A new analysis that shows the U.S. middle class is no longer the world’s richest should alarm more than just those in the nation’s dwindling middle. They already know the story too well.
Decades-long trends that have shifted the nation’s wealth to the very top and widened the gap between rich and poor have undermined our democracy. They also have weakened the nation’s consumer-driven economy.
Regressive state and federal fiscal policies have exacerbated these trends. In Ohio, Gov. John Kasich continues to pursue income tax cuts that chiefly benefit the state’s wealthiest residents and ignore vital investments in Ohio’s future.
It’s time for new, nonpartisan policies and priorities. The national economic debate should no longer be framed and constrained by the recycled rhetoric of the right and left.
No one understood the importance of a broad, healthy middle class better than industrialist Henry Ford. In 1914, Mr. Ford more than doubled, to $5 a day, the wages he paid his workers. That move helped create the U.S. middle class and modern economy.
A century ago, Mr. Ford’s gesture was widely seen as an act of goodwill or a radical idea. In truth, it was neither: The $5, eight-hour workday was a bold business strategy to lower employee turnover, run three shifts a day instead of two, and, most important, enable Ford employees to buy Ford cars.
Today, the idea that the economy needs workers with money to spend appears lost on politicians, as well as corporate executives who make hundreds of times more than their workers. The pay gap between the nation’s CEOs and average workers is 10 times greater than it was a generation ago.
Low-wage service jobs that replaced outsourced and automated manufacturing jobs and shortsighted policies — including regressive taxes, a stagnant minimum wage, and deep cuts to education and other public services — have eroded the standard of living of tens of millions of American workers.
According to a recent New York Times analysis, only a small percentage of American households fully benefits from U.S. economic growth. Lower and middle-income workers in other industrialized nations have received significantly larger raises during the past three decades.
After-tax, middle-class incomes in Canada — way behind the United States in 2000 — now appear to be higher, the newspaper reported. The poor in much of Europe earn more than the nearly 50 million poor Americans.
America’s middle class, once the envy of the world, provided a model of how shared prosperity could fuel an almost miraculous economic engine. No more.
At $7.25 an hour, the federal minimum wage has lagged far behind inflation in recent decades, eroding its purchasing power by 30 percent. If it had risen with the cost of living during the past four decades, it would amount to more than $10 an hour today — still barely enough for single adults to support themselves, even in the affordable Midwest. Ohio’s minimum wage is $7.95 an hour; 330,000 workers — nearly 7 percent of the state’s work force — earn that or slightly more.
Raising the minimum wage and expanding state and federal earned income tax credits would inject millions of dollars into the economy. Low-income workers would use the extra money to buy food, clothing, household items, and other necessities, mainly from local retailers, especially in large and medium-sized cities such as Toledo, where poverty rates are typically double state averages.
Cuts in higher education also have hurt the middle class. Ohio has slashed need-based student aid by one-third in the past decade. Average annual tuition and fees exceed the national average by 32 percent at Ohio’s public two-year colleges and by 19 percent at four-year schools.
Lawmakers should pose a central question about every policy and program: Does it benefit working and middle-class Americans? Those that do will also fuel the nation’s economy.