How the middle class became the underclass
Back in 1988, the income of an average taxpayer was $33,400. 20 years later, the average income got pegged at $33,000. But at the same time, the richest 1% of Americans experienced an income growth of about 33% over the last 20 years. What happened? You can blame the usual suspects – like technology and globalization – but there’s more to the story.
For one, majority of the middle class workers ignored the importance of collective bargaining made possible through labor unions. Union workers traditionally had higher incomes, roughly 15-20% more, than their non-union counterparts. But in 2010, union workers were down to less than 12% of the workforce.
International competition is another factor. Instead of sourcing jobs to the middle class Americans, companies course employment where labor is cheap, say in China. In this case, U.S. has primarily turned into a services-producing economy, which gives premium to college grads and puts those only with high school diploma at a disadvantage.
This economic trend has continued to work against the middle class, but gave unfair advantage to the wealthiest. Outsourcing of labor where it’s cheap, for example, helped companies to reduce cost and boost profit. Public policies continue to sustain the trend as well. The tax cuts from the Bush administration, which extended under Obama’s, sustain the rich’s economic upper hand.
While the America’s wealthiest are on their way to recovery, it seems that the middle class of America needs to put up with the effects of recession much longer.
Source: CNN
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