Likewise, bridging the present chapter with the income topic of the subsequent one, a definition of the category under examination may be cited, which owing to its over-inclusiveness constitutes a clear case of the aformentioned leaping methodology: “Another way to see it is that, after covering the essentials, middle-class households have some money to spare Given how over-stretched the term under consideration becomes according to the author cited below, his conclusions regarding the numbers to which the term reportedly refers in Italy’s context is not surprising: - in other words, they’ve risen above subsistence living and can start thinking about the future” (Krueger 2014). Now, this is in point of fact a case analoguous to that of the central character in Moliere’s comedy “Le Bourgeois gentilhomme”, who was not aware he all his life was speaking prose. Similarly, the author of definition of the middle class cited above does not suspect that his definition rests in fact on the notion of the value of labour power. Contrary to some claims, the former notion extends far beyond the subsistence level;its creator, again contrary to the received wisdom, has been crystal clear on that point: “the number and extent of his so-called necessary wants, as also the modes of satisfying them, are themselves the product of historical development, and depend therefore to a great extent on the degree of civilisation of a country, more particularly on the conditions under which, and consequently on the habits and degree of comfort in which, the class of free labourers has been formed. In contradistinction therefore to the case of other commodities, there enters into the determination of the value of labour-power a historical and moral element” (Marx 1976; Ch. 6). Other chapters also, not excluding the next one, include abundant examples of so conceived leaping notions of the middle class.
Marx’s broad approach makes all the more clear that the definition in question is not fit for purpose. Whether it should be understood as encompassing all those employees who are paid according to the value of their labour power, or even-stretching the concept a bit-as referring to those who are overpaid compared to their value of labour power, the category thus carved out would be extremely broad, in any case too broad to designate anything like a single class, middle or otherwise. Another akin pronouncement can be regarded as a crypto-definition inasmuch as the outward guise, so to speak, of the definition in question merely masks what turns out to be the real tool by which to recognise individuals as being middle-class. According to Krueger (2014), “defining “middle class” in purely economic terms misses a lot. That’s because to be middle class is as much a question of values as of income or wealth. “Middle class values,” says development expert Homi Kharas, “emphasize education, hard work and thrift.” The goal of all this, adds columnist David Brooks, is improvement - of the individual, family and society: “They teach their children to lead different lives from their own, and as Karl Marx was among the first to observe, unleash a relentless spirits spirit of improvement and openness that alters every ancient institution.”
It’s these values that make the middle classes so important -a reality underlined by recent protest in Brazil and elsewhere”.
Any attempt at defining the middle class based on the hard core of values is untanable, however, if only because of its ahistoricity: the various historical embodiments of the said category may well exhibit very different values and attitudes:” Middle classes from Bangkok to Istanbul, from Cairo to Kiev seek to overthrow elected governments outside of the electoral cycle. Wary of majority rule, the middle class in the capital is ready to form alliances with traditional elites to disenfranchise ordinary citizens and even overthrow electoral democracy.
Like their Egyptian peers, well-heeled Bangkokian protesters called for military intervention to deal with the rural masses and their “populist” masters.
This anti-democratic behavior seems to contradict liberal notions of the middle class. In Seymour Martin Lipset’s modernization theory, the equation was straightforward: the more middle class, the more democracy. Alexis de Tocqueville should, however, serve as a reminder that the middle classes have always been wary of “the tyranny of the majority” (Saxer 2014).
From a dialectical point of view, intrinsic to socio-economic structuralism, both claims concerned may be true, only that concerning different times and different societies. At any rate, any sweeping generalisation in that regard is inconsistent with the very nature of inherently variable socio-historical reality.
As if admitting this much,, the author switches gear and calls in the same Homi Kharas, according to whom “there were 1.8 billion middle class people in the world (based on the $10 to $100-a-day definition) at the start of this decade. Europe and North America accounted for more than half the total, and the next biggest share was in the Asia-Pacific region, with 28 percent of the total. By 2030, Kharas estimates that the middle class will total 4.8 billion, and around two-thirds will live in the Asia-Pacific”. (Krueger 2014) Thus, it is all very well to reject “crude economism”, talk about values, etc., but when it comes to statistics, it turns out that those “soft” definitions are difficult, if not impossible to operationalise and therefore have been replaced by their proponent himself.
Let us end this part of the chapter with a strong accent: “ What exactly constitutes the Russian middle class has been a subject of a two-decade-long debate, with estimates ranging from 2 percent to 80 per cent” (Eremenko 2014), which cannot but include some wildly eccentric criteria, precisely this arbitrariness is discussed at more length in the section 8.1. of this chapter.
8.1. THE PERILS OF SUBJECTIVISM
If the use of at first glance objective measure as income does not preclude that a given definition subscribes to subjectivism, it is easy to imagine that this is all the more easy in the case of criteria that belong to the sphere of consciousness, such as widely used in stratification approaches prestige. Thus, if adopting such a point of departure, one would put the basic question: “„How Many Classes?”, the answer would be anything but straightforward: “Describing the structure of prestige classes in a community is inevitably problematic. The analyst wants to know how many classes there are and where boundaries between them are located but soon discovers that there is little consensus on these matters. One reason, according to a study of a small Southern town by three Warner colleagues, is that the class structure looks different from the perspectives of people at different class levels (Davis) Gardner, and Gardner 1941:65). Their report, titled Deep South, demonstrated this phenomenon with a chart showing how the people at each level perceive the people at other levels. Based on patterns of association and lifestyles, the researchers found six classes among the town’s white population, similar to the Yankee City classes. The six boxes in the chart show how the class structure appeared to people in each of these classes. Think of them as windows, each of them showing the distinctive perspective from which a particular class views the class structure. Between the boxes, there are abbreviated labels delineating the classes described by the researchers (UU = upperupper class) LM = lower-middle class, eta). Within the boxes, horizontal lines indicate perceived class distinctions-with solid lines marking a distinct social cleavage and broken lines suggesting less social distance between adjacent classes.
A comparison between the upper-upper class box and the lower-lower class box in the chart reveals large gaps in perceptions. The lower-lowers lump the people in the top three classes into one big class (“Society or folks with money”). Similarly, the upper-uppers collapse the two bottom classes into one (“Po1 whites”). People inboth classes make morę class distinctions at their own level. The labels they use for one another are quite different. For example, the lower-lowers describe the people at the top with phrases suggesting wealth and social pretense, while the upperuppers describe themselves and nearby classes in terms emphasizing inherited position, social prestige, and respectability.
Some important conclusions about perceptions of the class structure in this Southern town and elsewhere can be drawn from the study. (Like the chart itself, these points tend to underestimate the differences of perception within classes) while usefully highlighting the differences between classes.)
1. Number of classes. People at all class levels perceive class differences, but there is disagreement about the number of classes in the community. No class recognizes a structure of six classes, corresponding to the Warnerian classes. Instead, they see four or five.
2. Perception and distance. People make more distinctions among those close to themselves in the hierarchy than among those who are far away. That tendency emerged sharply in the mutual perceptions of the upper-uppers and lower-lowers described in Deep South.
Coincidence of cleavages. Despite class differences in the number of classes perceived at various levels in the hierarchy, the distinctions actually made by people from different classes coincide. For example, the line that the lowerlowers drew between “society” and the “way-high- ups but not society” was the same as the upper-uppers’ distinction between “nice respectable people” and “good people but nobody.” That is, when the researchers asked people about specific families, they found that the lower-lowers and upper-uppers placed them in the same one of these two groups.
Basis of class distinctions. People often agree about where individuals or families belong in the class hierarchy, but not about why they are there. In other words, they find different bases for class distinctions. For example, people at the top understand class position in terms of time; they distinguish between “old” families and “new” families. People in the middle make moral evaluations of how things “should be.” People in the lower class view the system as a hierarchy of wealth.
From the analyst’ s viewpoint, perceptions of four or five rather than six classes or discrepancies in the perceived basis of class distinctions are not important as long as the breaks that people do make all fit together in a consistent way. Naturally, people make the finest distinctions regarding those whom they know best and tend to merge others into broader categories. Researchers can take this into consideration and, if they wish, can subdivide a group according to the views of those in and immediately adjacent to it. The task is like that of accommodating for perspective when making a map from aerial photographs. The practical problems in social mapping reduce to two: Do all observers put Albers above Jackson in the hierarchy, and if they distinguish between their ranks at all, do they all divide Jacksoris group fromAlbers’s atthe same place? These are the questions of ranking consistency and of cutting consistency” (Gilbert). Referring back to the previous example under consideration, let us look at another case of the perils inherent in the method of determination of the middle class on the basis of lifestyle and consumption factors-once topical they can easily become out-of-date, as evidenced by the following example: “Jonathan Freedland quotes a past when ‘a home was something middle-class people could purchase’. Lots of people did, and we now have 64% home ownership” (Wilson 2013).
That such an approach may lead to bizarre results is shown both by the very title and the content of the book on the newly discovered subset of America, labeled the Middle-Class Millionaire (Prince 2008). The author does not deny that “the world” his interviwees “now inhabit is the world of the wealthy”.
Nevertheless, he argues that “their values continue to make this group” [part] of the middle class.” After all, he claims to provide “a portrait of a previously unrecognized demographic group: the emerging affluent middle class”.
But the fact of the matter is, this more consumer-oriented definition that focuses less on what the middle class earns than on how it spends its money has proven to be fairly popular.
Diana Farrell, managing director McKinsey and Company and former deputy director of President Barack Obama’s National Economic Council, has estimated that
families could be considered middle class if they had at least a third of their income left over after paying for necessities like food, shelter and clothing.
This leftover cash is referred to as “discretionary income” since families can choose how to spend or save the cash.
Scanning through Statistics Canada’s Survey of Household spending, it’s possible to sort out, broadly, how much Canadians spend on the essential items food, shelter, clothes, taxes and other basic living costs — compared to non-essentials such as cars, phones and retirement savings. (Many people would argue that these are also essential expenses, another reason why it’s so tricky to measure the middle class.)
By Farrell’s measure, the minimum household income to qualify as middle class in Canada would be around $36,000 a year, since that’s the point at which households report having at least a third of their income left over for discretionary spending. In that case, the vast majority of Canadians are, in fact, middle class and that proportion has been holding steady for some time.
An economist opines that “the most accurate measure of the state of today’s middle class is one that Statistics Canada touched on more than two decades ago. In 1991, the agency staged its own attempt to gauge the number of Canadians who had significant discretionary income. Unlike Farrell’s income cut-off, Statistics Canada defined discretionary income as “the amount of money which would permit a family to maintain a living standard comfortably higher than the average for similar families.” In other words, the number of Canadians who were succeeding at keeping up with the Joneses.
It considered Canadians with discretionary income to be only those families who spent at least 30 per cent more than their friends and neighbours on non-essential items such as “vintage wines, stocks and bonds, [and] vacations.”
Using data from 1986, it discovered that the typical “discretionary income family” turned out to be the classic yuppies. They were married couples earning two incomes who owned a house and two cars, lived in or near a large city, ate out regularly at nice restaurants, took plenty of vacations, bought nice clothes, spent freely on alcohol, home renovations and new furniture, gave money to charity and still had enough left over for an RRSP.
Back then very few Canadian families actually looked like this— just a quarter of Canadian households met the discretionary income threshold. Statistics Canada determined that total discretionary income in Canada amounted to less than $29 billion, a significant sum, but hardly an engine of economic growth.
But, the study noted at the time, marketers were keen to pitch their products to this small swath of the population since they held the keys to a lucrative pile of “spare cash.” (McMahon 2014)
To anticipate later remarks, the above passage underlines how closely the concept of middle class is tied to that of stratification. This does not mean that class theory is not interested in income or consumption; far from it, the difference being within the latter framework such factors are construed as class, i.e. ownership dependent, and thus theoretically grounded (cf. section 10.1 in this volume) and not just described as facts of life.
Flash forward more than 20 years and that definition of “discretionary income” looks suspiciously like the present day middle class ideal: A family who owns a house and a car (or two), lives near a big city, likes the occasional visit to a restaurant and trip to Disneyland, with enough left over to renovate the kitchen. (McMahon 2014) A related notion constructed for the USA demonstrates that the concept concerned may in fact be plagued by the opposite fallacy to that suggested above. Petrazycki referred to “lame” concepts as those whose substantive content is narrower than its terminological form suggests.
The commentator, whose text seems to be politically motivated, announces at the very outset that “The ‘middle class’ has atrophied into the 10% of households just below the top 10%. The truth is painfully obvious: a middle-class lifestyle is unaffordable to all but the top 20%” (Bonner 2014). 20 and 10 per cent are entirely differnt magnitudes, let us note in passing, although for the commentator in question, driven by political passion the difference may be irrelevant compared to his big political plan.
Anyway, he argues that “there are ten key criteria for entry into the ‘middle class’.
1. Meaningful healthcare insurance (ie, not phantom ‘insurance’ with deductibles that cost thousands of dollars a year and that offers no non-catastrophic care at all).
2. Significant equity (25%-50%) in a home.
3. Income/expenses that enable the household to save at least 6% of its income.
4. Significant retirement funds: 401 (K)s, IRAs, etc.
5. The ability to service all debt and expenses over the medium-term if one of the primary household wage earners loses their job.
6. Reliable vehicles for each wage earner.
7. The household does not rely on government transfers to maintain its lifestyle.
8. Non-paper, non-real estate assets such as family heirlooms, precious metals, tools, etc. that can be transferred to the next generation, i.e, generational wealth.
9. Ability to invest in offspring (education, extracurricular clubs/training, etc.).
10. Leisure time devoted to the maintenance of physical/spiritual/mental fitness.” (Bonner 2014)
Now comes the conclusion:”Who can afford all that? [...] the cost of these things came to $106,000. Trouble is, America’s ‘middle class’ doesn’t earn that much. Only those with the top 20% of household incomes qualify” (Bonner 2014).
In the author’s biew, the above argument allows for such a strong accent at the ennd: “Want a middle-class lifestyle with middle-class finances and middle-class attitudes?
Forget it. Trying to enter the middle class is like trying to get a job as a galley slave. You get chained to an oar. You sit. You row until you drop dead.
The middle class[...] is desperate to continue its ‘aspirational consumption financed by debt’. It’s a trap set for you by the oligarchs and poligarchs [people whose votes can be bought cheaply], who control the American government and its major industries.
And if you’re young, you face a lifetime of backache, trying to keep up the pace. You will be forced to pay for the most expensive health care in the world, the most expensive military in the world and the most expensive education system in the world. All while your real income falls.
These heavy burdens didn’t ‘just happen’. They are the result of dirty dealing by America’s goons and poltroons, its oligarchs and poligarchs and all the company of modern crony democracy. (Bonner 2014)
Significantly, it is also the factor of aspirations that has been associated with the lack of a satisfactory, let alone universally agreed, definition of the concept: “Definitions of class are hard to come by-so much so that the U.S. Department of Commerce, on behalf of Vice President Joe Biden’s White House Task Force on the Middle Class, emphasized descriptive language rather than statistics, finding that ‘middle-class families are defined by their aspirations more than their income. [We assume] that middle-class families aspire to homeownership, a car, college education for their children, health and retirement security and occasional family vacations’” (Meacham 2012).
A later list of things the middle class can no longer really afford rounds off the picture of dire straits the middle class has found itself in.
It should be made clear that the list does not include any lavish luxuries, like private jets and yachts. The items on this list could be regarded as basic, and some of them are even necessities.
The ranking of this list is based on affordability and necessity. Therefore, items that are necessity ranked higher, as did items that a larger percentage of people have trouble paying for:
Vacations
A vacation is an extra expense that many middle-earners cannot afford without sacrificing something else. A Statista survey found that this year 54% of people gave up purchasing big ticket items like TVs or electronics so they can go on a vacation. Others made sacrifices like reducing or eliminating their trips to the movies (47%), reducing or eliminating trips out to restaurants (43%), or avoiding purchasing small ticket items like new clothing (43%).
New vehicles
Very few people who earn the median income can afford to buy a new car or truck. Interest.com recently analyzed the prices of new cars and trucks, as well as the median incomes across more than two dozen major cities, and found that new cars and trucks were simply not affordable to most middle-earners.
“Median-income families in only one major city [Washington DC] can afford the average price Americans are paying for new cars and trucks nowadays.” As of 2013, new cars are priced at $32,086, according to the study. Mike Sante, Interest.com’s managing editor reminds us, “just because you can manage the monthly payment doesn’t mean you should let a $30,000 or $40,000 ride gobble up all such a huge share of your paycheck.”
To pay off debt
These debt statistics come from Debt.org: “More than 160 million Americans have credit cards.””The average credit card holder has at least three cards.””On average, each household with a credit card carries more than $15,000 in credit card debt.”
Not only do we have large amounts of credit card debt, we also have student loans, mortgages, cars, and medical debts. Our debt is growing faster than our income, and many middle class workers have trouble staying afloat. Money-Zine evaluated debt growth and income growth over the past few decades and found that “back in 1980, the consumer credit per person was $1,540, which was 7.3% of the average household income of $21,100. In 2013, consumer debt was $9,800 per person, which was 13.4% of the average household income of $72,600. This means debt increased 70% faster than income from 1980 through 2013.”
Emergency savings
To provide ourselves with a degree of financial security, we are supposed to have emergency savings to protect ourselves in the event of job loss, illness, or some other catastrophe. Most members of the middle class don’t have at least six months of emergency savings, however, and some working people have no such savings.
A Bankrate survey found that only around one out of four households have six months of emergency money saved, and many of them are in the higher income groups. Another one-fourth have no emergency savings at all, and the remaining household have a small to moderate amount of savings, but not enough to cover six months of expenses.
Retirement savings if you reach the retirement age with little or no money saved, Social Security is probably not going to be enough to cover your basic needs. Even if you want to work for your entire life, you have no way of knowing whether or not you will be physically capable of doing so.
Although having a lack of a retirement savings is a risky move, so many people bet on double zero, just hoping that things will work out in their favor.
While some members of the middle class neglect this aspect of financial planning because they are procrastinating, there are also some workers who cannot afford to set this money aside. Nearly half of those who don’t save for retirement say it’s because they simply don’t have the money.
As of late, around 20% of people near 65 have not saved anything for retirement at all, and the majority of people — 59% — worry that they don’t have enough money saved for retirement, according to a Gallup Poll.
Medical care
Medical care is a basic necessity and something we’d think would be affordable for someone earning a middle income. A Forbes article published data indicating that workers in large companies — many of whom are members of the middle class — “face nearly $5,000 in premiums, co-payments, deductibles and other forms of co-insurance.”
During the past few years, these costs have had a large impact on working Americans. A report by Feeding America found that a shocking 66% of households say they’ve had to choose between paying for food and paying for medical care — 31% say they have to make that choice each and every month.
Dental work
According to the U.S. Department of Health and Human Services, “the U.S. spends about $64 billion each year on oral health care — just 4% is paid by Government programs.” About 108 million people in the U.S. have no dental coverage and even those who are covered may have trouble getting the care they need, the department reports.
Oftentimes, people will purchase medical coverage and forgo dental because it’s so expensive. Plus, dental insurance may cover only 50% of the more expensive procedures, like crowns and bridges. This leaves those who have insurance with large co-payments.
In many cases, middle-earners will delay or even forego some of these procedures in efforts to save on costs. According to the CDC, nearly one in four adults between the ages of 20 and 64 have untreated dental caries (like cavities or infections). (Rawes 2014).
Given those realities, it should come as no surprise that so many commentators are confident that “The American middle class is dead. At least the middle class as we know it” (Goodkind2015). According to the author of that pronouncement, Peter Kiernan, the post-World War II notion of the middle class as a large block of homogenous Americans making similar amounts of money is outdated Instead we should “think of it like an atom with a core group in the center and then electrons spinning in and out of the middle class all the time”. What conclusions have been drawn from those premises in Kiernan’s book “American Mojo Lost and Found”? Somewhat extreme as he claims the only true social mobility in the United States is within the middle class, where families often move from lower-middle to middle to upper-middle class within a few generations. Moreover, the atomization of the middle class makes it impossible to define this grouping by income or even spending, Kiernan claims, his own alternative approach being couched in terms similar to those mentioned above, for in his view it is similar aspirations that could be said to bring cohesion to the group. Those aspirations include a home, a car, access to education and most importantly, “the confidence that their children will be better off than they are,” he sayswrites According to Kiernan, the changing nature of this demographic makes it difficult for presidential candidates to make policy that appeals to the “middle class” as a voting bloc, because there really isn’t one” (Goodkind2015). While, as noted above, most 2016 presidential hopefuls have shied away from using the phrase “the middle class”. The main point of the present work is that the aformentioned phenomenon should be viewed not only against its empirical background, but also in the context of underlying conceptual flaws pertaining to the notion in question.
A similar methodological approach can be detected in relation to South Africa. “Everyday use of the term middle class conjures up images of families (or individuals) with a certain lifestyle or level of affluence as evidenced by their expenditure on food, clothing, furniture, cars, education, holidays, etc. as well as assets such as housing – but, at the same time, this term refers to people who are not considered rich or upper class in some sense.
A UCT study classified South Africa’s middle class as households earning between R15 000 and R50 000, with their own transport, a tertiary education, employment in a white-collar job and owning their home or spending more than R4 000 a month on rent.
Statistics South Africa uses indicators that would increase the size of the middle class even more: access to formal housing, electricity, indoor plumbing, a phone and the use of gas or electricity as a main cooking source.
In South Africa, thinking about what it means to be middle class is complicated by the low average and median levels of incomes and the very wide income gap. Households who have achieved a modest standard of living are actually near the top of the country’s income ladder.
Too often in discussions the middle class is synonymous with both the affluent and the very affluent. One such example is the well-known study of Black Diamonds by the UCT Unilever Institute of Strategic Marketing, which describes the emergence of the black middle class – which includes the top-earning black people – in post-Apartheid South Africa.
The upshot is surprising: “the striking feature is that the ‘middle class’ (as understood in everyday usage) is not in the middle of the income distribution. And those who are in the middle are not ‘middle class’ (in the sense of being above some minimum level of affluence)” (Chriso 2014), which bizarre effect shows only in the extreme the implications of structural flaws inherent in the concept in question.
But, of course, it is when the criterion of class membership becomes awareness that all the deleterious implications of a subjective approach show up most glaringly.
The most common, and least refined instance of such an approach is provided by the universal methodology of sociological polls based-as they do-on the criterion of self-awareness. This may lead to even political problems in some situations, as the following case illustrates: “At the end of the year in which Minister of Finance Yair Lapid was the hope and disappointment of many voters, a poll by Molad - The Center for Renewal of Israeli Democracy indicates that 2013 did not end as he had planned. The chairman of Yesh Atid knew fully well why he targeted his election campaign to the middle class:
70% of the public calls itself middle class, but this has turned out to be a two-edged sword.
For almost a year, Lapid has claimed that he entered the Ministry of Finance to work for the middle class, but he has failed to persuade the public. The Molad poll found that 67% of the public believes that the 2013-14 state budget mainly serves the rich. Two-thirds of the respondents said that the budget was unfair, it benefits the rich and harms most Israelis who are struggling to pay their bills and support their families. Only 23% of respondents said that the budget was ‘a responsible budget’.
Not only does a majority of the public believe that Lapid has not kept his promises, more than half do not believe that he represents them. 64% of respondents believe that the middle class has too little political influence, even though the Ministry of Finance is headed by a politician who defined himself as ‘a finance minister of the middle class’” (Bramly 2014).
The author of the next pronouncement, a financial planner, has a point in that context when he states: “When politicians try to persuade us to support something they want, they often invoke the middle class. They talk about protecting the middle class. They talk about how important the middle class is to the economy. But the main reason they talk about the middle class is because most of us think they’re talking about us.
It seems to me that we really like the idea of what it means to be middle class. And why wouldn’t we? For most of us, we associate it with things like having steady jobs, owning a home and taking regular vacations. It’s the American dream brought to life, and we like it so much that it’s become not only an economical identity but a cultural one, too.” (Richards 2013)
And he goes on to lay out what is a subjective perspective through and through:
If you think I’m exaggerating, take a look at a recent Wall Street Journal/NBC News poll. The results revealed that what we define as middle class has more to do with how we think of ourselves than any particular number. Not too surprisingly, we tend to compare ourselves against what we know:
48 percent of people earning $40,000 – $50,000 consider an income of $50,000 middle class.
50 percent of people earning $50,000 – $75,000 consider their income middle class.
39 percent of people earning $75,000 – $100,000 consider their income middle class.
Why does this matter? Because labels with strong emotions behind them, like “middle class,” change how we think about ourselves and make decisions, especially financial ones.
[…] Labeling Yourself Middle Class Can Hold You Back The above figures could be compared with another manifestation of a subjectivistic approach: “A report from the Tax Foundation reveals that Americans can’t agree on who qualifies as “middle class,” noting that the disagreement has profound implications for the political debate over who should pay what in taxes. When asked, most Americans describe themselves as “middle class,” including 98% of the top 20% of earners” (Shulman 2013).
Recall Romney’s over-stretched income bracket used to define the middle class; it turns out, he could claim that his definition is simply reflective of what it means to be middle class in independent schools. Many of them decide to enroll their child in a public school or a less expensive private school option. The result is that schools feel their own kind of squeeze: increased pressure to stem the tide of middle-class defections to lower-cost alternatives.
“one federal source, the 2005 Annual Demographic Survey, March Supplement, (produced by the Bureau of the Census), does reveal that an objective measure of the ‘statistical middle income’ range is the middle 20 percent of all U.S. family households. In 2004, this quintile earned between $43,400 and $65,828. By contrast, the top 20 percent of family income earners earned $100,000 and higher.
What is interesting about these data is that many of those who consider themselves middle class and who say they are feeling the ‘squeeze” earn a lot more than the statistical middle class earns. When independent school administrators describe their middle-income families and the difficulty those families are facing, they do not speak of the $43,000-$66,000 family. [...] The annual earnings of the middle-income cohort that schools describe range from as low as $65,000 to as much as $200,000 (depending on whom you ask). These are the families that schools assert are not enrolling” (Mitchell 2006) because of the aformentioned financial squeeze.
With the core concept this murky, no wonder that others may estimate the percentage in question very differently;” Historian Alan Brinkley, weighing in on an early outline of President Bill Clinton’s 1994 State of the Union address, offered a word of advice that would dumbfound today’s politicians. Brinkley, in a December 1993 memo to speechwriter David Dreyer, praised the administration’s efforts to “target” the middle class as a “good politics and good policy as well”. But at the same time he pointed out he felt “uneasy about the heavy and explicit use of the term ‘middle class’ in this speech, which does not seem to me to have quite the inclusive meaning you intend. There are a great many people in the Democratic (and Clinton) constituencies who do not consider themselves truly ‘middle class’ – even if most aspire to become so” (Ballhaus 2013).
It must be admitted that this-in all likelihood-layman proved to be more prudent than a professional, who should know; meanwhile, it is a sociologist, who opines on “yet another understanding of the concept of middle class traditionally neglected by sociologists. According to this, they are the middle class who consider themselves as belonging to that class.
Consider another example of the inescapable conflict existing between such an approach and other definitions of the concept concerned that inevitably creep in: the author of a study in which he distinguished several middle classes, called attention to the fact that two of those: “Top of the Class and Struggling Middle seem, in some ways, anything but middle class”, which leads to the question: “Why don’t those in the Struggling Middle identify with the Lower Class; after all, their median family incomes fall well below the earnings of those Americans who say they’re in the least advantaged social class? And why don’t those seemingly privileged members of the Top of the Class identify with the Upper Class, with whom they seem to share so many advantages?” (Morin 2008).
“Part of the explanation”-argues the researcher in question, in line with our own remarks in the book-likely lies with the powerful attraction that the label ‘middle class’ has on most Americans and the stigma that some might associate either with the upper or lower class labels” (Morin 2008). Morin’s further argument, though, becomes contradictory; on the one hand he indicates some objective differences between the groups involved, e.g. pointing out that the Top of the middle Class don’t make as much money as the 21% of Americans who identify themselves as upper class in the Pew Research survey: The median income of those in the Top of the Class is $86,280, while median income for the upper class is $95,875, or more than $30,000 above the overall middle class median.
And in terms of levels of education, total wealth and how they rate their lives, the Top of the Class lags behind those in the upper class” (Morin 2008), but on the other belittles their importance, stressing the relevance of the subjective criterion whose apparent flaws has prompted Morin to question its applicability to the case at hand-“those in the Struggling Middle are, as a group, demonstrably different from those who identify with the lower class. [...] they are more satisfied with their lives and more likely to say they’re living better than their parents. Also, they are more hopeful about their own futures and, in particular, the future of their children. A 40% plurality of the Struggling Middle say they expect their children’s lives will be ‘much better’ than theirs are, compared with 25% of those who identify with the lower class. For these middle class Americans, at least for now, the American Dream may be more a dream than a reality—testimony that ‘middle class’ is as much a state of mind as it is a financial condition” (Morin 2008).
Stanislaw Ossowski, in The Class Structure in Social Consciousness, describes the aformentioned subjective concept in the context of an analysis of gradation schemes” (Kurczewski 1994). Obviously, Ossowski’s remark applies as well to any other concept of the middle class, as stratification is inherently gradational.
It was also a scheme of such a character that has been found in an ethnographic study to be an element of the subjects’ everyday consciousness. Phillip Mayer’s study of class stratification found that Sowetans seemed to work with a three-tier model of upper, middle and lower class. The upper class consisted of professionals and businessmen; the middle class ofthe ‘semi-skilled, factory workers, drivers, policemen, teachers, sales representative or clerks’; mainly those who had an education (Mayer 1977: 295). Those who had similar mannerisms to whites and were seen as ‘civilised’ were also part of the middle class (ibid. 295). The lower classes were the ‘ordinary working people’ and ‘the dissolute’ (Mayer 1977: 100-123). In fact, the main
This should be a bitter lesson for all those who believe that such folk classifications can be directly translated into sociological notions. After all, what at first blush appears to be a stratification typology, on scrutiny turns out to include a messy mixture of groups and criteria, including class ones.
One more manifestation of this confusing character is the fact that the middle class also appears in Mayer’s study as the ‘people who are in the middle’ or abantu abaphakathi (Mayer 1977: 100). He referred to them as the Mosa Phadi and Owen Manda respectable poor or ordinary labourers’ who had steady jobs and were able to cope economically, unlike those who were seen as dissolute.
As the preceding suggests, the approach concerned is not, of course, limited to the U.S. What follows is another pernicious effect of the widespread survey methodology, this time round concerning Korea: “A study shows that Koreans perceive a ‘middle class household’ as a family which earns close to 5.15 million won monthly and owns a 115.7-square-meter residence or 35 pyong one, a unit of size of rooms or buildings in Japan, Korea and Taiwan.
Hyundai Economic Research Institute recently issued a report ‘Are You a Middle Class?’ and surveyed 817 adults across Korea on their perception of middle class in Korea.
According to the report, the respondents considered an ‘ideal middle class household’ would earn 5.15million won and spend 3.41 million won in a month, dine out about four times a month and spend 123,000 won in each.
The surveyed thought that it would take a residence as big as 115.7 square meters which would cost about 370 million won, and a net asset of 660 million won to lead a family to a middle-class lifestyle.
Also, they answered an ideal middle class family should donate 2.5 percent of their income and volunteer work at least 3.5 times in a year, which shows their high interest in making social contribution” (Kim 2014 (). The reader, bombarded by the media with an incessant stream of (purportedly representing cutting edge social science) survey findings could be forgiven for being surprised at the size of the gap between the reality and the ideal of a middle class: “they answered that their family earn 4.16 million won and spend 2.52 million won mont, own 89.3-square-meter residence, or 27 pyong house, and hold a net asset of 380 million won.
They said that they go out to eat an average of .2 times and spend 63,000 won in each dining occasion, donate 1.1 percent of their income, and participate in volunteer work only 3.1 times in a year” (Kim 2014).To put those findings in a perspective-not diverging from other industrialised societies, “Korea’s top 1-percent income earners make 19 times more than median income earners–those who fall in the middle when lined up based on the amount of income, according to Economic Reform Research Institute. In 2012, the top 1 percent took home 313 million won, which was 18.9 times more than the earnings of median income earners, who collected 16.6 million won.
The aggregated earnings of 190,000 top-1-percent earners almost matched what bottom 40 percent earned. But after 2010, the gap between the top-earning class and median income earners was slightly diminished” (Kim 2014).
It is also on this kind of subjective approach that the author of the following story relies: “This past spring, I was interviewing assembly-line workers in a suburban Shanghai internet router factory. When I asked workers what class they belonged to, they asked me what I meant and I said that I’m from North America, where most people will describe themselves as middle class. Even with high-calibre translators, none of the workers was able to tell me what class they thought they were a part of. They didn’t see themselves as working class or middle class or any other form of currently existing class” (Coupland2014).
There can be no denying that the author mentioned above is correct as regards his fellow Americans. According to a USA Today/Gallup poll, they are most likely to identify themselves as middle class, (in 55 per cent) (2014) a trend that has remained essentially unchanged throughout the past decade. Another 31% identify as “working class” and 13% see themselves as “upper-middle class.” Ten percent say they are “lower class,” a slight decrease from 14% in April. Just Two percent identify themselves as upper class. (Duganm 2013)
Social surveys are indeed a case of subjectivism squared -not only do they employ subjective methodology, but also can on a purely subjective, arbitrary basis modify their questionnaires, which admittedly is the reason why in another study “roughly 90% of Americans self-identified as middle, upper-middle or lower-middle class (2% acknowledged being “upper class”; 6% said they are “lower class”) (Meacham 2012).
Phenomena such as class consciousness or lack thereof, as the case may be, are, to be sure, perfectly valid objects of sociological inquiry, but they must not be confused with the issue of existence of given classes. More or less members of a given class may realise they belong to that very class, which by itself is an interesting sociological datum, but by no means implies that that class exists to precisely this extent.
It is well-known from logic that from a false premise in certain circumstances one can derive true inferences, which seems to be the case of the aformentioned author; while his first contention cited below is utterly unfounded, the critique of overblown notions on the middle class is quite another matter:
“This led me to believe that we are at a very interesting moment globally, one in which old class definitions are becoming increasingly obsolete, while emerging definitions still seem vague or non-existent. This lack of definition also got me to thinking of how our notions of the future are knotted together with our notions of middle-class status, and where this relationship is headed. Herewith, some new words for a new era. Centrosis (aka centrosclerosis) is the inability to view society as successful unless it has a large middle class. Centrosis dictates that the future and the middle class are inextricably linked; if one aspect dies, so will the other” (Coupland2014).
A subjectivistic approach has been also adopted by Daniel J. Walkowitz, who in his book (1999) sets out to answer the question: “what does it mean to be middle-class? Is it based on economics, social status, or both? Does it denote the same position or experience for people of different racial and ethnic backgrounds? If not, how do people’s varied perceptions of what it means to be middle-class affect their politics, and subsequently social policy and social struggle?
He examines the complexity and “persisting ambiguities” of middle-class identity in the 20th-century United States. Embarking on a detailed historical and theoretical journey, Walkowitz primarily argues that social context, gender, race, and ethnicity, and people’s views about themselves, specifically in relationship to others, shaped and reshaped the meaning of middle-class over time.
Similarly, Psychologist Ken Eisold, a contributor to Psychology Today, said that the way people describe their social status has more to do with what’s going on in their heads than their wallets (Horn 2013).
Such subjectivism leads to predictably bizarre consequences:
“It’s really more about identity,” he said. Even families making six figures are “much more comfortable calling themselves ‘upper middle class.’ They might have a lot of money, but they don’t want to feel different.”
When Pew pollsters gave people a choice between lower, middle or upper class, 17% described themselves as upper class and 32% as lower class. When Gallup gave people more options, such as “working class” and “upper middle class,” only 2% said they were upper class and 10% chose lower.
“Saying ‘We’re a middle-class family’ has more than financial connotations to it,” said Julie Heath, director of the University of Cincinnati’s Economics Center. “It has a salt-of-the-earth feel to it. That’s the bedrock.”
Income matters, but so does ‘attitude’
A 2008 Pew poll found that 40% of Americans with incomes below $20,000 – roughly equivalent to the poverty line – described themselves as middle class.
And about one-third with incomes above $150,000 said they’re middle class, too, which sure enough, does little to eliminate the over-inclusiveness of the “leaping” concept.
Given a choice, people tend to lean to the middle. Donna Palmatary and Katherine Stillwell are examples.
Palmatary, 49, lives with her husband in suburban Cincinnati. He’s an engineer and she works part time from home. With a daughter in college, she said, it takes $75,000 to $125,000 for a family to live comfortably.
Stillwell, 60, lives alone in Dayton, Ky., and relies on help from her grown children to get by. She is disabled after years of work as a truck driver and lives on a fraction of the income she once did.
Both women say they’re part of the middle class. “I always considered myself middle class, not just because of finances but because of the way we lived,” Stillwell said. “I still do. It’s mostly attitude.” (Horn 2013)
It is from a subjective point of view that another author argues, too, using not quite fair arguments, let it be noted. The apparent fact of regional income differences does not necessarily entail a resort to any subjective viewpoint. After all, in each of given regions income data provide just as objective evidence as they would on a national level: “Whether or not people see themselves as middle class, there’s no agreed-upon definition of the term. In part, it’s a state of mind. Incomes or lifestyles that feel middle class in Kansas can feel far different in Connecticut. People with substantial incomes often identify as middle class if they live in urban centers with costly food, housing and transportation.
[...] Five years after the Great Recession ended, the slow-paced recovery has sapped the ranks of, since 2008, the number of Americans who call themselves middle class has fallen by nearly a fifth, according to a survey in January by the Pew Research Center, from 53% to 44%. Forty percent now identify as either lower-middle or lower class compared with just 25% in February 2008.
According to Gallup, the percentage of Americans who say they’re middle or upper-middle class fell 8 points between 2008 and 2012, to 55% (Rugaber 2014).
However, according to the most recent Pew Research Center/USA TODAY survey, more than 42 percent of Americans identify as middle class” (2014).
That such subjective data are of no use is suggested not only by the divergence of the percentages reported above.
“Studies show that most Americans believe “middle class’’ indicates someone who owns their own home, owns a car, has a college savings account (if they have children) and have a job with benefits” (McDill 2014).
Similarly, “he White House Middle Class Task Force identifies members of the middle class by their aspirations to own a home, buy a dependable car, save for retirement and take care of their families. However, increasing costs and decreasing wages makes achieving middle-class goals a challenge.
According to a recent Consumer Price Index from the U.S. Bureau of Labor Statistics, the cost of living nationwide has increased more than 17 percent between 2005 and 2012. Conversely, national median household income has shrunk more than five percent over the same time, according to the American Community Survey from the U.S. Census Bureau.
‘The financial goal of many consumers is to make it to the next payday’, said Tena Lozano, consumer advocacy manager with the California Credit Union League.
‘While financial experts routinely encourage people to save, when life hits, they have to have money and they have to have it today. And that might lead them to places that charge incredibly high rates’” (Lozano 2014). Thus, even taking as a frame of reference an official definition does not yields more unequivocal results.
The usefulness of subjective data is even further diminished by the fact, known to social scientists, that “people are generally slow to acknowledge downward mobility. Many regard themselves as middle class even if their incomes fall well above or below the average.
Given this pattern, it is no wonder that Experts point out that the rise in Americans who feel they’ve slipped below the middle class suggests something deeply rooted.
More people now think “it’s harder to achieve” the American dream than thought so several decades ago, said Mark Rank, a sociology professor at Washington University in St. Louis” (Rugaber 2014).
Roughly 8.4% of respondents to the General Social Survey, last conducted in 2012, said they consider themselves lower class. That’s the survey’s highest percentage ever, up from 5.4% in 2006. NORC is a social science research organization at the University of Chicago.
According to Tom Smith, director of the survey, even slight shifts are significant. “Class self-identification is traditionally one of the most stable measures”in the survey”, he said.
By contrast to the most recent recession, the severe 1981-82 downturn had little effect on class self-identification in Smith’s survey (Rugaber 2014)
Overall, from the perspective under consideration it turns out that “even in the United States, which has long prided itself on its middle class, the term doesn’t mean what it used to. As incomes have stagnated and inequality has grown, the middle class has become less stable and comfortable.
‘There seems to be a lot of evidence out there that the status of middle class is almost the new poor’, notes Geoff Williams of U.S. News. He points out that in a recent survey by Country Financial to measure Americans’ financial security, as many as 59 percent of respondents said they were no longer certain that it’s possible to live a ‘middle class’ existence and be financially secure” (Anderson 2014).
Lifestyle also “matters to Palmatary. She said frugality, a focus on family and a desire to see your children do better than you all are middle-class traits.
Income matters, too, she said. Middle-class families must earn enough to maintain a house, own a car and provide a comfortable life for children.
With all its inherent limitations and distortions, such status perceptions-taken in a timeperspective-can give some useful information about the trends at work.
According to Gallup, “The percentage identifying as middle or upper-middle class was almost the same in 2012 as it is in 2015, even though the economy, at least as perceived by the public, is in much better shape now than it was in 2012. This could suggest that Americans have shifted into a “new normal” way of looking at their class standing, with the Great Recession having convinced a number of Americans that they are not now, nor are they going to be, middle class[...].
51% of Americans say they are in middle or upper-middle class.
This is down from the 61% average from 2000 through 2008 48% now say they are in working or lower class. Americans are considerably less likely now than they were in 2008 and years prior to identify themselves as middle class or upper-middle class, while the percentage putting themselves in the working or lower class has risen. Currently, 51% of Americans say they are middle class or upper-middle class, while 48% say they are lower class or working class. In multiple surveys conducted from 2000 through 2008, an average of more than 60% of Americans identified as middle or upper-middle class.
Gallup began asking this five-part social class question in 2000. In that year, and at several points since, a high of 63% of Americans identified as either upper-middle or middle class. The average percentage placing themselves in the two middle-class categories between 2000 and 2008 was 61%.
Gallup didn’t ask the question between 2009 and 2011, but in 2012 and again this year, the combined middle-class percentage dropped significantly, to 50% and 51%, respectively. On the other hand, the percentage of Americans identifying as working and lower class rose to 47% and 48%, up from a low of 33% in 2000” (Newport 2015), And the most recent General Social Survey, conducted by NORC at the University of Chicago, found that the vast proportion of Americans who call themselves middle or working class, though still high at 88%, is the lowest in the survey’s 40-year history. It’s fallen 4 percentage points since the recession began in 2007” (Rugaber 2014).
To be sure, a typical explanation of those trends presented below is not be to be dismissed entirely. However, it seems to be inadequate.
“The trend reflects a widening gap between the richest Americans and everyone else, one that’s emerged gradually over decades and accelerated with the Great Recession. The difference between the income earned by the wealthiest 5% of Americans and by a median-income household has risen 24% in 30 years, according to the Census Bureau” (Rugaber 2014).
The point is not that the figures are wrong, but rather that this kind of argument implies a petitio principii fallacy- the proposition to be proven is assumed -in this case implicitly -in the premise; in other words, the premise having been drawn on a stratification framework, all the inferences are bound to refer also to social strata, such as “the middle class”, rather than class. Meanwhile, to bring down capitalism to income and/or wealth inequalities is to scratch the surface of that economic formation. Those disparities are determined by the shape of capitalist ownership relations, with its concomitant patterns of accumulation and concentration of capital. According to Marx, part and parcel of those laws of capitalist development are those linked to “the industrial reserve army”, which brings us right to the core reason for the above noted shifts in self-identification. Why do so many no longer regard themselves as middle class? A key reason is that the recession eliminated 8.7 million jobs. A disproportionate number were middle-income positions. Those losses left what economists describe as a “hollowed out” workforce, with more higher- and lower-paying and fewer middle-income jobs.
Rob McGahen, 30, hasn’t yet found a job that paid as well as the purchasing agent position at Boeing’s defense division that he left in 2011. Nervous about the sustainability of that job because of government defense cuts, McGahen quit after buying a bar near his St. Louis home.
The bar eventually went bankrupt and cost him his house. He and his wife moved to Pensacola, Fla., where he’s had little luck finding work in defense contracting.
Now, he works in the produce section of a supermarket. His wife earns the bulk of their income as a speech pathologist. Their household income has been cut in half, from $110,000 to $55,000, and he and his wife have put off having children.
“It’s definitely been a step back,” McGahen said.
Now living in an apartment, he misses the couple’s three-bedroom house on a quiet cul-de-sac in a St. Louis suburb” (Rugaber 2014).
A British social thinker considers the matter of class membership on his own example:
I can no longer – with a straight face at least – call myself “working class”. The implications of the term, which tends to suggest dropped aitches, manual labour, a preference for beer over wine, magazines over books and pies over frittata – all exclude me. So why do I still feel – in part, anyway – working class? Because, although I grew up in an entirely working-class environment – my dad worked in a greengrocer’s shop, my mum was a dinner lady – I was earning enough money to distance myself in economic terms from the “working class” by my mid-20s.
As a result of the British Social Attitudes survey released recently, I realise I am not alone in this feeling of contradiction. Despite the fact that the proportion of people living in a home headed by someone in a middle-class job has risen to nearly 60 per cent, 60 per cent of people still persist in defining themselves as “working class”.
More specifically, per cent of Britons now see themselves as working class More of us than ever qualify as middle class – but it seems we are just not ready to admit it.
For 60 per cent of Britons insist on describing themselves as working class even though in many cases their incomes and lifestyles place them higher up the social scale” (Doughty 2013).
This very issue has been picked up by a columnist, who does not hide his amazement that “ after all these years - after Thatcher, Major and Blair, after endless claims that we’re a classless society and considerable evidence that most of us are middle class - we’re still obsessed with being working class” (Proud 2014). Throughout the book there is ample evidence for the thesis that the said effect of “middle-class society” is largely an artefact, or the result of specific definitions of the group in question. Nevertheless it is useful for our purposes to get acquainted with Proud’s further argument.
He is clearly irritated: “Every time I think we might have grown out it, I hear the mangled vowels of another public school mockney or a celebrity declaiming their working class roots with the kind of self-righteousness you normally reserve for trying to prevent a genocide.
I have nothing against the working class or any other class. Inasmuch as class is largely an accident of birth, I don’t care if you were born in Mayfair or Middlesbrough. What I do care about, though, is being endlessly told that being born in Middlesborough is better and that, if only I was less of a product of privilege myself, I’d realise that. Like all guilt-trap arguments, this is total rubbish and amounts to saying: “Being a snob is dreadful, but being an inverted snob is something we should all aspire to.”
Obviously, I have a hierarchy of annoyance here. So I’ll start at the bottom with those I dislike the least – working class people who long ago become middle class and who now won’t shut up about how authentically working class they are.
Yes, in general, I’m sure it was harder for you. I’m genuinely impressed that you had the drive to work your way up and that your determination got you a look-at-me job in the media or fashion or film or whatever. I take my hat off to you and I recognise that your journey was harder than mine. But I can’t be impressed every single time I meet you. Or every time I read something you’ve written. Or every single time I see you on TV.
The thing is, once you’ve made it, you’ve made it. Once you’ve got your newspaper column or TV show or made your first million, you’re not working class anymore. And, pretty soon, your endless prole-ier than thou platitudes start to ring a bit hollow” (Proud 2014). There lies the rub. However the thinker cited above is not strict inasmuch as the fact of birth in a definite family environment is not affected by the fact that one currently is a member of a different class than that her parents belonged to, he inadvertently called our attention to the repeatedly stressed divergence of stratification (as represented by the notion of middle class) and the concept of class proper, which must be defined on a different basis.
“The apparent nostalgia for working-class status was revealed in the British Social Attitudes survey, an annual snapshot of the views of more than 3,000 people.
It found that the same number said they were working class as in 1983 – the first year the survey was taken” (DOUGHTY 2013).
Yet the intervening 30 years have seen the collapse of Britain’s heavy industry and a dramatic rise in wealth and home ownership.
The report, based on surveys carried out last year, said: ‘although Britain has become a majority white-collar society, subjectively it is still inclined to feel working class, albeit perhaps not as closely as it once did.
Nor has the balance between those who describe themselves as middle class and working class changed as much as we might expect, given the substantial changes in the kinds of jobs people do over the last three decades.
The proportion in a middle-class job or living in a home headed by someone in a middle-class job has risen from 47 per cent to 59 per cent since 1983.
But only 35 per cent call themselves middle class, just one point higher than 30 years ago. (Doughty 2013)
The reasons are straightforward. “Working class” suggests that you have not unfairly benefited from privilege. It also has a number of other positive overtones such as the idea of warmth, straightforwardness, practicality, humour and unpretentiousness.
Whether or not these ideas have any founding in reality, they fit into the matrix of British classsystem. Alongside class resentment. One of the ways in which I know I still have the remnants of working-class genes is that when I listen to Radio 4 – the bastion of liberal British middle-class life –I feel a powerful if intermittent irritation about the voices and attitudes of the people that are broadcast. The presenters and commentators strike me, on the whole, as pious and highly abstracted in their opinions. […] most particularly, moral authenticity. Most working-class people view middle-class morality – as evidenced by Radio 4 generally – as highly suspect, a parade of self-righteousness that is more to do with the stoking of their pampered egos than any actual behaviour towards the real world. And attitude is key to the British idea of class, far more so than income.
As Alfred Doolittle says in Pygmalion when challenged about his apparent lack of morals – “I can’t afford ’em, guv’nah, and neither could you if you was as poor as me.” (Lott 2013)
Interesting as it is, no commentator of the aforementioned survey took notice of the divergence between modes of societal existence pertaining to the notions concerned, which is another way of saying that one must not compare apples and oranges, as they say.
Anyway, the above example shows that subjectivistic distortions can involve also other entities, though it is the middle class that will be in the focus of attention in the subsequent chapter.
Let us round off this section with an example of a subjective approach, closely related to the aformentioned issue to be considered in the next chapter.
For capitalism, guano is just as good opportunity for profit as poverty, as the type of reality shows called “poverty porn” whereby television networks are exploiting economic desperation for entertainment vividly shows. What bothers a social commentator cited below, is, however, “that it no longer seems strange that middle-class families are a couple of bad breaks from poverty. Being broke is no longer just for the poor.
Unless you’re one of the lucky few on the good side of the wealth divide, you could be in the middle class and just barely getting by, hoping to make it month to month” (Stanford 2015).
One of such shows, “The Briefcase” is like “Sophie’s Choice” for the financially strapped. Every week, two families experiencing tough times are each handed a briefcase full of $101,000—with one horrible condition. “They have to decide how much to keep and how much to share with the other family.
Each family learns about the other’s hardships, so we witness a wrenching decision: However much each family keeps for its own survival is therefore denied to a family all-too-similar to theirs. All the while, the audience—Americans just like them—sits in voyeuristic judgment” (Stanford 2015).
The commentator concerned stresses that “Poverty porn is not limited to our country or our age. Over in Great Britain [...] being broke is no longer just for the poor.
Unless you’re one of the lucky few on the good side of the wealth divide, you could be in the middle class and just barely getting by, hoping to make it month to month.
[...] During the Great Depression, people also enjoyed watching their fellow struggling citizens entertain them by competing in dance marathons, six-day bicycle races, and flagpole sitting contests [...]
If modern-day poverty porn is just the reinvention of a dark period in American history, what’s different here is that the middle-class no longer represents safe harbor from the storm. It used to be that the American Dream was to buy a home, put your kids through college, and retire comfortably. Nowadays, good luck with that.
It’s more than a feeling of insecurity. The American middle class has not gotten a raise since the late 1990s, and the average family’s net worth is lower (adjusted for inflation) than it was in 1989. We’re closer to the edge than our parents were at this age, and it’s stressful. If this rings true to you, you’re not alone. A report by the Federal Reserve Bank of St. Louis found that the middle class is better defined by stress and anxiety than stability and a solid income” (Stanford 2015).
Let us end this section on a different note, however; common sense may encompass manystereotypes, contradictions, etc., but it may still be far more realistic than, say, often instrumental and opportunistic, as well as ideologically motivated assessments of politicians. “YouGov’s latest research shows that Americans tend to describe themselves as working class (46%) rather than middle class (41%). Among Americans who live in households with incomes under $50,000 a year, 62% call themselves working class and only 25% think of themselves as part of the middle class. Among households who earn $50,000 to $100,000 a year 34% still call themselves working class and 60% middle class. People earning over $100,000 a year are the most likely to call themselves middle class, with 75% saying that they are middle class and only 11% describing themselves as upper class. To be sure, one should bear in mind that in those juxtapositions one compares apples and oranges-the working class is a socio-economic class while “the middle class” is a stratum.
Anyway, the popular definition of middle class is far narrower than that of politicians. Respondents were asked to name the lowest and highest annual income which they think constitutes the middle class, and the median result is that in order to be middle class you need to earn over $50,000 but no more than $100,000. The poorest Americans have the narrowest definition ($45-80k) while the richest have the broadest ($50-150k).
The median household income, that is the income that half of American households earn more than and half earn less than, was $53,657 in 2014.
According to the Census Bureau only 28.5% of Americans earned between $50,000 and $99,999 a year in 2014. 24.7% of the country earned $100,000 or more, while 46.8% earned under $50,000 a year” (Moore 2016). Thus, while preferable than that espoused by politicians, the aformentioned common-sense sociology still provides a distorted rather than true picture of social reality.
8.1.1. THE MYTH OF AMERICAN DREAM
Another dramatic example of a deep disjunction between consciousness and reality is provided by the popular, and still widespread so-called American dream.
From our viewpoint it is crucial that “he American Dream is supposed to mean that through hard work and perseverance, even the poorest people can make it to middle class or above” (Hargreaves 2013).
Meanwhile, such a belief is not supported by evidence - it’s actually harder to move up in America than it is in most other advanced nations.
It’s easier to rise above the class you’re born into in countries like Japan, Germany, Australia, and the Scandinavian nations, according to research from University of Ottawa economist and current Russell Sage Foundation Fellow Miles Corak.
Among the major developed countries, only in Italy and the United Kingdom is there less economic mobility, according to Corak.
The research measures “intergenerational earnings elasticity” - a type of economic mobility that measures the correlation between what your parents make and what you make one generation later- in a number of different countries around the world .
No wonder that the aformentioned pair of economists delving-as they did-in the issue of economic inequality- are keen to debunk the myth concerned: “For decades, we believed that hard work and an education would get us ahead and catapult ourselves to a better life. We indulged ourselves with illusions of growth, and the idea that most of us, if not all of us, would continue to achieve a higher and higher standard of living. We did not understand that we were being fed economic fairy tales. If we had paused before taking another slug of the kool-aid, we might have thought to ask who among us were truly benefiting” (Esposito, Tse 2014).
In a word, If America is a ladder, the rungs have been moved further apart. The answer to the question why some countries have a greater degree of mobility than others, is not that difficult. At the heart of the matter is inequality. The greater disparities in wealth and income, the wider differences of lifechances between children of the various classes and estates. The privileged classes and estates are in a position to pay for tutors or extracurricular activities that poorer families cannot. The disadvantaged classes are also handicapped as far as their possession of cultural resourses is concerned, which is likely to impact on the educational performance of their children as well.
And this is all the more relevant that today education matters a lot more than it did in, say, the generation of our grandparents in terms of getting a good job.
“The rich can pump a lot more money into their kids’ future,” said Corak.
This helps explain why countries like China, India and many South American nations also exhibit relatively little economic mobility.
Families: having a stable home life is also associated with the ability to climb the economic ladder, said Corak. The United States tends to have higher rates of divorce, single-parent homes, and teenage pregnancy than many other industrialized countries.
While single-parent families are less likely to ascend the social ladder, thereby worsening socio-economic inequality, another factor having such effects is sort of (class-estate)endogamy: “men and women with college degrees and high pay are more likely to marry each other” and thereby amplify income gaps (RUGABER, Boak 2014).
Social policies: Countries that redistribute wealth - through, say, higher taxes on the rich and more spending on the poor - tend to have greater social mobility, said Francisco Ferreira, an economist at the World Bank.
This is especially true when it comes to education spending. Critics have long contended that the U.S. system for funding education - where school funding is largely based on property taxes - perpetuates inequality far more so than a system that taxes the whole country for schools, then redistributes that money to the districts that are most needy” (Gilbert 2013).
The factor of education has been also singled out for particular attention in a historical explanation offered by another commentator, who however, in failing to name the type of politics at work is bound to end up in usual commonplace generalities condemning “politics and politicians in general”:”In the middle of the 20th century, it seemed like we had figured it out. The post World War II GI Bill of Rights provided veterans the opportunity for a college education, for home ownership and for what came to be defined as the middle-class life.
Social Security, a benefit that began in the 1930s, helped lift the elderly out of the poverty that was a near certainty for prior generations.
Americans dreamed of far more than a chicken in every pot. They envisioned two cars in every garage. A bright future seemed inevitable for the middle class—until it wasn’t.
Today’s stagnant wages, lost homes, crushing education debt and constant partisan bickering speak of the collapse of the middle class and the end of the dream. There is the sense that Americans are powerless against forces beyond any individual effort, and that there is no need for citizens to work together through our civil government to patch up the dream.
The American Dream has not been battered solely by economic forces or cultural changes. What happened is that we bought into nonsense. The Economist magazine summed it up: “The seeds of today’s disaster were sown in the 1980s. College graduation rates kept soaring for the affluent, but for those in the bottom half, a four-year degree is scarcely more attainable today than it was in the 1970s. And because some colleges actually hinder social mobility, what increasingly matters is not just whether you go to college but where.”
Prior to the ’80s, an educated electorate was considered a public good, something worth the taxes that paid for it. Some voices, however, began to point to the higher wages earned by the college educated and declared that education is a private good. They argued that the public shouldn’t have to pay because students could shoulder loans and pay them back later. The same voices trumpeted lower public budgets, opposed the minimum wage and cut public pension benefits.
In campaigning for the presidency in 1980, Ronald Reagan often proclaimed that government was not the solution to our problems but was itself the problem.
His attitude has been perpetuated and continues to be a tenet of faith of government leaders at every level.
That unquestioning faith, along with a divided Congress that pays more attention to the needs of the wealthy than the middle class, is hamstringing the nation by making political faith more important than the facts of middle-class decline”. (Haupt 2014)
Along similar lines, economist Steven Fazzari of Washington University in St. Louis contended that with the existing socio-economic disparities, achieving the American Dream isn’t realistic anymore.
“The idea that if you work hard and play by the rules, you should have a decent, normal life and fairly secure economic life, and there’s a sense that a larger share of Americans are prevented from reaching that,” Fazzari said.
Statistically, the middle includes households that make between $35,000 and $70,000, Fazzari said. But that often doesn’t align with ideals for a comfortable life.
“Having a median income for a family of four might not do it for you anymore,” Fazzari said.
Fazzari says the ability to move up economically isn’t easy anymore with one of the key gateways, education, difficult to access when wages are low.
“If education is the ticket into the middle class, and you can’t afford it because your wages are low, family wages are low, then where does that mobility come from?” Fazzari asked (Jacoby 2014).
A new report out by the Center for American Progress (CAP) highlights the divergence between the ideal and the present-day reality. According to the aformentioned report, for a typical middle class married couple with two children, the combined costs of health care, day care, housing and savings for college and retirement increased a staggering 32 percent between 2000 and 2012.
As a consequence, it has become extremely difficult, if not impossible, for middle class families to satisfy some of the most basic needs, including having a place to call home.
The fact of the matter is that housing costs have increased 28 percent over the past 12 years, meaning that fewer and fewer families can afford to purchase a home, used previously as kind of insurance policy against retirement” (Dickerson 2015a).
With last year’s drop in the homeownership rate to just 64.5%, nearly all the gains over the previous two decades have been erased. In fact, according to the Harvard study, the number of homeowners fell for the eighth straight year, and the downtrend is expected to continue.
At the same time, all indications are, this decade will be the record one as far as renting is concerned. Interestingly, it’s not just millennials fueling rental market growth. It’s also the middle class.
Households aged 45-64 have accounted for about twice the share of renter growth as households under 35. And even more importantly, households in the top half of the national income range — where you expect to find high homeownership rates — contributed a whopping 43% of the growth among renters, Harvard found.
The troubling fact thus is, “cost burdens are climbing the income ladder, affecting growing shares of not just low-income renters but moderate- and middle-income renters as well,” according to the study, “The State of the Nation’s Housing 2015.”
The cost-burdened share of renters with incomes in the $30,000-$45,000 range rose to 45% between 2003 and 2013, while 1 in 5 renters earning $45,000-$75,000 is now cost-burdened as well.
But obviously, it is for lower-income minorities, including those who held onto homes after the subprime crisis that the study paints tan ven grimmer picture.
“Negative equity problems are highly concentrated in minority and low-income neighborhoods. Almost a third of black and more than a quarter of Hispanic homeowners are upside down on their mortgages vs. 16% of white and Asian owners. Home equity is a key source of household wealth, but it represents a much larger share of the typical black or Hispanic homeowner’s net worth” (Editorial 2015).
Contrary to what might appear from the above, The area of housing can serve as a convenient springboard for the anti-intervenionist right-wing, who can point to the poor record in that regard so far: “The Department of Housing and Urban Development alone already has spent $1.6 trillion, or more than $13,000 per household, subsidizing housing since its creation in 1965, while pressuring the mortgage industry — specifically Fannie Mae and Freddie Mac — to subsidize homeownership for low-income borrowers with weak credit.
The goal was to boost homeownership and make housing more affordable for all. Only, the median price of new homes has doubled and median rents have gone up by more than a third since HUD was formed 50 years ago.
Government creates devastating housing bubbles by stimulating artificial demand. We’d all be better off with less government in the housing market” (Editorial 2015).
An important reason for substantial difficulties in financing housing is the Americans’ debt trap: it takes them 20 years to pay off the mountains of student loan debt” (Dickerson 2015a).
The Cap points out that while owning a house has become next to impossible for the American middle class, renting one constitutes a substantial financial burden as well.
Over half of renters in American spend 30 percent or more of their total income on housing, meaning that less and less money remains for other essentials.
The upshot is, “recent polls and surveys suggest that, for many Americans, homeownership is no longer a core component of the American Dream” (Dickerson 2015a).
Simply put, the whole myth has broken down and the chief concern of its purported beneficiaries has come to constitute the maintenance of at least of one of the pieces, judged to be more vital than the notorious “home, sweet home”.
“A recent survey found that most Americans are now more concerned about having enough money to retire comfortably than about becoming a homeowner. Homeownership was the top indicator of financial success for only 11% of the adults who were surveyed by the American Institute of CPAs. More than twice as many (28%) felt that having enough money to retire comfortably was most important, and 23% put being able to give their children a debt-free college education at the top of the list” (Dickerson 2015a).
There are still more bad news, as “even though most millennials desire to own, more than 40% believe they cannot afford to make a down payment or pay for the costs associated with buying a home, and 47% doubt that their credit is good enough for them to qualify for a mortgage.
Millennials are not the only renters worried they cannot afford to buy. The New York Federal Reserve recently released results from its 2015 Survey of Consumer Expectations, which shows that 64% of all renters indicated it would be hard for them to obtain a mortgage.
Americans of all ages are renting rather than buying, mostly because wages have been stagnant for all workers except the highest earners for about three decades, and because wages have not kept pace with home prices. In addition, potential first-time home buyers and those with blemished credit are being shut out because stricter lending standards make it harder for them to qualify for a mortgage loan. The US homeownership rate has now reached a 20-year low. At the same time, the rental rate has risen to an almost 30-year high.
Americans, and particularly younger adults, are avoiding homeownership for a number of reasons.
Many millennials watched their parents lose their homes during the housing crash, while others witnessed home values plummet during and after the recession.Given the massive wealth losses families suffered, younger Americans are understandably more cautious when deciding whether buying a home is worth the long-term commitment and risk.
Millennials are also less likely to be (or aspire to be) homeowners because so many of them are buried in student loan debt – making them less credit-worthy for a mortgage.
A recent report indicates that Americans born between the early 1980s and early 2000s account for about 60% of student debt, yet they do not have higher wages to repay it. The Standard & Poor’s report notes that, since the end of the recession, student debt has surged at a pace more than six times that of hourly wages.
Most wage gains since 1979 have gone to the highest-paid workers, while wages for middle- and lower-income workers have barely kept pace with inflation, according to the Economic Policy Institute, a nonpartisan think tank.
Even Americans who can afford to buy homes are now avoiding homeownership. The Apartment List Renter Confidence Survey polled 18,000 renters and found that most – especially those who are younger, lower-income and less educated – are not optimistic about the direction of the US economy. And those fears about the economy made them less optimistic about the benefits of homeownership than older or more educated Americans.
Only 56% of renters who said the economy is on the wrong track planned to buy homes, according to this survey.
While 65% of renters with college diplomas planned to become homeowners, only 59% of high school graduates and just half of those who lacked a secondary degree intended to buy homes.
[...] During National Homeownership Month last year, the then-Secretary of Housing and Urban Development stressed the need to reaffirm the role that “home” plays for middle-class Americans and their neighborhoods and announced the Obama Administration’s commitment to “preserving the dream” of homeownership. This year, however, fewer Americans seem convinced that the dream of homeownership is worth pursuing” (Dickerson 2015a).
As noted, this is far from being the end of the story, as Americans are also struggling to save up for their children’s college education.
According to the CAP report, between 2000 and 2012 the average amount of money that a middle class family with two kids has to save for college education skyrocketed by 39 percent.
Moreover, the cost of an education from a four-year public college or university increased by a staggering 86 percent during that same time period.
According to the report, however, the high costs of housing and higher education for middle class families pale in comparison to the outrageously high costs of health care in Amerrica. (Hartmann 2014)
And it is important to take account of all factors that affect the real-world foundations of this widespread American belief. Earlier a range of peculiarities of the U.S. system of taxation have been discussed. To make the matter worse, in 2013 in the deal he cut with congressional Republicans, “the president not only agreed to extend the Bush tax cuts for the highest earners but also to eliminate the estate tax for all but the microscopic percentage of people passing down more than $5 million—causing inheritance tax proponent Ray Madoff to declare the battle lost for good.
And despite the role skewed financial rewards played in cratering the global economy, the Obama administration’s policy response has failed to address outsized Wall Street and CEO compensation in any meaningful way. Bonus season is upon us, and with the big banks now liberated from their TARP obligations, the general attitude seems to be, ‘What financial crisis?’ Class war, prosecuted from above, is depicted as a threat from below. A Billionaire private equity manager Steve Schwarzman had the gall to compare the Obama administration’s attempt to tax ‘carried interest’ at the same rate as other forms of income to when Hitler invaded Poland in 1939’.
When it comes to raising working-class incomes, Obama has been similarly ineffective. As it is implemented over time, [...] Obama’s health care reform may become a significant factor both in reducing the burden of medical costs on middle-class families and in promoting social equality. From 2008 to 2009, however, the number of people without health insurance rose from 46.3 million to 50.7 million. In the longer term, the key to combating inequality is upgrading the education and skills of American workers. But with the Republicans [...] in charge of the House, Obama’s hopes for major new investments in worker skills seem more elusive than ever. In particular, his goal of every American receiving some higher education is going nowhere. [...] Statistics show the problem is getting worse. According to a study by Emmanuel Saez of Berkeley, the top 1 percent of earners captured two-thirds of all income growth between 2002 and 2007. [...] The bottom 20 percent of the population—which earned 5.4 percent of national income in 1967—earned just 3.4 percent of it in 2009. The highest 20 percent went from 41.5 to 49.4 over the same period. The Gini Index—the standard measure of income inequality—ticked up again between 2008 and 2009, from .451 to .458. According to the CIA World Factbook, this figure puts the United States ahead of Russia and Turkey in inequality, and on par with Mexico and the Philippines.
Why is income inequality proving so intractable a problem? [...] On one hand, Obama is up against macro forces like globalization and a system that has grown highly effective at transmuting economic privilege into political power. Somehow, wide majorities have come to support tax law changes that benefit only tiny minorities” (Banu 2010).
For example, according to the new bill mentioned above, “for the first time, wealthy individuals can make gifts of up to $5 million during their lifetime to anyone, including grandchildren, and pay no tax.”
It’s like the old Steve Martin routine about how to be a millionaire and never pay taxes—except that instead of “I forgot!” you now say, ‘I’m allowed!’
It is an American peculiarity that rich people want to be thought of as middle class, while those in the middle class identify with the economic interests of an upper class they have only a remote chance of joining. The United States, the land of opportunity, now boasts the world’s second-lowest level of intergenerational income mobility. Meanwhile, the people most alarmed about the rise of new economic dynasties seem to be the enlightened superrich themselves, people like Bill Gates and Warren Buffett.
Obama deserves fault for failing to articulate this abstract threat in a way ordinary people can appreciate. Like the deficit, income inequality never killed anybody—it merely has the potential to sap the entire country’s health and spirit. Moving toward an income distribution like Brazil’s threatens individual happiness, social peace, and American values. But so far, the president hasn’t figured out how to get the public to relate to the issue. In April, Obama told a group of frowning bankers at Cooper Union, ‘There is no dividing line between Main Street and Wall Street.” But there is, and it is growing deeper every year” (Banu 2010).
It is certainly far easier to explain why Americans have a harder time making it into the middle class than why Americans cling to the belief that it’s still easy to do, which is really baffling. “Even though there is no clear consensus among economists, sociologists, or Americans themselves for a single definition of the term, most Americans [...] identify themselves as middle class and consider membership in the middle class synonymous with achieving the American dream” (McMahon 1998).
To put it another way, “public opinion data suggests that a strikingly large proportion of Americans, and particularly young Americans, believe they have a reasonably good chance of becoming rich in their lifetime. [...] Analysis of PSID data demonstrates the actual level of opportunity for upward income mobility over the life course and shows that Americans overestimate their chances of being rich. The overestimate is considerable even when subjective definitions are used, and is very large if conventional definitions such as top 3%, top 1%, or top 0.1% are used for the threshold” (DiPrete 2007).
To return, then, to the aformentioned question, “it could be because, during the late 1800s and early 1900-suggested Jason Long, an economist at Wheaton College in Illinois-the United States was a much more mobile country than Britain.
While not denying the role of such historical experiences, it appears that one should not leave out the factor pointed out by Gilbert (2011): “the American middle classes have been fed a very different line of propaganda, emphasizing individualism and the American dream of social mobility. Consequently, they tend to view in individual terms experiences that a European might interpret from a class perspective”. Similar factors are pointed out by other scholars, too: “it seems that everyone wants to think of themselves as middle class, even if that’s not the case. ‘The reality created by the commercial mass media is one in which everyone is middle class’, Kate Ratcliff, professor of American studies at Marlboro College, told U.S. News. ‘Advertising, television and movies all convey a world in which middle-class affluence is an American birthright’.
As for developing countries, they like to claim middle class status for their own reasons, Birdsall told Slate. ‘Developing countries that are growing fast take pride in that they’re getting richer’, said Birdsall. “Part of the discussion for them is, ‘We also have now a middle class. We’re not just poor” (Anderson 2014).
It should be pointed out, however, that this traditional American mindset has been not immune to the processes in the real world. Michael Snyder reckons that the current median income of “$27,520 a year will not allow you to live ‘the American Dream’ in this day and age. After taxes, that breaks down to a good bit less than $2,000 a month. You can’t realistically pay a mortgage, make a car payment, afford health insurance and provide food, clothing and everything else your family needs for that much money. That is one of the reasons why both parents are working in most families today. In fact, sometimes both parents are working multiple jobs in a desperate attempt to make ends meet. Over the years, the cost of living has risen steadily but our paychecks have not. This has resulted in a steady erosion of the middle class. Once upon a time, most American families could afford a nice home, a couple of cars and a nice vacation every year. When I was growing up, it seemed like almost everyone was middle class. But now “the American Dream” is out of reach for more Americans than ever, and the middle class is dying right in front of our eyes.
One of the things that was great about America in the post-World War II era was that we developed a large, thriving middle class. Until recent times, it always seemed like there were plenty of good jobs for people that were willing to be responsible and work hard. That was one of the big reasons why people wanted to come here from all over the world. They wanted to have a chance to live “the American Dream” too.
But now the American Dream is becoming a mirage for most people. No matter how hard they try, they just can’t seem to achieve it.
And here are some hard numbers to back that assertion up. The following are 15 more signs that the middle class is dying…
#1 According to a brand new CNN poll, 59 percent of Americans believe that it has become impossible for most people to achieve the American Dream…
The American Dream is impossible to achieve in this country.
So say nearly 6 in 10 people who responded to CNNMoney’s American Dream Poll, conducted by ORC International. They feel the dream — however they define it — is out of reach. Young adults, age 18 to 34, are most likely to feel the dream is unattainable, with 63% saying it’s impossible. This age group has suffered in the wake of the Great Recession, finding it hard to get good jobs.
#2 More Americans than ever believe that homeownership is not a key to long-term wealth and prosperity…
The great American Dream is dying. Even though many Americans still desire to own a home, they are losing faith in homeownership as a key to prosperity.
Nearly two-thirds of Americans, or 64%, believe they are less likely to build wealth by buying a home today than they were 20 or 30 years ago, according to a survey sponsored by non-profit MacArthur Foundation. And nearly 43% said buying a home is no longer a good long-term investment.
#3 Overall, the rate of homeownership in the United States has fallen
for eight years in a row, and it has now dropped to the lowest level in 19 years. This is not surprising given that “the average price of a newly built home nationwide has reached $320,100 — a 20.5 percent jump since 2012 began. That puts a typical new home out of reach
for two-thirds of Americans, according to government data.
Yet many builders have made a calculated bet: Better to sell fewer new homes at higher prices than build more and charge less-which provides an example of the aformentioned class bias present in the relationship between demand and supply.
Their calculation is partly a consequence of the growing wealth gap in the United States. Average inflation-adjusted income has declined 9 percent for the bottom 40 percent of households since 2007, while incomes for the top 5 percent exceed where they were when the recession began that year, according to the Census Bureau.
Buyers have historically paid about 15 percent more for a new home than for an existing one, a premium that’s reached 40 percent today, according to the real estate data firm Zillow. An average new home costs about six times the median U.S. household income. Historically, Americans have bought homes worth about three times their income.
The high prices and sparse construction are no help for a still-subpar U.S. economy. With new-home sales well below their historical average, construction firms need fewer workers. The economy remains 1.49 million construction jobs shy of its total in December 2007, when the Great Recession began.
After 60 years of migrating to car-dominated suburbs, polls show more Americans want out of long commutes in favor of neighborhoods where jobs and stores are nearby.
Stuck with pay that’s barely budging, many face a tough choice: Keep renting. Pile up huge mortgage debt to buy a home near their job. Or buy a cheaper home that requires a lengthy commute.
“Middle-class Americans are [being] squeezed out,” said John McIlwain, a senior fellow at the Urban Land Institute.
Low mortgage rates have eased some of the pain from rising prices. But the desire to live near town centers on costlier land could depress home ownership rates to as low as 60 percent, McIlwain estimates. That would be down from 65 percent today and 69 percent during the housing bubble.
About 40 percent of Americans still live in a suburb “where most people drive to most places,” according to a new poll by the American Planning Association, a trade group for community planners. But just 7 percent say they hope to stay in car-dominated neighborhoods. Those findings mesh with a March report on the preferences of millennials by Nielsen Holdings.
The construction business thrived for decades by bulldozing cheap farmland into suburban networks of streets and houses. But as farmland grew costlier, land prices in cities and towns with attractive amenities soared, says Christopher Leinberger, a professor at George Washington University and an industry strategist.” (Morici 2014).
#4 52 percent of Americans cannot even afford the house that they are living in right now…
“Over half of Americans (52%) have had to make at least one major sacrifice in order to cover their rent or mortgage over the last three years, according to the “How Housing Matters Survey,” which was commissioned by the nonprofit John D. and Catherine T. MacArthur Foundation and carried out by Hart Research
Associates. These sacrifices includegetting a second job, deferring saving for retirement, cutting back on health care (NYSEARCA:XHB), running up credit card debt, or even moving to a less safe neighborhood or one with worse schools.”
#5 According to the U.S. Census Bureau, only 36 percent of Americans under the age of 35 own a home. That is the lowest level that has ever been measured (Snyder 2014).
And those realities makefor some startling research findings, registering some serious shifts in the American belief system. The high cost of housing across the U.S. has made Americans pessimistic about the prospect of social and economic mobility, a recent study by the MacArthur Foundation has found. The research released Tuesday states 79% of Americans – across all ages and political party affiliations -believe it is more common for people to fall out of the middle class than rise up to it.
“We expected to see some pessimism for this, but the depth and breadth of this is quite profound,” said Rebecca Naser, a member of the team who conductedthe the research that surveyed 1,401 adults over the span of two weeks for the third annual study, “and allowed the respondents to define affordability for themselves” (Jones 2015).
Such findings are the more understandable, the longer is the list of developments inconsistent with “the American dream”.
#6 6.7 million people were part-timers. unable to find a full-time job, according to the Bureau of Labor Statistics.
#7 The labor force participation rate for Americans from the age of 25 to the age of 29 has fallen to an all-time record low.
#8 The number of working age Americans that are not employed has increased by 27 million since the year 2000.
#9 According to the government’s own numbers, about 20 percent of the families in the entire country do not have a single member that is employed at this point” (Snyder 2014).
And the analyst adds a couple of further factors whose significance does little to ameliorate the gloomy picture depicted so far:”
#10 [...] 25 percent of all American adults do not even have a single penny saved up for retirement.
#11 56 percent of all Americans have “subprime credit” at this point.
#12 more than one out of every five children in the United States is living in poverty in 2014.
#13 According to one recent report, there are 49 million Americans that are dealing with food insecurity right now.
#14 Overall, the U.S. poverty rate is up more than 30 percent since 1966. It looks like LBJ’s war on poverty didn’t work out too well after all” (Snyder 2014).
The above argument, deploying-as it does- by and large a stratification perspective, would benefit from shifting to an alternative, class approach which lurks behind his final conclusion.
“Sadly, it does not appear that there is much hope on the horizon for the middle class. More good jobs are being shipped out of the country and are being lost to technology every single day, and our politicians seem convinced that “business as usual” is the right course of action for our nation.
Unless something dramatic happens, it is going to become increasingly difficult to eke out a middle class existence as a “worker bee” in American society.
The truth is that most big companies these days do not have any loyalty to their workers and really do not care what ends up happening to them” (Snyder 2014).
Of course, in a way it comes as no surprise that a columnist of a Wall Street magazine can’t see the forest for the trees, as manifested in the individual observations made at the end of his argument: or to see that the phenomenon mentioned above is not accidental, but constitutes part and parcel of a specific model of capitalism, distinct from stakeholder capitalism.
In a similar vein, a person who is entitled to claim he is in the know-as a manager of a trillion dollars he has a first-hand knowledge about the subject: “The American Dream never really existed. It was a marketing scam.
And it was. The biggest provider of mortgages for the past 50 years, Fannie Mae, had as their slogan, “We make the American Dream come true.” It was just a marketing slogan all along. How many times have I cried because of a marketing slogan? And then they ruined it (Altucher 2013).
Some other researchers concur also with the aforementioned point about the misrecognition of one’s own, including class, interests. In the 2010 midterm elections, its voters rejected a ballot proposition that would have given the state an income tax applicable only to individuals making more than $200,000 per year and families making over $400,000. That 1.2 percent of the state’s population evidently had a lot of less-prosperous friends, since 65 percent of the voters opposed the tax.
This prompts the question why do the politicians’ solutions for the problem of inequality so often leave so indifferent, or worse, those who ought to be most interested in tackling the problem head-on. In 2008, Bonnie Snodgrass cleaned a television studio in the evenings after working days as a receptionist in Columbus, Ohio, bringing home a little more than $40,000 a year. The New Yorker’s George Packer interviewed her for a story about Barack Obama’s difficulties with working-class voters. Obama’s pledge to let tax rates revert to higher levels for families with incomes exceeding $250,000 was prominent throughout his 2008 campaign but seemed “incredible” to Snodgrass, even though she had always voted Democratic. “How many people do you know who make two hundred and fifty thousand dollars?” she told Packer.
“That’s a joke! If he starts at a hundred thousand, I might listen. Two hundred fifty - that’s to me like people who hit the lottery.”
Packer understood Snodgrass to be saying that Obama’s promises to increase government spending and reduce the deficit, while raising taxes on families making more than $250,000 and no one else, would be impossible for him to keep and were, therefore, impossible for her to believe. “He’ll keep going down, and when it’s to people who make forty-five or fifty thousand it’s going to hit me,” she said. “I’d have to sell my home and live in a five-hundred-dollar-a-month apartment with gang bangers out in my yard, and I’d be scared to death to leave my house.”
Such raw skepticism, coming from exactly the sort of voter liberals devise five-point programs to impress, is no less dismaying a problem for being a chronic one. In 1972, George McGovern’s plan to impose a 100 percent tax on any inheritance over $500,000 got a hostile reception from voters unlikely ever to bequeath or inherit enough money to be affected by it. (Half a million dollars in 1972 would be worth about $2.6 million today.) According to Richard Dougherty, McGovern’s press secretary, the problem was “the dream factor - every slob in the street thinks that if he hits the lottery big, he may be able to leave half a million to his family; it wipes out dreams.”
In 2004, Thomas Frank expanded on this assertion that working-and middle-class voters can’t or won’t understand their own best interests in his book What’s the Matter with Kansas? In Frank’s view, voters who would benefit from leftist redistributive policies are beguiled into opposing them because of an induced “derangement” Rather than supporting Democrats, who really are trying to address their economic problems, too many of them wind up supporting a Republican Party that conceals its plutocratic agenda behind a pageant of cheap, meaningless gestures of solidarity on peripheral cultural issues: God, gays, and guns.
Most recently, Slate’s Timothy Noah has echoed Dougherty and Frank, writing that “even mild economic populism” has been “a loser for Democrats.” This lament came in a 10-part series that ran in September, examining what Noah called ‘the most significant change in American society in your lifetime.” The “Great Compression” of the post-World War II era, when the gulf separating the rich from the rest was unusually small, has given way since the 11970s to the “Great Divergence,” as the gulf has done nothing but grow. There “probably was no better time to belong to America’s middle class” than during the Great Compression, Noah writes. As for the Great Divergence? Noah’s “gut-level feeling” is, “I do not wish to live in a banana republic,” since societies “starkly divided into the privileged and the destitute” are “repellent.” (Voegeli 2010)
Noah’s series ranged over the possible causes for the Great Divergence, only to conclude that a convincing theory of the case is as elusive as the list of suspects is extensive. Altered family structures, changes in race and gender relations, education, immigration, technology, foreign trade, politics and policies, the decline of unions, to which list one could add globalization as a key driver of capital and labour power movements, as well as income redistribution An extreme effect of the latter is destitution-the author cited points in this context to workers who have to devote such a large portion of their income to rent that they wind up skipping lunch because it’s too expensive. (Voegeli 2010)
Be that as it may, “it’s clear that Americans still believe that America has exceptional mobility, and that’s not true,” said Long, calling it “vexing” that “lots of people could be systematically mistaken about verifiable, factual information” (Hargreaves 2013)
Those facts in the eyes of some are so ominous that serve as a basis for far-ranging conclusions: “The United States was built on the assumption that a rising tide lifts all ships. That has not been the case for the past generation, and there is no indication that this socio-economic reality will change any time soon. That means that a core assumption is at risk. The problem is that social stability has been built around this assumption - not on the assumption that everyone is owed a living, but the assumption that on the whole, all benefit from growing productivity and efficiency.
If we move to a system where half of the country is either stagnant or losing ground while the other half is surging, the social fabric of the United States is at risk, and with it the massive global power the United States has accumulated. Other superpowers such as Britain or Rome did not have the idea of a perpetually improving condition of the middle class as a core value. The United States does. If it loses that, it loses one of the pillars of its geopolitical power” (Friedman 2013). The author has done us a service, demonstrating again what cognitively harmful consequences the concept of the middle class can involve-in this case it is ahistoricity, manifested in the author’s searching for the said “class” in the ancient Rome. Secondly, it should be recalled that those sweeping generalisations refer to what-at the end of the day-is but a statistical category, which means that it suffices to shift financial boundaries of the latter, and one might arrive at very different conclusions, and most relevantly, there is nothing either in the nature of the definition itself or in the form of any external authority to rrule out certain shifts in the meaning rather than some others-which is but one example of the inherent arbitrariness marking virtually all stratification approaches., as will be analysed at more depth in the second volume. As far as the aforementioned United Kingdom is concerned, it is useful-given both societies’ systemic affinity-consider whether there is such a thing as a British counterpart of the American dream, comparing underlying relevant real-world processes in both countries.
That we are not wasting our time can be seen from from this introduction by a British commentator:
“For the first time, swaths of middle-class voters, who for generations were given to understand that the system was fashioned for their benefit, feel it is rigged against them. In such a climate, the conventional messages - the appeal to aspiration and the promise to reward enterprise - ring hollow. Yet the current generation of party leaders doesn’t know any other kind of middleclass politics” (Behr 2012).
The author then, unsurprisingly, invokes “the American experience [that] is instructive. The US middle class has followed the same pattern of stagnant wages, shrinking opportunity and squeezed living standards but for even longer. The “Death of the Great American Middle Class” is a well-established trope in the US media, debated in newspaper op-ed pages and dissected by political scientists.
A new book by James Carville and Stan Greenberg, two veterans of Bill Clinton’s presidential campaigns, charts the phenomenon in depth. It’s the Middle Class, Stupid! argues that the mechanisms for delivering the American dream to the average citizen - access to quality education, affordable housing, jobs that pay decent wages - have broken down.
“There’s a presumption that you will do better and better, have more disposable income and more savings, and you’ll have a decent retirement, that your kids will get a college education and be able to do better than you,” says Greenberg. “If you look at the period 1945-80, that’s what happened in America.
We now know, looking back from 1980 onwards, that it largely stopped - the story is now a myth” (Behr 2012).
It is also in terms of the demise of socio-economic ideal concerned that the following Dallas commentator defines the middle class, and thus its today’s plight: “Median income in Dallas is about $48,000. This means that half of Dallas households make less than this amount and half make more. Median income in the United States is around $54,000” (Virgoe 2016). The author argues that “neither of these incomes qualifies as middle-class” and to support her claim she refers to what in the terms of values and ideology is concerned with the concept featuring in the head of the present section, but what in her concrete interpretation comes close to-surprise, surprise-to the notion of value of labour power: “When we think of a typical middle-class family, we expect the following: decent housing in a reasonably safe neighborhood, decent school system, reliable transportation, an annual family vacation (whether a long weekend camping or a trip to the beach), and some cash left to save for retirement and kids’ college. This is the definition of the American Dream. And, it is beyond the grasp of most American households” (Virgoe 2016).
This simply corrorobates the contention of the mythical nature pertaining to the said notion, but the author goes on to take up a more substantive socio-economic analysis:
“Let’s use a hypothetical family of four with the U.S. median income of $54,000 annually, or $4,500 per month, before taxes. Just how close to middle-class will this family be?
First, the $4,500 are their gross wages before income, Social Security and Medicare taxes. I estimated this, based on IRS tables, to be $584 per month. If the wage earners are self-employed, they pay the employer’s share of Social Security and Medicare taxes, an additional 7.65 percent, or $344, for a total of $928. The family really starts with $3,916 per month, or $3,572 if self-employed” (Virgoe 2016).
And then the author confronts the aformentioned figure with what makes up the costs of subsistence at a socially average level:
“This family wants to live in a decent neighborhood with good schools — the best that they can afford. Our family is going to turn to the suburbs — like true middle-class aspirants — for reasonably safe neighborhoods and decent schools at an affordable price. They’ve moved to the east side of Allen, and their kids attend Allen ISD. They spend about $1,100 on rent, plus about $125 on utilities and cell phone. According to the U.S. Department of Agriculture, a family of four can eat a healthy, low-cost diet for $191 a week, or $828 per month. That leaves them with $1,863 ($1,519 if self-employed).
In most of the Metroplex, residents would need two reliable vehicles. We’ll assume that our family is thrifty. They have two decent used cars or a reasonably priced new one and one that’s paid off. We’ll give them $600 for the payment, insurance for two adults, and gas. That leaves $1,263 ($919 if self-employed).
For health insurance, according to Kaiser Family Foundation’s health insurance marketplace calculator, they can purchase a silver plan for $325, after subsidies, leaving $938 ($594 if self-employed).
That sounds pretty good, right? Except, that has to cover everything else for the month: clothing, shoes, coats, diapers or kids’ school supplies, car maintenance ($200), medical expenses, emergency expenses, entertainment, and the three biggest middle- class nightmares: daycare ($540 to $975 full-day, per child), college ($400 starting at birth for 18 years for two kids attending state universities and living at home) and retirement ($675, the recommended 15 percent). The rest of the cash is consumed by the last three items, if this family wants to be middle-class.
But, it can’t be. There isn’t enough left. To be comfortably middle-class, this frugal family needs at least $2,400 extra per month (or $28,800 a year) in gross income. In other words, the least a North Texas family should earn to approach a middle-class lifestyle is $82,800 ($88,000 if self-employed), putting them in the top 30 percent of incomes.
For over two thirds of Metroplex residents, the American Dream is out of reach. They simply don’t earn enough. There is no middle class anymore, only struggling families falling further behind” (Virgoe 2016).
When discussing the parallels between the American and British predicaments, Greenberg pointed to one vital distinction: “in the United States is a much broader category. Those who aspire to the status automatically expect to acquire it and so pre-emptively identify themselves with it.
“In the US, working-class people who are clearly not middle class by the standards we’re talking about here [in Britain] consider themselves middle class, and they do so because they believe they will have rising incomes” (Behr 2012). Now, the fact of American authorship of that opinion does not prejudge that it is correct-later in the book the reader will be able to get to know an alternative treatment of the same issue, which constitutes yet another manifestation of the protean quality of the construct under investigation.
Anyway, to come back to the above-mentioned thread, Behr argues that:
When that expectation is disappointed the result is rage. It shows itself in the banners held aloft at last year’s Democratic National Convention saying “Middle Class First” (a slogan that would invite satirical sneers about easier access to organic vegetables in the UK). It is also a force driving the rise of the radical conservative Tea Party movement. Although the Republican fringe is better known in Britain for its Christian fundamentalism, it channels a sense of betrayal at the hollowing out of the American dream - the feeling that the Washington and Wall Street elite have stolen the country from the people.
As Greenberg sees it, the common belief is that America is “hard-wired” to furnish opportunity, so if it doesn’t happen, some conspiracy is to blame. “So we end up with a morality tale - who are the bad guys that are blocking the natural forces? It’s class conflict in the context of an assumption that we just need to take away the distortions that rig the rules” (Behr 2012).
A comment is in order-the author forcefully imposes an utterly fallacious impression that conspiracy theories and class struggle are somehow intimately related to each other. Now, there is no such a necessary logical relationship between the two, not to mention the elementary fact that the former are untenable theories of history, whilst class struggle, class war, warfare, you name it is a social and historical fact and one does not need to be a Marxist to recognize it. This follows also from further Behr’s remarks:
[…] Thus, in the US at least, the mainstream politics of class resentment, historically imagined to be a resource of the left, has been appropriated by the anti-government right. A significant observation in It’s the Middle Class, Stupid! is that the raw evidence from opinion polls shows Democratic candidates do surprisingly well when they become unapologetic in demanding that wealth be shared more equitably. Yet they are often intimidated out of pressing the point home by a received wisdom - and a well-mobilised conservative commentariat - which says that such messages are divisive, signal a drift away from the centre, represent “class war” and alienate independent voters with a whiff of socialism. (Behr 2012)
This illustrates well the fortunes, or rather misfortunes of the idea, and the very term “class struggle” (and its related forms) and the relationship of those with the ruling ideology. If anything the idea underlying the grand “American dream” ideology is one of social peace and order, where social change is by any means a collective advancement of a class, but instead nothing remotely that disruptive-individual efforts following a proscribed range of well beaten tracks. To be able to engage in so conceived individual mobility demands-or so the recieved wisdom goes-that any divisive, diverting attention from the set of goals one ought to follow, class struggle must be erased not only from social life, but also from the very language used to describe that life, which accounts for the hostility of mainstream politics, media and academia even to the term of class itself. “So instead of working class, we hear of ‘working families’ or ‘blue collar’ and ‘white collar employees’. [...]
Instead of the capitalist owning class, we hear of the ‘more affluent’ or the ‘upper quintile’. And at the opposite end of the societal spectrum, we hear of ‘inner city poor’ and ‘low-income elderly’” (Parenti 2011).
Parenti implies that for the reader to see how the above account fits today’s American practice, one needs not to look very far and “just listen to any Obama speech. Often Obama settles for an even more cozy and muted term: ‘folks’, as in ‘Folks are strugglin along’” (2011).
By contrast, the flip side of the “leaping” nature of the concept our analysis focuses on is that it has become the only “class” term whose use does not put one in the spotlight as a Marxist and “public enemy”: “’Class’ is used with impunity and approval only when it has that magic neutralizing adjective ‘middle’ attached to it. The middle class is an acceptable mainstream concept because it usually does not sharpen our sense of class struggle; it dilutes and muffles critical consciousness. If everyone in America is middle class (except for a few superrich and a minor stratum of very poor), there is little room for any awareness of class conflict” (Parenti 2011).
The aformentioned thinker warns, however, that this happy state of affairs “may be changing with the Great Recession and the sharp decline of the middle class (and decline of the more solvent elements of the working class).
The concept of middle class no longer serves as a neutralizer when it itself becomes an undeniable victim” (Parenti 2011).
This brings us to a distinctive feature of Britain that, however structurally cognate to the U.S. capitalism, is nevertheless also a member of the European Union, whose social model epitomizes stakeholder capitalism.
A similar dynamic operates in Britain, though much moderated because we are less hysterical about the spectre of reds under the bed. The charge of sowing interclass strife is central to Tory rebuttals of Ed Miliband’s attempt, laid out in his speech to this year’s Labour conference in Manchester, to position himself as the leader of a “one-nation” party. Conservatives leapt on Miliband’s scorn for David Cameron’s quasi-aristocratic background, Eton education and cabinet staffed with millionaires as evidence that the call for national unity disguised a return to embittered socialism. Cameron addressed the point directly in his own autumn conference speech. “We don’t preach about one nation but practise class war,” he said. (Behr 2012)
Finally, much the same experience is shared by yet another nation included in the category of shareholder capitalism. Canada’s middle-class is mortgaging its future to stay afloat, making the Canadian dream “a myth more than a reality.”
That’s the blunt assessment of an internal Conservative government report, an unvarnished account of the plight of middle-income families that’s in contrast to the rosier economic picture in this month’s budget.
(Beeby 2014b). “Middle-class families are struggling economically, but at least one of them is doing quite well, thank you very much: the working parents with two kids who appear as a fictitious example in the federal budget each year.Critics say the family’s rapidly rising income is a complete fiction as well[-the ] budget document introduced Blake, Laurie and their children, a made-up family pulling down $120,000 in combined salary – and enjoying $3,400 in annual tax savings, thanks to Conservative policies” (Beeby 2014a).
Attempting to draw some kind of theoretical lesson from the above, subjective treatments of the social group concerned are not successful on their own terms and shade over into the most common class of definitions discussed in the subsequent chapter: “middle class may refer to a group with shared values or views, but much of the time it is intended to refer to those who fall within a particular range of incomes” (Datta 2012).
This slippage shows up clearly in the argument, whose point of departure is a usual subjective assumption, for the author’s answer to the “ question: What is the annual earning for a middle class family”? is as follows: “This is sort of like that old adage that beauty is in the eye of the beholder. It seems ‘middle class’ also is in the eye of the beholder” (Fergusson 2014).
And the reader could be forgiven for being surprised by the justification offeredd for such an extreme subjectivism; ironically, we, Europeans, are told all the time that one of the chief distinctions of the U.S. model of capitalism lies in the widespread distrust in government on the part of the citizenry. Meanwhile, the author being cited, who is American, after all, invokes precisely the state authority in order to vindicate his cognitive scepticism: “There’s no official government definition of middle class, if that’s what you’re looking for” (Fergusson 2014). Be that as it may, one does not need wait long to see the effects of a subjective approach to the category concerned. The commentator in question admits willy-nilly that the said government social-scientific authority leaves something to be desired: “In fact, when I was researching this, I came across a CBS article from 2010 that talked about how the government itself was having trouble defining that as it wrestled with what were then the expiring Bush tax cuts and how they would affect the middle class. At that time, government-types were throwing around numbers like $250,000 or $500,000 as cutoffs for the middle class income in terms of taxes.
Frankly, I laugh at those numbers” (Fergusson 2014).
“In 2012, the Pew Research Center released a report that explored the topic of what it means to be middle class. The survey at the root of the report asked people how much money a family of four needs to lead a middle-class lifestyle.
“The median response among those who consider themselves middle class is $70,000, meaning that half of middle-class adults say it would take more than $70,000 annually and half say it would take less than that amount,” the Pew report gives the Public’s estimates of how much money it takes for a family of four to live a middle-class lifestyle are quite close to the Pew Research Center’s analysis based on U.S. Census Bureau data that the median income for a four-person household is $68,274,” it continues. “As expected from the varying cost of living across the country, the annual family income seen as necessary for a middle-class lifestyle is a median of $85,000 in the East and $60,000 in the Midwest (with a median of $70,000 in the South and the West).
“Similarly, the median among middle-class adults living in rural areas is $55,000; among suburban and urban dwellers, it is $75,000 and $70,000, respectively.”
Now, weigh that against some numbers from the U.S. Census Bureau. The Census Bureau says between 2007 and 2011, the median household income in Texas was $50,920, compared with $52,762 for the whole United States. In Gregg County, the median income was $44,608, and in Longview it was $43,414” (Fergusson 2014).
CHAPTER 9. THE MEDIAN INCOME PRINCIPLE
“The median household income of Americans in 2011 was $49,103. Adjusted for inflation, the median income is just below what it was in 1989 and is $4,000 less than it was in 2000. Take-home income is a bit less than $40,000 when Social Security and state and federal taxes are included. That means a monthly income, per household, of about $3,300. It is urgent to bear in mind that half of all American households earn less than this. It is also vital to consider not the difference between 1990 and 2011, but the difference between the 1950s and 1960s and the 21st century. This is where the difference in the meaning of middle class becomes most apparent” (Friedman 2013).
The head of the present chapter, which refers to by far the most widely used method of distinguishing the middle class (epitomized by the above statement), sort of echoes the median voter theorem, wwell-known in public choice theory (whose role in its respective theoretical context is, of course, quite different than that in the present case).
Concomitantly, perhaps the most common approach in the literature under consideration is based on “the simplest procedure, [which] is to take the median and then decide how large the percentage of people on both sides of that median should be” (Wogarta 2013).
For instance, the autors of a Korean investigation referred to above defined the middle class as people earning between 50 to 150 percent of the median income, and low-income earners as those who make less than 50 percent.
The median income rose from 920,000 (US$1=W1,055) in 1990 to W1.79 million in 2010 (Kim Hee 2014).
A similar approach is outlined in the following account: “economists often start with the middle 20% of the country – people earning between $39,000 and $63,000 a year – and work their way out” (Horn 2013).
In one instance of applying such a procedure one obtains the following “income range to be considered middle class: $25,500 – $76,” 500 (Kamp 2013).
In the same vein, another participant to the debate argues that the most sensible income amount to attach to the middle class would be the median household income, of around $54,000. Perhaps, anyone who earns between the 25th percentile and 75th percentile is a member of the middle class” (Rawes 2014).
Diana Farrell, once Deputy Director of America’s National Economic Council, told The Economist she thinks a middle class income begins at the point where a person (or family) has one-third of their income left over for discretionary purposes after they’ve provided themselves with food and shelter. In other words, someone who earns $3,000 per month would have $1,000 left after they’ve paid their mortgage or rent, utilities, and grocery bills.
Though there is some debate over the exact income a middle class household brings in, this does not affect those who claim that their judgments reflect the majority opinion; for instance, the reader might learn who the middle class are — most working class people, which again speaks to the problem of two different modes of classification: class in the last instance and stratification, regardless of the term being used in that context, which surely makes for confusion.
Thus, the matter would appear to be fairly straightforward -which is challenged by the same commentator mentioned above, who has some rather cautious remarks regarding the concept of the middle class, which seem to go a long way toward our paramount thesis: “in his contributions to analyze America’s shrinking middle class, or better the earnings of those people considered middle class in the 1970s and 1980s, MIT’s Lester Thurow took the group lying between 75 and 125% of the median (Thurow, 1986). By that measure fewer than a quarter of Canadians are actually middle class, a proportion that has fallen from 31 per cent in the mid-70s. (By contrast, the number of Canadian families earning above that threshold has grown from 33 per cent in 1976 to 35 per cent in 2011, while the number who fall below it has jumped from 36 per cent to 40 per cent.)” (McMahon 2014), thus testifying to an increasing income disparity.
In 2013, William Galston, a former advisor OF President Bill Clinton and senior fellow at the Brookings Institution, updated the definition of middle class to include anyone making between two-thirds and twice the median income. In Canada, that encompasses families who earn between $32,000 and $95,000 a year, which represents 40 per cent of Canadians.
The same bracket has been chosen in the most recent study of the Pew Research Centre in which “middle-income” households are defined as those with an income that is two-thirds to double that of the U.S. median household income, after incomes have been adjusted for household size. For a three-person household, the middle-income range was about $42,000 to $126,000 annually in 2014 (in 2014 dollars)” (Kocchhar et al. 2014).
William Easterly took also a broader spectrum than Thurow in a later study, including two fifth of the income earners on each side of the median (Easterly, 2001).
In a similar vein, Robert Reich, the Chancellor’s Professor of Public Policy at the University of California at Berkeley and former Secretary of Labor suggested defining middle class as those with income levels 50 percent above and below the median income” (Kamp 2013). And it is interesting to note that “the percentage of households with income within 50% of the median fell from 50% in 1970 to 42% in 2010” (Rugaber 2014), thus confirming the well-known “shrinking” claim.
The aformentioned Pew study also showed the trend in the same direction, putting its final conclusion that way: “After more than four decades of serving as the nation’s economic majority, the American middle class is now matched in number by those in the economic tiers above and below it. In early 2015, 120.8 million adults were in middle-income households, compared with 121.3 million in lower- and upper-income households combined” (Kochhar et al. 2015). In other words, “the middle class made up 50% of the U.S. adult population in 2015, down from 61% in 1971” (Kochhar et al. 2015).
A more straightforward approach uses the official statistical income scale, defining “The middle spectrum of the brackets “as $41,110 to $65,952. “Nationally, 20 percent of Americans fall into the middle income bracket, while another 20 percent fall into the lowest bracket, making less than $21,433 annually” (Phillips 2015).
An African researcher reminds us that “economists’ categorise the definition of middle class into two broad heads; relative and absolute terms. In relative terms, individuals or households that fall between the 20th and 80th percentile of the consumption distribution or between 0.75 and 1.25 times median per capita income, respectively” (Gupta 2014).
Nancy Birdsall followed the same approach as Lester Thurow; concentrating on the 50% around the median in the case of developing countries in general and Brazil in particular (Birdsall, 1996, 2000a). Different from the American case, however, her and her colleagues research is first and foremost aimed at the critical assessment of income distribution patterns and differences in third and first world countries, being concerned over past developments and worsening trends of income distribution in both” (Wogarta 2013).
But the above-mentioned differences do not tell the whole story-“one of the problems of the aforementioned studies are the comparability of median incomes of rich and poor nations. Consumption patterns and attitudes should differ considerably of middle class families in the USA with a per capita income of over US$46,000 vs. Brazil with a per capita income of barely $6,000. Hence, “he new, lowest rung of the middle class is what in the U.S. would be called the working poor, with monthly incomes of between $500 and $2,00” (Block 2013)
In addition, while one study may be more interested in wage earners, the other one may find that without getting hold of good estimates of earnings in the informal sector, no useful information on middle class earnings can be derived” (Wogarta 2013).
And these are not the only problems. Even if one restricts oneself to one particular country, there remain many issues, those associated with regional and demographic differences being amongst the most salient; while even more weighty appear to be problems caused by a wide margin of discretion intrinsic to the process of designating the limits to the category concerned.
For starters, let us illustrate the first class of issues: In Dyer County, Tennesse, the median income is $38,909 a year. Thirty-five thousand dollars can be both middle class, and underwater. [...]
[...] The researcher in question focused on the $35,000-to-$50,000 group and concluded that this big portion of the middle class now feels poor, which elicited a comment that “they are poor, unless we’re talking about a one-person household.” The author addmitted that “some of these are indeed one-person households. The group also includes households in different regions where costs are very different. I would agree that in New York (where TMN is based), $35,000 a year is poor. That’s not the case in some other places.
To decide whether $35,000 should count as “middle class,” it is useful to know where it falls compared to the middle. So here’s one important data point: In 2011, the Census Bureau’s income threshold for the bottom of the middle fifth of households was $38,250. That places a household earning $35,000 a year in the next-to-last quintile, a little below the 40th percentile.
If “middle” means anything, this is indeed middle class. Yes, it’s below the median income, but surely the middle class has to include more than the few people making precisely $52,100 a year, right? If you want to be extra-precise, you can say it’s the less well-off half of the middle class. No matter how you slice it, based on the income numbers alone this is a group that in previous decades would not have been considered poor” (Gimein 2013).
In other contexts it can be seen that precisely the intersection of the poor and the middle-class creates a fertile ground for the second fallacy out of the two mentioned above:
In 2013 the median income for all U.S. households was just over $51,000, and the average was about $71,000. (Tims 2013b). But, as it turns out, those figures give anyone wanting to define the middle class a substantial leeway. This can be clearly seen from the following series of examples, notably the last one. “Some experts use a relative approach and define a household as middle class if it’s earning, say, between 75 percent and 125 percent of median income. (Median income is the point in the income range, after taxes are paid and state transfers received, that separates the top 50 percent of earners from the bottom 50 percent.)” (Krueger 2013). But some other approaches-called by the author global-can be very differen: Goldman Sachs has defined middle class households as having an income of between $6,000 and $30,000 a year. By contrast, experts working in development tend to use a much lower figure -between $10 and $100 a day” (Krueger 2013). According to the Oregon Business Association, “The middle class can be defined to include those with income between roughly $20,000 and $60,000.”
The local journal took issue with that definition: believing that “the $60,000 figure sounded about right, but $20,000 struck us as low”.”, she decided, therefore, to probe deeper. D.J. Vogt, the business association’s legislative director explained the figures came from a chart in a recent state Office of Economic Analysis report showing the bulk of “middle income” wages for various occupations in Oregon falling between $20,000 and $60,000.
“I was including anything that could be considered middle class,” Vogt said. “I took the broadest possible income level to put a number on it.”
The journalists then called Mark McMullen, Oregon state economist, who co-authored the report that Vogt relied on. He noted that nowhere did the term “middle class” appear.
“We stick to calling them middle-wage jobs,” McMullen said. “We don’t want to make any inference about spending power or quality of life given those income levels.” In addition, he said, the term is simply too loaded politically to serve a useful research purpose. (Tims 2013b)
The issue of political entanglement will be taken up immediately below, but now.
As there are some other relevant data available, it is worth exploring further the claim that the “middle” of Oregon’s income scale is bookended by $20,000 and $60,000.
Now, a review of 2011 Oregon tax returns at first blush seems to bolster the aformentioned claim. Oregon Revenue Department figures for 2011 show the high end of each quintile - the standard slicing of income ranges into fifths, with each quintile having roughly the same number of tax filers - looks like this:
Bottom 20 percent: up to $9,881
Second-lowest 20 percent: up to $22,833
Middle 20 percent: up to $41,631
Second-highest 20 percent: up to $75,152
Top 20 percent, split into three groups: the first 15 percent, up to $145,039; the next 4 percent, up to $302,811; and the top 1 percent, more than $302,811.
The commentator cited above concludes that “so while the association’s high-end “middle class” figure looked pretty solid, its low-end $20,000 looked dubious. Someone earning that much a year is actually near the bottom of the state’s income scale.
He reports further: for reference, we also checked federal statistics, which place the poverty threshold at $11,490 for a single-earner and $23,500 for a family of four. So someone earning $20,000 might be in poverty if they’re supporting others, or not far off. Not a great place, in other words, to be calling the middle-class home.
Mary C. King, a Portland State University economics professor, disputed the idea that $20,000 a year, even for a single-earner, can be called middle class.
However, she acknowledged the same stumbling block others identify, that “middle class” can be as much of an idea as a definable economic reality.
“Still,” she said, “that just makes no sense at all. That’s $10 an hour. No one is getting a mortgage on $20,000 a year” (Tims 2013b).
Such considerations lead again to a fairly agnostic conclusion: there is no official definition of “middle class.” Is it having a home mortgage? Being able to afford two cars or send kids to college? We’re still not certain - and neither are most economists, as indicated by Mathur’s email reply - but we do think the term has its economic limits. And those limits don’t extend anywhere near the official poverty range, as the business association’s $20,000 does.
The association’s upper end of $60,000 is much more solid, though, landing well above the median income level for all Oregon tax filers and roughly in the middle of Oregon income levels. We also need to allow for households with two wage-earners- one with two people earning $20,000 each, for example, could more realistically be considered part of the middle class. Splitting the difference between a dubious low level and a sound high one, we rate the claim Half True”. (Tims 2013b)
The criticism appears to be well-founded, which does not detract from the fact that its cognitive nihilism is not overly constructive, to put it mildly. Relativism in the paragraph above is manifested in an introduction of a double income measure to determine the middle class membership.
Our discussion of one particular state of the U.S. entails a wider issue-that of contextualisation; “the median income of any region differs, as the U.S. Census Bureau data shows. In 2014, the median income in the state of Maryland was $67,000 while the median income in Mississippi was $39,078” (McDill 2014).
All its ambiguities and inconsistencies notwithstanding, the income criterion is deemed robust enough to override some of the other ones that hav been mentioned above. Thus, in the statement below it is not the fact of being a small capitalist as such that constitutes the basis for inclusion into the middle class, but a specific level of income earned by the former: “the vast majority of small employers are middle class, as well. Our recent polling found only 5 percent of small-business owners reported earning more than $250,000 a year” (Timmel 2013).
In a similar vein, as suggested above-a category of wages can be used to define the middle class, which approach has come to be widely used recently-in a perverse way, as illustrated below:” Officials in Oregon have kept records on what happened to thousands of people who lost their jobs when RV manufacturing in that state imploded during the recession. A major swath of people have dropped from middle-wage earners to low-wage earners, which is a trend we’re seeing across the U.S. Another group of people did even worse” (McEvers 2013b).
Likewise, another commentator points out that “what’s happening in Lincoln is happening in so many towns and communities across the country: As we recover from the Great Recession, jobs are coming back. But they are not middle-wage jobs — they are either high-wage jobs or low-wage jobs. The middle class is in serious decline. […] Factories have been closing since the ‘80s and ‘90s. One of the best government jobs in town, the state-run home for people with mental disabilities, was closed in 2002. Thousands of people lost their jobs.
Then came the Great Recession. Since then, the few factories that have managed to hang on in Lincoln have tended to hire temporary workers at lower wages with no benefits.
There is one new plant in town: a warehouse and distribution center for food products. But the jobs there are mainly stacking boxes or driving trucks. And the starting wages are $16 to $18 an hour — what economists say is barely a living wage. This is the new reality that economists say is hitting so many communities across the U.S. Jobs are being created. But in Illinois and its neighboring states, the most jobs coming back are low-wage jobs.
In Lincoln, where unemployment is 8.4 percent — a point higher than the national average — the few middle class jobs left are in health care, teaching and prisons.
[…] Richard Longworth, a fellow at the Chicago Council on Global Affairs, wrote a book about the struggling Midwest called Caught in the Middle: America’s Heartland in the Age of Globalism. […]
He says towns like Lincoln need to realize this is not just about the recession. This is about a long, slow decline.
Longworth says for communities to survive in this new reality, they’ll have to reinvent themselves — try to keep the factory alive, attract people who are willing to work the lower-wage jobs.
Otherwise, what happens to towns like Lincoln will be just another episode in what he says is a major societal upheaval.
“I grew up in a middle-class America where we pretty much knew life was an escalator,” he said. “You got on the bottom step, and if you behaved yourself, paid your dues, went to work, worked hard — you’d end up at the top of the escalator. And I think that escalator’s broken now. It’s a tougher scramble” (McEvers 2013a). The final sentences refer, of course, to the so-called American dream to which a separate chapter is devoted.
The preceding discussion makes it clear that the literature under examination is plagued with inherent ambiguities and contradictions. Thus, in that case some authors do expound an exactly opposite view, i.e. they consider it proper to supplement income by other criteria.
One source gives the following median incomes in 2012: “$53,000: U.S. median household income $61,000: California median household income $73,000: San Francisco median household income” (Lamb 2014). However, according to an American Community Survey report, the median household income in 2012 was $51,371. (According to the federal HHS Department, the poverty level for a family of four stands at $23,550.) (Clark 2013).
Clark goes on to say that:”the census is split into five classes, each involving 20 percent of the population. The middle 20 percent of households ranged in the $38,500 to $62,400 category” (2013), noting that in his view “This group is probably not the middle class, with 40 percent of 310 million in population both above and below it financially” (Clark 2013).
Therefore, he deems it necessary to draw on some data present in Time magazine in February 2009:
Today, most middle-class Americans are homeowners. They have mortgages, at least some college education and a professional or managerial job that earns them somewhere between $30,000 and $100,000 a year ... and 70 percent of them have cable and two or more cars.
Two-thirds have high-speed Internet, and 40 percent own a flat-screen TV.”
Blue-collar, unionized workers also fit that description. (Clark 2013), which constitutes another instance of confusion, considered in a separate chapter.
In addition, the middle class literature cannot overcome the vexed problem of determining socio-economically sensible boundaries of that group, stressed throughout the book: “in the past few years, the “middle class” income range has been described as between $32,900 and $64,000 a year (a Pew Charitable Trusts study), between $50,800 and $122,000 (a U.S. Department of Commerce study), and between $20,600 and $102,000 (the U.S. Census Bureau’s middle 60% of incomes)” (Horn 2013).
It is on the basis of one of such metrics that the Forbes’ contributor lists his usual grumblings: “The middle 60% of earners’ share of the national pie has fallen from 53% in 1970 to 45% in 2012. [...] In the four decades since 1971 the share of the U.S. population earning between two-thirds and twice the national median income has dropped from 61% to 51%, according to Pew.
Roughly one in three people born into middle-class households, those between the 30th and 70th percentiles of income, now fall out of that status as adults” (Kotkin 2014a).
9.1. POLITICAL ARENA
To revert to the aformentioned issue of inescapable political associations, it is fair to say indeed that the concept in question is kind of political football: “Every election season, politicians seek to renew their love affair with the American middle class. Proposals, stretching from “middle-class tax breaks” to tuition tax credits for “middle class” parents of college students, fill the airwaves. Thus, many observers of the U.S. political scene take notice of what might be called a left-leaning shift to the center by the Republicans, as they plan to address the same issues that Democrats harped on in 2013: on-the-job benefits for the middle class and income inequality.
“Working middle-class families are struggling to find a good-paying job, get ahead and keep more money in their pocket,” said Republican House Majority Leader Eric Cantor. “House Republicans will continue to offer conservative solutions that help create better conditions for them”. The elusive “middle class” is therefore a perfect instrument of political manipulation. Leveling such a partisan attack Republican Neel Kashkari accused Democrats around the nation of ‘actively fighting against poor, black and brown kids’. Not delving into whether that charge could be regarded as valid, what is relevant to our present purposes is what link may there be between the above-mentioned developments and his assault on the local politician, Gov. Jerry Brown, who, according to his critic, has destroyed the middle class, due to the state’s high unemployment, low educational attainment rankings and nation-high poverty rate” (Walters 2014). The use of the term concerned in this context is unfair because the latter afflictions affect by no means only the middle class-it is only that it is believed that this kind of talk can above-named collection of examples should suggest to the author that are the source of ills depicted is intrinsic to the capitalist system itself.
Seventy of Americans believe we are still in the middle of the economic crisis, or that the worst is yet to come. And, I fear they are correct.
There is no doubt the great American middle class is being murdered. My new book, “
The Murder of the Middle
And it’s not simply because middle-class incomes are no longer rising, or that many of their number are falling into lower income brackets. The blows to the middle class are being delivered from much wider spectrums.
Yesterday I had the privilege of joining Alan Kohler and Steve Bartholomeusz in a KGB bring tangible political benefits as distinct from the focus on the other classes, whose plight may be even more dramatic. And the vagueness of the concept of middle class explains why in many political debates their both sides talk past each other, although they appeal purportedly to the same constituency. This is epitomised by the recent session of the state legislature in the state of Illinois with “both sides saying they are the one best looking out for the middle class” (Fitton 2015). On the one side, Senate President John Cullerton supported the Republican governor: “Much of his (Rauner’s) agenda has a theme. It’s middle class workers lose and corporate CEO’s win” (Fitton 2014). Rauner retorted: “They are not about the middle class; they are about the political class. … Speaker Madigan and President Cullerton make their money from big government, and big government is crushing the state” (Fitton 2015).” And the conclusion of a political commentator who has covered the conflict concerned is thus legitimate: “argument tends to stay circular” (Fitton 2015).
Yet even cursory look at the aformentioned initiatives shows that they are surely not fit for (Publicly declared) purpose.
The truth of the matter is, for years, the conservative response to the income gap could be summed up in two words: “So what?” That’s the price of a free-market economy, they’d say.
But now even most hard-core free-marketeers cannot deny the fact that the American dream is eroding fast, as is discussed at more length in a later section. The fact of the matter is, the gap between the wealthy and everyone else is wider than at any time since the Great Depression. In 2012, the top 10 percent of earners took home more than half the nation’s income. This kind of facts can make even an ardent proponent of an unbridled capitalism think twice.
A Washington Post/ABC news poll in December, 2013 found that a large majority of Americans believe the government must pursue policies that reduce the income gap. “Poll found, too, two-thirds of Americans are unhappy with the nation’s distribution of wealth“ (RUGABER, Boak 2014).
As a result, Republicans like presidential hopeful Sen. Marco Rubio, R-Fla., have crossed over and are traveling through another dimension to rewrite their talking points. Finally acknowledging that inequality and poverty are problems, they stick to their right-wing ideology, contending that “the solution is to slash taxes on the wealthy and gut long-standing worker protections, social safety net programs and environmental and consumer safeguards that have kept millions of Americans out of poverty” (Morain 2014). No wonder that those proposals prompted the following response:
That’s not only wrong; it’s insulting. Remember, it was lack of regulation of the banking industry that allowed the greed of subprime lenders to crater the economy in the first place, without consequences to the ultrawealthy who caused the crash.
The truth is, the income gap is a result of an economy that favors the wealthiest few at the expense of the rest of us. Giving the rich more tax breaks and carte blanche to pollute our environment and endanger the health and safety of working people won’t do a thing to address income inequality. In fact, it would make it worse”.
In California, we took several steps in the right direction last year by putting an end to devastating budget cuts, expanding paid family leave, tightening the reins on out-of-control corporate tax breaks, funding new job opportunities for welfare recipients and raising the minimum wage. The rest of the country should follow our state’s lead by abandoning the austerity measures known to slow economic growth and, instead, start investing in the middle-class families that power our economy” (Morain 2014).
It should be not surprising, therefore, that in the 2015 pre- presidential election campaign, the argument of the middle class was used by a Republican politician as a weapon against the Democratic candidate: “Reince, chairman of the Republican National Committee pointed out that Clinton “has spent very little time with ‘everyday Americans’ — the people she claims she’s fighting for.”
Not only that, Clinton and her husband are so very rich that, “The average American could pay their bills for years with just one Clinton speech” (Wilder 2015). In line with the remarks made elsewhere in the text, it is clear that this kind of assault has been greatly facilitated by the ambiguity of the concept in question, where the equation marks between the terms “median”, “average” “middle” are taken for granted, which slippery nature makes the concept concerned the perfect weapon of political fight.
It should be added that this Republican shift echoes the shift announced earlier by Senate Majority Leader Harry Reid (D-NV). Reid announced that the Democratic Party will place its focus on income inequality and legislation beneficial to the middle class. This is a platform on which progressive Democrats have stood for years”. (De Leon 2013)
And indeed this very fact contributed to what amounts to a rather sceptical reception of the aformentioned shift by many mainstream conservatives, whose representative thus appraised their recent political booklet: “ the ideas that ‘Room to Grow’ contains are not the ones upon which Republicans must campaign to win in 2014 and 2016. Room to Grow is largely irrelevant to solving America’s most important problems. [...] Instead of talking about increasing economic growth, which would strengthen America and benefit everyone, Room to Grow starts off by talking about “the middle class.” In the second sentence of their text, the editors declare:
The demonstrable failure of the liberal welfare state provides an opportunity to advance conservative reforms, firmly rooted in our constitutional order, that advance the aspirations of middle class Americans.
Focusing on the middle class is straight out of the Democratic Party’s playbook. Specifically, it’s right out of It’s the Middle Class, Stupid! by James Carville and Stan Greenberg. The last thing the Republicans should be doing is trying to copy the Democrats. If the voters want to elect Democrats, they’ll vote for the real ones” (Woodhouse 2014).
While there is surely some logic to the above argument, this alone does not validate the author’s subsequent claim: “besides, the “middle class” theme is not only divisive, it is wrong—economically, morally, and politically wrong.
This is because there is a set of conservative policies that would benefit everyone: rich, poor, and middle class. The only people that would be ‘hurt’ by a creative conservative reform agenda are crony capitalists, government bureaucrats, and various other rent-seekers—people that desire to live off government subsidies and favours” (Woodhouse 2014).
Sadly, this traditional Tea Party’s agenda is too good to be true-even if there are policies that benefit the whole nation, an equal distribution of those benefits defies both evidence and logic. The fact of the matter is that claims to the contrary would be more often advanced by those at the right end of the political spectrum, especially because they tend to deny the class nature of societies, or at least the importance of class divisions. But, of course, there is no necessity for this being the case, as class theory can be very effectively and efficiently applied by many conservative politicians, writers, etc.
One could point to some other evidence of the fact that this new political direction has been embraced less than wholeheartedly by many Republicans, which has been exploited for political purposes by one of their political contenders: “The Republican Party proclaims that they represent the Middle Class, but their actions prove otherwise. [...] For the past four years the middle class in Alabama has felt the impact of the Republican Party in their day-to-day life.
Since 2008, public schools have lost $1,200 per student because of Republican legislation and budget cuts. This is why our children come home with supply lists that have necessities on it such as toilet paper, tissues, hand sanitizer, in addition to copy paper, pens, pencils, and the list goes on and on.
Parents have to supply their children’s classrooms almost completely. We live in a time that most children are doing good to have clothes on their backs and food in their mouths, much less the ability to bring in bags of supplies to their school on a regular basis” (Hall 2014).
Remaining within that political camp, the middle class has been the trump card of the now President of the U.S.
The president pointed this out at his first post-election press conference. “I’ve got a mandate,” Obama said, “to help middle-class families and families that are working hard to try to get into the middle class.”
Some political commentators would argue that Obama won because the electorate understood that a vote for him was a vote for policies that would help the middle class and the working poor. Three-quarters of voters said the president’s policies favored these groups, while 53 percent said GOP presidential nominee Mitt Romney’s policies favored the rich.
Below there will be many an occasion to consider the theoretical and substantive status of the aformentioned categories at more depth.
Returning to the thrust of political comments mentioned above, they imply that “voters knew they could trust the president to preserve and strengthen the social safety net — including Medicare, Medicaid and Social Security. They knew they could count on the president to make critical investments in education, infrastructure and scientific research that can expand the economy for everyone instead of just lining the coffers of the wealthiest few.
These protections and investments aren’t “gifts” to particular voting blocs. They are the foundation of our international economic competitiveness and the tangible representation of our government’s moral obligation to serve the needs of all Americans.
But the president also won because, after almost three decades of experimentation with trickle-down economics, the public has joined the majority of leading economists in recognizing that a strong middle class, not ever more generous benefits for the wealthy, as the true engine of economic growth.
[…] Obama’s message of “middle-out, not top-down” growth was more than clever rhetoric. A “middle-out” economy more accurately describes the desires and beliefs of the American people – who want their children to benefit from the same access to high-quality education and public services they had. They know the economy will be stronger as a result.
Consider, “middle-out” economic policies recognize that our most innovative and successful entrepreneurs and inventers, our Steve Jobses and Sergey Brins, are most likely to come from the ranks of an educated and robust middle class.
This also reflects the experience of today’s middle-class workers – who have seen their take-home pay stagnate even as income inequality reaches record highs. They have seen their purchasing power decline as costs for services like health care and higher education skyrocket, and their political power diminish everywhere but the ballot box, as Washington is overtaken by moneyed special interests” (Podesta 2012 ).
This shows that the concept in question is rather flexible or elastic: from the Owners of an Internet giant to the working poor-this represents anything but a narrow spectrum.
Whilst this over-inclusiveness diminishes the concept’s cognitive value, it simultaneously -paradoxically on the surface only-enhances its utility for politicians, as evidenced by President Obama himself, repeatedly deploying the aformentioned phrases, often with populist undertones. One of his June weekly addresses was inspired by “a letter he received from a working mother named Rebekah, who shared with me the hardships her young family has faced since the financial crisis. She and her husband Ben were just newlyweds expecting their first child, Jack, when the housing crash dried up his contracting business. He took what jobs he could, and Rebekah took out student loans and retrained for a new career. They sacrificed – for their kids, and for each other. And five years later, they’ve paid off debt, bought their first home, and had their second son, Henry.
In her letter to me, she wrote, “We are a strong, tight-knit family who has made it through some very, very hard times.” And in many ways, that’s America’s story these past five years. We are a strong, tight-knit family that’s made it through some very tough times.
[...] By measure after measure, our economy is doing better than it was five years ago.
But as Rebekah also wrote in her letter, there are still too many middle-class families like hers who do everything right – who work hard and who sacrifice but can’t seem to get ahead. It feels like the odds are stacked against them. And with just a small change in our priorities, we could fix that.
The problem is, Republicans in Congress keep blocking or voting down almost every serious idea to strengthen the middle class. This year alone, they’ve said no to raising the minimum wage, no to fair pay, no to student loan reform, no to extending unemployment insurance. And rather than invest in education that helps working families get ahead, they actually voted to give another massive tax cut to the wealthiest Americans.
This obstruction keeps the system rigged for those at the top, and rigged against the middle class. And as long as they insist on doing it, I’ll keep taking actions on my own – like the actions I’ve taken already to attract new jobs, lift workers’ wages, and help students pay off their loans. I’ll do my job. And if it makes Republicans in Congress mad that I’m trying to help people out, they can join me, and we’ll do it together.
The point is, we could do so much more as a country – as a strong, tight-knit family – if Republicans in Congress were less interested in stacking the deck for those at the top, and more interested in growing the economy for everybody” (2014).
The conditional mode employed in the argument cited above is, in a sense, a rhetorical device, as “a leopard cannot change its spots”, after all.
Nevertheless, the argument is worth citing:
“So rather than more tax breaks for millionaires, let’s give more tax breaks to help working families pay for child care or college. Rather than protect tax loopholes that let big corporations set up tax shelters overseas, let’s put people to work rebuilding roads and bridges right here in America. Rather than stack the decks in favor of those who’ve already succeeded, let’s realize that we are stronger as a nation when we offer a fair shot to every American” (Obama 2014).
To be sure, the Language of politics has its own peculiarities, but even from such a perspective to portray the American nation as a tight-knit family is a case of wishful thinking. From our point of view, it is more important to call attention to a problematic middle-class identity of the President’s correspondent, the latter being determined by one’s current, not past standing; therefore, the fact that Rebeka’s husband used to have a business of his own is irrelevant. Similarly, not knowing her possible position in the structure of employment relations, one cannot establish whether Rebeka is a member of any socio-economic class, since the fact of being a student has by itself no such implications. However, those inaccuracies do not discourage the speaker, who-conversely-is able to profit politicaly from this imprecision, equating the concept of a member of “the middle class” with that of “every American”.
This kind of argumentation has come to constitute something like a constant refrain in Obama’ speeches-e.g. In his Kansas weekly address he declared that the U.S. political decision-makers should concentrate on doing their best “ to grow the middle class and help folks work their way into the middle class. [...]
I’m always willing to compromise if folks have other ideas or if it advances generally the interests of working Americans.
But so far last year, Republicans in Congress have blocked every serious idea to strengthen the middle class. Lifting the minimum wage, fair pay, student loan reform – they’ve said no to all of it. And that’s when I’ve acted this year to help working Americans on my own” (2014).
it is easy to see why the term in question could gain such currency in the political circles-as the above-mentioned examples show, it functions almost as an occasional concept, which can change ad hoc its content depending on the contexThis explains why literally there is no such issue under the sun that could not be linked to the notorious concept. This is shown byvirtually all hot topics of recent and current debate; for instance, CNNBC’s Larry Bossidy, former Honeywell CEO, discussed how the divisive trade agreements affect the middle class and the upcoming presidential election (2015).
It is also those movable boundaries that allow for rather extreme pronouncements like this one: “The rich liberals will neither sell what they have and give to the poor, nor will they cut their salaries to equal the poor nor have homes/cars/clothes like the poor.
So where is the money going to come from to raise the poor higher? It won’t come from the rich liberals. Income inequality is about lowering the standards of the middle class so the rich can have more” (Carr 2014).
Considering such odd usages, it comes as no surprise that whilst Obama made hay by portraying Romney as an out-of-touch rich guy, Romney joined in later in the campaign, repeatedly mentioning the middle class in speeches, as did his fellow Republicans.
In one speech in 212, according to Slate.com, U.S. Sen. Marco Rubio of Florida used the term “middle class” at least 35 times.
“People, by and large, like to consider themselves middle class,” said Gene Beaupre, a Xavier University political scientist. And one does not have to be conversant in public choice theory to concur with the above-mentioned scholar: “so if you’re trying to deliver a message and reach as broad an audience as possible, that’s the term of art.”
He said that’s likely to continue because, whatever else it may be, the middle class remains popular.
“It’s a feeling, a touchstone. It defies numbers,” Beaupre said. “It’s a mind-set that says, ‘I’m part of the working fabric of American culture.’“ (Horn 2013)
Trouble is, there’s no definition of this group that everyone can agree upon. The meaning of the term, depending on who is using it and for what purpose, can be stretched like a rubber band” (Tims 2013b)-as a result of which it can support a wide diversity of claims, illustrated in the book. An important reason for this intellectual voluntarism is the circumstance that “government has never defined the middle class, so it actually is what anyone says it is” (Clark 2013).
That is why, firstly, many politicians can pay lip service to their purported key electorate: “On almost every left-right issue that divides Democrats and Republicans -as well as Republicans themselves there is a neglected populist constituency.
The result is that populist politics are largely caricatured as Tea Party extremism and a voice for the middle class is largely absent” (Hansen 2013).
But it is at least partly the vagueness of the class concept in question that accounts for its political disutility, so to speak. Obama’s crucial policy of “middle-out economics” has been exceptionally hard to pin down for good reasons, after all.
And the political chicken come home to roost, as exemplified by a disappointed Obama voter “ When I voted for Barack Obama in 2008 I believed that he would do what he said. That he would govern as President Clinton had governed from the middle.
That the era of big government was over”. (Howard 2014)
First of all, the size of government as such seems to be an exotic criterion by which to judge the class character of the latter. If anything, the big government may be more powerful, and thus effective in satisfying the needs and interests of a given class, without prejudging which class is at stake. Furthermore, the author a few sentences later praises the classic example of government intervention: “in the 1930s when millions of Americans were out of work, Franklin Delano Roosevelt put men and women to work in an alphabet soup of federal agencies, including both my paternal grandparents” (Howard 2014). Secondly, keeping in mind President Clinton’s various policy measures of clearly neo-liberal provenance, the above classification appears to be somewhat debatable. This does not alter the fact, however, that at least at a rhetoric level Clinton seems to be less reluctant than during his presidency to employ the term in question: “You are not going to get rid of poverty until you get rid of middle-class stagnation. Poor people have got to have someplace to move up to,” Clinton said.
“And the absence of social mobility is a far bigger problem than income inequality.”
“Americans don’t resent other people’s successes — what they resent is not having a fair chance,” Clinton said.
His statement came at the end of an hour-long speech on anti-poverty policies proposed by the think tank, and it has special significance because Hillary Clinton would have to navigate the divide between different factions of Democrats on income issues if she runs in 2016.
Some Democrats, such as New York mayor Bill de Blasio and Sen. Elizabeth Warren of Massachusetts, have put a greater focus on reducing the growing gap between wealthy Americans and everyone else. And Hillary Clinton herself has been talking more about inequality lately. She referred to the “cancer of inequality” in a Facebook video to promote her book, “Hard Choices,” and she gave an entire speech on the subject to the New America Foundation this spring.
But other Democrats — including the centrist Third Way and Democratic strategist James Carville, the former Clinton adviser — say that focus is misplaced, because most Americans don’t resent rich people’s incomes and would rather just earn more money themselves.
The former president sided with the second camp in his remarks in June. He stressed, however, that he was not rebuking Obama’s policies: “I’ve got no problem with any of that. We should pay more taxes, those of us in high income groups.”
Still, he said, “we should try to create a world in which everyone can be proud to pay taxes because they have good incomes, and they can take care of their kids, and they know what the money is buying, and it’s buying a return of the American Dream” (Nather 2014).
While the charge of populism is usually levelled at the aformentioned left Democrats, in fact it is Clinton’s pronouncement that is an EPITOME of demagogy. He does not want to be seen as an “”enemy of the people”, hence he pays lip service to the poor by pretending to be tackling their problems by focusing on the middle class, which makes a strange intermediation or substitution. Clinton succumbs to the vulgar ideology (peculiar to the U.S. model of capitalism) of self-centred individualism, even “the American dream” framing in economic terms.
And even the supposed difference between the progressive and centrist Democrats is far narrower than it might seem. “One of the more progressive members of the Democratic caucus, Sen. Elizabeth Warren railed against a Washington that works for the rich and powerful, and promised that Democrats will fight for the middle class.
Warren said the Democratic caucus is continuing to push for policies that benefit the middle class but has faced continuous opposition.
“Democrats are defending the values that we’ve protected for decades … while Republicans have gone to extremes to tilt the playing field to the rich and powerful,” she said” (Goswami 2014).
Along the same lines, in the 2015 pre-presidential campaign, “Democrats promoted their party as defenders of the middle class while decrying the economic positions of Republicans. Former Iowa Lt. Gov. Sally Pederson [...] pounded on Ernst, a freshman senator who famously told Iowans she was going to “make ‘em squeal” in Washington as she cut pork from the federal budget. ‘Under Republican priorities, it’s the middle class that squeals, while the super rich, the corporations and special interests get even fatter’, she said.
“’That’s not all, though. You need a stronger word than ‘squeal’ to describe the reactions most Americans have had to the Republican candidates’ positions on LGBT rights’.
Jason Pitt, a regional spokesman for the Democratic National Committee, pointed to a recent Des Moines Register/Bloomberg Politics Iowa Poll that showed a massive split between Republicans and Democrats when it comes to income inequality.
According to the poll, 90 percent of likely Democratic caucusgoers say they want to hear candidates talk about the issue, compared with just 36 percent of Republicans” (Pfannenstiel 2015).
Now, there is no reason to doubt that the progressive beliefs of Sen. Warren are genuine and deep-rooted. However, this contrasts with rather poor means of articulation to those views-the conceptual framework mentioned above is rather crude, let alone misleading, as it draws out the class divide which in actual fact is not there: neither the middle”, nor “the regular Americans”, or the rich or poor, for that matter qualify as classes.
The same pattern can be found in other similar pronouncements, which only underscores the weight of the issue-all the more that the matters involved are indeed of vital relevance to those concerned; “thus, a recently issued “Progress Report”entitled “Historic SUPREME COURT DECISIONS TILT POWER AWAY FROM MIDDLE CLASS” clarifies that “The Supreme Court’s final decisions of the term [...] in the now established tradition of the Roberts Court, they strike another blow to working Americans. In Harris v. Quinn, the five conservative justices undermined public sector unions by barring homecare workers in Illinois from collecting fair share fees to ensure that everyone shares in the cost of bargaining. And in the closely watched Hobby Lobby case, the same five male justices gave unprecedented power to for-profit employers to make health care decisions for their female employees.[...] The majority opinions for both rulings were authored by Justice Samuel Alito, who is considered to be the most business-friendly justice ever; number two is his colleague, Chief Justice John Roberts”.
The point is that in a review of cases supposed to be supportive of the above claim, a sociologist’s eye discerns various categories-social classes rather than estates, but the head.
Let’s go through each case where the court chose to trample on the rights of the people at the expense of the powerful:
Harris v. Quinn Public sector unions bargain on behalf of all of their workers” [...]
v. Quinn, the Roberts court ruled 5-4 that some Illinois home-care workers who did not want to join the union but still saw their wages rise thanks to collective bargaining are exempt from having to pay those fees. The decision weakens the ability for public sector unions to bargain on behalf of their workers. [...] the court left the door open to future rulings that further weaken unions, hurt middle class workers and put more power in the hands of corporations and CEOs.
That makes it more important than ever for working Americans to stand up like they have at fast-food strikes around the country and negotiate for the rights, freedom and dignity they deserve. A single court ruling doesn’t negate our obligation to keep fighting to restore the American middle class.
The rights of the employer now trump the rights of the employee.
[...] Supreme Court rulings from five conservative justices use judicial activism to benefit corporations and CEOs while hurting workers and women. The Roberts Court’s friendliness to corporate interests and the powerful at the expense of regular Americans is continues to be unprecedented, and it continues to be critical that progressives use every available avenue to fight back” (the Progress Report 2014).
Unfortunately, noble as the aformentioned intentionss are, the truth is that any attempt to turn them into practice would be hampered by an inaccurate conceptual apparatus, wherein a variety of terms, some of them having social-scientific counterpars, some not, including those simply drawn from the everyday speech.
It may be noted in passing that this kind of intellectual weakness of the American left has been a big factor in the decline of working-class movement in that country.
In that sense middle-class politics could be seen as playing the same function as the so-called dog-whistle politics, a phenomenon considered in a new book by Ian Haney López, a law professor at the University of California-Berkeley, who argues that racism in this country is not dead, only taking on new forms.
Today, Lopez points out, racially coded language is used to “denigrate” mostly members of the Muslim and Latino communities.
“Why,” Lopez asks, “ so many [Americans] would vote to slash taxes on the rich, favor deregulation, slash social services, if not partly or primarily because of the racial narrative employed with dog whistle politics.”
Despite blatant bailout funds to corporations at the expense of the majority of citizens, huge and inhumane cuts to social services, the problem still remains.
Lopez recalls Newt Gingrich’s pronouncement: Look! President Barack Obama is “putting“ more people on food stamps! And what is this absurd statement to conjure up if not the image of a “Black” president, sitting at the Oval office desk, personally adding lines of “Black” citizens to the food stamp rolls.
And what has prevented this Black president from uttering the word “race”? What forced him to participate in the public denigration of his pastor and friend, Rev. Jeremiah Wright? (Given his topmost political position, the president’s refraining from the use of racially charged language is not surprising. It appears that Obama first explicitly used such a language in the wake of the Charleston murder).
Lopez (2014) argues that: "Gingrich’s statement “triggers racial anxiety,” but he can deny he is saying anything about race".
[...]
Dog-whistle politics refers to code words or phrases that carry connotations readily apparent to a target audience, much as a dog can hear the high-pitched whistle that doesn’t register with humans. The Republican Party, he argues, is using coded language to rally white voters to its side.
“Over the last half-century conservatives have used racial pandering to win support from white voters for policies that principally favor the very wealthy and wreck the middle class,” Haney López writes. “Running on racial appeals, the right has promised to protect supposedly embattled whites, when in reality it has largely harnessed government to the interests of the very affluent.” (Daniels 2014).
And yet, despite the best intentions, the above account replicates the very error it tries to warn against-overplaying the role of “the middle class”, it overlooks other groups such as the white working class that might have fallen prey to the stratagem concerned.
This does not mean that race, which in theoretical terms is an ascriptive feature of one’s labour power does not matter in today’s America, as manifested in the black community being, on average, hit particularly hard by the recession.
In the case of many Afro-Americans, job loss has knocked them out of the middle class and back into poverty, which may cause a historic reversal of hard-won economic gains.
“History is going to say the black middle class was decimated” over the past few years”, said Maya Wiley, director of the Center for Social Inclusion. Algernon Austin, director of the Economic Policy Institute’s Program on Race, Ethnicity and the Economy opines that “the recession is not over for black folks.”
Let us look at the facts.
In 2004, the median net worth of white households was $134,280, compared with $13,450 for black households, according to an analysis of Federal Reserve data by the Economic Policy Institute. By 2009, the median net worth for white households had fallen 24 percent to $97,860; the median net worth for black households had fallen 83 percent to $2,170, according to the institute.
Austin described the wealth gap this way: “In 2009, for every dollar of wealth the average white household had, black households only had two cents.”
Austin thinks more black people than ever before could fall out of the middle class because the unemployment rate for college-educated blacks recently peaked and blacks are overrepresented in state and local government jobs. Those are jobs that are being eliminated because of massive budget shortfalls” (Washington 2014). This obviously implies a causative role of one’s place in the division of labour-in this instance, its non-economic, estate sphere, and it is only on the basis of far more comprehensibe data that one would be able to establish its weight as compared to ethnicity.
Since the end of the recession, which lasted from 2007 to 2009, the overall unemployment rate has fallen from 9.4 to 9.1 percent, while the black unemployment rate has risen from 14.7 to 16.2 percent, according to the Department of Labor. In April, 2013 black male unemployment hit the highest rate since the government began keeping track in 1972. Only 56.9 percent of black men over 20 were working, compared with 68.1 percent of white men.
While the proportion of African Americans calling themselves middle class has increased from just 12 percent in 1949 to 41 percent today (Farley 1996), on the other end of the economic spectrum, almost a third of the African American population are poor and the number in concentrated urban poverty continues to grow (Blank 2001; Jargowsky 1997). This trend may have halted in the late 1990s but appears to have resumed in the last few years (Pearlstein 2002).
Even college-educated blacks fared worse than their white counterparts in the recession. In 2007, unemployment for college-educated whites was 1.8 percent; for college-educated blacks it was 2.7 percent. Now, the college-educated unemployment rate is 3.9 percent for whites and 7 percent for blacks” (Washington 2014).
Finally, nearly 8 percent of African Americans who bought homes from 2005 to 2008 have lost them to foreclosure, compared with 4.5 percent of whites, according to an estimate by the Center for Responsible Lending.
It may be judged as paradoxical that this “decline of black middle class” should have taken place on the watch of the first black president.
Princeton Professor Cornel West told truthdig.com thhat Obama sold out the poor to become “a black mascot of Wall Street oligarchs and a black puppet of corporate plutocrats. I don’t think in good conscience I could tell anybody to vote for Obama.”
Wiley took a more balanced view, indicating that Obama should be applauded for several initiatives that have helped the black middle class, such as programs to modify certain mortgages and prevent foreclosure because of job loss. But she would like Obama aggressively to counter the suggestion that first black president would be showing favoritism
if he specifically helped black people.
“It’s the right thing to do for the nation,” she said. “Black people are a huge segment of the population, they’re especially hard-hit, and the country cannot recover if the black community — as well as the white community and others — does not recover” (Washington 2011). The concluding remark is in fact a tautology, and thus undeniably true, but at the same time hollow. Moreover, Not only in this case an interesting contradiction appears-“the American spirit” is said to be characterised by the combination of individualism with a free-market-ideology, and the corresponding aversion to the so-called big government, which are not consistent with the idea of purportedly almighty saviour, who can freely change the operation of economic and social laws. The said contradiction is pinned down in the pronouncement by Kai Ryssdal, senior editor of Marketplace: “I want to take you to the speech you gave earlier this week out by Key Bridge, and many other speeches you’ve given throughout your presidency, in which you’ve said we have to grow the economy from the middle, we can’t grow this economy top down. Now, setting aside the irony of you, the ultimate guy on top, trying to grow an economy from the top down, right?” (Ryssdal 2014).
Along similar lines, Louis Woodhill has observed: “There is nothing that the federal government could possibly do for the middle class (or any other class, for that matter) that having 30% more income would not do much, much better” (Ferrara 2014).”
The expansion of income inequality and the shrinking of middle-class America have also caught the attention of two Democrats seeking the party’s nomination in the 2nd Congressional District; Earl Everett supports a strong middle class. Harris-Till said one of his top concerns is the fact that congressional Republicans “have done nothing to address the needs of the American 99 per cent.”
He said the Congress has a key role to play in narrowing the income inequality gap.
“American economic history has repeatedly demonstrated that the American middle class is the single most important driver of the nation’s economic vitality” (Smoot 2014).
Again, the above-mentioned claims raise some issues, concerning on the one hand an extremely over-stretched definition of the middle class, which indeed by virtue of its numbers may be accorded this kind of economic role. But this is only a statistical illusion, which becomes apparent once one focuses on a more standard definition instead that clearly does not support the aformentioned claim-which, if anything, should be constructed in terms of the real subjects of economic production and property relations, i.e. socio-economic classes as opposed to “classes” in the sense of social strata. Much the same criticism applies to an otherwise sound assault on the quintessential capitalistic anti-heroes, “those benevolent brothers who own most of Koch Industries, Charles and David Koch,,[who] feel under attack. Well, guys, try being part of the downsized middle class.
The middle class has been under siege, under the boot for a long time, and a lot of us will not be rising up except to reclaim our rights and democracy.
I say sing a song, write a poem, and celebrate the achievements of the great middle class, for the labor that built this country and not some old-school elitists who work hard to crush the American dream for the 99 percent rowing the boat” (Seul 2014). Again, the claimthat the middle class “built this country” can be rendered tautological if -as in this case-the overwhelming majority of that nation is counted in the said “class”.
Speaking about the middle, the aformentioned commentator confesses that “the reason I have been a Democrat my entire adult life was it was the party that advocated for the working and middle classes.
My assumption was the upper classes, which I aspired to join, could take care of themselves. But I never counted on a president who believed helping the working class was telling it what was good for it [...]
Without revealing any non-public information I can say unequivocally that President Obama wasted $35 million dollars in direct taxpayer cash on one “clean energy” company putting hundreds of working class and middle class Americans into the unemployment lines. And now he has said to the dirty old coal burning power plant and its several hundred working and middle class employees you too join the unemployment lines. In neither case did his programs include any job training, relocation plans, or any other path forward for those employees. He just [...] killed the businesses, and left those employees holding the bag.
[...] The president and his allies spend a lot of time talking about climate change, shutting down coal related businesses (mines, power plants, distributors, suppliers, equipment manufacturers), but what about the workers? Is there a plan to retrain these workers? Is there a plan to move them to Texas or North Dakota where the economy is booming” (Howard 2014)? Those legitimate concerns, however, which would surely benefit from the isolation of the working class whose interest are in actual fact at stake from this under-specified collection of individuals going by the name of the middle class) are coupled with some doubtful claims: “Working men and women are not stupid. When the party in power pursues CEO jobs for rich women, climate change, and every other pet project of the rich.
Left other than jobs, the working and middle classes vote Republican” (oward 2014). This is a blatant demagogy, reflecting obscurantist prejudices and stereotypes cherished by many right-wing politicians and media. Obviously, climate warming, being a problem of global and universal relevance, will potentially hurt the propertied classes far less than the wage-earning classes.
Similarly, it would be to the U.S. Senate candidate and current West Virginia Secretary of State, Natalie Tennant’s benefit if she could apply a more fine-grained map of societal differentiation. Tenant said she wants to stand up for the middle class and not for big businesses, adding: ’When we talk about workers and the middle class, it’s about equal pay for equal work for women. It’s about increasing the minimum wage because two-thirds of those who work on minimum wage jobs are women who are the breadwinners in our families’.
Senator Warren recently led an effort to lower interest rates on student loans but that legislation was blocked” (Chau 2014)
The intentions of the aformentioned politician are, sure enough, noble, but their articulation would be less confusing and confused if she did not put the equation mark between all the following terms: “the middle class”, “workers”, and “students”.
Even more confusingly, the same politicians star in a dramatic comedy (or a comic drama, if you like )under the title “ Democrats doing pro-business populist two-step” (Dionne 2014) On the one hand: Sen. Elizabeth Warren, D-Mass., traveled to West Virginia [...] to lift her party’s underdog Senate candidate, [...] Natalie Tennant. [...] Tennant’s camp is betting that many working-class social conservatives are still attracted to a politics that draws sharp lines between the well-connected and everyone else.
‘Citibank and Goldman Sachs and all those other guys on Wall Street, they’ve got plenty of folks in the U.S. Senate willing to work on their side’, Warren declared. “’e need some more people willing to work on the side of America’s families. Natalie’s that fighter’” (Dionne 2014).
It is extremely problematic whether Democrats’ standing for omnibus “American families” can be an effective alternative to “a politics that draws sharp” divisions The same flaws mark an attempt of House Democrats [...]to cater to “the voters they most prize: [...] their “Middle Class Jumpstart” agenda for the fall elections that included a minimum wage increase, student loan refinancing, and infrastructure investment through loophole closing.
“Sen. Charles Schumer, D-N.Y., said there is an underlying consistency in his party’s side of the debate because Democrats believe public action can benefit both business and the middle class” (Dionne 2014).
There is a Latin phrase that appears to be descriptive of the above situation: ad utrumque paratus, which means “prepared for either [alternative]”, whose English counterpart seems to be the phrase: “have the best of both worlds”, and a fortiori-to have one’s cake and eat itHowever, to bring in another adage, one which appears to be a fitting commentaryto the aformentioned strategy: Between two stools one falls to the ground. .
Thus, there seems to be a parallel process here at play-an omnibus term inspires a political party to adopt an omnibus political strategy classwise that blurs key lines of class divide. Needless to say, it is precisely such measures that are responsible for the (an object of frequent complaint) lack of any significant differences between the major parties in the present-day capitalist democracies.
More broadly, owing to its inherent fuzziness, the term of middle class is used, or rather, misused to putatively refer to some other segments of the population, which cannot but aggravate the extent of conceptual and political chaos. A case in point is the hot topic of minimum wage (on its part bound up with the aformentioned issue of class benefits stemming from specific political measures), the White House being unhappy with a new Congressional Budget Office study of the economic impact of Obama’s proposed boost of the federal minimum wage. A gradual increase from the current $7.25 per hour to $10.10 would, they said, probably cause about half a million people to lose their jobs, but lift nearly twice that number out of poverty. As it mmight be expected, critics pounced on the job-loss point. The administration fought back, releasing a statement from two members of Obama’s Council of Economic Advisers charging that the CBO’s job-loss estimates “are not reflective of a consensus of the economics profession.”
And in parallel, it engaged in a big social-media campaign, under the hashtag #RaiseTheWage, to stir up support for its plan. A key talking point has been that a minimum-wage hike will be good for the middle class—this was the second bullet of six from the CEA, and first of two tweets from the official White House Twitter account. This effects in truly bizarre claims marked by a glaring disjunction between the real content of what is being referred to and its verbal guise-“CBO finds that raising the minimum wage would increase income for millions of middle-class families, on net, even after accounting for its estimates of job losses. Middle class families earning less than six times the poverty line (i.e., $150,000 for a family of four in 2016) would see an aggregate increase of $19 billion in additional wages, with more than 90 percent of that increase going to families earning less than three times the Federal poverty line (i.e., $75,000 for a family of four in 2016). Contrary to critics’ claims that teens are the primary beneficiaries of increases in the minimum wage, CBO, found only 12 percent of the workers likely to benefit from a minimum wage increase are teenagers” (Furman, Stevenson 2014). Overall, according to CBO, the envisaged increase in the minimum wage would lift 900,000 people out of poverty. Furthermore, contrary to opponents who condemned this figure as an over-estimate, a study from University of Massachusetts-Amherst economist Arindrajit Dube found that if Congress were to go through with a plan backed by President Barack Obama to raise the minimum wage from $7.25 an hour to $10.10 an hour, it would reduce the poverty rate among Americans between the ages of 18 and 64 by as much as 1.7 percentage points, That would bring about 4.6 million people out of poverty directly and reduce the ranks of the nation’s poor by 6.8 million, accounting for longer-term effects.
“What I found is very robust evidence that minimum wage increases tend to have a moderate reduction in the poverty rate.” Dube said.
A $10.10 minimum wage would help to reverse some of the damage done by the Great Recession. The economic downturn, which technically ended in 2009, and recovery have been marked by high unemployment and stagnant or falling wages. After the recession, many jobs that did return were low-paying - with many offering just minimum wage or close to it.
Three-fifths of the new jobs created during the economic recovery paid low-wages, according to an August 2012 analysis from the National Employment Law Project, a left-leaning advocacy group focused on low-wage workers.
The combination of many Americans not working at all or working for not that much money contributed to a 3.4 percent increase in the poverty rate during the recession that has not abated.
A $10.10 minimum wage could go a long way in reversing some of that economic damage, according to Dube.
“[The $10.10] increase would erase more than half of the increase in poverty we have seen during the Great Recession,” Dube said. “We’re talking about roughly 5 million less people in poverty inAmerica. (Berman 2014)
But to shift the reader’s attention away from those substantive issues to the methodological ones, and thus to the observation made at the outset of the present paragraph, the above usage is part of a broader pattern in American politics.
National politicians, even on the left, seem afraid to speak directly about helping the poor, and often justify government action in the economy with reference to the middle class, even if many of the intended beneficiaries actually are poor. It was a big theme for the Democrats in 2012.
Obama at the Democratic National Convention that year was talking about budget cuts: “You can choose a future where we reduce our deficit without sticking it to the middle class.” A speech at the same convention by Elizabeth Warren, the Democratic Party’s most outspoken critic of inequality, contained no less than eight references to the middle class and just one to poverty. Bill Clinton did manage to talk about helping the poor, though they were almost always listed as a beneficiary alongside the middle class, e.g. “They’ll cut way back on...all the programs that help to empower middle-class families and help poor kids.” Obama’s 2014 State of the Union was a similar tale—if you dozed off for a few seconds during the bit on minimum wage, you could have come away thinking that there are two social classes in America: the wealthy and the middle class. Obama did say he’d build “ladders of opportunity into the middle class,” but the ladders seem to come up from nowhere. (Gay 2014), obviously, the matter can be little helped by the proposal of the political thinker cited above. His starting point is the premise-itself being a result of a particular definition of the category in question-that “the vast majority of the population is not poor - but middle class” (Hansen 2014). Trying to determine “how have the political parties done in making their middle class constituents’ lives better”. He admits, though, that “unfortunately, the only proxy that even comes close to establishing a metric would be median income. To cut a long story short, “there is little evidence either political party has been good for the middle class” (Hansen 2014). […]
One party seems to believe it is their duty to protect the poor (using transfer payments from the government to fuel spending), while the other seems to protect the rich (as the rich have the ability to fuel the economy through investment). Both believe in trickle economics - feeding a weak economy using the government to transfer funds that will trickle up or feeding the rich to trickle down. There is no evidence that trickle anything works except for short periods of time. There is only one way to fuel the economy - and that is to fuel the middle class directly by increasing its ability to produce income, and lowering regulatory hurdles so the middle class can directly embark in capitalism” (Hansen 2014).
Now, this recommendation is intriguing indeed, being inconsistent with his broad frame of reference as containing such terms as “poor” and “rich”. Meanwhile, as the author himself confirms below, he actually conceptualises the middle class as business owners, for he continues:
“Having spent much of my life living in countries which have limited social safety nets, it always amazes me to see individuals make a living through small business endeavors. This is capitalism. Small business in the USA has been in a down trend for years“ (Hansen 2014).
And the second consequence is a considerable susceptibility of the said concept to a host of politically motivated uses and misuses.
Moving for a while to the UK, The Chancellor predicted a “year of hard truths” in response to Labour Leader Ed Miliband’s claim he will save the middle class. A political opponent could take advantage of the said concept’s lack of clarity and asks natural in such a situation questions: “Who are they really talking to, and which of them will sway the voters?” (Ford 2014).
“The Guardian” admits that definitions of the middle class framing it as a vast majority of the population may raise the question why one should “use class labels at all”, answering: “because “middle class” or the “squeezed middle” is a useful way of framing a broader narrative about the cost of living” (Boyle 2014), and thus in fact a proxy only.
As it happens, the same journal published an article concerning the above named concept “the squeezed middle class”, revealing its whole ambiguity. The point that kicks off the argument will be made clear immediately after that: “The real ‘squeezed middle’ class can’t afford £45k on school fees. Confusion over who the “squeezed middle” actually are is nothing new. Back in February Gillian Tett asked “Which middle class, which squeeze?”
In the Financial Times, explaining why the term raises so many difficulties. How do you define middle class? Is it absolute wealth, and if so how does the middle class of China relate to the middle class in the United States? Or is it more important where your income fits within your perceptions of those around you?
With that in mind one could be forgiven for thinking that the tag can be applied to almost anyone. Almost anyone, yet Judith Woods’s recent piece in the Telegraph - “I make £120,000 but I can’t recall the last time we went out for dinner” makes you realise just how out of touch many are. Despite what the article suggests, if you’re earning £120,000, you’re not the squeezed middle, you’re not even struggling – you are in the top 5% of of earners, and not far from the top 1%.
The numbers aren’t hard to find .
As of 2011-2012, a salary greater than £104,000 means that 98 out of every 100 people earn less than you, the top 2%. The top 1% meanwhile earn over £147,000 a year. Conversely if you earn less than £7,740 you are in the bottom 1% (all these figures are before tax). The median salary, where you sit in the middle with half the population earning more than you and the other half less, is currently around £20,300” (Holding 2014).
The aforementioned author cannot hide his irony: “If £120,000 really is the squeezed middle, then I’d love to be part of it. In 2009 I graduated with a PhD, four years after finishing my undergraduate degree and a total of eight years spent as a student. Even after all that time, early career academic positions within the sciences are still considered training posts. You are expected to take one or two short-term contracts, each two to three years in length, before making the step up to become an independent researcher.
My first position came with a salary slightly above the UK median income. Within weeks of taking the position, like so many people during that period, my salary was frozen. I didn’t see any change in the amount I earned for the next three and a half years, with inflation running at over 5% at times. Like many, I felt the pressures of increased food, fuel and housing costs on my static income as the real value of my salary decreased.
When that contract came to an end I applied for another post. At interview they offered to salary match: an offer that was less in real terms than my starting salary three years earlier. Instead, I asked to be paid in line with my experience. I was laughed at, the director dismissing it as he had faced the same pay freeze and was ‘suffering’ too.
There was a difference between us though: I wasn’t wanting more disposable income. I had no real income from my employment. The childcare provider, with which my employer had a negotiated a discount, cost £300 more than my income after tax each month. That’s before you include all the other incidental costs like fuel to get to work, the cost of running a car and my parking charges on site. It didn’t pay to work. I was with an income as close to ‘middle’ as it was and yet was better off not working.
[...] I raise my story not to make you feel sorry for me, but to question why a person earning near the median income salary, i.e. better off than half of the individuals in the country, can be in a position where they are questioning if they can afford to go to work. And that’s before we even discuss receiving any benefits.
This wouldn’t appear to be an isolated case either. The figure that the Minimum Income Standard (MIS) project recommends for a couple with two children living outside London is around £470 per week, after tax and not excluding childcare. If we assume one parent would have to undertake full-time childcare, it would require a main earner within the top third of the population (69th percentile £470 x 52 weeks + tax) to achieve that income. The average age for a first child is around 30 and HMRC gives the median income for that age bracket as £23,000 before tax, not substantially higher than for the population as a whole.
This is where the real squeeze lies, not in the finances of a man who chooses to spend £45,000 a year sending his kids to private school, but in the lives of academics and professionals who can barely afford to go to work. Income inequality is increasing at an alarming rate, and most of us are on the wrong side of it. George Osborne can claim all he wants about the success of his recovery, but all that appears to have happened is the rich have become richer” (Holding 2014).
This view is echoed by another columnist in another British broadsheet, theIndependent: “In the grim economic circumstances of the past few years, one question has been asked again and again: who has borne the brunt of it? It’s a complicated matter, and the answer sets the political agenda; surprising, then, that if you judge by column inches and the tenor of political rhetoric, there is a single view. The real victims of the great recession, our leaders and leader writers agree, have been the middle classes, also known as the squeezed middle” (Bland 2014).
Bland indulges in poking fun at the alleged victims of hard economic circumstances: “We heard about the distressing fate of the squeezed middle in a piece in The Daily Telegraph last week that told the story of Guy Jackson, a financial compliance officer in the City. Guy is so darn squeezed it’s a wonder his buttons aren’t flying off. He’s not asking for much: he just wants to maintain his and his family’s standard of living. But the squeeze has “really hit” them. Trips to Tesco instead of Ocado deliveries. No city breaks. No new cars! It’s no wonder: with two sons to keep at private schools, Guy and his wife Sharon must manage on his ‘basic salary’ of £120,000 a year. (The article neglects to mention Sharon’s contribution to the pot, which is mysterious, when LinkedIn reveals her ownership of what sounds like a thriving corporate training business.)
You might argue that this is just trolling: a fiendish bit of Samantha Brickery designed to draw the outraged hate-clicks of people who find it obscene” (Bland 2014).
Bland goes on to argue-along the same lines as our earlier remarks on the necessity of proper proportions in the appraisal of the situation of the “middle class” compared with that of true socio-economic classes, esp. the working class-that : “there’s more to it. Most people, it’s true, would put someone on £120,000 a year outside of the article’s excessively downbeat estimate of belonging to the “upper end of the squeezed middle”. And yet the ballad of Guy Jackson is not being recited in a vacuum. Since Ed Miliband first started using the term in 2010, the squeezed middle has become accepted shorthand for … well, nobody knows what, exactly. The definition of ‘the squeezed middle’, and indeed of the ‘middle class’, is so loose as to be useless. Quite often, though, it seems to mean: people who think that their second car matters more than a poorer person’s first job” (Bland 2014).
The British columnist’s point is well taken, as well it accords with the thrust of our own argument.
His comments on the political use-value of the concept involved are also pertinent: “I don’t really blame Ed Miliband for this. You can see why it’s useful to sell your political wares to a group so nebulous that anyone who doesn’t wear a monocle and a top hat can think himself a part of it. Also, at least the adjective ‘squeezed’ is sort of honest, conveying as it does a sense of incredibly mild discomfort, like when you’ve eaten too much cheese, rather than suffocating constriction. For Miliband, the phrase also has the advantage of reassuring the cognoscenti that you’re not going to do anything too radical. Refer instead to the crushed underclass or the moneyed elite and people are going to start getting alarmed.” (Bland 2014)
But his next remark regarding the geographical relevance of the phrase named above seems not necessarily true, as it appears to be far more widespread: “There’s something terribly British about the squeezed middle, at once polite and standoffish, reluctant to appear self-centred but also really irritated by chuggers. The squeezed middle conceives of itself as docile until the chips are down; the trouble is, its definition of what state the chips have to be in to qualify as ‘down’ is a little hazy” (Bland 2014).
And indeed, as we have been stressing throughout the book, it is exactly there where the rub lies.
Having thus pinned down the critical weakness of the concept under examination, Bland can come back to his satire: “Self-defining members takes a scandalised pleasure in telling stories about shopping at Aldi, apparently viewing an adjustment to their grocery shopping as a defiant rearguard action that merits comparison with Dunkirk; they like to think of themselves as loath to make a fuss but are quite prepared to have a row with the waiter if that’s what it takes to avoid eating halal.
Crucially, they view the trappings of the upper middle class as symbols of the whole vast category, even the bit without that vital prefix. But most members of the middle class aren’t going on holiday to Tuscany. In that same Telegraph article that wept for the Jacksons, Janette Wallis of The Good Schools Guide remembered hearing someone say ‘you can tell the middle-class parents, because they will go to almost any lengths to send their child to an independent school’. But only 7 per cent of British children go to private school.” (Bland 2014)
Bland’s further remarks highlight the slippery nature of the notion under investigation as well: “Almost no one views themselves as upper middle class, perhaps because it seems conceited to do so, perhaps because of a sense that being upper middle class must be more fun than this. We are hard-wired to believe that other people are doing better than us. If our self-definition is to be trusted, which it isn’t, upper middle class is a category that only counts for 7 per cent. Participants in the same 2011 study which gave that figure chose Kate Middleton as a representative of the upper middle classes. But if the term is to mean anything, it surely has to extend beyond a woman whose son will be king.
There is a squeezed middle – but the people who think they’re in it are not. Take Guy Jackson. With his salary of £120,000, he feels as if he’s in the middle, but instead, he’s in the top 2 per cent. Lots of people who earn, say, £50,000 a year, think of themselves as slap in the middle of the curve – a fantasy in which they are enabled by our political leaders. If this is you, take a moment to guess what the median income in this country is – the salary at which half of people earn more than you, and half of people less. Got your number? The answer is £27,000. I bet you thought it was higher” (Bland 2014).
The author being cited attempts to shed light on what he believes to be a psychological background to the misconception discussed above: “Partly this is because we all hang out with people like ourselves, and so come to think of our problems as universal. When the Joseph Rowntree Foundation did a class study a few years ago, it found participants in its focus groups ‘demonstrated a strong tendency to place themselves in the middle of the income distribution’ wherever they truly stood. “For most of the participants it is people ‘like them’ … who seem to be undergoing a particularly difficult time’, the study said. In their words, ‘it is the ‘middle band’ who ‘get forgotten’, who ‘suffer the worse’ and who are ‘worse off’, losing out to both top and bottom’” (Bland 2014).
The paradox could be accounted for by the type of political considerations involved:
“It’s a strange old idea, that those in the middle are worse off than those worse off than them – and yet it seems to be persistent. The only way to really deal with it is to state unapologetically, that the people in the middle are not the ones suffering the most. But if you are poor and young, you are less likely to vote, and so unlikely to be heard. In contrast, the so-called squeezed middle might be a fiction, but it is a very influential one. To give it a hard time is to mess with the most influential and engaged people in the country. And where are the votes in that?” (Bland 2014)
A parallel case concerns another nation belonging to the shareholder capitalism zone: Ireland’s “political parties [...] cherish what they vaguely call ‘the squeezed middle’, ‘the coping classes’ and whatever definition it can find to cover the increasingly surly electorate.” (Brennan 2014)So far, so well-known, and the next remark is hardly surprising either: “one problem our political elite has is that no one has defined precisely who this grouping comprises” (Brennan 2014). A historical and conceptual background given to the above claim is valuable: “this difficulty has undoubtedly been accentuated by the previously happy scenario where, during the era of the Tiger, we believed Ireland had transcended the issue of class.
If the Ireland of that time was too modern and too wealthy for such dated notions, in the wake of the great fall, class has made a serious comeback” (Brennan 2014). There is definitely a sarcastic subtext to those remarks, and the researcher’s further comments amount to an effective unpacking of the concept concerned: “it has become somewhat more amorphous since the simple days of Monty Python when a bowler-hatted John Cleese could claim he was middle class and Dudley Moore could say he was of the working class stripe. Today, however, in a development mirrored across the Western world, the squeezed middle incorporates a previously upwardly mobile working class and the old already-there middle class” (Brennan 2014).
And the continuation of the argument deserves the reader’s attention as well:
“This forced merger has created a new grouping bigger than the squeezed middle for whilst the phrase is popular, it is far too reductive a description of the scale of the number of our citizens who now live in a permanent state of suspended alienation from the political process. Instead it might be more accurate to suggest the class which has been failed by our political elite should be termed the new ‘working poor’” (Brennan 2014). What is not totally clear,is why a political criterion has been chosen to delineate the grouping in question-after all the former critique, the reader would be entitled to be presented with a more theoretically grounded and sophisticated argument. And this is not the end of surprises, as one would not expect such a critical argument to end up in... what to all intents and purposes signifies “back to Square one”: “this new class of ‘working poor’ is legion” (Brennan 2014). But what he has to say on the composition of that category is interesting, too: “the ‘working poor’ now incorporates the working classes and the middle classes in the private and the public sector.
In spite of the belief in Labour that the new ‘working poor’ consists of teachers, nurses and what used be called the ‘caring professions’, low pay is not just a public sector issue.
The new ‘working poor’ include the unwilling non-working tradesmen, the credit-starved small business owners and those self-employed white collar professionals who all know from bitter experience the State swiftly becomes their enemy when they become unemployed.
Intriguingly, a substantial group of the ‘working poor’ consists of the newly employed, be it those ‘fortuitous’ interns in Googleland or our tremulously returning main street retail economy” (Brennan 2014). Thus, legion or not, but sure enough the grouping in question itself comprises a dozen or so of diverse social groups. Brennan tries to find some common denominator to the latter: “the bad news on that front for a coalition banking on a jobs recovery to save its political hide is that this particular wing of the new ‘working poor’ is not terribly grateful for its subsistence wages” (Brennan 2014) By the same token Brennan failed to take account of his own classification-his mega-category comprises a number of subcategories whose forms of income may have very different nature.
[...] They, along with our public sector workers and the other aforementioned classes, are instead part of the new Irish economic phenomenon of the cashless recovery where at a time when all economic indices are rising, the ‘working poor’ have no disposable income” (Brennan 2014) But then an unexpected turn: “the one thing that should be – and in some cases is – exercising the minds of our politicians is the fact that there is no more terrifying revolt than that led by the petite bourgeoisie.
It is that mix of upwardly mobile middle and working poor classes who introduced Madame la Guillotine and Robespierre to the world and followed that up with the rise of fascism and Stalinism” (Brennan 2014).
oomph, these are rather bold and far-fetched assertions, to say the least; whilst comparisons between Stalinism and fascism are staple in what had been once called sovietology, the thesis on an analogous social background to both those regimes is, to this author’s knowledge, novel, all the more that the core support of both systems is named as the same-petty bourgeois class.
On the other side of the Pond such a reasoning, prima facie concerning the middle class, but in actuality-quite different segment of society: in this instance, “the poor”, which is a colloquial term, whose theoretical rendering, though, is not at this point attempted, is also much in vogue: Paul Ryan has been indicted on account of his newest budget as marking the “seventh time he has tried to ram his anti-middle class and anti-environment budget through Congress.
Why would he strangle the middle class when the average income for 90 percent of workers is now at 1966 rates?
His budget would cut food stamps by $126 billion, cut student loans by $700 billion, cut education by 24 percent by 2024, block increasing the minimum wage, turn Medicare into a voucher system, increase military spending by $483 billion, fully repeal the Affordable Care Act and expand onshore and offshore gas and oil production [...] The rich would still get their tax breaks.
Why would Ryan, who used his father’s Social Security to attend college when his family could well-afford his college education, push his cannibalistic agenda again and again? Simple. The middle class would get a $2,000 tax increase, and the millionaires would receive $200,000 in “entitlement” tax cuts.
His cuts are hypocritical and another example of perpetuating income inequality where all the money is transferred to the wealthy, corporations and Wall Street.
Ryan continues to convince voters that the poor will work harder if they get reduced entitlements, while the rich will work harder if they get bigger tax cuts – namely ‘entitlements’.” (Lindgren 2014).
The Ryan budget is thus an exercise in obfuscation — failing to specify trillions of dollars that it would need in tax savings and budget cuts to make its numbers add up. No one should take seriously its claim to balance the budget in ten years” (Lindgren 2014).”
A journal whose political colours are not difficult to pin down considers as an axiomatic truth the following assertion: “that the middle class is disappearing in the United States is indisputable, and the question of whether that trend can or even should be addressed is at the core of the ideological divide facing our nation.
President Barack Obama speaking at the progressive Center for American Progress on Wednesday put it bluntly: “I believe that this is the defining challenge of our time: making sure that our economy works for every American.” (McHugh 2013)
It would seem that the president and the journal are, therefore, in the same ideological camp. Nothing could be further from the truth, however.
The author of the article being cited states, albeit without providing any proof, our greatest disappointment in this administration is that addressing inequality has not been the defining challenge of the Obama presidency, and whether this weakened administration can effectively drive the debate now is dubious at best. (McHugh 2013)
But our goal here is not to delve into the current American political debates; rather, the focus is on the article’s approach to the concept under investigation, which can be brought down to two-both unfounded-claims, first, identifying the middle class with “all Americans” and, second, positing that a decrese in inequality serves exclusively, or at least mostly the class favourites of the journal. But this class-biased view flies in the face of reality. Withh due respect, “daily challenges facing folks in the middle of our society” (Krueger above-showing that those have increasingly come to be made fun of) pale in comparison with the plight of the clients of the institutions described in the following paragraph.
While the introductory words of the researcher quoted below may seem to be overstated, think of his whole pronouncement as an alternative perspective on (on the surface) the same developments that are typically focused on by the middle-class literature And again, it is important to keep proper proportions in comparing the scale of existential problems faced by the classes referred to in the subsequent paragraph and the so-called “first world problems for the middle class”, also referred to as “white whine”, which is unfortunate,since the geography of the region in question inevitably carries some racist undertones. Anyway, the list reproduced below contains truly “world problems”: “Your new car’s drink holder may not be wide enough to hold your Starbucks Venti Latte.
3. It’s hard to find “good help” to raise your kids and keep your home. You even have to clean for them and may not know where they put your dear belongings.
[...] 6. Your massage therapist talks during your entire session.
7. The shampoo in your health club shower is crap.
8. You pay a fortune in income taxes and/or property taxes. You may not even qualify for a lot of deductions” (Passamani 2014).
More weighty issues are described in the following story: “A soaring number of girls from middle class families and public schools are turning to shoplifting as their parents have cut back their pocket money during the economic downturn, experts warn.
Teenage girls, between the ages of 14 and 17, are regularly going into department stores to steal perfume and designer labels and handbags, it is claimed. Crisis Counselling for Alleged Shoplifters (CCAS) said there has been a surge in the number of girls from affluent backgrounds being caught shoplifting, with the lead up to Christmas this year being worse than ever before.
“We are finding many parents are not giving their daughters sufficient money and allowance to spend,” said Harry Kauffer, chairman of CCAS” (Carter 2013).
A veritable drama, or is it really?
The only things that seem to be really growing in the UK and US economies these days are hunger and food insecurity. The growth of food banks and other forms of hunger-relief charities is a strong reminder of the “pseudo-recovery” we are in and that the financial crisis hasn’t gone away.
This economic catastrophe was first shifted on to governments in the form of a sovereign debt crisis. (Rioux 2013)
Although the author is an economist, he makes use here of too far-reaching a short-cut; the sovereign debt crisis, and the debt crisis generally cannot be brought down to such simple cause-effect relationships. (cf. Tittenbrun 2013c).
Anyway, the economist under consideration argues that:
With states now balancing their budgets through austerity measures, the crisis is mutating yet again, this time in the form of a growing subsistence crisis. And, as banks post record profits, another type of bank is thriving: the food bank.
Over 13m people in the UK (about one in five) live below the poverty line. According to a recent survey for Tesco, the Trussell Trust and FareShare, a staggering 30% of UK adults have either skipped meals, gone without food to feed their family, or relied on relatives or friends for food during the last year. With growing numbers of people having to choose between heating and eating, food banks are reporting that increasing numbers of people are returning food items that need to be heated, as they cannot afford the associated energy cost.
The Trussell Trust, a charity dedicated to providing food in the UK, reported a 170% increase in the number of people who have turned to its food banks over the past 12 months. The number of people receiving a minimum of three days emergency food more than doubled between 2010-11 and 2011-12. The organisation helped 346,992 people in 2012-13, more than a third of which were children. To keep up with demand, the charity is launching three new food banks every week. It and now runs over 400 across the UK.
FareShare, a national charity that redistributes surplus food to local organisations, is also rapidly growing. In March it reported feeding 43,700 people a day through 910 local charities, a 26% increase on the previous year. Similarly, the Sikh Federation UK estimates it is serving around 5,000 meals to non-Sikhs each week.
In the US, the number of people without secure access to food has also increased in the wake of the crisis to 49m people, or 15.9% of the population). The number of participants in the new federal food stamp programme has increased from 17.2m in 2000 to 44.8m in 2011.
Children are particularly badly affected. In 2009, one fifth or more of the child population of 40 states and Washington DC lived in food insecure households. More than 31m children now receive free or reduced-price meals through the National School Lunch Program”.
“Oxfam’s “Below the Breadline”, compiled in conjunction with Church Action on Poverty and the Trussell Trust, revealed a 54% rise in the number of food parcels distributed in Britain over the past 12 months.
Food banks gave out more than 20m meals last year to more than a million recipients. Government welfare policy, in particular the use of sanctions withdrawing benefit and leaving those affected with zero income, is identified as the most important driver of this increase.
On the same day the Social Mobility and Child Poverty Commission reported that 3.5m children would be in poverty by 2020 without strong measures aimed at low-income households.
In a country where the richest 1% own 54% of the wealth, the richest 1,000 individuals saw their income double over the past five years.
Inequalities are at the heart of understanding the welfare crisis.
Thomas Piketty’s Capital in the 21st Century has shone the spotlight on wealth inequalities in the developed world while Wilkinson & Pickett’s The Spirit Level has linked them with a wide range of health inequalities. Both suggest far greater action is required by government if these widening inequalities are to be reversed.
A few comments on the specific Scottish case:
Scotland is one of the richest parts of the UK, yet it is also one of the most unequal and contains some of the worst areas of poverty. The Institute of Fiscal Studies estimated that child poverty rates will be back to the worst levels of one in three children living in households below the poverty line by 2020 if income redistribution is not accelerated.
Scotland’s health inequalities are also among the worst in the UK, which is linked to food poverty and food-related ill-health. The Scottish government’s Equally Well policy recognised that “Scotland’s health is improving rapidly but it is not improving fast enough for the poorest sections of our society.”
Food poverty and health inequality go hand in hand Oxfam area14mp/bys437sg-1402401907
Food poverty and health inequality go hand in hand. An example of this problem is that the richest 10% of the population has a life expectancy at birth of over 13 years more than the poorest 10%. Whether we are looking at cancer, heart disease or strokes, Scotland’s population suffers from high levels of mortality and high levels of health inequalities” (Morelli 2014).
As in the UK, growing hunger in the US is largely being met through private charity rather than state economic policy. Feeding America – a nationwide network of member food banks and emergency kitchens – reports big increases in food bank usage since the crisis. It also reports that 36% of its clients were from households with one or more adults employed, illustrating the dire reality of labour market restructuring. Again, just as in the UK, many food insecure households reported having to choose between food and other necessities, such as paying for utilities, heating fuel, or rent.
House Republicans passed a nutrition bill that eliminates $39 billion from the Supplemental Nutrition Assistance Program, previously known as food stamps.
Nearly 47 million Americans currently rely on SNAP - roughly 15 percent of the population - and 17.6 million U.S. households are considered food insecure, which means they aren’t sure where their next meal will come from. According to the U.S. Department of Agriculture, nearly 17 million of these people are children, 5 million are seniors and 300,000 are elderly veterans.
In these and other advanced capitalist societies, the rise of hunger is closely related to the growing numbers of the working “poor – or those who are employed but still unable to meet basic needs. “By 2009 in the US, nearly one in three working families were defined as ‘low income’. For these families, unexpected expenses, sickness or temporary unemployment are sufficient to shake dramatically an already fragile financial situation” (Rioux 2014).
It would be interesting to know if those persons are also included in the definition of “all Americans”, equating the latter with “the middle class” at that.
Admittedly, such a view would not be worlds apart from the position of another columnist, who argues-at the opposite end of the quantitative spectrum- that”high food prices hurt the poor and the few Americans left who call themselves middle class. [...]Prices of beef, pork, fruits and vegetables are rising [...] Families are eating cereal for breakfast and dinner; fresh produce is even scarcer on America’s tables.
Chalking up the cost of breakfast a few weeks ago, USA Today found eggs up 5.7 percent, tomatoes up 6.9 percent, sausage up 8.7 percent, potatoes up 6.9 percent and oranges up 12.2 percent.
[...] most Americans get by on a fixed amount of money each week; 10 or 20 dollars more spent for the same amount of food means something has to give” (McFeatters 2014).
Arguably, “it gets harder and harder to work your way out of dire straits. A mom with two kids toiling full-time for minimum wage at a grocery store would make about $15,000 a year, well below the poverty line of $18,498 for a family of three” (Parramore 2014). Moreover, poverty figures alone do not tell the whole story.
A far larger group of Americans — around 100 million — is considered low-income, which would mean about $45,000 in income for a family of four. When you include the low-income category, census data show that the number of economically distressed Americans jumps to 50 percent. Half of the nation!
Former President Jimmy Carter has said that the American middle-class is beginning to look like those who lived in poverty when he occupied the White House. He attributed this reduced quality of life to the rise in tax breaks for the wealthy, an insufficient minimum wage, and electoral districts drawn to maximize political polarization.
New research shows that four out of five U.S. adults will struggle with joblessness, near-poverty or reliance on welfare for at least parts of their lives. What’s especially interesting is that the face of poverty is changing. You are still more likely to be poor if you are black or brown, but census data show that race disparities in the poverty rate have significantly narrowed since the 1970s. By the time they turn 60, a whopping 76 percent of whites will experience economic insecurity, defined as a year or more of periodic joblessness, reliance on government assistance like food stamps or income below 150 percent of the poverty line. (Parramore 2014)
“Many states are experiencing a fiscal crisis, with increasing pressure to enact policies that will reduce overall spending in social security and nutritional programmes. But this is happening at the precise time when the demand for, and therefore the costs of, such programmes are rising. These measures will entrench poverty and hunger even further.
While benefit delays, rising living costs and benefit changes are often named as the causes behind the surge in the number of people turning to food banks, high food prices and reduced benefit payments do not constitute a crisis in and of themselves” (Rioux 2014). The root cause of rising hunger amid plenty lies in. Significantly, the economist under consideration draws below on the same facts that have served to derive pessimistic evaluations of the condition of the middle class radically different conclusions: stagnant and declining real wages, unemployment and underemployment.
The displacement of the 2008 financial crisis on to governments represents a financial coup d’état, the consequence of which is that more and more of our relatives, friends and neighbours are paying an unacceptable price – being hungry and experiencing heightened food insecurity. We need a strong interventionist state that can implement social and economic reforms capable of transforming the minimum wage into a living rather than a poverty wage, combating unemployment and underemployment, and reinforcing and expanding the social safety net.
With nearly 870m people suffering from chronic hunger globally, growing food insecurity in advanced capitalist countries highlights the uneven, yet global, nature of the current subsistence crisis.
This kind of considerations make as clear as a day that if a given author or researcher chooses to focus on more or less real or conversely, sham problems of the middle class at the expense of some other truly underprivileged segments of society, she views her subject matter through a particular variety of class-coloured lens that distort her clarity of vision and hence findings. A case in point is provided by the following moanings over the purportedly sorry fate of the New York middle class:
Wall Street money is making a comeback, but the gap between the haves and have-nots is growing, with not all middle-class New Yorkers feeling the recovery.
First the good news: More than 11 percent of households in New York’s metro region had incomes over $200,000 last year. That’s nearly twice the national rate, the Census Bureau’s 2012 American Community Survey reveals.
The 19 million residents of the metro region, from Midtown to its far-flung suburbs, recorded a median income of $63,982 last year.
The middle class faces a stark reality. Declines in income and rising costs push them down the economic ladder, closer to the poor struggling to climb up.
An analysis by New York’s Fiscal Policy Institute (FPI) shows inflation-adjusted median family incomes in New York City in the decade up to 2010. These incomes grew by 55 percent in high-income neighborhoods, declined by 3 percent in middle-income neighborhoods and were unchanged in low-income neighborhoods.
Meanwhile, median income for “renter” New York City households jumped by 24 percent. That did not keep pace with median monthly gross rents — which rose even faster, by 53 percent.
The recovery from the Great Recession has been uneven, analysts say. New York median family incomes, adjusting for inflation, declined slightly in 2012 and are $3,800, or 6.5 percent, below the 2008 level, the FPI notes.
Nationwide, inflation-adjusted median family incomes fell by $5,000, or 7.5 percent, over the same time.
New York’s middle class, the foundation of strong economic growth, is being squeezed economically, says James Parrott, the FPI’s chief economist. That’s a reflection of a broader national trend.
An estimated 51 percent of the US population was in the middle class at the start of the decade. That’s a sharp decline from 61 percent 40 years earlier.
That decline is certainly apparent in New York. Parrott notes that from the 2008 recession through the end of last year, unemployed New York City residents approximately doubled.
There was no increase in the number receiving public welfare, but the number on food stamps grew by an alarming two-thirds — meaning they required some help.
Many see the flood of newly minted New York millionaires as a great boon to the New York economy.
However, New York’s middle class pays a disproportionately higher share of local taxes than the richest 1 percent, Parrott says. New York City’s poverty rate rose from 18.2 percent in 2008 to 21.2 percent last year, according to the American Community Survey.
That’s an increase of 3 percentage points, and more than the nation’s overall rise.
Manhattan’s poverty rate was about 18 percent last year, compared with 31 percent in the Bronx. (The US government put the poverty level for a family of four at $23,050 in 2012.)
The Bronx’s median household income was $32,460; in Manhattan it was more than $67,000.
The New York metro region is not the nation’s worst when it comes to income disparity. That belongs to Sebastian-Vero Beach, Fla., metro region. It’s followed by No. 2, Bridgeport-Stamford-Norwalk, Conn” (Byrne 2013).
Call it myopia, blindness, or whatever-Byrne mourns the dire straits of those who earn comfortably over 63,000 dollars, while simultaneously in the same city there are people in real poverty. Nevertheless, all revolves around the celebrated “middle class”, apparently the paramount, if not the only-to all ends and purposes-class in society.
Only slightly more balanced is the description of Brooklyn residents’ household income, according to which “The most common categories are $50,000 to $74,999 (16.7 percent), $35,000 to $49,999 (12.8 percent) and $75,000 to $99,999 (10.2 percent)” (Geberer 2014),.
But even if the author admits: “Thus, even though lots of people are buying expensive new condos, they’re still a minority. In fact, 12.5 percent of Brooklynites have received food stamp benefits during the last 12 months, and 20 percent of Brooklyn families are living below the poverty level” (Geberer 2014), his interest is primarily not neither in the privileged classes nor the unddepriveleged segments of society, but-surprise! surprise!-the celebrated middle class: “but all in all, most Brooklynites are middle-class” (Geberer 2014).
The above considerations surely do not make any better the epistemological status of the concept involved, already undermined by the previous demonstration of its ambiguity. And indeed, as a consequence-as Aparna Mathur, an economist at the American Enterprise Institute in Washington, D.C., wrote-“There’s not really a definition of what constitutes middle class,”. “it’s more of a notional concept of how you view yourself relative to others” (Tims 2013b).
It is worth keeping in mind that view, as it both deconstructs and deontologises the concept under investigation, turning the middle class into in effect a state of mind. It is extremely problematic whether this kind of subjectivism can serve as an effective counterweight to a key flaw to the concept under examination, i.e. its intrinsic ambiguity, apparent also, for that matter, in the above paragraph (quoted from Tims’ article), wherein an additional characteristic of “lifestyle” is superimposed on that of a a medium income.
Consider another example of the perils of the subjective approach. As many as three in five working-age Chinese consider themselves to be middle class, according to a survey by the Centre for Social Survey at Guangzhou’s Sun Yat-sen University.
One in three, or 33.6 per cent, consider themselves to be lower class and 7.2 per cent consider themselves to be upper class, the survey found.
The survey queried more than 10 thousand households and 16 thousand individuals in 30 administrative divisions.
The first interesting point to be made concerns the range of differences in self-perception compared to a similar survey conducted by Pew Research last year in the US. While those who see themselves as lower class make up about a third of both countries’ populations, which finding reveals the uselessness of this kind of data; 10 percentage points more Americans than Chinese, 17 per cent, consider themselves upper class, which is again hardly surprising, given the length of historical period over a span of which fortunes of the American bourgeoisie were able to accrue as compared with Chinese nouveau riches.
Not as many people actually belong to China’s middle class. A study by the Organisation for Economic Co-operation and Development in 2010 estimated China’s middle class to stand at 157 million people in 2010. (Boehler 2013)
On the other hand, even some Chinese social scientists at least implicitly challenge the validity of the concept under consideration; for example, Qin Yan’s China’s Middle Class: The Mainstream of China’s Future Society”. Not only the author admits that she actually celebrates a class that, as she himself acknowledges, is only just in the process of formation, but also is aware that “the middle class hardly represents a uniform category but rather a diverse array of different social positions with differing degrees of power and affluence”.
Above ample evidence has been provided that growing income disparities squeeze what is commonly regarded as the middle class. By the same token, the reverse situation in income distribution should have opposing effects.
“Brazil’s economic growth in the post War period has often been accompanied by increasing income inequality. Several recent studies of Brazilian researchers at IPEA and the Getulio Vargas Foundation are not only signaling the surge of the middle class, but also find that income distribution has continuously improved during the last 15 years. (de Barros et al., 2007, 2008; Neri et al., 2008). Their statistics show that almost 52% of households now earn between 1,064 and 4,591 Brazilian Reais a month, roughly equivalent to US$ 625 and US$ 2,700, and with it have moved into what they call the “C” class. In addition, income distribution improved consistently though slowly as shown by its basic indicator, the GINI coefficient, which fell from over 0.6 to close 0.55 between 1993 and 2007” (Wogarta 2013).
However, the concept under examination seems to be notoriously ambiguous, which refers also to the Multiplicity of income criteria used to delineate the middle class; “according to a recent Pew Research Center survey, people across a wide range of income levels, including those making less than $30,000 and more than $100,000 a year, identify as being middle class in the United States” (Jing 2013).
That ambiguity refers to each level at which the concept is used-be it scholarly literature, journalistic commentary, or common consciousness of men and women in the street, as evidenced by the results of a poll about what constitutes the “middle class” in Oregon, being a response, in part, to a PolitiFact Oregon story (reported earlier in this chapter) looking at the Oregon Business Association’s 2014 Work Plan, which includes the claim: “
The middle class includes those with income roughly between $20,000 and $60,000.”
The poll drew 765 total votes. Interestingly enough, the results looked fairly similar to income distributions among Oregon tax-filers.
Readers were given five choices of what equates to middle class membership. A plurality of the votes, 320 or 41.83 percent of all votes cast, said someone needed to earn at least $40,000 annually to gain the distinction. The second most votes, 215 or 28.1 percent, put the figure at at least $50,000.
Next, with 207 votes or 27.06 percent, was an annual income of at least $60,000. Trailing far behind were incomes of at least $20,000 (20 votes, or 2.61 percent) and incomes of at least $15,000 (three votes, or .39 percent). (Tims 2013a)
It is useful to acquaint oneself also with some of the comments readers posted:
Tina wrote: “To be middle class you have to be able to pay for the essentials but not really any luxuries: My estimate for a family of 5 your need at least $100K: Do the math. I was shocked it really is this high:
First you have to pay your taxes at apx. $35K
Home including repairs and utilities etc: $20K
Food: Good quality but only eating out say 1X a week. $10K
Transportation: 2 Cars -A truck & a sedan or SUV about 5 years old, inc. insurance, gas etc $12K
Health insurance and health care at least $10K
Savings: Including Retirement, Emergency and College 5K
A Family vacation at least every other year. $3K
Furniture and stuff that is decent. Not too cheap or fancy. $1K
Clothes that are decent quality at least Kohls, Penneys or Land’s End prices that are not bought on clearance or used. $3K
School expenses: inc. sports etc $2K
Now give to charity! $3K It goes really fast!” (Tims 2013a)
The mention about the family draws our attention to an important methodological issue, pointed out also by the following reader:
Jane J questioned the poll itself: “Your poll is flawed in that it does not explain if it is talking about what one person needs to earn to be middle class or what a household with several people need to live as middle class. A single person making $30,000 is clearly middle class. But a parent of three earning $30,000 clearly is not. Similarly, my high school aged child is middle class (by virtue of his parents’ income and education levels) even though she earns $1,000 a most from babysitting.” (Tims 2013a)
As a matter of fact, however, the author is mistaken; children, as long as they are supported by their family of origin and live in the same household-Weber’s commensalism, which masks, in fact, common property on which the family is based, do not belong to any class sensu stricto;, they can be members of a quasi-class, though.
In most sociological theories that- which is still rare rather than frequent-take account of the question of the class position of housewives they are ascribed to the same class as the so-called head of the family, which still-under the traditional family model that, to be sure, slowly changes in modern conditions-is usually her husband. Of course, as suggested above, fully possible is the reverse situation, i.e. that it is the wife who works for pay, is the breadwinner, while her spouse is rearing their kids, cooking and so forth. This in no way alters our question, which is: how is the class position of those housewives or “househusbands”, for that matter, to be defined?
Given the fact that the persons in question perform a lot of socially and economically important quasi-work, it becomes implausible to attribute to then only secondary class position. From the perspective of socio-economic structuralism these persons should be classified as relatively independent quasi-classes. The word ‘relatively’ refers to an undisputable distinction between quasi-work and regular labour, by means of which some members of the household earn a livelihood. In other words, we disagree with the following judgment: “A major achievement of feminist research has been the broadening of the concept of work to include ‘the invisible labour’ of the home and neighbourhood (Glucksmann, 1995; Ungerson, 1997)” (Reay 2005). This is so because the above-mentioned feminist conception blurs the fundamental socio-economic distinction between two types of activities whose importance for social and individual being is materially different. One must keep a distinction between those who are gainfully employed and those, be they men or women, who perform even outwardly identical activities which, however, have no commercial objectives, do not yeield any income or, mor broadly, the means of subsistence. It is the latter, as distinct from the former, type of activity that is termed quasi-work by socio-economic structuralism. It is precisely to that key distinction that Kay Standing refers when she asserts that parental involvement in schooling has become “A form of unpaid household labour that breaks down the public/private divide by taking the work of the home into the school and that of the school into the home” (1997:2)
This circumstance is tied to the fact that particular quasi-classes take their prefixes from the kind of work performed by their life partners. Thus, if the basic means of subsistence are earned by the factory worker, then his non-working wife would be classed as a member of worker quasi-class. Similarly, a man who is sustained by his female partner working as a manager, is a member of an executive mega quasi-class, or, if she works, say, in a bank, managerial financial quasi-class.
To cite but one piece of empirical evidence corrorobating the salience of the dividing line in question, Melvin Kohn has madę an intriguing contributions to this literaturę.
Kohn studied class differences in the values parents impart to their children. He wanted to understand exactly why such differences exist and how they contribute to the perpetuation of the class system (Kohn 1969, 1976, 1977; Kohn and Schooler 1983). In a series of surveys in the United States and abroad, Kohn and his associates asked parents to select from a list of characteristics those they considered most desirable for a child of the same age and sex as their own child. Here are a few examples (Kohn 1969:218):
That he is a good student.
That he is popular with other children.
That he has good manners.
That he is curious about things.
That he is happy.
Families were assigned to classes on the basis of the father’s occupation. Although the studies found consensus across class levels about the importance of some values (parents of all classes wanted their children to be happy), there was less agreement about others. For example, parents at higher class levels were more likely to choose “curiosity,” and those at lower class levels were more likely to select “obedience.” The top panel (A) of Table 5.1 compares values characteristically cited by parents in the upper and lower halves of the class structure (for convenience labeled middle class and working class). Parental views were quite varied at every class level, but the values we are calling working class become increasingly common at lower class levels and those we have labeled middle class become more common at successively higher class levels.
But they also observed that the class patterning of parental values could be strengthened or diluted according to the occupations of employed mothers. For example, among women married to working-class men, mothers with manuał jobs were much morę likely to conformto the working-class value pattern than were mothers with white-collar jobs.
This stress on the concept of quasiwork as underlying the quasiclass relations is what distinguishes the position expounded here from at first glance somewhat similar notion proposed by E.O. Wright, who argues that “if you are married to a capitalist, regardless of what you yourself do, your interests and choices will be partially condi¬tioned by this fact. And this fact is a fact about your location. This particular dimension of the problem of class locations can be called ‘mediated locations within class relations’. Mediated locations are especially important for understanding the class locations of children, of retired people, of housewives, and of people in two-earner households” (2005:15).
Wright pays attention within his discussion to precisely such two-earner families, leaving open to debate an interpretation of the remaining cases-again for the reason that has been repeatedly pointed to above: the absence of a sound notion of economic ownership. It could be then take as a working hypothesis to be verified in the course of research that the family comes up as an ownership unit, which cannot be explained away in any investigation of the livelihood and consumption of given family members. But a pensioner, for example, will usually possess an estate position of her own, as a beneficiary of respective state transfers.
To return to the aforementioned poll, Westurrito questioned not the poll itself, but some of its respondents’ competence: “I don’t think the survey respondents understand what it really means to be poor. $40k+ implies that $36k is poor. I’m confident that 36k a year will get you a home, food, clothes and a car if you choose. I know a lot of people that make do with much less than that, scrape to make rent and still own iPads somehow.”
How does the question differentiate between individuals and families? Of course you can always breed yourself into the poorhouse. A family with 4 kids and one worker getting just 36k would really struggle- that’s only 6k per person. Perhaps this is why fast food workers are demanding $31k a year- as if that job was created to support a large family.” (Tims 2013a)
Let us end this review with an observation of Michael22, who said with a doze of healthy scepticism -that definitions may be meaningless: “It’s crazy to think we spend so much time trying to save the middle class, when we can’t even agree on who ‘they’ are.” (Tims 2013a)
There is something to be said for the above claim, despite its evident common-senseness.
Another aspect of the problem has been noted by the Brazilian economist cited above, even though part of his pronouncement may reflect his country’s specific circumstances: “because of its heterogeneity and the difficulty in properly identifying the middle class (MC), less has been researched and written on their behalf than on the poorest segments of the population” (Wogarta 2013).
More precise is another commentator, who reveals a class bias lurking behind the common focus on the middle class: “Trudeau continually makes reference to the middle class when pronouncing his grand scheme of things. When did the term working class become derogatory?
The political magicians have used their smoke and mirrors to convince ordinary Canadians that everyone can climb through the glass ceiling into the world of the corporate elite. No one wants to label himself as a worker; it has become something very undesirable” (Rendall 2014). “All parties have shifted their rhetorical focus to helping ‘families,’ usually vaguely defined as ‘middle class.’ No federal political party is proclaiming a new ‘war on poverty.’
In 1989, the Canadian Parliament passed a resolution to abolish child poverty by 2000. To no one’s surprise, that didn’t happen. Indeed, in recent years, the anti-poverty rhetoric that dominated Canadian policy debates over income distribution has almost disappeared” (Banting 2015).
At the same time, when it has recently become increasingly clear how serious a toll the crisis and its aftermath, or more plainly-the essential mechanism of the capitalist system have taken on the grouping described commonly by the buzzword in question, this could not but be taken heed by the politicians, who adjusted their rhetoric employed in their political speeches accordingly. And this accounts for the at first sight strange phenomenon consisting in the numerous participants in the presidential race avoiding what only recently has been their own favourite catchword; the reason is straightforward: “Because the middle class in America is shrinking. As a result, the term no longer connotes aspirational, feel-good emotions.
Long associated with the American Dream, the phrase now conjures up anxiety about the future and a lifestyle that’s become unattainable for millions of Americans. Pollsters concluded that using the term on the 2016 campaign trail would hurt more than help” (Wood 2015). And to be honest, this change of heart should not come as a surprise considering that “some 95 percent of income and wealth gains have gone to the top 1 percent over the past few years. And during the same period, average income for everyone else — including the middle class — actually dropped.
Meanwhile, tax cuts for the wealthy have reduced the quality of education, infrastructure, and other public goods and services.
Tickets into the middle class like public schools and higher education are waning. College education in particular is becoming unaffordable for ordinary people, who are forced to take on massive debt for a shot at a degree.
Job growth since 2008 has been concentrated in low-wage jobs like retail and restaurant work, not in higher paying middle-class jobs. For many in the 99 percent, that means choosing between a low-wage job and no job at all. It also means unpredictable schedules, temp work, and insufficient benefits — or often no benefits at all. [...]
Our increasingly precarious economy has made the term ‘middle class’ lose its resonance among voters.
So how are candidates responding?
By introducing new language that doesn’t evoke the same anxiety.
Hillary Clinton’s campaign references ‘everyday Americans’. Scott Walker’s team prefers ‘hard-working taxpayers’, while Rand Paul reaches out to ‘people who work for the people who own businesses’.
Marco Rubio calls them ‘the millions and millions of people who aren’t rich’. It does give the growing cluster of presidential hopefuls a chance to show off their linguistic talents. And it shows they’re attuned to emotions and how certain word choices might help their campaigns.
But using other terms won’t fix what’s broken in the economy” (Wood 2015).
Indeed, whilst the prothean nature of the concept in the focus of the present study does not exactly make us veryy ardent defenders of its place in the political vernacular, this does not translate into anything like support for its substitutes, sharing its shortcomings. And such replacements are unlikely to contribute to the solution of the real problems that the term of middle class better or worwse connotes. Small wonder that not all politicians have succumbed to this new fad. Martin O’Malley, who in June announced his decision to run for the democratic nomination for the presidency made a point of mentioning a term his fellow presidential aspirants seem to have been avoiding, And whether or not you like O’Malley’s brand of politics, he did bring up an issue that’s certain to be a crucial battleground in the coming election and in domestic politics for years to come” (Merton Ferron 2015). Those comments are correct only insofar as one bears in mind the limitations of the concept concerned, which can serve merely as a general signal of the underlying problems, but not as their cognitive reflection eligible as an effective research and policy tool.
But normative evaluation, as it were is one thing, and reality is quite another. All in all, it is hardly imaginable that any conceptual rival will be ever capable of superseding the term of middle class as the weapon of political debate. A peculiar confirmation of that political role is, paradoxically, provided by a specific vision of U.S. structure of social differentiation from which, here is the paradox, the concept of middle class has been eliminated. The flip side of this view is, though, the author’s recognition of the political role pertaining to the notion concerned: “Candidates for political office say they are going to improve conditions for the middle class, promising help for the middle class that exists only in voting machines and ballot boxes. The current administration in power since 2009 has been focusing their attention on the middle class but household incomes are down more than 4%, adjusted for inflation. Middle class to a politician is defined as a voter and politicians-in-waiting and politicians-in-office are pulling for you. Well, not really, they are pulling for your votes” (Baynton 2015).
Overall, then, the aformentioned reserve to the notion concerned is counterbalanced by an awareness of its utility: “Jesse Rhodes, a professor of political science at the University of Massachusetts Amherst, said deepening economic inequality in the United States has been accompanied by more frequent and more positive references to class by politicians.
Rhodes co-authored a recent paper that analyzed party materials going back to the 1952 campaign and showed a rising use of terms such as lower-, working-, or middle-class.” (Lopez 2014) From our perspective, neither of those terms refers to any social class at all, as the entire schema belongs in the framework of social stratification.
To round off this section, let us cite the following political commentary which refers to both the “leaping” concept of the class in question and the decline of the latter, another theme familiar to the reader of the present book: “for a long time, “white middle class Americans” was an expansive cohort that ran from factory workers to doctors, lawyers, and other professionals. They thought our political establishment adequate to their interests, and they toggled back and forth between Democrat and Republican on the basis of a fairly narrow range of issues. [...] that’s changing. the white middle class is in decline, both economically and culturallly” (Reno 2016), which changes may be linked to the political shifts noted above.
9.2. THE NEW SPIRIT OF CAPITALISM
As the reader should have got it by now, the concept under consideration means different things to different people, and accordingly many an author implicitly or explicity, as in the case below, disagrees with the kind of approach discussed above.
The following passage, it is not difficult to notice, could be placed within the chapter on the death of the middle class, since the phrase even features in the head of the paper in question.
The commentator concerned begins with what purportedly fits the income or occupational model: “The loss of the middle class is viewed by politicians, business, bankers, labour movement and policy analysts as one of the terrible consequences arising from the economic turmoil during the last 30 years. Headlines proclaim the reduction of earning potential, the disappearance of manufacturing jobs, the end of a certainty that children will have better lives than parents” (Collins 2013).
Hospitality and service industry jobs are viewed as low wage, dead end jobs, but the only ones available to many jobseekers. Permanent full time jobs are becoming the rare bird among part time positions.
Pensions and benefits that may have existed are no more. Jobs are available with the minimum of costs attached” (Collins 2013). So far, so conventional. But But then Collins condemns, in still conventional terms, the present capitalist system, his conclusions concerning the middle class being inconsistent with the mainstream treatment of the middle class referred to above: “Lotteries and gambling only work because there are a small number of winners and many losers. The system of sharing, which is the basis of an economy, has been tilted from sharing to winning.
Middle class is being defined as a customer profile, The cash cow that provides ongoing spending for the latest model with all options” (Collins 2013), which definition admittedly can be included under the rubric of income criteria, which obviously must be met if themiddle class is to fulfill the role ascribed to it. But Collins takes issue with the above line of reasoning:”Middle class does not have a history of just a customer. Middle class carried the traits of earning your money proudly, looking suspiciously at easy money and knowing the value not just the price. Middle class came with an independent spirit that was not herded easily. Middle class met the needs of family, expected everyone to contribute and carry their weight. […] Wants that became ongoing were the mark of a spoiled individual without the wisdom to tell the difference between need and want. Middle class knew that riches came not from what you earned but from how much less you spent than you earned regardless of the work you did or the job you held. How you lived was determined by the money you earned, not by credit limits.
Middle class worked hard at understanding the world in order to live their life not the life the world tells you to live. There was a hard practical wisdom that understood the line of people that wanted your hard earned dollars - and the choice with every decision to keep your dollar or give it away” (Collins 2013).
It is evident that the aformentioned commentator offers a rose-tainted, idyllic and ideological picture of his beloved middle class, based to a great extent on Weber’s account of “The Protestant Ethic and The Spirit of Capitalism”. How i nfluential is still Weber’s approach, is shown by another argument developed along similar lines : “ The middle classes [...] could be said to epitomize Western Civilization. Both are uniquely Western phenomena, [...] because they embody the strengths of the West - creativity, rationality, and individualism [...] The middle classes constitute the greatest strength of the West, since they are the productive class. We have all heard or read about the laudable characteristics of the ‘mercantile spirit’: thrift, calculation, rationality, and so forth. But throughout history these very assets of the middle classes have often put them at a disadvantage. The bourgeoisie and ‘moneyed interest’ flourished in Europe under the tutelage of absolutist monarchy, and in continental Europe took power in sudden and often brutal upheavals like the French revolution. This is no coincidence: the first business of the middle classes was always business, not government or the moral underpinning of government. However, the problem was that the middle classes felt that their wealth and growing significance in society entitled them to occupy the seat of power. This claim was certainly justified in itself, but the result was that - at least in continental Europe - a bourgeoisie came to power that essentially saw government in terms of the account book, and not in the proper terms of legitimacy, morality, and realism.
By the end of the nineteenth century, the deficiencies of middle class rule became all too clear. Or rather, it became clear the middle classes did not have any moral defense against all kinds of adversaries, like socialism and nationalism” (de Jong 2014).
Unfortunately, there is no space here to engage with the topic, which might require a brand new volume, but the reader’s attention might be drawn to Boltansky and Chiapello’s rather impressive account to the contrary, depicting “the new spirit of capitalism” (2007).
Be that as it may, Collins insists on his ethical interpretation:
“The middle class will not disappear because earnings have fallen below a predetermined level. The middle class will disappear because the character value and spirit of this group has died. This death will be part murder but mostly suicide. Middle class is a choice, not a salary range. Murder, suicide, either may describe these circumstances” (Collins 2013).
By way of commentary to the above, the telling result of a recent survey by the Pew Research Center (2008) Social & Demographic Trends project may be cited that are at odds with the claim, consonant with the aformentioned middle-class ethos, which “Americans worship at the feet of the almighty dollar”. Only 13% of adults deemed it “very important” for them to be wealthy, ranking this personal priority far behind six others measured in What We Value Most. According to the survey, another 43% of adults say being wealthy is “somewhat important” to them, while about the same proportion say it’s “not too important” (33%) or “not important at all” (10%).
These survey findings cannot, to be sure, answer whether most Americans genuinely place a medium-to-low value on wealth, or whether they accept the fact that they’ll never be rich, or whether they’re reluctant to admit that money matters a lot to them. But whatever the explanation, it’s striking how few Americans rank being wealthy as a top priority in their lives.
Four times more people say “doing volunteer work or donating to charity” is a very important priority than say the same about being wealthy (52% vs. 13%).
And about five times more Americans (67%) say it’s very important to them to have enough free time, the top-rated value in this survey, which result would be less surprising in a similar study in Europe. Regarding the 2016 presidential election campaign, “a commentator noted that one of the candidates, Bernie Sanders who openly identifies himself as a democratic socialist “is not simply cherry-picking a few popular ideas here and there. He’s tapping into a broadly shared set of inter-related attitudes and ideas about closely related issues; although these views and ideas are usually sidelined in most political discourse, the convergence of attitudes into a coherent policy texture is remarkably consistent. And this gets to a primary problem with America’s political system: liberal policy views form a coherent whole, every bit as much as conservative ones do, but they are far less publicly recognized, articulated, discussed and explored—despite the fact that they are wildly popular!
[...] The paradox of a large majority of Americans qualifying as operational liberals while at the same time a majority hold to a conservative ideology has been repeatedly emphasized. [...] We have described this state of affairs as mildly schizoid, with people believing in one set of principles abstractly while acting according to another set of principles in their political behavior. But the principles according to which the majority of Americans actually behave politically have not yet been adequately formulated in modern terms …
There is little doubt that the time has come for a restatement of American ideology to bring it in line with what the great majority of people want and approve. Such a statement, with the right symbols incorporated, would focus people’s wants, hopes, and beliefs, and provide a guide and platform to enable the American people to implement their political desires in a more intelligent, direct, and consistent manner” (Rosenberg 2015). To be sure, such sea changes do not occur overnight, but at any event the above statement, distancing itself from the allegedly universally held American dream is worthy of mention.
CHAPTER 10. UPPER AND LOWER MIDDLE CLASS
From our perspective, the following New Statesman columnist kills two birds with one stone in that he both identifies an additional context related to what has been repeatedly pinpointed as the crucial flaw of the concept under examination and, as if referring to the earlier discussion of polarisation suggests that the latter could be framed in terms of the division indicated in the title to this chapter: “ the idea of middle class decline [...] is too often met with derision, especially among progressives.
Part of this is down to a distorted view of what ‘middle class’ is, a popular association with what is in effect the upper middle classes; the world of piano recitals and Waitrose where “struggle” means difficulty meeting school fees. Of course, the middle class contains many like this too and they are doing more than fine. In fact, the most interesting development that experts have pointed to in recent years is the fracturing and polarisation of the middle class, between the upper echelons and those at the lower end. And previous generations who started out at the lower end of the middle class, bought a house at the right time, settled into a profession and now face retiring near the top may well be the last to make that journey en masse. In short, the bottom is falling out of the British middle class. [...] contradictions within modern British capitalism mean the lower end of the middle class is sinking. The entire middle is being stretched, squeezed and polarised as never before. The result is entire neighbourhoods – which on the face of things look serene – in fact struggling to keep their head above water, facing futures significantly less secure, less stable and less well-off than their parents” (Akehurst 2014)..
Ironically, while criticising the middle class literature, the aformentioned author himself is not immune to the same sin of using under-specified terms- the criteriawith with to distinguish between the two substrata of the basic category are not clear.
Protestations of the critic cited at the end of the previous chapter notwithstanding, it is precisely earnings that serve to demarcate what is usually dubbed the lower and the upper middle class.
This may be attempted both at the local and global level. Thus, referring back to the city touched on in the previous chapter, The 38-year-old Potrero Hill resident and her boyfriend together make $80,000 — about $7,000 more than the median household income — making them solidly part of The City’s shrinking middle class. […]Melissa LaBonge of The City has a well-paid job that puts her solidly in the middle class, but fears she’ll have to join friends who’ve had to leave the increasingly pricey city. […] Relatively well-paid LaBonge, who works at a nonprofit, considers herself lucky — she has a $1,012-a-month, rent-controlled apartment. Still, she’s looking for another job outside of San Francisco. It’s just too expensive here, she said, and her landlord just moved into the building.
[…]
Melissa LaBonge is among a disappearing group of San Franciscans.
“Very few still live here,” LaBonge said of her middle-class friends. “Most of them have moved. ... Everyone else has three jobs.” To preview the kind of theoretical language pertinent to the theory of class, being laid out in the book, the aformentioned fact is an unmistakable sign of a given individual’s labour power being underpriced-relative to the value of the labour power, that is.
More than half the households in San Francisco — about 66 percent — are either very poor or very well-off, while the rest are somewhere in the middle, according to the Census Bureau’s 2012 American Community Survey.
For the past 30 years, the number of middle-income households has slowly been in decline, but the data show a precipitous recent change: The City’s richest households increased by 10 percent from 2008 to 2012 as the middle declined by almost the same percentage. Bear in mind that The City’s population grew by about 20,000 from 2010 to 2012.
In 2012, of The City’s 341,721 households, only 114,960 could call themselves middle class, accounting for only about one-third of all households. Those at the bottom — some 28 percent of households — number 95,774, while the 131,285 at the top make up a plurality of all households at about 38 percent.
[…] The most recent housing-cost report by The City’s economists, released in 2012, contained more than housing data. It also laid out how much San Francisco is becoming increasingly divided and how much you have to make to be called middle class or, if you are lucky, rich.
Those in the middle are broken into three parts: low, moderate and above-moderate income. Understood as not any encompassing maps of social differentiation but as sources of information on income inequalities stratification approaches can be useful. This does not apply, however, to the classification in question, which uses too broad categoories minimising what information in the above regard they are in position to provide; otherwise, the scheme concerned exhibits all the shortcomings of their conceptual foundations, notably what for sure is an arbitrary and confusing intersection of those strata categories and class concepts.Technically, any household making from 50 to 150 percent of the area median income — roughly $73,000 — is defined as middle class.
The lower-middle class — for example, a construction worker making $45,000 and his wife, a part-time waitress, making $10,000 — has since 1990 been in slow decline, making up about 55,000 people as of 2010.
The middle of the middle class, according to The City, might be a single man who is a designer making $67,000. This group’s numbers also have declined, hovering just below 60,000 in 2010.
An upper-middle-class household would be a couple with two children — one a professor making $85,000 and the other an architect making $65,000. Unlike their middle-class brethren, this group — a small proportion of the middle — has increased over this period to about 36,000.
Almost all of these numbers about the middle class have gone down since, as the data used by The City are a few years old. Besides breaking down who fits where on the income ladder, little is said in The City’s report about the cause of the middle’s decline.
“San Francisco’s income mix may be changing for many reasons. We cannot isolate factors that have led to net decline in low and moderate income households,” notes the report, which only posits some possible causes — job opportunities, cost of living and housing prices. (Lamb 2014)
Income groups according to The City’s calculations:
33: Percentage of middle-income households in S.F.
41.7: Percentage of middle-income households in California
44: Percent of middle-income households nationwide
S.F. income breakdown:
The Bottom:
Very Low Income: A single person with one child making $35,000 or less
The Middle:
Low Income: Young couple – one makes $45,000, one makes $10,000
Moderate Income: Single person making $67,000; or two housemates, one making $50,000 and the other making $42,000
Above Moderate Income: Married couple with two children – one makes $85,000, the other makes $65,000; or a single person making $100,000
The Top:
Upper Income: Married couple without kids, one making $75,000 and the other making $100,000
Source: Mayor’s Office of Housing Middle Income Data, 2012
As noted earlier, the middle-class literature often employs instead occupational rather than income criteria, which applies also to the present context; for example, Russian researchers “divide middle class into two subgroups namely the upper or professional middle class that consists of highly educated professionals and managers and the lower middle class composed of semiprofessionals and lower level managers” (Grigory,Salmina 2011 ). Other definitions use both types of criteria mentioned above: “The upper middle class, which constitutes about 15 percent of the population, includes corporate executives, physicians, attorneys, white-collar management, and professional employees. Many in this class have household incomes of $150,000 or morę as well as advanced college degrees. There are some exceptions, however. For example, many college professors have relatively low incomes but are included in the upper middle class by virtue of occupational prestige. Similarly, a successful small business owner may not have a college degree but may gain entry to the upper middle class by virtue of high income.
[…] Within rank, age is an important variable. Young professionals often have heavily mortgaged homes, luxury autos, and some income-producing investments (Wright and Ransom 2005). Those late in their careers may also have substantial investments and assets. Members of the upper middle class often belong to country clubs, live in expensive homes in elegant neighborhoods, and are active in politics and community affairs.
Although, by definition, the above category is bound to be narrower than than than the general concept of middle class, it nevertheless is sufficiently broad to include a very heterogeneous mix of a variety of social groups, some of which being classes as grounded in economic property relations-as opposed to others, such as “college professors”, who represent a typical social estate. That this confusion is not a unique property of the aforementioned definition, is evidenced by another sociological enumeration: “engineers, professors, architects, pharmacists, school principals, civil service executives and civilian contractors” (Ehrenreich 2001 ). For instance, as will be argued in detail below, pharmacists-just as other small business owners-are part of the economy, and thereby of the class structure, whereas school principals and civil servants are located in the non-economic sphere, by virtue of which they belong to social estates.
The term “mix” pertains also to the multitude of factors deployed to distinguish the aforementioned “class”, which is typical of a so-called multidimensional stratification approach.
Class A large and diverse lower middle class (33% of the population) occupies the next rung on the social ladder. Its members emulate the upper middle class and share many of its values, but they lack the resources to copy their morę affluent lifestyles. Many in the lower middle class worked their way through college and have degrees from community and state colleges and universities.
Teachers, bank employees, midlevel supervisors, and salespeople make up a large part of this class. Although most are white-collar, nonmanual workers, they have con-siderably less autonomy and on-the-job decision-making power than upper-middle-class professionals. In terms of America’s core values, members of the lower middle class play it by the book. People in this class tend to live in modest but well-groomed homes and neighborhoods and they try to keep up with the Joneses. They watch the right TV shows, drive sports utility vehicles or hybrids, take the kids to scouts and soc-cer matches, and are members of the PTA.
In recent years, many in this class have become “overworked” and “overspent.” According to economist Julia Schor (2000), members of this class—and many in the working class as well—who once desired to “live comfortably” now have adopted the consumption patterns of those who earn three or four times morę and who have ben-efited from rising stock and real estate markets.
By choosing to emulate consumer behaviors of the rich (especially the rich on prime-time TV), many members of the lower middle class have had to make liberał use of their credit cards and borrow heavily. (Thompson, Hickey 2014)
Overall, the above description is empiricist, which is another way of saying: under-theorised. It is striking that virtually all terms employed by stratification approaches have their source in the common speech and sense. Meanwhile, our own theory of social differentiation rests on a consistent analytical framework organized around the concept of ownership.To illustrate, the above-mentioned “autonomy” under socio-economic structuralism would have to be recast in terms of vertical sociation of one’s labour power; other forms of labour power are involved in what is described as the horizontal sociation, which is roughly coterminous with co-operation.
Likewise, the following classification that further subdivides the group under consideration utilises a hodgepodge of heterogenogous, objective and subjective criteria; the four groups named below are all part of the 53% majority of Americans who identified themselves as “middle class” in a Pew Research telephone survey taken from Jan 24 through Feb. 19, 2008 among a nationally representative sample: the largest of the four groups, comprising slightly more than a third of the 53% of Americans who identify themselves as “middle class” in the Pew Research survey was dubbed The Top of the Class. Members of this group—predominantly male, disproportionately well-educated and financially secure—expect to do even better in the future. Life is considerably tougher for The Struggling Middle, a group disproportionately composed of women and minorities. In fact, many members of the Struggling Middle have more in common with the lower class than they do with those in the other three groups and actually have a lower median family income than Americans who put themselves on the lowest rungs of the social ladder. About one-in-six self-identified middle class Americans fall into the Struggling Middle.
The Satisfied Middle has everything but money; their comparatively modest incomes have not muted their sunny outlooks or overall satisfaction with their lives. This group is disproportionately old and disproportionately young; middle aged adults are relatively scarce in the Satisfied Middle. They make up a quarter of the middle class.
By the conventional yardsticks of income, education, age, employment and family status, in which words the authors of the study acknowledge their reliance upon the multidimensional-stratification framework, the fourth middle class group is the most middle class of all—and the most dissatisfied and downbeat of the four groups. While they enjoy some of the economic advantages of the Top of the Class, they express many of the same bleak judgments about their lives as those in the Struggling Middle. The researchers call them The Anxious Middle; they make up slightly less than a quarter of all middle class Americans. (Morin 2008)
In a separate chapter the harmful effects of relying on the over-stretched concepts are analysed in more detail, so at this point let us just illustrate those perils with an example drawn from the above discussion: the author of the research willy nilly admits that only “Two of the groups that emerged from this analysis—The Satisfied Middle and Anxious Middle—straddle the statistical middle of the American life” (Morin 2008).
The above-mentioned figure of 15% of the population serves to infer that the American upper middle class consists of professionals making more than $62,500 who commonly reside in households with six figure incomes (Thompson, Hickey 2005; Gilbert, :15). Needless to say, both of these figures are considerably above the national median of $32,000 regarding individual income and $46,000 for households. Many upper middle-class professions feature salaries above $67,348, which was the median household income for a household with two income earners in 2003 (U.S. Census Bureau 2006b).
For example, the US Department of Labor” reports that median salary for economists was $72,780, meaning that the majority of economists out earn the majority of two-income households with their single salaries alone.
Overall, the median household income of a household whose householder had a bachelor’s degree or higher was $77,179. The median household income for those with a master’s degree was $81,023, while those with a doctorate or professional degree had a median income above $100,000 annually (Thompson, Hickey 2005). Stratification researchers-just as human capital analysts- invoke commonly such data to support their claim on the cconnection between education and earnings. However, such a reasoning is flawed-correlation and causation are far from being the same thing.
This is not the only methodological criticism that may be levelled against the framework under consideration.
While according to both Gilbert’s as well as Thompson & Hickey’s models. The lower middle class is the second most populous, constituting roughly one third of the population, the same percentage as the working class. However, according to James M. Henslin, who also divides the middle class into two sub-groups, the lower middle class is the most populous, constituting 34% of the population (Williams et al. 2005).
Differences of that order speak volumes about the quality of measurement available in the middle class literature.
In all three class models the lower middle class is said to consist of “semi-professionals” and lower level white collar employees. An adaptation by sociologists Brian K. William, Stacy C. Sawyer, and Carl M. Wahlstrom of Dennis Gilbert’s class model gave the following description of the lower middle class: (2006)
The lower middle class... these are people in technical and lower-level management positions who work for those in the upper middle class as lower managers, craftspeople, and the like. They enjoy a reasonably comfortable standard of living, although it is constantly threatened by taxes and inflation. Generally, they have a Bachelor’s and sometimes Master’s college degree. The reader could be forgiven for her resigned attitude towards repeated cases of under-specified and inconsistent definitions. Those defects stem often from –discussed in a separate chapter-contradiction between approaches to social differentiation in terms of class and stratification. Thus, in the above statement it is said that the lower middle class work for the upper one, which conflates two very different classwise situations-one referring to the kind of relations between a given manager and the higher-level executive, while in the second case the power base is constituted by the relation of ownership.One can apply U.S. Census Bureau income statistics to the percentages provided in the six-class model by Gilbert, as well as the model of Thompson and Hickey. According to these class models the lower middle class is located roughly between the 52nd and 84th percentile of society. In terms of personal income distribution in 2005, that would mean gross annual personal incomes from about $32,500 to $60,000 (U.S. Census Bureau 2006a).
As 42% of all households, and the majority of those in the top 40%, had two income earners, household income figures would be significantly higher, ranging from roughly $50,000 to $100,000 annually (U.S. Census 2005).
In terms of educational attainment, 27% of persons had a Bachelor’s degree or higher.
Similarly, the following use of the division in question begets some unintended consequences in that the argument refers in fact to the definite socio-economic classes rather than strata -though labelled as “[the middle] class”: “The New York Times recently ran an article in its Business section titled, “The Middle Class Is Steadily Eroding. Just Ask the Business World.”
This trend, however, may be extrapolated beyond that which the Times originally intended.
Indeed, North Carolina has been subject to this trend for quite some time, especially since the state’s economy has paralleled the national economy in its transition from a reliance on the manufacturing sector to a reliance on the service sector.
Since 2000, employment in the manufacturing sector — which pays, on average, about $3,430 more than the state’s median household income — decreased by nearly 37 percent, while employment in the service sector — which pays, on average, about $3,570 less than the state’s median household income — increased by almost 15 percent.
The low-skilled lower and middle classes bear the brunt of the state economy’s transition.
The number of low-skilled employment opportunities which pay less than $23,484 in annual wages has increased by 19 percent, while the number of low-skilled employment opportunities which pay between $28,787 and $43,950 in annual wages has decreased by 10 percent.
The number of high-skilled employment opportunities which pay more than $43,950 in annual wages, on the other hand, has increased by 3 percent.
Nevertheless, such employment opportunities require the completion of post-secondary education and extensive training, both of which may serve as substantial obstacles for low-skilled lower- and middle-class workers who desire to earn higher wages.
North Carolina’s middle class, once a unique amalgamation of low-skilled and high-skilled workers earning above-average wages in the manufacturing sector, has been divided into a low-skilled lower class of workers, who are unable to escape the below-average wages of the service sector, and a high-skilled upper class of workers, whose completion of post-secondary education and extensive training afford them access to high-wage employment opportunities.
The division of the middle class into increasingly disparate lower and upper classes is not unique to North Carolina, but is more profound than in other states.
In the years following the Great Recession, the income of the state’s top 1 percent increased by 6.2 percent, while that of the bottom 99 percent decreased by nearly 3 percent.
North Carolina is one of only 17 states that have experienced an increase in income for the top 1 percent and a decrease in income for the bottom 99 percent since the Great Recession.
In addition, the average income of the bottom 99 percent of North Carolinians is $39,145, well below that of the South and the rest of the nation.
This unfortunate trend may bring about various negative repercussions, most important of which is the reduction of economic mobility.
The National Bureau of Economics recently found that the probability an offspring earns an income within the top quintile of the national income distribution when his or her family’s income is within the bottom quintile is 4.4 percent in Charlotte, but 12.9 percent in San Jose, California.
Ben Olinsky and Sasha Post of The Center for American Progress similarly discovered that an individual born within the lower class in Raleigh is likely to remain within that class for years to come.
If Raleigh’s middle class were as large as the average city’s, however, that individual would be earning nearly $5,500 more annually, perhaps enough to become a member of the state’s waning middle class.
The aformentioned Robert Reich, explains that ‘the ladder is far longer now. The distance between its bottom and top rungs, and between every rung along the way, is far greater’.
It’s a distressing reality, this division of the middle class into increasingly permanent lower and upper classes — so much so that Gov. McCrory’s heralding of “encouraging signs in North Carolina’s economy” has fallen on deaf ears (Alshanteer 2014).
Now, the correlation between a given ownership of labour power and earnings that it enables to make is a question worthy of investigation, but it does not follow that the classification in terms of ownership, and thereby class should be replaced by that pertaining to stratification, with its income rankings. That the latter are in fact termed by a misnomer, is revealed in the fact that their brackets have been actually constructed primarily in terms of socio-economic class, and only secondarily with reference to income.
“The more recent studies have concentrated on absolute figures to discuss and compare middle classes around the world. The largest number of researchers have chosen to establish a bottom floor for the middle class, by including everybody’s earnings above the daily poverty limit of US$2 a day and then going up to US$12. Another group has started with the latter amount and stopped at around $50, since that range reflected the average of the respective incomes in Brazil and Italy (Milanovic and Yitzaki, 2001). In that study the middle class of the emerging economies was estimated to have reached 250 million in the year 2000, and is expected to grow to 1.2 billion people in 2030. Large as those figures would seem in absolute terms, they amounted to only 6% of the world population in 2005 and are expected to be 15% in 2030.
That group could then be considered to be the upper or “global” middle class. (Wogarta).
Let us look more closely at one of those societies. “The wealth disparities between Israel’s upper and lower middle class are significant and growing, according to a Taub Center study released recently.
The lower middle class, which accounted for 40 percent of the population, had a monthly per capita wage range of NIS 1,950 to NIS 5,000, while the upper middle class, which accounted for 29% of the population, had a range of NIS 5,100 to NIS 12,540.
The biggest factor explaining the difference in the groups was the number of wage earners in the household: Smaller percentages of families in the upper middle and upper classes had just one income.
“These findings can explain, at least in part, the lower likelihood that haredim, Israeli Arabs and immigrants will belong to the middle class, since in these households the number of wage earners is particularly low,” the study said.
Another factor affecting haredim and Israeli Arabs, in particular, was the number of children: Every additional child under 18 increased the likelihood of the household belonging to a lower class, the study said.
Overall, haredim had a 42% higher chance of being in one of the lower classes, while Israeli Arabs had an 18% higher chance.
The study also found that age played an important role. Up until a certain age, getting older increased the chance of belonging to a higher economic class; after that age, it reduced the chances. The lowest class was the oldest, while the upper middle class was the youngest-those findings again underline the inadequacy of the stratification frame of reference which should be replaced by a class one. From the latter perspective, the age-income trajectory described above is accounted for by one’s ownership of labour power. On average (though in different occupations this may take a correspondingly diverse shape) up to a certain age as experience and knowledge are accumulated, value of labour power usually increases; however, the wear and tear of the very labour power has an opposite effect, and earnings are dependent to a large extent on a type of labour power held: ascriptive or achievement-based being two important varieties.
Gender also played an important role. Nearly 60% of poor households were headed by women, while only 24.3% of upper-class households were.
When it looked at which policy tools were best at narrowing the wealth gaps, the study questioned the usefulness of child allotments.
“There is no proof for the conjecture that child allowances contribute to a lessening of the polarization between rich and poor,” the study said.
Old-age allowances were shown to be more effective in narrowing income disparities, it said” (Elis 2014).
The single segment of that middle-class world that has experienced the most rapid growth in recent years is obviously China, so it is instructive to get to know a somewhat similar division of “the Chinese middle class into two segments: the mass middle class – those earning annual household income of RMB60,000 to RMB106,000, equivalent to US$9,000 to US$16,000– comprising 54% of all urban households in 2012. And the upper middle class – with household income of RMB106,000 to RMB229,000,equivalent to US$16,000 to US$34,000 – accounting for 14 % of urban households in that year” (Orr 2014), though, as it will be seen below, the choice of terms is unfortunate-it is rather the latter variety of the “middle class” that engages in what is commonly understood under the term of mass consumtion.
Anyway, according to the perspective concerned, “the upper middle class punches above its weight in terms of consumption, accounting for 20% of China’s urban private consumption. This structure should look very different by 2022, when the upper middle class could comprise 54% of total urban households and 56% of urban private consumption by 2022, compared with around 13% in the case of the mass middle class. But this will only happen if household incomes continue to grow across the middle class.
A successful shift towards the upper middle class will lead to a more mature and attractive market for businesses. Relative to the mass middle class, upper-middle class consumers are already more willing to pay a premium for quality products, have a higher level of trust in well-known brands, and spend more of their income on discretionary products and services. They are also much more international in their outlook, open to – and even eager for – international brands.
China’s upper middle class consumers are becoming more mature. They decreasingly perceive shopping as a desirable family activity, spending significantly more time on leisure activities and travel than they did a decade ago. As a reflection of this trend, China’s hotel room capacity quadrupled between 2000 and 2012, and since 2010, the annual growth rate of cinema ticket receipts has exceeded 30%, with more than 1,000 new cinemas opening in 2013 alone.
Powered by higher incomes, upper middle class shoppers buy a wider range of products and at higher price points than their compatriotsin the mass middle segment. Nearly 60% of upper middle class consumers have bought digital cameras, compared with just 40% of mass middle class consumers. In the case of laptops, 51% of upper middle class consumers bought this item, compared with only 32% of the mass middle class. A similar pattern is evident in purchases of laundry softeners, where 56% of the upper middle class bought this product compared with 36% of the mass middle class (Exhibit 2).
Stark disparities exist between the two segments with regard to what products they consider attractive. Basic functional benefits appeal to mass middle class consumers, two-thirds of whom mention ‘durability’as one of their top five buying factors for a washing machine, compared with less than half of upper middle class consumers citing this factor. In the case of smartphones, 62% of mass middle class consumers cited durability in their top five considerations, compared with only 36% of upper middle class consumers.
Emotional and social benefits are increasingly important to upper middle class consumers, who are more than 50% more likely than mass consumers to cite considerations such as‘showing my taste’ and ‘makes me feel that my family is living a better life’, when purchasing products such as shampoo or mobile phones.
China’s expanding upper middle class is much more outward-looking than the broad swath of Chinese citizens—a dramatic break from the past that has broad implications for their consumption behavior. This group is much more willing to buy foreign brands. Foreign-branded food and beverages are favored by 34% of upper-middle class urbanites compared with 24% of all city dwellers. The upper middle class is also much more likely to travel abroad—in 2012, 10%of the urban middle class travelled overseas, compared with 3% of all urban Chinese.
This international outlook reflects a number of factors. Upper middle class citizens are better educated and more likely to speak a foreign language – 34% of the upper middle class holds a bachelor’s degree or above, and 26% can speak and understand English. They have, as a result, been the beneficiaries of the newly created, higher paying jobs in financial services, professional services, and the travel industry.
Widespread adoption of the internet is another important ingredient in this internationalism; the upper middle class are more likely to buy online and spend a higher proportion of their income online. The Chinese market will continue to retain its own unique characteristics, but if the upper middle class becomes the new mainstream, we should expect it to bear an increasing resemblance to mature international markets.
The geographic center of middle class growth is shifting Businesses looking to serve these consumers will need a granular understanding of where the greatest growth in middle class numbers will. While China’s middle class expansion is largely happening in cities and will continue there, it will become much more evenly spread geographically.
In 2002, 40% of China’s urban middle class lived in the tier 1 megacities of Beijing, Shanghai, Guangzhou and Shenzhen. However, this share is expected to decline to 16% in 2022, while the share will rise in tier 2 and tier 3 cities. Tier 3 cities hosted only 15% of China’s middle class households in 2002; by 2022, that share should reach 31% (Exhibit 3). This shift in the weight of the middle class households from megacities to medium-sized cities means that there is also a movement from the huge urban centers of the coast to urban areas inland. In 2002, only 13% of the urban middle class lived in inland provinces, but that number is expected to rise to 39% in 2022” (Orr 2014).
It is instructive to acquaint oneself with another prediction concerning the perspectives of thos class segments. “the upper middle class of China was mostly filled with officials, former officials, or those with links to government officials that benefited them.
However, thanks to China’s urbanisation, the composition of the middle class is changing.
Right now, the upper middle class (those with an annual income of 106,000–229,000 yuan) account for about 14% of the urban population. In contrast, 54% make up the mass middle class. [...] for a long time this part of the population had links to the government that benefited their lives. So up until now, there’s been no real demand for change.
However, by 2022, the mass middle class will account for 22% of the urban population. This will result in more than 50% of the urban population being in the upper middle class bracket.
And this is going to create problems for the government.
To begin with, few of these new found upper middle class folk will have links or access to government officials.
And secondly, this growing segment of the population will want more control over their lives than the Chinese government currently gives them” (Smith, Shae 2014).
Owing to the sheer size of its vast economy and enormous population China does not have to worry about the interest of the world in all things Chinese, but this is precisely why the lens through which to perceive the latter matters-and the notion of middle class as its prime constituent does not make for anything like clarity of view.
Somewhat akin social divisions mark another Asiatic rapidly growing economy: “The Asian Development Bank (ADB) estimated that 47.85 million (54.9% of total Philippine population in 2006) are ‘middle class’, with the capacity to spend from $2 to $20 a day. (From 1988, about 21 million people were added to the middle class during the 18-year period to 2006.) But refining sub-levels within the grouping, only 3.8% are in range of $10 to $20 daily spending; 19.6% with $4 to $10 daily spending; and most, or 31.49% of total population are in the ‘lower middle class’ as the majority has traditionally been, with a $2 to $4 (lowest) daily-spending range. [Given such a range of the concept in question, no wonder that the reader is told that-note: J.T. “It is easy for the complacent lower middle class to fall below that critical $1.50/day poverty line (Ylagan 2014).
Focusing on the U.S. situation, according to the Brookings Institute’s Hamilton Project report examining the travails of those Americans it categorizes as the “struggling lower-middle class”, subsisting on an annual household income of anywhere between $15,000 and $60,000 (100-250 percent of federal poverty standards, depending on size of household), these families have trouble making ends meet, depend heavily on government assistance, and yet still are counted among the country’s much-honored middle class. Here’s a brief look at some of the most disquieting claims advanced in the report.
10.1. STRUGGLING FAMILIES ARE EVERYWHERE
The struggle to stay out of the American underclass may be hidden in a society addicted to conspicuous consumption, but it exists in every community. According to the study, nearly one in three American a) working-age families with children qualify as struggling lower-middle class. Roughly one half of such families, therefore, are currently defined as poor or living in uncomfortable proximity to poverty.
Broken into income levels, this amounts to 54 percent of the nation’s families living on less than $60,000 per year and fully three quarters of them living on less than $100,000. While few liberals would classify this second sum as the earnings of a “struggling” family, it’s a telling benchmark for some of our policymakers: In [the recent] presidential election, voters were presented with a choice between two candidates who claimed to believe that the middle class included any family making less than $200,000. In fact, those high earners represent less than 3 percent of all American families (MAHNKEN 2013). Naturally, it prompts an awkward question what is the point of the term that encompasses nearly all the population- such a term lacks any discrimatory power.
Overall therefore, it is legitimate to conclude that “the expression “middle class” is especially useless considering the sharp divide between upper and lower middle class, that the term “upper class” is used only for a very small group, and that the overclass does not coincide with any of the traditional classes.
Having seen that the categories in question even in their objective guise are slippery, to put it mildly, it is only with some reluctance that one cites the following findings of a survey conducted by the Pew research group, according to which “ The percentage of Americans who say they are in the lower-middle or lower class has risen from a quarter of the adult population to about a third in the past four years, according to a national survey of 2,508 adults by the Pew Research Center.
Not only has the lower class grown, but its demographic profile also has shifted. People younger than 30 are disproportionately swelling the ranks of the self-defined lower classes.[...]
The survey finds that hard times have been particularly hard on the lower class. Eight-in-ten adults (84%) in the lower classes say they had to cut back spending in the past year because money was tight, compared with 62% who say they are middle class and 41% who say they are in the upper classes. Those in the lower classes also say they are less happy and less healthy, and the stress they report experiencing is more than other adults.
As they look to their own future and that of their children, many in the lower class see their prospects dimming. About three-quarters (77%) say it’s harder now to get ahead than it was 10 years ago. Only half (51%) say that hard work brings success, a view expressed by overwhelming majorities of those in the middle (67%) and upper classes (71%). While the expectation that each new generation will surpass their parents is a central tenet of the American Dream, those lower classes are significantly more likely than middle or upper-class adults to believe their children will have a worse standard of living than they do” (Morin,Motel 2014 ).
The above passage is another illustration of the relevance of class as compared with stratification. For instance, potentially useful data on the spending squeeze faced by the category in question would become truly useful if one knew what class they refer to, reflecting then some relevant economic realities, which could be used as a policy tool.
Besides, a note of caution is in order as regards the study’s methodological premises.
Now, to measure social class, the Pew Research surveys in 2012 and 2008 asked respondents this question: “If you were asked to use one of these commonly used names for the social classes, which would you say you belong in: the upper class, upper-middle class, middle class, lower-middle class or lower class?” One does not have to be a psychology professor to predict that few respondents in either survey placed themselves in the “lower class” or “upper class” categories. So for the aformentioned report “lower class” constitutes those who placed themselves in the lower or lower-middle class. Those who identified themselves as upper or upper-middle class are combined to form the “upper class” group” (Morin, Motel 2014).
To revert to the previous researcher, if Muir had been more accurate in his labelling, he’d have been right. The professions have been captured by the privileged class (which is not the same as the middle class)” (Wilson 2013).
Somewhat similar criticisms might be levelled against the statement that “one cannot actually lump the middle class in a box. There’s the upper middle: managers, professionals, politicians who have cemented their place in life through multiple degrees, some help from a compadre, if not making a jackpot under the table. Then the nouveau riche: wealth made by a relative abroad, or sheer luck in cold, nocturnal BPO offices. They’re not afraid to flaunt their newfound wealth and dominance” (Eugenio 2014).
The author of the statement commits the very error he forewarns against-he puts in one bag both income, stratification criteria and occupational characteristics. Moreover, the latter refer both to positions in the economy and in politics, which surely does not add one iota to the coherence of the framework employed. The subsequent definition also explicates the meaning of one of two terms featuring in the head of the present chapter by an array of typical class concepts, which methodologically is incorrect, of course: “lower strata of the middle class- the small tradespeople, shopkeepers, retired tradesmen generally, the handicraftsmen and peasants- all these sink gradually into the proletariat” (Free dictionary). The topic of divergence of stratification and class perspectives is continued in the next chapter.
CHAPTER 11. HIERARCHY AND STRUCTURE OR STRATIFICATION AND CLASS
The most widespread scheme of social stratification is admittedly a folk one, boiling down to the following three units: “The Rich, The Middle And The Poor” (How 2013). This core scheme may come up in several slightly different variants, as, e.g. in that presented by James Frayne, author of a British study, who said: “Vast swathes of the middle class – those just about managing – are overlooked as the parties increasingly focus their attention on those at the top and bottom” (Fedor 2015).
The extent to which the scheme has been ingrained in the mass consciousness can hardly be overr-estimated: according to an anthropologist’s testimony, “The people I worked with, like other Americans see class as a system of oppositions-poor versus rich versus a middle ground in which they locate themselves. They shape these perceptions in speech acts that rarely surface in a social science literature” (Urciuoli1993).
The following pronouncement of one of such social commentators reveals the stratificatory bakground of the term in the focus of the present study: “The dream of attending a university, earning a degree and beginning a career is one shared by all income classes.
Tuition Cut Would Be a Savings for Middle Class” (Chronicle editorial board 2015). The term “income class” is akin to that of social class only verbally-in fact, as is argued repeatedly in the book, it denotes a social stratum, an entity whose distinguishing feature consists in its inherently hierarchic nature. This is equally apparent from other versions of the aformentioned scheme; e.g. in one article “the poverty class”, “the middle class” and “the wealthy class” are considered (Pinnell 2015).
The incommesurability of the aformentioned perspective with that of class is apparent even from statements in which the latter is being squeezzed into the former: “with consumer spending representing almost 70 percent of the United States economy, there’s no way to sustain economic growth without a healthy middle class. But [...] the gap between rich and poor has grown significantly since the late 1970s.
For instance,[...] after adjusting for inflation, the average worker’s annual income dropped to around $34,000 in 2010 from $48,000 in 1978. While that occurred, the income of those in the top 1 percent almost tripled to about $1.1 million from $394,000” (Oliver 2014).
Each action prompts a reaction, so that when some were wearing sackcloth and ashes, others “made fun of the daily challenges facing folks in the middle of our societies. In truth, their supposed pretensions and status anxieties have long made the middle classes objects of fun and even scorn. Even John Lennon, raised in fairly comfortable surroundings, turned his back on them and proclaimed himself a Working Class Hero. Lennon was able to play with his identity, perhaps, because from a social perspective the term that might have described him best- “middle class” –is so vague. By definition, middle class is relative -somewhere between not well-off and very well-off, or rich, but where? The economic definition is unclear” (Krueger 2013), as indeed could be seen in the previous chapter.
According to a social commentator, until the financial crisis, most, if not all economists have ignored socio-economic inequalities, and by the same token the middle class. It is only lately that they have tried “to understand the role of the middle class”, in particular of the weakening middle class for the economy.
The thinker concerned rminds the reader that “The United States was founded as a middle-class country. On the eve of the American Revolution, America’s carpenters, shopkeepers, and farmers [...] Thomas Jefferson noted in a letter that “we have no paupers. . . . The great mass of our population … possess property [and] cultivate their own lands” (Madland 2015). This might suggest that the concept of middle class refers to the autocephalous and peasant classes-i.e. classes of small proprietors, not employing other people’s labour. Yet, what the author goes on to say indicates that this class definition is over-determined by an approach in terms of stratification-“the bulk of society formed a prosperous middle class that was in relatively close proximity to both the top and the bottom” (Madland 2015).
The remaining part of the story is familiar: “Yet, over the past three to four decades, middle-class America has come undone. The American middle class was already hurting when the Great Recession struck and is now in deep trouble. While there’s no official definition of the middle class, it’s not hard to see that it is in decline. By most every measure, most Americans are struggling.
First, there is the basic level of income earned by the typical American. Median household income—meaning half make more and half make less—was lower in 2013 than it was in 1989. This means that middle-class households now earn less than they did two decades ago. Similarly, incomes for poor and even upper-middle-class households have also stagnated. It is true that over an even longer time period, the middle class have seen some income gains. But these gains have been quite small: over the past four decades, median compensation, including both wages and benefits, has grown at a snail’s pace of just 0.27 percent per year—far slower than the overall economy or output per worker. The miniscule gains that households have made have largely come because women have increasingly entered the workforce—meaning families are working longer hours, as they run faster and faster to stay in place. Indeed, the hourly wage earned by a typical man is less than it was in 1973.
Even these gloomy figures may be too rosy because they show what is happening to the typical household—but the typical worker is getting older, and older workers generally make more than younger workers. Income trends are even worse when workers are compared to those of a similar age from a few decades ago. Median incomes for male workers now in their thirties are about 12 percent lower than the income was for their fathers’ generation at the same age” (Madland 2015).
Three observations will come up time and again in our discussion within not only this chapter: the framing of the middle class in income and at the same time hierarchical terms, and still another claim, indicating the evident ambiguity of the concept concerned, as in the case below, wherein the classes from both sides of the industrial barricade have been in effect homogenised or reduced to the least common denominator, since it is only on that condition that the construction of the following concept of the middle class has become possible: “members of the middle classes are struggling to maintain their standard of living, despite their best economic efforts. In the process, their status, independence and values are being eroded either through redundancy, permanent job insecurity, or business failures”.
Equally gloomy is the view of the investigator of the counterpart of the above grouping in a rich Arab country. “The prospect of the Kingdom’s middle class disappearing almost became a reality with the crash of the Tadawul, the Kingdom’s stock exchange, in 2006. Many faced the harsh reality of losing all of their savings when the capital market stumbled to a five-year low.
All of this happened even though it was the middle class that was the main engine to move the wheels of development” (Al-Farhan 2014). Thetreatment under examination includes in fact more elements of the typical middle class literature, as not only an economic but also social role, and above all its inermediate place in a well-known hierarchy: “This segment also played an important role in maintaining a social balance between the upper and lower classes.
[...] the middle class is comprised of two sections: The first include workers, farmers, traders and owners of small and medium sized enterprises (SMEs) and factories. The second is a mixed class, comprising professionals, artists, writers, men of letters, researchers, academics, employees and military personnel. Most often these people rely on their physical or intellectual capabilities to earn a livelihood” (Al-Farhan 2014).
Now, had the aformentioned author command a good socio-economic class theory, he would not put into one bag the categories he included into his “mixed class” (another residual term), as those refer mostly to the extra-economic domain. Even more blatant is that error in the case of the first of the two fractions of the middle class distinguished-grouping both owners of the means of production and economic activity in general employing other people’s labour power, such owners who combine possession of working conditions with their personal work, and finally, owners of sole or mostly sole labour power. This is no small deal! The author managed to conjoin-if only on paper-a number of socio-economic classes representing three main setups of ownership relations, and then to label them with a common term, as though the terminological commonality could cause them to converge in real terms. Such a practice opens the door to the “class peace”: at least on paper, and perhaps even to the classless society.
The commentator in question concludes with -again -conventional prediction that greatly overplays the societal impact of those varied groups that may be counted in the middle class: “There are signs the middle class is fast shrinking in the absence of state-funded programs to support and strengthen them. There is no doubt that if this segment of society decreases, it would be a big tragedy as the gap between the rich and poor would grow.
The middle class is the symbol of moderation in everything and this class is instrumental in achieving a balance in society. In its absence, corruption will spread, poverty will increase, crime will be rampant and the security of the nation will be in danger. This will lead to family disintegration, too” (Al-Farhan 2014).
“Another report has come out in support of Bus Rapid Transit (BRT), an innovative way to provide public transit at a low cost with dedicated bus lanes, stops, and schedules.
The study from pro-transit group Embarq, found that BRT drastically reduced commute times, improved air quality, and cut road fatalities in congested cities like Bogota, Istanbul, Johannesburg, and Mexico City. And we already know that BRT is one of the most cost-effective public transit investments a municipality can make.
The catch? In most cities examined in the report, those benefits only extend to low- and middle-class residents. (In Johannesburg, the poorest residents did not use BRT).
“Since the dominant benefit is travel time savings,” the study’s authors wrote, “the majority of benefits tend to accrue to the strata most represented by BRT users — typically lower- and middle-income” (Barry 2013).
The scions today of ambitious working-class parents of the post-independence era have been raised on the belief that education and professional qualifications were compensating attributes for not being owners of the means of production on a mass scale.
However, they must resign themselves to facing a life of such grave economic uncertainty and threat to their standard of living that they can no longer look to public service employment to guarantee a safe haven of respectability and mobility up the class ladder” (PRYCE 2013).
Significantly, alongside the term of class ladder, another one, apparently inconsistent with the former frame of reference has been used in the above passage-that of strata. Indeed, the abundance of terms and frames of reference leads more often than not to misunderstandings and misconstruals.” “The surveys show that the lower class has decided for Dilma whereas the upper class has decided for Aecio,” says political scientist Geraldo Tadeu Monteiro, director of the Rio University Research Institute.
Regarding the recent presidential election in the largest Latin America’s country, the reader could learn that “the battle ground is the middle class, especially the new middle class that came out of poverty in recent years”. (Carneiro 2014), which picture depicted by means of the conventional framework of stratification contrast, however, with highlighted by the same author, the (once again evident) social divide within the sugar cane industry “with those working in the plantations often thinking differently to the owners” (Carneiro 2014), which reflects the fundamental class relationship of the capitalist mode of production.
That all is not well in the kingdom of social differentiation, may also be gleaned from the fact that the author of the following pronouncement treats its content as if it constituted a great discovery, whereas in actuality we are presented with a platitude: Laird W. Bergad, the Director at the Center for Latin American, Caribbean, and Latino Studies, CUNY Graduate Center pealed solemly: “there are complexities and nuances that have to be examined when you look at income distribution. That there’s a hierarchy, social structure.
There are wealthy families, households within every race, ethnic groups in the U.S. just as there are very poor households because poverty is a problem, especially childhood poverty” (Benson 2014).
Thus, it can be seen that the quality of knowledge on stratification can be as poor as that on class theory.
This, however,does not detract from the contrast between the two approaches to social differentiation, which shows up also in the following story: “Columnist Lane Filler claims that the legend that Henry Ford paid his workers higher wages so they could afford his cars is false [”Ford didn’t pay well just to be nice,” Opinion, Dec. 18. ].
The legend, he says, gave rise to “the idea that paying higher wages than the market demands increases the size of the middle class, the buying power of laborers and the prosperity of the companies that pay those inflated wages” (Hauca 2013). Our interest in this case is, of course, not in the details of the “legend”, but in its class content, so to speak. This is really interesting for its implication that one can belong to the working class and simultaneously-on condition of obtaining higher wages-to the middle class. This shows clearly that in both cases quite distinct principles of ordering the social space are at work.
This becomes rather blurred in the pronouncement of a columnist, who otherwise makes use of the same industrial example, which serves as a springboard for attack on “the wisdom of trickle-UP economics. If middle and lower class workers have more money to spend, businesses will have more customers. Working class people, not businesses, are the real job creators. When America’s middle class is thriving, America will be prosperous” (MENK Ellsworth 2014). It is apparent that both “lower” and middle class” may be, at best, only auxiliary terms to the main one, i.e. the working class-whose standard of living could be characterised in terms of the aformentioned income categories.
In much the same vein, both perspectives are included in the following statement, which underscores their divergence: “One of the most startling results of the ILO survey is that more than half the ‘developing middle class’ works in the service sector. Factory workers form between 15% and 20% of each income group: they are spread from the destitute to the above-$13 group. This, say the researchers, reflects the fact that the industrial sector of the global south now offers as much skilled, high-value work as it does sweated labour” (Mason 2014).
Even more instructive in that regard is the following passage, concerning one of such developing countries, which additionally brings to light the hierarchic quality of stratification. According to a recent poll, the well-to-do, or so-called ‘AB’ socio-economic class are Uganda’s senior government officials, top business owners and managers, top commanders of security forces, doctors, lawyers, and other professionals” (Kagaba 2014).
As has been suggested above, such a wide variety of social locations, including both economic and extra-economic positions, and within the former category-both those who own their business and those who may be employed in this kind of firm must not be grouped under one heading, all the more that named as a single “class”. And the consequences of vilating that ban are quick to follow: “according to the poll, this group seems to be unhappy with the current performance of the country’s economy and doubt that President Yoweri Museveni’s government can improve things.
Surprisingly in this, their responses are similar to those of their labourers, maids, drivers and cooks; the so-called DE or poorest socio-economic class” (Kagaba 2014). The term again is doubly misleading; poor those individuals may well be, but this fact makes them members of an appropriate income stratum rather than class. As regards the latter, they represent in fact a specific class of domestic servants, and the term “LABOURERS” IN RELATION TO THE LATTER SHOULD BE USED WITH caution IN ORDER NOT TO CONFLATE THEIR SPECIFIC SOCIAL POSITION WITH THAT OF PRODUCTION WORKERS OF THIS OR THAT SORT. It is best to uncloud this point on yet another concrete example. The South African middle class, in the form of activists, journalists, politicians, public servants and many others” has been charged with hypocrisy-whilst they have been very vocal in condemning the vices of members of the bourgeoisie, who exploit the proletariat” (Ndzamela2014), in practice, according to the aformentioned critic, “a large part of the middle class in this country apes what the mine and factory owners do. Little thought has been given to the role the middle class plays when it comes to the exploitation of unskilled and migrant labour. Some among us have been very vocal in critiquing how little R12,500 a month is for a worker, yet, as the middle class, we do not pay our own workers well.
While the factory and mine owners exploit workers on the shop floor and in the shafts, SA’s middle class exploits the domestic labour employed in their suburban households, paying their child-minders and general helpers’ wages that perpetuate inequality.
Some of us who fill the ranks of the middle class exploit by paying measly wages that are not even in line with the minimum pay set by the Department of Labour [...]
Some people even whinge when their domestic helpers want to knock off on a weekend, yet we complain when our own bosses expect us to work on the odd Saturday or Sunday.
The bulk of the middle class complains when the companies they work for do not pay bonuses, yet no bonuses are offered to the child-minder when the midyear bonus and that 13th cheque arrive.
The middle-class professional often whinges to the boss that the pay packet is not enough to take the child to a good school, yet no thought is given to the child of the child-minder. This is the hypocrisy of the middle class in SA.
The middle class demands medical aid, retirement benefits and many other perks from employers yet no discussion of retirement is held with the child-minder at home.
When the child-minder ages, she is let go to retire in poverty, because her middle-class professional employer has not extended the benefits or advised on the need for the helper to put some money aside for retirement.
The middle-class professional sometimes qualifies for housing, travel and phone allowances from their employer, yet no discussion of the sort is held with the child-minder.[...]
The debate on pay should be extended to everyone who has an employee, both in informal and formal employment. If SA is serious about dealing with inequality, the middle class should also play its role and not ape what the factory owner does.
The call to review the wages paid to workers should not only be heeded by the mine and factory owners” (Ndzamela 2014).
Neither the facts, nor the noble intentions of their critic cannot be denied, which does not apply to the interpretation of the former, though. Any similarity between the domestic and industrial worker is superficial. the class of domestic servants hold merely concrete labour power, i. e. the effect of this labour, be they services, or consumer goods are purchased on account of their specific use-value, and not as a source of surplus-value and profit. Their work does not bring in their principal any income, on the contrary, the latter purchases the useful effects of the activity of their labour power from her or his personal income. Marx points out in „Capital”J (vol. I, ch. 24) that „Just as little as the commodities that the capitalist buys with a part of the surplus-value for his own consumption, serve the purpose of production and of creation of value, so little is the labour that he buys for the satisfaction of his natural and social requirements, productive labour. Instead of converting surplus-value into capital, he, on the contrary, by the purchase of those commodities and that labour, consumes or expends it as revenue.”
And in that context it is worthy of mention that “the number of immigrant au pairs, nannies and live-in maids in American cities increased over the last twenty years after a long period in which paid domestic service had all but disappeared” (Hondagneu-Sotelo, 2001).
And this by any means is the end of the story.
The reader would be forgiven for being slightly overwhelmed by the purportedly “class” avalanche: “It is the C1 and C2 class, the so-called “middle-class”, the junior middle managers and professionals, nurses, journalists, mechanics, and teachers, who are the most optimistic and happy with Museveni” (Kagaba 2014).
For obvious reasons our interest is not as much in the substantive beliefs or opinions of Nigeria’s citizens, but rather in the specific methodological grounds on which some definite conclusions regarding the latter are being drawn. From this standpoint, the category of middle classes, as framed in the survey under investigation, represents a messy smorgasbor-mechanics as an occupation may be located in a variety of economic and non-economic sectors, physicians and nurses may be employed in the public or private sector, and in the latter instance they can be both employees and self-employed, and so on. To be sure, there is no denying that those groupings can be combined on the basis of a similar income levels, but this is exactly why they should be categorised at best as a social stratum, not a class.
The question the poll results raise is why?
Several questions on the performance of the economy formed a big component of the opinion poll commissioned by the Daily Monitor and the Uganda Governance Monitoring Platform in April with the aim of assessing the opinions and attitudes of voting-age Ugandans two years ahead of the 2016 general elections.
The poll which was conducted between April 15—27 in 117 parishes and 89 districts across the country categorised Uganda’s population into the wealthy (AB class), the well to do and highly educated (C I & C2 class) and the low-class rural population (DE class).
Looking at the range of responses given by Uganda’s richest people, they appear unhappy by the current performance of the economy.
Questions asked included: “Are you better off economically as a person since the 2011 elections?
“Do you think your well-being shall improve in the near future?
“Do you think this country’s economy shall improve during the current government?”
For each of these questions, the richest people seem more negative than the poor rural and low class Ugandans.
For instance, when asked if in their view since the elections in 2011, the country was better economically, 64% of the wealthy (those in the AB class) said no; while only 31.5% of the rest of the respondents in the other socio-economic classes said the country was not better off. It did not matter if the respondents were rural or urban based.
Interestingly, when asked whether, at an individual level, they were better off economically since the 2011 elections, 64% of the rich said no. The so-called “middle-class” the C1 and C2 class were the happiest with Museveni with 55% saying they are better off. Among the poorest, only 46 said they were better off economically.
[...] it is easy to understand the optimism within the rural folk because the rural economy is now diversified.
“There are now more non-farm activities especially in areas neighbouring the urban areas whereby the people directly linked to the growing sectors are happy,” says Bategeka.
Even with farm activities, household incomes are rising because there is relative ease for these people to find market for their produce despite the fact that Uganda’s agriculture has been growing very slowly at about 2% per annum. If it were not for the diversified rural economy, those people would not be as happy. A country’s middle class are the makers of the economy.
They pay the bulk of a country’s taxes and feel the pinch of the economy when it is going wrong which makes it only natural for them to actively participate in the running of the state.
“The middle class are the tax payers, traders and manufacturers who have been at the receiving end of the economic instabilities over the last three years,” says Stephen Biraahwa Mukitale, the MP. . “All this has built up the pessimism amongst Uganda’s wealthy class,” Afrobarometer Survey released results of an opinion poll it conducted between November and December, 2011.
Back then at least 75% of Ugandans polled believed the country was heading in the wrong direction, largely because of poor economic performance. RWI quickly followed the Afrobarometer survey with its first ever poll on May 22, 2012 in which they wanted to understand the opinion of the public a year after the election.
RWI’s poll was conducted between March 19 and April 6, 2012, and over 80% disapproved of the performance of the economy.
Back then the country, especially Kampala where about 80% of the country’s GDP is made, was reeling from rising inflation which at one time was 30% with the price of a kilogramme of sugar rising from Shs2500 in February 2011 to Shs10, 000 in August 2011. The opposition’s ‘Walk to Work’ campaign was at its strongest.
Mukitale adds that the country also was in the middle of an energy crisis with the business community running their premises on fuel-guzzling generators, until Bujagali was switched on in October, 2012.
The high inflation and interest rates also saw many in the business fraternity lose their properties, and a number of them have not recovered from this shock.
On the urban-rural divide, Lawrence Bategeka, an economist says people in the urban areas tend to depend on salaried employment, and trade opportunities.
These are less and because of the shrinking of the regional market owing to the war in South Sudan, the urban people are a complaining lot.
“When you bring in the issue of the government trying to increase the tax base, these are the people the government always tries to reach first,” he adds.
Onesmus Mugyenyi, the deputy executive director of the Advocates Coalition for Development and Environment (ACODE), a public policy think tank based in Kampala says the difference is because “expectations of the middle class and those of the rural people are obviously miles apart.”
“The wealthy think the country should be doing much better,” he says, “In the countryside as long as they are able to access UPE and once in a while get a panadol which they never used to get, they are happy with that.
“Unlike the rural folk who are looking at finding market for their produce, the wealthy class is looking at bigger opportunities [infrastructure, more jobs, and technological advancement].”
Bategeka adds that the pessimism about Uganda’s economic performance despite the fact that the economy has been reported to be growing over the last one decade, including the last three years, needs to be well understood.
He says one needs to understand that within the growing economy, it is the services sector which has registered big growth but even within the services sector, it is the financial services and telecoms sub-sector which are much smaller and employ fewer graduates that have been growing.
The other sector is construction. Bategeka says because these sectors have tended to employ fewer graduates, it is understandable when a pollster asks a non-beneficiary about the performance of the economy what kind of answer they will give.
On the other hand, it is easy to understand the optimism within the rural folk because the rural economy is now diversified.
“There are now more non-farm activities especially in areas neighbouring the urban areas whereby the people directly linked to the growing sectors are happy,” says Bategeka.
Even with farm activities, household incomes are rising because there is relative ease for these people to find market for their produce despite the fact that Uganda’s agriculture has been growing very slowly at about 2% per annum. If it were not for the diversified rural economy, those people would not be as happy.
So will the angry wealthy now become more active in promoting change? Not so, says Cissy Kagaba, the executive director of the Anti-Corruption Coalition Uganda. She says Uganda’s middle class’ laissez faire attitude will continue as long as their status quo is not threatened.
“As long as they can still put food on the table and take their kids to school, they are comfortable,” she told The Independent on May 27, “They may express their dissatisfaction of having a million shillings less today than a couple of years back but they can still afford to put food on the table.”
She added: “Like the majority of Ugandans, a lot of them fear to come out and speak openly about what is happening in the country. This is myopic.
Unless they start seeing beyond today, nothing will change in Uganda. It is important that we leave our comfort zones and see the big picture.”
Kagaba says the middle class might have spoken out during the polling process but they did so privately.
Mugyenyi says the lack of participation is down to the fact that the middle class has no confidence in the political process and they know that their participation will not bring about change. It is a view shared by many“ (Kagaba 2014).
The following example clearly shows-all the more that in the context of a similar treatment of the “middle class” as bearing the brunt of the nation’s taxation-how much the distinction between the two approaches involved matters: “Democrats don’t agree with CEOs making millions because we don’t like paying for their employees to live, when they refuse to pay them. We don’t agree that the middle class has to pay tons of taxes and Big Business does not. We don’t have a problem with actors and athletes making millions because we don’t have to pay for their employees. Actors and athletes do pay taxes” (Keelin 2014). Notice that the author of those claims has been thus able to draw a compelling distinction between two types of class (irrespective of whether, as the case may well be, the subcategories involved have equal income levels or not): those who do ant those who do not benefit from other people’s labour.
What follows is another example of this dual frame of reference, with a difference-the difference being the subjective survey methodology used to obtain “the answers to the question about which social class the respondents would place themselves in without being prompted by a ready-made scheme. The gradation scheme (upper, middle, lower class) is then chosen by 32 percent of public opinion (14 percent rank themselves in the lower class, 17 percent in the middle, and 1 percent in the upper). In 42 percent of respondents, this self-definition is accompanied by the old categories of the socialist Holy Trinity, constructed of the worker (21 percent), the peasant or farmer (9 percent), and the intellectual worker (10 percent), supplemented by 2 percent of private initiative. In the social consciousness, the functional division outweighs the gradation division, yet the latter also has a social function, and one may assume that it will gain in popularity” (Kurczewski 1994). Unfortunately, the author of the study, in his ill-conceived intent of bringing up to date an old term of intelligentsia goes definitely too far, since the report ought to mirror the categories used in the survey, by the respondents themselves-and, sure enough, the sociologist in question himself points to the fact of reverting by the latter to the socialist frame of reference, which definitely has not included anything like “intellectual worker”. But even more important is what hides behind the gradational and functional scheme mentioned above. Of course, these are our old friends: social stratification and social class, respectively.
In the following statement, however, one of the two perspectives involved is striking by its absence, which distorts the lens through which to look at the phenomena involved. In his article entitled “the rich vs. the party of the even richer” (Jenkins 2014), the author argues: By now it should be ridiculously obvious to anyone who has not been living in a cave, or getting all their news from CSNBC (which is kind of like living in a cave), that neither of the two major political parties in this country represents the interests of middle-class Americans”.
Now, not only from an academic, but also from a practical standpoint it is crucial to be able to identify a class nature of a political party, which is bound to go badly wrong when one substitutes for real socio-economic classes conventional brackets on the income scale, and this is the most favourable rendering of the above statement; otherwise, words such as “rich” or “poor” have their roots in the common speech and by extention, common-sense thought. And science, which restricts itself to replicating common-sense knowledge loses its rationale.
In the next case the class framework comes up implicitly at bestthe author of the pronouncement cited highlights an ambiguous meaning of the term under consideration referred to repetedly earlier in the book -“While I don’t have any money in the bank and the only assets I have are a computer a video camera and a rusty old mountain bike, most people would look at where I live and where my children go to school and label me squarely in the middle class. I usually accept that label. It is easier than telling the whole world that am in my mid forties with no savings, no retirement plan, no 401K- and I live the life of a new media freelancer; check to every increasingly small check. These facts would make my middle class friends uncomfortable. But I digress. The reason I say’f*ck you’ to the middle class is that holding onto the status of middle class requires a poor class.
There would be no middle, without the poor. That 1 in 5 kids in the United States live below the poverty line is both immoral and a requirement of our system. This system holds as its very center, heartbeat and myth of the American Dream the cherished “middle class.”
George Carlin frames it this way:
“The upper class keeps all of the money and pays none of the taxes. The middle class pays all of the taxes (and) does all of the work. The poor are there just to scare the sh*t out of the middle class” keep “em showing up at those jobs” (Trainer 2014). The aformentioned triad is a colloquial rendering of a more academic scheme which distinguishes three “classes”: upper, middle and lower that has become ingrained in the minds of the population, as evidenced by “ Hout’s (2008: 30) study conducted in 1991 (with Wright and Martin Jankowski) where, in a response to the open-ended question, ‘What social class do you consider yourself a member of?’, only 16 per cent volunteered the answer ‘working class’, and the ‘modal reply ... was to mention the upper, middle and lower classes’. Interestingly, as many as 90 per cent of respondents provided an answer, but it did seem that working-class identification was weaker when there was no prompting. The following shows how little, if any, information pertains to that mini-hierarchy that in point of fact blurs the paramount social identity determined by one’s way of earning a living: “in Kenya’s established class society, lower class watchmen guard the property of the middle class while the police force takes care of the upper class.
The typical watchman over 30 years of age, will have a strong political position. Watchmen may be dismissed as uneducated until they start discussing politics.
Middle class Kenyans love to discuss politics with watchmen because they are usually better informed about the on goings. [...] time is something watchmen have in plenty.
They will listen to radio all day and peruse newspapers in detail. The middle class can afford to be dismissive of politics because they are often in a position to leverage influence against decisions that undermine their interests.
Watchmen on the other hand are pretty vulnerable and random political decisions directly affect their livelihood. The new security measures announced by the state will seriously undermine the position of watchmen. Before CCTV cameras, we relied on watchmen.
They kept harm at bay and acted as the first line of defense, with nothing more than a baton and whistle. Now watchmen have being reduced to primarily manning gates” (Pala 2014) The above detailed description of several specific featuresof the watchman’s position in the societal division of labour contrasts with the colourless term of “the lower class” that contributes little, if any, to the understanding of the latter.
By contrast, the author of the pronouncement cited below distinguishes the working and middle class, as if referring to the story mentioned above: “Recent studies show that the people claiming to be working class often earn more than those claiming to be middle class” (Boyle 2014).
The member of that class begs to differ, however, locating such a period in the nostalgically viewed past.
I grew up in an automaking town in the 1970s, when it was still possible for a high school graduate — or even a high school dropout — to get a job on an assembly line and earn more money than a high school teacher.
[…] the ’70s are remembered as the Decade That Taste Forgot because they were a time when people without culture or education had the money to not only indulge their passions, but flaunt them in front of the entire nation. It was an era, to use the title of a 1975 sociological study of a Wisconsin tavern, of blue-collar aristocrats.
That all began to change in the 1980s. The recession at the beginning of that decade – America’s first Great Recession – was the beginning of the end for the bourgeois proletariat. Steelworkers showed up for first shift to find padlocks on mill gates. Autoworkers were laid off for years. The lucky ones were transferred to plants far from home. The unlucky never built another car.
When I was growing up, it was assumed that America’s shared prosperity was the natural endpoint of our economy’s development, that capitalism had produced the workers paradise. Now, with the perspective of 40 years, it’s obvious that the nonstop economic expansion that lasted from the end of World War II to the Arab oil embargo of 1973 was a historical fluke, made possible by the fact that the United States was the only country to emerge from that war with its industrial capacity intact. Unfortunately, the middle class – especially the blue-collar middle class – is also starting to look like a fluke, an interlude between Gilded Ages that more closely reflects the way most societies structure themselves economically. For the majority of human history – and in the majority of countries today – there have been only two classes: aristocracy and peasantry. It’s an order in which the many toil for subsistence wages to provide luxuries for the few. Twentieth century America temporarily escaped this stratification, but now, as statistics on economic inequality demonstrate, we’re slipping back in that direction. Between 1970 and today, the share of the nation’s income that went to the middle class – households earning two-thirds to double the national median – fell from 62 percent to 45 percent. Last year, the wealthiest 1 percent took in 19 percent of America’s income – their highest share since 1928. It’s as though the New Deal and the modern labor movement never happened. The hero of that story, Gary Galipeau was born in Syracuse, N.Y., in the baby boom sweet spot of 1948. At age 19, he hired in at his hometown’s flagship business, the Carrier Corp., which gave Syracuse the title “Air-Conditioning Capital of the World.” Starting at $2.37 an hour, Galipeau worked his way into the skilled trades, eventually becoming a metal fabricator earning 10 times his original wage. (McClelland 2013 )
However, for the present-day USA more typical are such data: despite claims that the industry provides middle class wages for blue-collar jobs, a recent study by the University of Southern California found that warehouse workers in the Inland Empire area of California average $23,000 per year for men and $19,000 per year for women, in contrast to $45,000 per year—the figure cited by an industry model developed by the Southern Californian Association of Governments, according to Juan De Lara, author of the study and an assistant professor of American Studies and Ethnicity at the University of Southern California. (Good 2013).
Thus, the aforementioned member of the industrial working class speaks about the predicament of his own class, but from the perspective of what should be regarded as a false class consciousness, as to describe his experiences he resorts to the term of middle class that is in fact unfit for purpose, its true nature being revealed by Galipeau himself-namely, owing to his use of the term “stratification” (whilst the two-group model, useful for purposes of indicating some salient trendnds, is however untenable as an overall framework of societal differentiation).
This is also apparent in yet another lamentation over the end of the middle class. This time round it is –we are told-“Silicon Valley: Where America’s Middle Class Died - Behind Google and Apple, there’s a stark class divide but […] it’s a place where rich entrepreneurs live in one part of town and their poor Hispanic maids and gardeners live in another. And tech workers cluster in apartments because houses are too expensive to buy. So lo and behold, friendly Silicon Valley is ground zero for the death of America’s middle class,
As one analyst put it, “It’s a weird Upstairs, Downstairs world in which there’s the gentry, and the role for everybody else is to be their servants.
The agenda of the gentry is to force the working class to live in apartments for the rest of their lives and be serfs.”
But it wasn’t always so. In the 1970s, people flocked to Silicon Valley (formerly known as the Santa Clara Valley) to raise families and work factory jobs at companies like HP and Intel. Then came the lowering of trade barriers, the exodus of manufacturing jobs, and the brutal dotcom crash of 2000. Now companies like Google and Facebook rule the roost, but employ surprisingly few people—many of whom can barely afford Silicon Valley unless they move to the suburbs and endure long commutes” (Allen 2013). And to round off her obituary, the author generalizes its content: “the middle class death isn’t limited to California. Taxes, government entitlements, liberalism and Obama make this a national tragedy. (Allen 2013)
And below there is yet another example of how a misleading verbal guise in which the concept under examination is dressed can distort its comprehension. “Knoxville nonprofit Compassion Coalition offers Bridges Out of Poverty trainings geared toward those who grew up in middle class or wealth so that they can better understand those who grew up in generational poverty” (Bales-Sherrod 2013). Now, if the use of the term in question does not strike the reader as inappropriate, as the case may well be, this is because she is socialised to accept the specific usage of it, which however, does not stand up to scrutiny. Between the two words composing the verbal dyad in question, it is clearly the first one that is crucial in the context under consideration, referring to those who are better off than the poor but not so affluent as the truly rich; while the term “class” seems actually redundant, conveying no specific information in the same context.
Much the same considerations apply to the otherwise competent account of an important period in the U.S. recent history: “for 35 years, politicians (and the bankers who own them) have been hammering away at middle-class institutions. The assault began in the 1970s, when New York City’s fiscal crisis and California’s property-tax revolt marked the start of a long decline in public services. Next came the recession and anti-union policies of the early 1980s, whose whip’s end hit the black working class especially hard. (Automakers have long been among the nation’s largest private employers of African Americans. In the late ‘70s, one in every 50 African Americans in the workforce was employed in the industry.) Thanks to the UAW the automakers provided good jobs and pensions for workers who, in many cases, had a high-school education at best. When Chrysler hit the ropes in 1979, Congress did pitch in with a $1.5 billion loan guarantee (I worked on that bill as an economist for the House banking committee), but the decade that followed still pummeled autoworkers-as they did all of American manufacturing.
The consequences are still unfolding. Total employment of manufacturing workers peaked in 1979, and three decades later, we’re in the endgame. Jobs in the sector are down by about a third since 2000-some 6 million lost” (Galbraith 2010). Indeed, similar views are widespread: “For decades, American manufacturing provided entrée to the middle class, especially for workers without college degrees.
No more. Globalization, automation and recession destroyed nearly 6 million manufacturing jobs between 2000-2009, casting many displaced workers out of the middle class and, consequently, widening the income gap between rich and poor” (RUBINKAM 2014).
“Most of them will never be replaced. Nothing can stop the Chinese, Koreans, Vietnamese, and others from making shoes and ships and sealing wax at wages we can’t compete with. And nothing will.
For a time in the 2000s, some of those job losses were offset by gains in the other hard-hit sector: construction. But the Great Recession put an end to that. Since 2007, a quarter of construction jobs have disappeared, more than 2 million in all-about as many as were lost in manufacturing, but from a much smaller base.
Those numbers tell of the next big middle-class tragedy-the housing bust. Homeownership was a great American success story. It rose for 60 years, peaking around 2004-and for most of those six decades it was an honest business, more or less. But in its last five years, the long boom was kept alive by the greatest financial swindle in world history. In the collapse that followed, an enormous amount of middle-class wealth was wiped out. Homes were once a source of pride, safety, and collateral. Now they’re often a burden-and homebuilding is at lows not seen since World War II.
With manufacturing and construction on the ropes, service jobs now practically comprise the whole economy. Our rich folks today make their money in finance and technology; the upper middle class lives on trade, law, and medicine; and the middle class teaches and works in the civil service. The working class cooks, cleans, trucks, soldiers, stocks, repairs cars, makes beds, changes bedpans, and rings up sales. Today there are more salespeople, more hotel and restaurant workers, far more lawyers, doctors and accountants, and almost twice as many education and health workers as there are people producing tangible goods” (Galbraith 2010).
Further conclusions of the researcher concerned again reveal the theoretical misery of stratification approaches. From their perspective, all the reader should count on is a descriptive, empiristic account, lacking any robust analytical grounding. Meanwhile, in terms of class, and thereby ownership of labour power, there indeed are striking differences as regards the degree of exposure of the latter to natural and other processes built in a given working setting. Theoreticallly, this factor leads to vastly different rates of wear and tear pertaining to diverse classwise types of labour power. This is what the paragraph cited below -implicitly-refers to, whilst another feature of labour power touched on is concerned with the collectivisation of labour power resulting from unionisation whose level is very varied in different sectors:
“This isn’t all bad. Conditions in stores, restaurants, and hospitals are often better than in factories. Jobs are more stable because labor in these businesses is mainly a fixed cost-an assembly line can be idled at a moment’s notice, but a store needs salesclerks even when business is down. Goods made abroad are cheap, which helps consumers. The health and education sectors now have almost 30 percent more workers than they did in 2000, and that means, in part, more and better services in these areas.
The downside is that because many of these jobs aren’t unionized, wages are lousy. The only thing that reliably bolsters service wages is the federal minimum wage: When it rises, as it did from $6.55 to $7.25 in 2009, service jobs above the minimum are forced up as well (to maintain the spread). And when Congress doesn’t raise the minimum, real wages decline with inflation.
Is it any surprise that today our leading reactionaries come from retail behemoths like Wal-Mart? Is it a shock that Target was among the first companies, in the wake of the Supreme Court’s Citizens United decision, to write a huge check to a political campaign? That fast-food chains are tenacious opponents of a higher minimum wage? That hotel owners from New Orleans to Santa Monica have fought against “living wage” laws? Having thwarted the unions, they now target the government-its taxes, its regulations, and above all, its wage standards.
So: Most of the nation’s remaining jobs are in services, where pay depends largely on acts of Congress. Houses are no longer valuable commodities. Private pensions are largely kaput, and many 401 (k)s were also wiped out in the crash. (Galbraith 2010).
Let us now put some flesh on the above rather abstract bones: “In August 2008, factory workers David and Barbara Ludwig treated themselves to new cars — David a Dodge pickup, Barbara a sporty Mazda 3.
With David making $22 an hour and Barbara $19, they could easily afford the payments.
A month later, Baldwin Hardware, a unit of Stanley Black & Decker Corp., announced layoffs at the Reading plant where they both worked. David was unemployed for 20 months before finding a janitor job that paid $10 an hour, less than half his previous wage. Barbara hung on, but she, too, lost her shipping-dock job of 26 years as Black & Decker shifted production to Mexico. Now she cleans houses for $10 an hour while looking for something permanent” (RUBINKAM 2014).
The case under consideration clearly shows how what could be classed as an economic analysis shades over into a social one: “the downfall of manufacturing in the U.S. has done more than displace workers and leave communities searching for ways to rebuild devastated economies.
In Reading and other American factory towns, manufacturing’s decline is a key factor in the widening income gap between the rich and everyone else, as people like the Ludwigs have been forced into far lower-paying work.
It’s not that there’s a lack of jobs, but gains often come at either the highest end of the wage spectrum — or the lowest” (RUBINKAM 2014).
That is why, using a misleading terminology (since the author is concerned with income, and thus a stratification aspect rather than class) Wialsaid Howard, an economist with the Brookings Institution and the University of Illinois at Chicago couches the developments in question in well-known terms: “a loss of manufacturing has contributed to the decline of the middle class,”
. “People who are displaced from high-paying manufacturing jobs spend a long time unemployed, and when they take other jobs, those jobs generally pay substantially less.”
In Pennsylvania, between 2001 and 2011, 258,000 middle-income factory jobs were lost. At the same time, Pennsylvania added jobs at the lower end of the wage spectrum — in health care and social services and at the highest end, in sectors like management and finance.
Berks County, of which Reading is the county seat, is a mirror of that larger problem.
Decades ago, Reading was a mighty manufacturing town where the Reading Railroad — once the world’s largest company, now a spot on the Monopoly board —built a 19th-century transportation empire, and factories produced everything from hats to hardware. At one time, the city boasted so many manufacturing jobs that you could quit one, cross the street and easily land another, longtime residents say.
“You made a very, very good middle-class living. You could get a new car every couple years, send kids to college,” recalled Ed McCann, Berks County’s longtime director of workforce development.
Then the factories shut down. The wealthy fled to the suburbs, their grand Gilded Age mansions carved up into apartments, and poor immigrants moved in.
Now Reading, population 88,000, is one of the nation’s neediest cities, with more than 40 percent of its residents living in poverty, up from 19 percent in 1990.
As poverty grew, so too did the gap between the rich and everyone else. The difference between the income earned by the wealthiest 5 percent in Berks County and by a median-income household rose 13.2 percent in 20 years, according to the U.S. Census Bureau. Nationally, the wealth gap became even more pronounced, increasing 15.8 percent.
Six years after David Ludwig lost his factory job, the couple have exhausted their retirement savings. They don’t go out to eat or spend on their grandchildren.
Barbara, 56, said she has applied for more than 200 jobs since January and gotten one offer, as a shipping clerk, for $7.50 an hour. She has lost 40 pounds, blaming it on the stress.
“I don’t mind wearing the big baggy clothes, but just to put money aside to buy one or two bras because I lost too much weight, I couldn’t even do that.
It sounds silly, but it’s true,” she said.
The toll can also be seen at the Greater Berks Food Bank. It distributed 7.2 million pounds last year, up from 2.5 million pounds in 2001, and the food bank plans to move into a larger building to accommodate the surging demand.
The latest wave of plant closures, beginning around the turn of the millennium, hit companies like Dana Corp., Agere Systems, Luden’s, Glidden and Baldwin Hardware. Some 9,300 jobs evaporated between 2001 and 2011 — nearly a quarter of Berks County’s manufacturing base, according to Penn State economists Theodore Alter and Theodore Fuller. They were replaced by jobs in lower-wage sectors like education and especially health care, a phenomenon that has played out around the state and nation.
“The manufacturing sector was decimated, and the people who had those skills had no place to go,” said Karen Rightmire, a longtime United Way official who now runs the Wyomissing Foundation, a private philanthropy outside Reading. “The days of the factory job that just required a strong back are gone.”
Nationally, manufacturing declines accounted for 40 percent of the increase in joblessness from 2000-2011, according to labor economist Erik Hurst. And the middle class was hit hardest” (RUBINKAM 2014), which again, is a case of the fallacy named petition principii-it is true provided one assumes as a premise of one’s reasoning a social-stratification perspective, whose another consequence shows up in the very conclusion mentioned above, i.e. the validity of the concept of middle class as descritptive of the economic position pertaining to the individuals whose predicament is reported above.
The author describes a number of employee classes, superimposing on that map an interpretive framework that is completely out of kilter, as it comes from a distinct analytical universe. All in all, common, or vulgar, versions of both frameworks concerned are outlined in the following: “it’s been clear that the government is intent on rationalising the unwieldy tripartite class system – upper, middle, lower – into a two-group setup: the haves and the have-nots” (Mangan 2013).
The tripartite hierarchy in the version mentioned above is indeed the most perfect embodiment of stratification. Interestingly, there are also cases of mixed definitions, as it were, combining two main approaches. Thus, the following dictionary definition of “the middle class” correctly identifies it as a social stratum whose exact definition is, however, unclear; but at the same time it moves into an altogether different theoretical territory, framing the former in terms of the bourgeoisie: “Also called bourgeoisie a social stratum that is not clearly defined but is positioned between the lower and upper classes” (American Heritage Dictionary 2009).
It is symptomatic that to find an author, representing a sound position concerning the linkage between an alternative system of social differentiation and the social group under examination one needs to go as far as to the ex-colonial countries: “ middling strata” (Pandey2009). In another context the aformentioned author touches the same issue from another perspective, pointing out that the middle class is characterised by “a denial of the significance of class” (Pandey2009).
Paradoxicallly, another commentator, referring this time round to the U.S. situation, makes use of a stratum-like term, whereas other concepts employed in that context-“small business”, “the self-employed” have an explicit economic, and thus class connotation. “We’ve run an experiment under Bernanke, Bush and Obama to pump up the economy from above, and what we’ve done is squash the aspirations of those middle orders, particularly small business and the self-employed” (Kotkin 2014).
11.1. CLASS-DEPENDENT FACTORS
Putting at the momennt aside the divergence between “the middle class” and how socio-economic class is theorised in the analytical framework mentioned above, we borrow from the latter the notion of two types of factors: dependent on and conditioned by class/ownership relations (alternatively we can render this distinction by the dyad: strong/soft dependence, which in still other terms may be couched as the distinction between direct and more indirect conditioning of given classes of variables by the underlying ownership relations).
It is under this rubric that one can include the following definition of the social category under examination: “ in 2010 the U.S. Commerce Department published a report about what it would take for different types of families to reach the historical U.S. middle class - which it defined as a house, 1-2 vehicles, an annual vacation, decent health care and enough savings to retire and contribute to the college education of one’s children. Its conclusion was that the middle class has become much more exclusive than it used to be. “Even two-earner families making almost $81,000 in 2008 - substantially more than the family median of about $51,000 reported by the Census - would have a much tougher time acquiring the attributes of the middle class than in 1990,” one analyst concluded. An additional perspective on the growing gap among the classes can be found in a 56 percent jump in the cost of housing since 1990, a 155 percent leap in out-of-pocket spending on health care and the double-digit increase in the cost of college. “Either we define the middle class down a couple of notches,” stated one reporter, “or we acknowledge that the middle class isn’t in the middle anymore” (Droke 2013).
Thus, although the above statement does refer to income, it puts emphasis on the “attributes of the middle class” named above.
To refer back to the issue of retirement mentioned earlier, it enables us to unpack yet another theoretical misuse found in the literature on the middle class. Whilst in the above cases the concept of stratum has been conflated with that of socio-economic class, in still other applications it is a social estate that may be at stake-“OLD-AGE pensioners are increasingly joining the ranks of the middle class, with a new study revealing the rise in the aged pension delivered by the previous government and more generous indexation arrangements have transformed their class status.
The analysis by the University of Canberra’s National Centre for Social and Economic Modelling found that 26.2 per cent of age pension recipients were in the middle of five income brackets in 2012, up from 15.2 per cent in 2007” (Carvelas 2014). Pensioners constitute a quintessential social estate, a non-economic group.
Similarly, the following report conflates financial or income criteria with class ones, generating thereby a typical misnomer: “ Military middle-class families are committed to saving, according to the First Command Financial Behaviors Index. First Command released on Thursday the latest results of the survey of senior NCOs and commissioned officers with household income of at least $50,000.
Average short-term savings are up 18% since the end of 2013 to $1,080. Long-term and retirement savings showed a more modest increase, rising 11% to a monthly average of $2,374.
[...] military families that work with an advisor put more than twice as much money into savings accounts as those who don’t work with a professional, the survey found. DIY investors saved an average $709 in short-term accounts, compared with more than $1,720 for military families with an advisor.
They’re clearly hearing the message about retirement, too. Families with an advisor saved an average $3,951 per month for retirement and long-term savings. Those without an advisor saved just $1,467” (andrus 2014).
Even more ambiguous is the following excerpt from the report of Pew Research Centre “The share of adults who are employed - the employment-population ratio - ranged from 38% among lower-income adults to 66% among middle-income adults to 78% among upper-income adults.
A similar pattern exists for the unemployment rate, the share of the labor force that is without work and actively looking for work. The unemployment rate of all middle-income adults, 4% in March of 2015, was much closer to the 2% rate of upper-income adults than to the 13% rate for lower-income” (Kochhar et al. 2015).
The broad category of the employed includes not only economic classes, and the concept of the jobless refers-in the case when the source of livelihood for a given individual is an unemployment benefit, to a social estate.
It is appropriate to end the chapter with a pair of citations that underline the theoretical point following from the preceding: the following political commentator is surely deeply mistaken in his linking the term “class” solely to the Marxists. Yet, from our standpoint his implicit acknowledgement that the the term “the middle class” refers to a middle-income segment of society is worth citing, as it corrorobates our main point: “We hear the term ‘middle class’ often in this country, but it is a subliminal use of Marxist rhetoric. There are no ‘classes’ per se in this country, but the left would have you think otherwise. Thus, I refer to ‘middle income’ rather than ‘middle class’” (Longstreet 2015).”
In a similar vein, Rick Santorum, who failed to secure the Republican Party nomination for president in 2012, described his own campaign as different because it had focused on “those who are working Americans” (Whitaker 2013).
“Notice I didn’t say middle class,” he stressed.
His next argument refers to the aformentioned political partisanship which pushed to its extremes would have incredibly damaging effects on the language we speak, as it would force us to eliminate form our speech all those phrases and words that our political opponents use:
“Why do we use a term I should say that is of the other side?” he asked. “Why do we, as Republicans who believe in the dignity of every human life, who believe in equality of opportunity for everyone to rise, adopt a class-envy leftist language that divides America against themselves?”
But the right-wing politician in question endeavours to give some quasi-theoretical underpinning to the aformentioned claim:
“Do we really accept the fact there are classes in America?” he continued. “Then why do we use that term? Why do we adopt their language? We have to stop that.”
“We should use the term working Americans,” he added later. “Because unlike them, we believe work is a good thing.”
Santorum has criticized the term “middle class” in the past, telling a group of Iowa Republicans in August 2013 that “there’s no class in America”.
“Don’t use the term the other side uses. What does Barack Obama talk about all the time? The middle class,” he said. “Since when in America do we have classes? Since when in America are people stuck in areas or defined places called a class? That’s Marxism talk.” (Whitaker 2014)
Let us clear up some blatant misunderstandings present in the above argument. Class is by no means exclusively Marxian, let alone Marxist term. Class divisions are objective, independent of human consciousness and will, so that naming them or not may conntribute to the weight of their social impact, but cannot create those objective socio-economic relations. Class differentiation does not rule out social mobility, which supposedly-in the eyes of the Republican politician concerned-should pertain only to a class structure, American style. At the same time, paradoxicallly, Santorum inadvertently put his finger on the problem when he denied the existence of not classes in general, but the middle class in particular, which however, is not at all due to political considerations.
Paradoxically, a good deal of what have been said above regarding important ramifications of Santorum’s pronouncement applies also to some notions to be encountered in the public debate in China.
Following on the heels of the World Bank report on China’s rising Gini coefficient, in the 1990s ‘social strata’ (shehui jieceng) replaced Marxist class analysis as a framework within which to think and speak about China’s changing social structure. The ideological and political undertone of this shift was rather transparent- Unlike ‘class’ (jieji), the new language of ‘social strata’ (shehui jieceng) refers to social inequality in a way more congenial to the Chinese authorities who fall victim to kind of magical belief in the performative function of language: when one does not speak about social antagonism, class struggle etc., then the respective relations somehow disappear from the real world. . The policy of allowing ‘a few to get rich first’ that launched the economicANN reforms in the early 1980s played down the relevance of social inequality, viewing it as an issue of social dynamics rather than statics or structure: those who prosper before others must not become the targets of class resentment but models for others to emulate; they are but herolds of a more generalised prosperity to come.
That the basic premise of this kind of reasoning is based on a misunderstanding, can be shown on a concrete example. Liang Xiaosheng, a well-known thinker, published A book containing an Analysis of Social Stratification in China became a bestsellerHis book is organised into seven chapters, each portraying a different social stratum: capitalists, compradors, the new middle class, intellectuals, ordinary citizens (ping min), as well as the urban poor, peasants, and secret societies. This schema replaces the ‘simpler’ threefold socialist era classification of ‘workers, peasants, and cadres’. In his introduction Liang explained that the concept of class was no longer appropriate for reform-era China, as it is purportedly applicable only to undeveloped and backward societies. As society develops economically, class as a pivotal axis of society is superseded, as being incapable of grasping the complexity of the market-driven social difference in reform-era China.
Obviously, the claim that class theory applies to socialism rather than capitalism is absurd, and his own exposition confirms it to the full extent. His own examples of sociall strata refer in part to nothing other as classes (the bourgeoisie, the peasantry), while other terms used denote no social strata (and then again, no social classes) at all-like the citizenry. The error of the author becomes comprehensible when one looks at his “socialist classes” whose enumeration is both simplistic and inadequate. Such an over-simplified understanding of class could not but result in the belief that the latter notion is irrelevant, to be frank, whether in a capitalist or socialist society. And every day news from China provide ample evidence that the true social classes, as distinct from their distorted simplifications, are very much in conflict over a range of issues, which will be completely beyond the grasp of China’s politicians devoid of the only conceptual tools that allow for their understanding in all their complexity that, contrary to the Chinese author cited above, is no barrier to class analysis. And finally, rather unpleasant associations, to put it mildly, that the notion of class struggle suggests are not surprising, given China’s recent turbulent history-nor is such a reaction unique, the same phenomenon had been very much at play in the former socialist societies of Eastern Europe in the post-Stalinist era, where the populace had been haunted by the memory of an instrumental use of the concept of class struggle by Stalinist rulers. This being said, such a course of history does not make “class”, “class struggle” and related concepts inapplicable to the aformentioned ex-socialist societies Liang conveys the conceptual difference between the two terms through the elaborate metaphor: class structures society like a large-toothed comb or rather a comb with many missing teeth. It divides society crudely into two opposing groups: the rulers (tongzhi jieji) and the ruled. The productive forces of such a society do not produce enough wealth to satisfy the basic needs of all its members, and it is this scarcity, the sheer struggle for survival that pits one class against the other. By contrast, once the productive forces of Chinese society developed (by default, in the post-Maoist era), the effect on the organisation of society was like the action of a fine-toothed comb separating each strand of hair into the more finely differentiated gradations of ‘social stratification’. The main lesson to be drawn from the above argument was that economic reforms had transformed the societal organisation to such an extent that any application to it of the notion of class structure in general and that of class warfarein particular would be utterly misplaced. The point is, social strata also displaced a class-based conflict model thanks to the image of a “ladder” that aspiring subjects could clamber up.
“the success of the economic reforms rests on raising rural households out of poverty. [...]
By the end of 1999 the population under the poverty line in the rural areas had decreased from 250 million in the late 1970s to 34 million, down from 33% to around 3% of the total rural population. The impoverished people in rural areas have basically achieved adequate feeding and clothing. On the surface, this looks like an impressive accomplishment. And yet these figures look markedly different in light of global standards of poverty measurement and of the fact that, by the government’s own admission, poverty is on the increase, despite a more than 9% growth rate in the Chinese economy in 2003. [...]government’s official poverty line is drawn at CNY625 (roughly $78) per capita annual income, whereas the UN draws the line at $1 per day or $365 per year.
Statistics produce the empirical ground for evaluating whether China’s economic course over the past three decades has produced a ‘miraculous economic takeoff or a crisis of economic disequilibrium (as statistically measurable by the Gini index) or, perhaps more accurately, the necessary co-production of both. What does seem to be widely acknowledged is that there is a growing chasm between the winners and losers in a Darwinian struggle for survival in which strategies of accumulation feed off the produc¬tion of social inequality. [...]
Leftist critics in China decry the terrible social costs of the economic reforms. Others are not so kind. The English Industrial Revolution serves in this discourse as a figure that demonstrates the ineluctable necessity of this stage to attain the development of a ‘full market economy’. In today’s China people cite phrases learned from Marx to substantiate their belief in the necessary violence of development. If tenant farmers in Britain were thrown off their land to starve so that sheep could graze, then China must also go through a ‘sheep eating people’” (ANAGNOST 2008:501-518).
CONCLUSION
“Reviving the middle class is clearly the most important challenge, involving the most people. But it’s also the hardest – it began 40 years ago – and one for which it has proved difficult to find an enduring solution. There is strong evidence that rising inequality is crowding out the middle class. But there is also a powerful story to be told about how technology, globalization, and declining American education and skills have contributed to the stagnation of wages for the median worker” (Zakaria 2013). That practical policy recommendations offered are clearly under-specified stems surely from the repeatedly emphasised above the deficiency of the concept in question, i.e. its inescapable ambiguity. This touches on a broader quality of the analytical framework employed-the purpose has been to provide an evidence-based and theoretically grounded analysis of a body of facts related to the middle class. As a result, the concept has been deconstructed to the point of extinction. And those conceptual considerations are largely responsible for some reservations that one has about the widespread thesis on the death of the middle class; rightly capturing an increase in income and wealth disparities, it is, however, incapable of conceptualising the issue correctly.
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INDEX
Abram 346, 506
Adelson 6, 7, 322
Africa 215, 251, 252, 255, 259, 261, 262, 266, 349, 350, 352, 354, 355, 367, 513, 532, 537
African Development Bank 352
Agee, W. 24
AIG 40, 64
Alaska 77
Al-Farhan, I. 480
Alito, S. 424
Allen 400
Alter, T. 497
Alvaredo, F. 225
Amazon 22
American Bankers Association 39
Ameriquest Mortgage 53
Anderson, L. 376
Anstad, D. 187
Apple 493
Ariel 50
Asia 90, 207, 242, 243, 245, 249, 250, 253, 254, 255, 259, 261, 266, 299, 341, 353, 358, 514, 536
Associated Press 150
Atkinson 76, 90, 225, 233, 234, 506, 507
Atlanta 112, 542
Austin 426
Australia 93, 202, 203, 204, 206, 217, 218, 219, 224, 238, 239, 240, 268, 339, 383, 512, 514, 539
Baker 182
Bakija 49, 76, 77, 79, 80, 84, 227, 507
Bank of England 42, 237, 532
Barca, P. 306
Barone, M. 187
BBC 96
Beaupre, J. 421
Bebchuck 49
Becker, S. 27
Behr, R. 398
Beijing 473
Bellamy Foster, J. 214
Benedict, K. 297
Berkeley 15, 20, 86, 90, 92, 125, 327, 390, 406, 425, 511, 520, 526, 537
Berle, A. 28
Bernanke 44, 116, 117, 118, 119, 498, 509, 513
Bernstein 41, 42, 145, 148, 149, 181, 182, 183, 335, 509
Beverly Hills 275, 277
Bhalla 257, 333
Birdsall 254, 257, 263, 264, 265, 356, 391, 407
Bivens 50, 76, 77, 85, 157, 158, 509, 529
Blackberry 223
Blankfein, L. 20
Blodget 175, 217, 509
Bloomberg, A. 59
Blue Shield 197
Boeing 201, 312, 313, 314, 315, 318, 319, 378, 511, 518, 520, 536
Boltansky, L. 458
Bolten, J. 64
Boon 40, 43, 521
Boston 90, 115, 119, 125, 223, 249, 535, 538, 540
Botswana 350
Braley, B. 306
Brasil 258, 266, 297, 339, 357, 390, 407, 449, 470, 509, 533, 539, 541
Brazile 194, 510
Brennan, S. 438, 440
Brookings 87, 105, 149, 153, 406, 474, 496, 509, 524
Brooks, D. 357
Brown, C. 169
Brown, G. 68
Brussels 54, 66, 67, 506, 525
Bryant, W.C. 300
Buffett 8, 10, 11, 13, 20, 224, 390, 514
Bumbai 252
Burkhauser 156, 157, 158, 159
Burlington 34
Bush 9, 10, 40, 47, 64, 274, 389, 404, 498
Calandra, R. 188
Calhoun, B. 60
California 15, 86, 92, 125, 131, 284, 291, 307, 327, 341,375, 406, 412, 416, 425, 463, 469, 492, 493, 494, 511, 516, 520, 526, 537, 539
Campbell 192, 193, 529
Canada 31, 201, 202, 203, 204, 205, 206, 218, 220, 221,224, 230, 231, 268, 295, 349, 361, 362, 403, 406, 509, 512, 523, 527, 530, 539
Canberra 499
Canfin, P. 66
Cape Town 251
Cartier 23
Carvill 399, 417, 422
Cashin, A. 116
Cecchetti, S. 167
Chandler, A. 78
Chapman, T. 96
Charleston 425
Chiapello, E. 458
Chicago 77, 90, 171, 376, 377, 411, 496, 506, 508, 513, 515, 523, 528, 531, 533, 538, 539, 540
Chile 260, 267, 297, 527
China 7, 26, 101, 102, 238, 240, 241, 243, 244, 245,246, 247, 248, 249, 254, 258, 259, 266, 268, 269,270, 330, 339, 349, 384, 434, 449, 471, 472, 473, 474, 502, 504, 521, 525, 531, 536, 537, 538
Chirac 55
Chow, P. 13
Christie, Ch. 289
Churchill, W. 173
Cincinati 374
Citi group 64
Citigroup
Citi Group 87, 88
Citizens United 60, 495
Clark 412, 421, 512, 538
Cleese, J. 438
Clinton, H. 416, 455
Clinton, W. 64, 399, 422, 423
CNBC 355, 525
CNN 126
Coca-Cola 25
Codevilla 37, 41, 46, 512
Cohan 15
Cohen 49, 508
Collins 86, 457, 458, 459, 512
congress 61
Congressional Budget Office
CBO 143, 152, 153, 155, 157, 158, 168, 183, 208, 321, 335, 431, 512, 517
Connecticut 77, 142, 375
Cooper Union 390
Corak, M. 383
Cornell 126, 156, 191, 287, 529
Corzine, J. 65
Countrywide Financial 53
Covey 6, 7
Credit Suisse 203
Crouch 55
Crudeli, J. 118
Currier, E. 347
Dallas 195, 287, 399, 539
Danziger, S. 17
Dauergas 12
Davis 47, 130, 359, 513, 519
De Blasio 290, 291, 422
Detroit 90, 523
Dinardo 31
Dobbs, L. 137
Dougherty, R. 397
Draut, T. 132
Droke 115, 499, 515
Druckenmiller, S. 20
Easterly 257, 339, 406, 515
Ebay 223
Eigen 57, 59, 520, 521
Engels, F. 71
Equilar 150
Eremenko 255, 256, 358, 516
EU
European Union 53, 54, 58, 65, 66, 67, 144, 506, 534
Europe 24, 40, 48, 65, 67, 97, 114, 127, 130, 144,177, 202, 203, 206, 220, 224, 225, 227, 236, 238,259, 261, 266, 267, 270, 292, 295, 300, 353, 356, 358, 458, 459, 503, 513, 514, 518, 522, 524, 536
Facebook 126, 422, 493
Families USA 196
Fannie Mae 40, 117, 387, 396
Farrell, D. 361
Farrell, K. 269
Fazzari, S. 385
Federal Reserve 10, 41, 42, 64, 98, 102, 115, 116, 118, 123, 204, 208, 287, 382, 388, 426, 506, 518
Fergusson, D. 403
Ferrara 94, 173, 174, 428, 516
Feyrabend, P. 289
Finland 221, 228, 229
Fitoussi, J. P. 172
Florida 90, 421
Ford, H. 170, 482
Forsyth, G. 91
Fraina, L. 298
France 11, 55, 146, 225, 226, 228, 229, 266, 295, 301, 510, 524, 532
Francis 269
Frank, R. 126
Freddie Mac 40, 117, 387
Friedman 82, 83, 199, 273, 398, 405, 517
Fuller, T. 497
Gabaix 82, 83, 517
Galbraith 65, 168, 208, 494, 495, 496, 517
Gallup 88, 315, 365, 372, 374, 375, 376, 377
Galvin 25
Galvin, L. 25
Garicano, L. 82
Gates, B. 224
Gazprom 257
GDP
General Domestic Product 7, 14, 20, 26, 42, 78, 143, 167, 172, 174, 209, 210, 213, 214, 248, 250, 339, 487, 517
Geithner 40, 43
General Electric 201
Germany 144, 146, 201, 204, 261, 266, 267, 301, 329, 383, 524
Ghalib, M. 341
Ghana 262, 350, 351
Gilens, M. 51
Gingrey, P. 322
Gingrich, N. 426
Gini coefficient 251
Glass-Steagall Act 48
Global Pacific 350
Glucsman, M. 451
Gm
General Motors 201
Goldman Sachs 20, 41, 64, 65, 259, 408, 430, 540
Goldthorpe, J. 279
Golodets, O. 256
Google 344, 493, 522
Gorbachev, M. 129
Gordon, D. 210
Gordon, E. 177
Gordon, R. 84
Gordon, S. 221
Gore, A. 274
Gosar, P. 113
Gramm 56
Greece 217, 267, 268, 270, 541
Green, D. 142
Greenberg, S. 399
Greenspan 42, 47, 518
Greg County 404
Grimes 183, 211, 212, 518
Grinstein, Y. 82
Gross 10, 14, 20
Haldane 42, 48, 49, 518, 532
Hannauer 21, 22, 24, 175, 176, 215, 216
Hansen 130, 421, 433, 519
Harding 236, 237, 289
Hargreaves 126, 383, 397, 519
Harris, S. 177
Harvard 103, 105, 110, 168, 205, 222, 315, 386, 508, 522, 527, 532
Haupt, N. 385
Hawaii 77, 142
Hayes, T. 60
Hayman, F. 275
Heath, J. 374
Heim 49, 77, 79, 80, 84, 227, 507
Helmsley 8, 26
Hewko, J. 258
Hickey 200, 465, 466, 467, 468, 520, 538
Hightower, J. 274
Hoggart 346, 506, 520
Holmes, O. W. 37
Hong Kong 348
Houston 77, 524
Hungary 267
Hungerford 11, 13
IMF
International Monetary Fund 51, 52, 72, 167, 171, 352, 353, 521
India 101, 241, 243, 252, 253, 254, 258, 259, 264, 265,266, 269, 296, 323, 325, 339, 342, 343, 349, 384, 513, 521, 533
Indiana 315
Indonesia 51, 241, 249, 251, 266, 339, 340, 511
internal Revenue Service 8, 15, 334
Internal Revenue Service 7
Iowa 131, 306, 423, 501, 524
Ireland 217, 229, 438, 510
Isquith 22, 23
Israeli 367
Italy 206, 228, 258, 270, 301, 356, 383, 470
J. P. Morgan 7
Japan 40, 201, 202, 203, 206, 224, 225, 226, 227, 242, 247, 266, 268, 371, 383
Johnson 24, 25, 40, 43, 44, 45, 49, 51, 56, 58, 71, 72, 82, 219, 328, 510, 521
Johnston 8, 24, 25, 513, 531
Kagaba 483, 485, 488, 489, 522
Kaiser 91
Kampala 487
Kaplan 79, 82, 227, 522
Kapur, A. 87, 88, 522
Karachi’s 5
Kattak 5
Katz 82, 110, 165, 202, 205, 522, 524
Kearney 202, 524
Kentucky 183
Kenya 349, 350, 352, 491, 507
Kharas, H. 357
Kharroubi, E. 167
King, M.C. 410
Kingston, J. 322
Kirkham, E. 308
Kleinbard, D. 159
Kleinbard, E. 158
Koch, Ch., D. 21, 429
Kochhar 121, 160, 161, 162, 163, 164, 407, 500, 523
Koehler, E. 322
Koffler, K. 179
Kohn, M. 452
Kotkin 87, 91, 306, 413, 498, 523, 524
Krueger 140
Kudrin, A. 257
Kurczewski, J. 489
Kwak 43, 44, 521, 524
Lamb 412, 463, 524, 533
Landier 82, 83, 517
Lapid, Y. 367
Las Vegas 90, 322, 530
Latin America 241, 255, 259, 261, 264, 266, 297, 482, 513, 534, 535
Latterman, D. 292
Lauenstein, M. 63
Lazonick, W. 78
Le Mieux 31
Leach-Bailey 56
Lehman's 50
Leinberger, Ch. 394
Lennon, J. 479
Leong 243, 525
Leonhardt 201, 205, 221, 525
Levin-Waldman 140, 141, 525
Lew, J. J. 165
Lewis' 229
Lewis, M. 71
Lewis, S. 300
Liddy, E. 64
Lipset, M. 358
Lomas, U. 228
London 11, 54, 67, 219, 228, 235, 236, 282, 435, 507,510, 512, 513, 515, 516, 518, 525, 526, 527, 530, 532, 539, 540
Long-term Capital Management 42, 514, 526
Longview 404
Los Angeles 77, 276
Ludwig, B., D. 496
Luhby, T. 205
Lundergran, A. 183
Mack, J. 23
Macleod 88
Magdoff, F. 206
Maher, B. 23
MAHNKEN 4, 475, 526
Main Street 115, 116, 119, 326, 390, 522
Manhattan 89, 114, 290, 300, 447, 541
Marx 27, 29, 71, 127, 128, 129, 173, 175, 180, 230, 272, 296, 357, 378, 485, 504, 527
Maryland 77, 142, 410, 530
Massachusetts 131, 185, 199, 211, 422, 432, 456, 511, 528
Matthews, D. 89
Mayer, Ph. 371
McConnell, M. 183, 316
McDill 338, 375, 410, 527
McGahen, R. 378
McGovern, B. 396
McKay 235, 535
McWilliams 94, 95, 97
Means, G. 28
Medicare 153, 155, 156, 187, 192, 198, 199, 208, 327, 331, 335, 336, 337, 399, 418, 440, 529
Merrill Lynch 64
Merton Ferron, C. 455
Mexico 132, 250, 251, 264, 267, 297, 390, 481, 496, 538
Miami 90, 112, 114, 305, 345
Mian 59, 124, 172, 528
Michigan 27, 197, 315
Milanovic 125, 242, 243, 258, 259, 264, 266, 470, 528
Miliband, E. 229, 437
Miller, L. 273
Minnesota 142
Minow 25
Mishel 50, 76, 77, 85, 145, 157, 158, 308, 509, 528, 529
Mishra 57, 59, 520, 521
Missouri 37, 205
Modi, N. 342
Moliere 356
Montgomery 9, 11, 13, 14, 529
Moore, D. 439
Moran 47
Morelli 204, 205, 444, 529
Morgan 50
Morgan, G. 47
Morgan, K. 192
Morgenson, G. 26
Morris, Ch. 166
Morrison-Knudsen 24
Moss, D. 168
Mugyenyi, O. 487
Mukitale, S.B. 487
Murphy 82, 83, 516, 530
Nader, R. 58
Naser, R. 394
Nather, D. 423
Ncube, M. 352
Netherlands 201, 202, 221, 507
New Jersey 53, 65, 77, 103, 137, 194, 289, 506, 511
New York 10, 25, 26, 40, 41, 54, 64, 77, 98, 103,114, 117, 125, 131, 149, 165, 174, 180, 191, 204,207, 223, 246, 257, 276, 289, 295, 307, 335, 350,388, 408, 422, 446, 447, 468, 494, 506, 508, 509,510, 511, 513, 515, 517, 519, 520, 521, 524, 525, 526, 527, 529, 531, 533, 536, 537, 540, 541
New Zealand 22, 218, 224
Newman 22, 23, 24, 51, 530
Obama 6, 10, 20, 40, 62, 63, 74, 86, 95, 114, 119,123, 138, 140, 148, 170, 173, 177, 178, 179, 180,181, 187, 189, 191, 198, 199, 219, 231, 238, 300,308, 310, 321, 322, 328, 332, 338, 344, 361, 389,390, 396, 402, 418, 419, 420, 421, 422, 423, 425,427, 429, 431, 432, 433, 441, 493, 498, 501, 507, 511, 515, 516, 524, 530, 535, 539, 541
O'Brien, M. 204
Occupy Wall Street 18, 24
Office of the Comptroller of the Currency 39
Ohio 71, 194, 396, 511
Okun, A. 168
Olson 37, 69, 70, 531
Organization for Economic Cooperation and Development
OECD 22, 206, 265, 266
Osborne 237, 435
Ossowski, St. 371
Ottawa 383
Oxfam 234, 443, 444, 519, 531
Packer, G. 396
Page, B. 51
Pakistan 252, 253, 519
Park Avenue 136
Patterson, M. 64
Paulson 64, 65
Payton, L. 231
Peck 89, 100, 101, 102, 103, 108, 109, 110, 112, 531
Pedersen, S. 423
Perelman 7, 15, 26
Perkins, T. 23
Perry, Ch. 282
Petrazycki, L. 337
Pew 16, 18, 19, 27, 90, 161, 243, 265, 326, 347, 348 , 370, 374, 375, 404, 406, 407, 412, 448, 449, 459, 465, 466, 475, 476, 500, 523, 528, 529, 532
Pfeffer, F. 17
Philippines 474
Philippon 50, 83, 532
Picket, K. 443
Picketty 15, 26, 76, 77, 82, 84, 126, 128, 155, 156, 157, 225, 334, 335, 443, 506, 507, 532, 534
Piergiorgio 42, 532
Pimco 10, 20
Pitt, J. 423
Pollack, R. 196
Portland 410
Price, T. 322
Prince, R. 361
Princeton 223
Proud, A. 379
Pryce 305, 306, 482, 533
Public Citizen 55
Pyke 7, 61, 325, 533
QE
quantitative easing 115, 117
Quayle, D. 64
Quealy 201, 221, 525
Quinn, H.V. 424
Rajan, R. 171
Rauch, J. 171
Rauh 79, 82, 227
Ravallion 257, 258, 259, 263, 333
Rawes 132, 134, 135, 136, 295, 366, 405
Reagan 10, 48, 116, 143, 207, 385
Reich 18, 19, 21, 22, 33, 145, 146, 147, 199, 338, 406, 469, 506
Reshef 50, 83, 532
Reynolds, A. 151
Rightmire, K. 497
Riverside 112
RJR Nabisco 25
Robb, A. 339
Roberts, P. C. 149
Robinson, N. 165
Rolls-Royce 96
Romney 338, 341, 369, 418, 421
Roosevelt 21, 326, 330, 422
Root 15
Rosen, S. 82
Rosenfeld 31, 32, 33, 535
Rosengren, E. 115
Ross 23
Ross, W. 23
Rossi, E. 82
Rowlingson 235, 535
Rubin 64, 65, 86
RUGABER 22, 77, 384, 415, 535
Rupert, J. 23
Russell Sage Foundation 17, 19, 87, 203, 383, 541
Russia 26, 51, 129, 255, 257, 390, 516, 524
Rysdall, K. 74
Ryzhkov, V. 257
Sabmiller 255
Sachs 82, 83, 517
Saez 15, 16, 26, 75, 76, 77, 79, 82, 84, 86, 90, 92, 121, 122, 123, 124, 125, 155, 156, 157, 225, 327 , 335, 390, 506, 507, 523, 532
Samuelson 55, 60, 78
San Francisco 77, 90, 112, 291, 292, 412, 462, 463, 506, 509, 524, 542
San Jose 90, 469
Sanbrook, D. 230
Sanders 34, 123, 199, 200, 330, 459, 507, 518, 520, 521, 535, 538
Sang Chun-wa, J. 348
Santorum, R. 501
Saraceno, F. 172
Schoeni, R. 17
Scotland 443
Seattle 90, 112, 219, 313, 511, 537
Securities and Exchanges Commission 39
Senate 10, 34, 59, 60, 62, 142, 183, 189, 276, 321, 334, 415, 416, 430, 512, 520, 533
Senegal 259, 350
Shanghai 473
Sharma, W. 298
Shaw, G.B. 300
Sheen, V. 238
Sheffield 96
Shenzen 473
Silicon Valley 89, 112, 493, 506
Simpson 53, 336
Singapore 96, 97, 240, 339, 518
Singh 88, 250
Slemrod 84, 518, 536
Slemrod, J. 84
Snodgrass, B. 396
South Korea 51, 268, 270
Spain 206, 217, 225, 267, 268, 270
Spamann 49, 508
Spokane 91
St. Louis 87, 131, 205, 376, 378, 382, 385, 521, 538
Steel, R. 64
Stigler, G. 44
Stiglitz 169, 267, 268, 321, 530, 537
Stockman, D. 116
Stolper, W. 78
Sturgeon, A. 309
Sufi 59, 124, 172, 276, 528
Super, P. 186
Sweden 202, 221, 225, 228, 229, 266
Tacitus 130
TAIBBI, M. 64
Tam, T. 348
Taylor, D.D. 189
Teece, D. 78
Tennessee 27
Texas 131, 274, 400, 404, 429, 513
Thain, J. 64
Thurow 257, 258, 406, 407
Tims, D. 339
Tittenbrun 1, 29, 31, 96, 129, 159, 193, 201, 271, 312, 442, 538
Toscany 437
Treasury 45, 64, 68, 107, 149, 152, 154, 165, 351, 514, 531
Trebbi 59, 528
Trudeau 231, 295
Trussell Trust 443
Turkey 267
Turner, A. 167
Tyson Foods 26
Tyson, J. 26
U.S.
United States 7, 8, 11, 12, 13, 16, 19, 20, 21, 22,26, 30, 34, 37, 39, 40, 42, 44, 48, 49, 50,51, 52, 53, 54, 60, 61, 65, 66, 68, 71, 77,78, 86, 88, 90, 95, 97, 98, 99, 100, 102, 103,105, 107, 109, 110, 113, 115, 117, 118, 120, 122,123, 125, 130, 132, 135, 136, 138, 142, 143, 144,145, 146, 148, 149, 150, 154, 159, 160, 161, 162,165, 169, 170, 172, 173, 174, 175, 177, 181, 183,191, 192, 193, 194, 199, 201, 202, 204, 206, 209,213, 215, 220, 221, 225, 226, 227, 229, 231, 233,235, 237, 239, 243, 244, 246, 259, 261, 263, 273,284, 289, 308, 310, 314, 315, 316, 318, 319, 334,347, 363, 366, 369, 371, 375, 376, 384, 389, 391,393, 394, 395, 399, 400, 402, 403, 404, 406, 407,408, 410, 411, 412, 414, 418, 420, 421, 423, 430,444, 445, 455, 466, 467, 468, 474, 482, 493, 496,497, 498, 499, 506, 507, 512, 513, 514, 520, 522, 523, 524, 525, 528, 532, 533, 539, 541
Uganda 350, 483, 486, 487, 488
UK 42, 43, 47, 48, 55, 58, 67, 68, 96, 97, 172,177, 218, 228, 229, 232, 234, 239, 240, 271, 339,346, 347, 356, 401, 433, 435, 442, 443, 444, 509, 510
Ungerson, C. 451
Unilever 249, 251, 252, 367
Union Bank of Switzerland 42
United States 7, 9, 11, 13, 24, 26, 31, 33, 47, 53,54, 55, 58, 76, 84, 90, 92, 93, 94, 98, 102,108, 111, 121, 123, 125, 134, 144, 145, 147, 150,178, 184, 192, 193, 201, 202, 203, 205, 206, 207,210, 214, 215, 217, 218, 219, 220, 221, 224, 225,230, 231, 240, 242, 253, 261, 263, 266, 267, 272,278, 295, 310, 315, 319, 320, 349, 366, 373, 376,384, 390, 391, 393, 395, 397, 398, 399, 404, 434,441, 449, 452, 456, 478, 479, 490, 492, 506, 521, 523, 525, 527, 531, 532, 536, 541
Vermeulen, Ph. 125
Vestal, S. 91
Vietnam 209, 249, 259, 536
Virgin Islands 13
Visagie, J. 252
Vogt, D.J. 409
Volcker, P. 49
Volkswagen 27
Wachovia 64
Wall Street 9, 20, 25, 40, 43, 49, 53, 59, 61, 65,67, 71, 72, 74, 87, 89, 97, 100, 112, 116, 117,119, 124, 151, 166, 187, 198, 326, 329, 330, 368,389, 390, 395, 401, 427, 430, 446, 511, 520, 521, 527, 532
Wallbank, P. 95
Wal-Mart 126, 130, 145, 295, 320, 495, 537
Wargas 177, 193
Warner 359, 540
Warren 8, 10, 20, 390, 422, 423, 424, 430, 432, 518, 519
Washington 10, 17, 41, 53, 54, 60, 63, 65, 71, 87,89, 91, 99, 112, 150, 168, 189, 191, 194, 200, 219,268, 277, 292, 304, 315, 316, 318, 320, 344, 364,376, 385, 394, 401, 415, 419, 423, 427, 428, 443,448, 508, 509, 514, 515, 521, 523, 527, 528, 529, 530, 532, 534, 535, 536, 538
Weber 27, 28, 36, 37, 177, 180, 272, 273, 450, 458, 540
Weinberg, B. 111
Weiss, R. 273
Wells, H.G. 300
Wente, M. 224
Wheary, J. 132
Whitaker, M. 501
Wiley, M. 426
Wilkinson, R. 443
Williams, B. 184
Wisconsin 27, 109, 306, 331, 332, 491, 535
Wolf, E. 204
Woods, J. 434
World Bank 64, 255, 258, 263, 265, 333, 339, 352, 354, 355, 384, 502, 506
Wright 63, 116, 338, 425, 452, 453, 464, 490, 541, 542
Wright, J. 425
Xi Jinping 243
Xiaosheng, L. 502
Yermak 25, 542
Yitzaki 258, 259, 470
Yugov 382
Zell, S. 23
Zenith Optimedia 244, 245, 247
Zuckerberg, M. 126
Zuckman 11, 12, 13, 121, 122, 123, 124, 125
Zurowski, C. 27
Frequently asked questions
What is this document about?
This document appears to be an excerpt from a book or a detailed research paper focusing on an analysis of social classes, particularly the middle class, and income inequality in the USA and other developed countries. It includes a table of contents, chapter summaries, and sections addressing various aspects of economic and social stratification.
What key themes are explored in this document?
The document delves into themes of:
- The potential "demise" or shrinking of the middle class.
- The impact of income disparities on the economy.
- The role of unions and their decline.
- The concept of "neopatrimonial capitalism" and regulatory capture.
- The existence and implications of a "ruling class."
- The "American Dream" and social mobility.
- The relationship between economic classes, social stratification, and social estates.
- The role of political ideologies and their effects on different social classes.
What specific topics are covered in the chapter summaries?
The chapter summaries cover a wide range of topics, including:
- The challenges and woes facing the middle class in various countries, including the USA and Pakistan.
- The role of taxes, tax avoidance, and wealth hidden in offshore havens.
- The state of unions and their impact on worker wages and inequality.
- A detailed analysis of "neopatrimonial capitalism," including regulatory capture, lobbying, and political influence.
- The political dynamics surrounding income inequality and the middle class, including discussions of Obama's policies and Republican opposition.
- The impact of income disparities on various social classes.
- A thorough deconstruction of the very concept of the "middle class."
What are some of the key words used in the document?
Key words and phrases frequently used include:
- Middle class
- Income inequality
- Wealth disparity
- Social class
- Social stratification
- Neopatrimonialism
- Regulatory capture
- Labor unions
- Wealthy
- Capitalism
- American Dream
Does the document present an optimistic or pessimistic view of the middle class?
The document presents a generally pessimistic view of the middle class, particularly in the USA, suggesting it is facing significant challenges and decline. However, it also acknowledges counter-arguments and complexities within the issue.
What countries are specifically mentioned in the document?
The document primarily focuses on the USA, but also mentions:
- Pakistan
- Canada
- The United Kingdom
- China
- Indonesia
- Brazil
- Mexico
- Argentina
- South Korea
- Japan
What is the document's perspective on the term "middle class"?
The document critiques the common understanding and use of the term "middle class," arguing it is often ambiguous, over-inclusive, and ideologically driven. It explores the various definitions and interpretations of the term and highlights its limitations as a tool for socio-economic analysis.
What are some of the factors contributing to the decline of the middle class as described in the document?
Several factors are cited as contributing to the decline of the middle class, including:
- Globalization and offshoring of jobs.
- Technological advancements and automation.
- Decline of unions and worker bargaining power.
- Increasing costs of education, healthcare, and housing.
- Tax policies favoring the wealthy.
- Financial deregulation and risk-taking.
- Political influence and lobbying by powerful interest groups.
What is the central argument or thesis of this document?
The central argument is that the traditional notion of the "middle class" is a flawed and often misleading concept. It suggests that a more nuanced understanding of social differentiation, based on class, economic ownership, and power structures, is necessary to analyze contemporary societal trends.
- Quote paper
- Jacek Tittenbrun (Author), 2016, The Middle Class or You only live twice, Munich, GRIN Verlag, https://www.grin.com/document/322750
