Steve Lopez unleashed a column today that sounds like Howard Dean’s talking points:

… In the new economy, finding work isn’t the problem. But the odds on finding work that keeps you in the middle class — and able to handle those little necessities like paying the kids’ doctors’ bills — aren’t much better than the odds on winning at “American Idol.”

“We have a proliferation of low-wage jobs,” says Kent Wong of UCLA’s Center for Labor Research and Education. “The changes in the economy have had a devastating effect on middle-class jobs and communities, and this is compounded by the problem of troubled public schools that aren’t preparing people for the future.”

… I’m not here to tell you there’s no good job but a union job. Unions have always created many of their own worst problems. But there’s a flood of money in this economy, all of it flowing uphill toward the already rich, while the middle class shrinks as fast as the unions that used to fight for a fair share.

“At the very top, the champagne is tastier than ever. But for everyone else, I think there’s a lot of uncertainty,” says UC Berkeley labor and economics professor Harley Shaiken.

“For your dad and millions of others, a competitive firm meant one that offered good health benefits and a pension. Today, a competitive firm offers no health benefits and no pension. And class and connections have replaced hard work as a means to doing better.“

He frames the story around the closure of the Wonder Bread bakery in San Francisco where his father worked. I understand the emotional impact that could have, but that’s no excuse for hyperbole and poor use of statistics.

Is the middle class shrinking? Perhaps a little over a long period of time. Looking at census data for white households only, the share of aggregate income received by the middle 60% of white households dropped 5.6% over almost 40 years. Almost half that change (2.7%) came since 1992, all of it in the ’90’s boom. Since 2000 there has been a slight reversal of the trend:

1967: 52.6%;

1992: 49.7%

2000: 46.8%

2003: 47.0%

(white households is the relevant group: black household income has been improving so rapidly it should be isolated, and Hispanic household income is affected by the huge number of new immigrants in the last fifteen years)

So in forty years the middle class has shrunk about 10%. Given that the first part of this period includes the retrenchment of large swaths of the American economy, and the latter part includes the ’90’s bubble, that’s not surprising.

Are middle class communities devastated? There’s no doubt that as certain industries decline, their hometowns can face major problems. But there is a nationwide suburban building boom going on, with 1.2m new houses built last year averaging 2,140 square feet — more than half priced under $250k. That does not sound like middle class communities are hollowing out.

Is the meritocracy dying? Research indicates that what economists call “mobility” — the movement of families through different income brackets over time — has changed little:

Using their data on working-age households, we find no evidence of an increase in family income mobility since the 1970s. Consistent with earlier studies, we find that mobility held more or less constant from the 1970s to the 1980s. Based on newly available data from the 1990s, we estimate that mobility decreased slightly in the 1990s.

For instance, of families that were in the middle 20% of incomes in 1988, by 1998 10.9% had fallen into the bottom 20% while 12.6% had risen to the top 20%. The rest stayed in the middle 60% (click on the image to see full size):

So this is by no means a static society where the rich have pulled up the ladder behind them.

In general, individuals should expect to see increasing income over their lifetime. A report from the Dallas Fed shows what happened over time to the income of people who were roughly college age in 1975. It clearly shows the value this economy places on a college degree and the opportunities that affords (click on the image to see full size):

Lopez’s complaint that the middle class is more inaccessible doesn’t hold up.

Does it take something different to get ahead? I’m not sure how Lopez’s Berkeley source can support “class and connections have replaced hard work as the means to doing better.” Anyone? Bueller?

Is anything really different? Lopez’s basic problem seems to be that the economy today isn’t the economy of that he grew up with in 1950’s and ’60s. And that’s true. The period 1946 to about 1966 was one where many U.S. industries faced little foreign competition, with the result that there were many artificially profitable sectors with cash to spare for their unions and benefits plans.

Thus, for a little while, you could graduate from high school and expect that if you worked forty hours a week in a factory, you would be well paid and could afford a middle class lifestyle.

Many of those industries — textiles, steel, shipbuilding, and others — paid a price for the complacency of their management, the voracity of their unions, and their failure to reinvest their cash in their businesses, and are gone from these shores. Those that remain are much more tenacious.

The result is that the days of supporting a middle class lifestyle with only a high school education are, for the most part, gone. But aside from that one idyllic era after the war, could a factory worker or the equivalent ever have that expectation? In the hell that most cities were in the late 1800’s? In the Depression? No. It was a transient thing, and its time has past.
This is not to deny the serious impact of these macro trends on a middle-aged blue collar worker who loses his or her job. But there are no generalizations about “devastating effects” and “shrinking middle class” to be made here. The middle class is about as big as it has been for years. Income mobility is about the same, so it’s reasonable for people to think that they can do better for themselves. There are plenty of middle class jobs –they just aren’t the same ones as forty years ago.
The story about the Wonder Bread bakery was nice. The rest was overreaching.

(click on “Read the rest of this entry” below to see some additional material)

Technorati Tags: LA Times, LAT, Los Angeles Times, steve lopez

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Resources:

Cafe Hayek, at this link and five earlier ones, discusses income inequality and shows you where to go for more.

At least Lopez didn’t blame his nemesis the Gov.

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Lopez also makes this odd statement:

… union members are publicly ridiculed by Gov. Arnold “Fantastic Jobs for Everyone” Schwarzenegger, and business leaders are trying to take away their pensions, their job security and even their right to campaign against such thievery.

Leaving aside the hyperbole of the first two pieces, whose “right to campaign” is being taken away? Does he mean California Prop 75, which would require public employee unions to obtain member’s consent prior to using dues for political purposes? If not that, what?

This entry was posted on Monday, August 1st, 2005 at 12:03 am by A Senior Administration Official and is filed under Los Angeles Times, I knew I'd use my Econ major. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.