Can the Middle Class Be Saved?By: Benjamin Gran
Every now and then, I read a news article that makes me want to run through the streets stopping passersby and begging them to read it. This article by Don Peck in the Atlantic Monthly, "Can the Middle Class Be Saved?" is one of them. This is a must-read article for anyone who is concerned about the financial future of America's middle class - and by extension, the future of America itself.
It's no secret that America has been hit hard by the "Great Recession." But what many people might not realize is that the fundamental structure of the American economy and social compact of American society is being reshaped in simple and profound ways.
In the aftermath of the Great Recession, most of America's middle class - especially the "non-professional middle class" who have finished high school but did not attend college - are worse off than they were before. The biggest costs and heaviest damage of the recession have been inflicted on the people who we used to describe as being the "backbone of America."
America's strength as a democracy and a capitalist country has always been based on a strong, prosperous middle class. Our country has become a magnet for talented people from countries around the world in large part because of our middle class "American dream," the idea that if you stay in school and work hard, you can achieve a comfortable life with a house, yard, car, two kids and a dog, and a summer vacation every year.
Now as we start to tally the losses of America's economic downturn, most of these old certainties have been cast into doubt. The America of today is a far less friendly place for the middle class than most Americans might imagine.
Consider these statistics from the Atlantic article:
- From May 2009 to May 2011, daily consumer spending rose by 16 percent among Americans with incomes over $90,000 a year; among all other Americans, spending was flat.
- From the first quarter of 2007 to the first quarter of 2010, America lost 27 percent of its construction jobs and 17 percent of its manufacturing jobs.
- Although the Great Recession was a global crisis, 25 percent of jobs lost worldwide were lost in America.
- In March 2011, the national unemployment rate was 12 percent for high school graduates, 4.5 percent for college graduates, and 2 percent for people with a professional degree.
- According to a 2010 Pew study, the typical middle-class family lost 23 percent of its wealth during the recession.
- During the first two years of the recession, one out of 12 white-collar jobs in sales, administrative support, and non-managerial office work were lost (along with one out of six blue-collar jobs in production, craft, repair and machine operation).
- Men, especially non-college educated men, have been hit hard by the recession (there's a reason some call it the "Mancession"). In 1967, 97 percent of 30- to 50-year-old American men with only a high-school diploma had jobs. In 2010, only 76 percent had jobs.
- Seventy-five percent of American job growth in 2010 was in industries that pay an average of less than $15 an hour.
This and other facts point to a troubling "big picture" - most Americans are falling behind in the new global economy. Getting a college degree is no longer an adequate protection against job loss or wage stagnation. Our country as a whole needs to re-evaluate how we are preparing our children for the future and how we are investing the wealth that our economy generates.
Peck recommends significant national investments in innovation, education and job training - from government investments in startup companies, to bigger tax breaks for research and development, to using "career academies" to better connect high school students with the adult world of work, with an emphasis on vocational training and apprenticeships for students who prefer not to go on to a four year college degree program.
How can Americans best protect themselves and their families from the forces buffeting the middle class?
- Stay in school. As bad as the economy has been for the middle class, it's been even worse for people who don't have a college degree. The unemployment rate for college graduates is only 4.5 percent, which is not too far below the ideal "full employment unemployment rate."
- Get outside your comfort zone. One cause of the "Mancession" has been the tendency of men to cluster in industries that are traditionally male-dominated, like construction and manufacturing. If men are better able to adapt and find jobs in other fields - like education and health care - their job prospects will be better.
- Save, save, save. The best antidote to an uncertain economy is a healthy cash cushion. Save at least six months of living expenses in an FDIC-insured savings account. Live within your means. Don't rely on debt and credit cards to support your lifestyle.
There is still hope for the American middle class. Even though this recession has been brutal, the overall trends suggest that job growth will recover even in many of the hardest-hit areas of the economy. However, the people who will have the most success in the economy of tomorrow are the ones who figure out how to adapt, evolve and grow. Whether it's getting additional job training or an advanced degree, or whether it's fundamentally changing the way you spend, save and relate to money, perhaps the best way to save the middle class is for individual members to find ways to save themselves.