Liberals accuse Republicans of engaging in class warfare. Conservatives accuse Republicans of engaging in class warfare. Cynics accuse both parties of existing “solely to hurl rhetoric at each other and pander to the the most ignorant of their base constituencies.”
While the Antiplanner is sympathetic to the cynical view, I also think the idea of class deserves more attention than most Americans give it. Too many people use the term “middle class” when they mean “middle income,” which is something quite different. Classes have distinct cultural values, which may be quite independent of income. Classes also tend to be rigid, with various barriers prevent people from moving from one class to another, whereas income levels like “1 percent-99 percent” are quite porous.
The Antiplanner sees four main classes in America today. The upper class includes people who are so wealthy that work is merely an option. Perhaps only 1 or 2 percent are in this group (which is not the same as the “1 percent” which includes people who do work but earn large amounts). The middle class includes people (and their families) whose work involves thinking more than labor. For the most part, they are college educated, which allows us to estimate their numbers: just under 30 percent of working-age Americans have bachelor’s degrees. The underclass includes people who are permanently poor, not just people who are between jobs or recent college graduates who do not yet have jobs (who are included in Census Bureau poverty numbers). Around 10 percent of Americans fall in this category.
Finally, the remaining roughly 60 percent consists of working class people (and their families), whose work is physical or repetitive rather than knowledge-based.
In his book, The Working Class Majority, economist Michael Zweig agrees with the Antiplanner that the working class makes up about 60 percent of the labor force. However, his definitions are a little different, “based on the power and authority people have at work”: people who give orders are middle class; people who take orders are working class. By those definitions, for example, doctors are middle class while nurses are working class.
An economist named Richard Wolff shows why class has become an issue. He claims that, from 1820 to 1970 “workers’ real wages rose every decade.” Since 1970, however, working-class wages have stagnated while corporate profits have grown. I don’t think Wolff adequately explains how corporations have gotten away with fattening their profits while denying wage increases, but the stagnation of working-class income is a big issue that no doubt plays an important role in the hostility to recent immigrants and other domestic political issues. (If you like watching video lectures, which the Antiplanner doesn’t, here is Wolff explaining his reasoning.)
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What is clear is that the United States has become less egalitarian than it was in 1970. In 1970, people with college degrees earned about 50 percent more than people with no college education; today the former earn about twice as much as the latter. The barriers between working class and middle class have gotten stronger: although we like to believe that anyone born in America can grow up to become president, by my reckoning we haven’t had a working-class president since James Garfield. For what it’s worth, a recent Pew study has shown that residential areas have also become increasingly segregated by income.
My liberal father, who broke through the working-class barrier and entered the middle class, always said that the only reason to vote Republican is if you were rich. Yet when I speak to Republican groups, I find an awful lot of people who are working class.
The Democrats claim to be the party of the working class, but as faithful Antiplanner ally Joel Kotkin points out, most union workers today are public employees and include teachers, bureaucrats, and other middle-class occupations.
“Obama’s core middle-class support, and that of his party, comes from . . . an ever-expanding class of minders–lawyers, teachers, university professors, the media and, most particularly, the relatively well paid legions of public sector workers–who inhabit Washington, academia, large non-profits and government centers across the country,” says Kotkin. While the Democrats may also enjoy the support of working-class unions, only about 7 percent of private-sector workers are union members.
The real problem is that what Kotkin calls the clerisy are the ones who have the real political power to set policy. I view the tea party movement as a reaction against that (as well as a reaction against the neoconservatives who make up the Republican version of the clerisy). As the race currently stands, it appears that the tea parties will continue to influence local and state elections, but haven’t been able to toss the neocons from the Republican Party and are unlikely to toss Obama from the White House.
Beyond this election, though, the real questions are: Why did wages stagnate after 1970? Did barriers between the working and middle classes really increase and if so why? How can those barriers be reduced? I’ll be focusing some of my efforts on these questions over the next year.
That’s a little too distinct to put people into 4 different groups. For one thing, some jobs require substantial education but you end up working with your hands (mechanics for planes, luxury cars, etc.) Roy Underhill went to college, where he studied mechanical engineering, forestry and history as multi disipliary courses.
And whose to say democrats are not rich. Where the term limousine liberal got its start in the 60’s.
Where the term limousine liberal got its start in the 60?s.
A quick scan of the online archives of the Washington Post found an article entitled ‘Working Americans’ Are Rediscovered about the race for mayor of New York City dated 1969-09-29 by staff writer Richard Harwood (this is the earliest hit in those archives). Mario Procaccino was challenging the incumbent, John Lindsay.
The relevant paragraph reads:
They are the Studs Lonigans of American life and they understand the bitterness that creeps into Procaecino’s voice as he damns the world none of them has ever known – the “silk stocking” precincts of East Manhattan, poetry readings in Central Park, the board rooms of Wall Street, the “limousine liberals” from Harvard, Yale and Princeton whose leader and symbol is the patrician WASP, John Vliet Lindsay, mayor of New York.
I don’t think we will stop this descent into Banana Republic-dom until campaign finance reform is truly enacted and Citizens United repealed. Few pols above county level in America are beholden to people like you and me. Instead, because of the amount of money needed to wage a campaign, they are beholden to their donors. At the national level, we are talking about billionaires spending whatever it takes this year to get their way, and the broadcast media is happy to sell them the time to air their SuperPAC swill. No one is listening to the likes of you or me.
DS
Dan, I assert that corporations are not people, and they are not entitled to many of the rights enumerated in the U.S. Constitution.
Yes, CPZ, the USC has made several decisions that – with benefit of hindsight – are large hindrances today.
DS
Corporations have NO constitutional or natural rights. The Constitution was enacted by humans to guarantee natural rights bequeathed to humanity by the Creator, for “ourselves and our posterity”, not “ourselves and our legal entities”. Humans possess rights, corporations possess powers and privileges conferred by human made law since they are creatures of humanity, and not God.
That conservatives should end up on the wrong end of this proposition shows how far so-called conservatives of today have strayed from their intellectual moorings 225 years ago.
Why did wages/benefits stagnate while productivity and profits continue to rise? Because corporations have managed to end the expectation of lifetime employment, bust most private sector unions which everyone acknowledges serve to cartelize workers labor and drive up wages for their members, outsource work to low wage hovels in China, India, Vietnam, and Bangladesh, and reduce many benefits programs by pushing costs off to their employees as wage deductions (think 401K’s and medical plan co-pays and deductibles) vs. no direct cost to employees pension and health care plans that were more standard 30-40 years ago.
I don’t know about others here, but I have to pay $4 per hour for my own retirment plan and I pay $5 per hour in copays for medical and dental insurance, as well as another $1 per hour in disability and life insurance. Medical deductibles in a typical year are at least $1-2 per hour additional, if not more. That is a $25,000 per year bite out of my pay, to which should be added the 15% in FICA, state, and local taxes on this “income” that would not have been paid when these benefits were provided free by the employer.
“Beyond this election, though, the real questions are: Why did wages stagnate after 1970? Did barriers between the working and middle classes really increase and if so why? How can those barriers be reduced? I’ll be focusing some of my efforts on these questions over the next year.”
These are great questions and I look forward to the coming discussions. At first thought, I’m wondering exactly how globalized markets have played their part. Can part of the reason that working class wages have become stagnant is that there is always someone somewhere willing to do the job for less?
I’m wondering exactly how globalized markets have played their part. Can part of the reason that working class wages have become stagnant is that there is always someone somewhere willing to do the job for less?
We had most of the world’s manuf capacity after WWII. It took a generation + to catch up. Shipping containers, investment, and automation helped capital immensely. We also paid generous pensions across the board because we thought we were richer than we were, which limited our ability to adapt and change. Now it is no problem to chase cheap wages, altho the recent issues at FoxConn hint that capital can’t chase the lowest wages forever.
DS
Though Sweden, which did not actively participate in World War II had some of the same advantages (though on a smaller scale), and even though they went through some tough times in the 1970’s through the early 1990’s, their economy seems to be doing better than ours (at least in terms of impacts on the middle class).
Labor is not the major cost in most manufacturing, and high wages typically more than offset higher costs of goods. Frequently once offshored, other costs increase dramatically such as shipping and logisitics, foreign exchange accounting, and internal management coordination of the more complex and far-flung enterprise, and suck up much of the savings in low wages.
The real reason for offshoring is that modern management is amoral and lacks any sense of community with its workers or the places in which it operates, and sees no guiding value in operating an enterprise beyond putting a few more dollars in its own pockets through maximal extraction of operating income. Modern management is also unthinking, and prone to fads put out by the ivory tower crowd in business schools. If bringing in 100 illegal Mexicans or shipping a factory to some third world despotate results in a 5% bump in profit from slightly lower operating costs, the company does it and the previous American workers are let go without a heartbeat of hesitation as to their interests or future welfare.
We have lost sight of the economy being for the purpose of serving humanity and human need and have changed it instead to serve the purpose of simply piling up wealth without reason or purpose.
That is a $25,000 per year bite out of my pay, to which should be added the 15% in FICA, state, and local taxes on this “income†that would not have been paid when these benefits were provided free by the employer.
They were never “free”. They are all part of your compensation. Whether they take the form of wages or fringe benefits is merely a matter of tax treatment.
MJ:
They were never “freeâ€. They are all part of your compensation.
They were free to me, and the cost to the company is obviously equal whether they pay them directly or pay them to me first unless the company deals unfairly by not compensating the employee for the higher costs being passed on. And as the costs (and risks) have been gradually shifted to me without compensation, my real income declines until I get actual raise. If I get a 3% annual cost of living adjustment, but half the bump every year is eaten up by higher health insurance copays, my standard of living decreases by the year and I have to cut back on consumption, even as I am supposedly becoming higher “paid”.
Look at a real example. Some time ago, I used to earn $31.76 per hour, had $308 in biweekly medical and retirement deductions, and paid $361 biweekly to FICA and local taxes, and over 4 years got 3% increases so that now I am earning $35.74 per hour. But at the same time, lets say the company asks for dramatically more in health insurance copays that it used to cover, so that I am now paying $453 in medical and retirement, and $405 in FICA and local taxes. Although my biweekly pay is theoretically up $320, $190 of that has been swallowed by increased benefit costs and resulting higher taxes on higher pay. My real net pay has gone up 5%, but the general cost of living is up 12.5% meaning I am worse off. The company has saved money and increased its profits by jamming what were its previous overhead costs down on me and making me cover it by cost of living adjustments, because they were billing me out under contracts that covered my pay times the overhead + 10% profit and accounting for 3% annual pay increases.
“Since 1970, however, working-class wages have stagnated while corporate profits have grown. …Why did wages stagnate after 1970?”
What happened in 1971? Oh, yeah, Nixon took us off the gold standard under the guise of halting inflation.
One need only look what happened to the monetary base and the Consumer Price Index as a result.
In 1970, the cent was made of 100% copper. In 1982, the copper content fell to 2.5%, the rest being zinc. Today, it costs almost three cents to make one cent out of zinc and there’s talk of using steel to further debase coinage.
When government debases the currency, those who are paid in currency (i.e. working and middle class) suffer the most. When the Federal Reserve inflates the monetary base, those who first use the newly printed dollars (banks and the first borrowers of the new money) benefit while the other classes suffer the invisible tax of inflation.
It’s not rocket science.
It’s much more complicated than rocket science.
I’d also add that part of the problem is expectations. While a college educated populus is beneficial, it can also be harmful. There are only so many jobs out there that can be filled by a college educated populus. There are also a vast number jobs people used to do that they don’t want to do anymore. Couple that with easy outsourcing policy and we become victims of our own success.
One thing is certain. We cannot survive as a service only nation. We have to produce something.
One of the benefits of college education is knowing that populus is a genus of flowering plants, and populous is a group of people living in a certain place. I am all for educating poplar trees, though. They can be pretty dense sometimes.
But even though one can spell and write better than most of the population due to education, that does not necessarily translate to increased income or improved standard of living.
I agree with your assessment and hope you don’t take my ribbing personally. >:)
LOL… Didn’t even read it. Typed it in word then cut and paste. Gotta love Microsoft and autocorrect….
I don’t disagree with this assessment though I think there may be some causality opposed to coupling. As working class wages became stagnant and jobs shipped over seas, more and more people looked to higher education as a way to succeed. I don’t think the lack of “producing something” is due to more people going to college, I think more people going to college is due to the lack of “producing something.”
If you were 17 what decision would you make? How would that decision be different if you were 17 in 1969?
No difference for me, my field hasn’t changed much other than the available tools.
It’s a good question, bennett. Sadly, I suspect that if we were 17 again, we’d just repeat the same old mistakes all over again.
For me it would have likely been different. Had I been 17 in ’69 the probability that I would have chosen a working class job would have been much higher. My family at the time was predominantly “working class” (as Mr. O’Toole defines it). Choosing a job where the “work is physical or repetitive rather than knowledge-based,” would have still allowed me to have a decent wage, probably a pension and maybe I could have learned a trade/craft.
By the time I was 17 (’90’s) working class jobs were not as good of a gig and few and far between. College seemed like the only rational choice.
I hear you. I’m 27 and have been able to earn a decent living my entire adult life without a college degree, but as I look to the future, college seems more & more likely. The big question is what to major in, and of course the ever-present fear of doing the wrong thing and ending up one of those 100k student loan screwups profiled on major financial sites.
My brother was 17 in the late 70s and manged to score a computer job at the right place at the right time without a college degree. Now he’s 50 and earning well over 100k as an IT professional WITHOUT a college degree. Meanwhile, I have a master’s degree and make less than half he does. If I were 17 again, which would have been in the late 80s, I would have gotten a computer science degree and ridden the wave to prosperity. Public schools don’t prepare students for the job market. The churn out obsolete products.
If I were 17, I would still do what I do as a college graduate civil engineer. Its what I wanted to do my whole life from when I was very little, I’m very happy doing it and seeing things built for the benefit of the country, companies, and people, and they pay me well enough for me to have relatively few complaints. I’m sure I could earn more in Wall St. finance to which some tried to recruit me at the end of college, but I prefer what I do and the life it gives me with my family.
I wish others were as fortunate to find something they loved at which they could make a good living.
We weren’t on a real gold standard since 1933.
Nixon simply prevented the emptying of the American gold reserves by the French and Arabs.
The real transformational economic event of the 1970’s was the loss of American pricing power over oil and energy prices as swing oil supplier status changed from the Texas Railroad Commission to Saudi Aramco. However, events in the 1970-1973 period do not account for the disconnect in wages vs. productivity which occurred after 1981. Those things are much more clearly linked to our new tax code and new economic system brought in by Reagan.
The Antiplanner wrote:
Liberals accuse Republicans of engaging in class warfare. Conservatives accuse Republicans of engaging in class warfare.
Jonathan Cohn wrote something similar on the New Republic’s Web site: The Different Ways That Republicans and Democrats Want to Divide America
Why did wages stagnate after 1970?
The answer lies in economics. The Fed started inflating during the LBJ administration to pay for Viet Nam and Nixon closed the gold window in ’71. Massive inflation has ensued. The rich benefit from inflation — the middle class, not so much.
IS THERE AN ECHO IN HERE? is there an echo in here?
Closing the gold window had to do with foreign trade balances and especially oil imports and a desire to staunch bullion outflows, and not directly budget deficits and inflation. Price inflation from 1966 to 1972 was no worse on an annual basis than from 1982 to 1992, when it was widely thought to be under control. Gold was used by America to settle foreign accounts, and all major currencies were forcibly linked to the Dollar at stable exchange rates. Inflation did not go wild until February of 1973 (at the end of Nixon’s wage and price controls), which is also right when the Smithsonian system of fixed exchange rates was coming to an end, and this was because of the revaluation of the dollar internationally from its price being steadily fixed for 40 years.
People should remember that in aggregate, the budget deficit – the current account deficit = personal savings, and that price inflation results from net new money being created through budget deficits in excess of economic and population growth so that more money per capita is chasing the same amount of good per capita.
If we assume people want to save a fixed ratio amount of income every year, a rising demand for imports, in the case of the US in the late 1960’s/early 1970’s for exponentially more foreign oil, necessarily drives a higher budget deficit to accomodate the change, and the excesive budget deficit causes inflation which devalues the real value of the dollar. With a foreign trade system where the balance of payments was guaranteed in gold, which is limited in quantity, this situation was untenable, and exacerbated by the falling real value of the dollar. If you can take $35 and get $70 in gold, you obviously take the gold.