Impoverishment of the Middle Class
& the Global Economy

Read this first:
Who is the Middle Class? and Debunking Common Myths about the Middle Class 
Graph your and your families socio-economic characteristics to see how your class status compares with others in the United States.

Read about the distribution of USA income and where you potentially will end up in your life!

In 1950 the portion of federal taxes paid by corporations was 26.5%, but by the year 2000 the corporate tax share had fallen to a mere 10.2%. This decline of 16.3% was slyly shifted to the citizens of the middle class in the form of Social Security and Medicare paycheck deductions which increased from 6.9% of federal taxes in 1950 to 31.1% in 2000.

From 1995-1998, middle-income households added 70 hours a year to their work schedule, almost two extra weeks. From 1989-1998, the increase in work was 3.4 weeks. Most people are working longer hours and are glad to be earning the same or even less, when measured against inflation! Another trend is corporations moving professional jobs overseas. Ron Hira, professor at the Rochester Institute of Technology, has been studying this new trend. It's almost every single day that we get a new news story of a new announcement from some major company. And these are the who's who of technology companies: Hewlett Packard, Electronic Data Systems, IBM, Yahoo, Microsoft, and on, and on, and on, that they're expanding operations overseas. These same companies are either cutting back in the U.S., or they're not hiring. For U.S. corporations, the economic benefits of sending jobs to India are almost irresistible. Consider the results of one recent survey:

Occupation in USA in India These numbers point to a transformation of the American workplace with white-collar jobs being shipped offshore to far away places as companies seek out the lowest wages. They're using euphemisms like "realigning resources," "rebalancing the workforce," and "redeploying people." [Source: PBS, Now with Bill Moyers, 29 August 2003.]
software programmer $66,000 a year  $10,000 a year
mechanical engineer $55,000 a year  $5,900 a year
accountant $41,000 a year  $5,000 a year

Recent studies predict more than half a million technology jobs will move overseas by the end of 2004. Financial services companies will be next, also expected to send more than half a million jobs abroad in the next 5 years. In fact, over the next 15 years, 3.3 million white-collar jobs are predicted to go overseas -- jobs now held by middle class workers who've traditionally been the backbone of the American economy. Jobs, once held by people in the USA, are moving to India: article on customer services and another article about call-centers and IT departments.
Once upon a time in the United States, poverty and the poor were easy to recognize. Against a background of mass prosperity, the suffering of the "other America" stood out sharply. Poverty meant a state of serious want, the lack of decent food, clothing, and shelter. The poor were those who, for whatever reason, could not or would not provide these necessities for themselves. Or so we thought.

Today, poverty has changed. We cannot rely on conventional wisdom when talking about it, although the "other America," captured and distorted by the images of conventional wisdom, persists and is unlikely to disappear. Slowly, quietly, a new kind of poverty has crept up the rungs of the social ladder where it now threatens people who consider themselves solidly and faithfully middle class. The new middle class poverty has largely escaped attention. Its victims don't always fit our image of "the poor."

In the last fifteen years, 60 percent of households in the United States have lost income in real terms. When only the last five years are considered, the figure jumps to 80 percent of U.S. households. In 1993, real median household income in the United States fell by $312 -- even though the economy grew robustly. By 2002, median household income was $42,409 -- falling in the last three years. According to a 1994 report released by the Census Bureau, the percentage of Americans working full-time but earning less than a poverty-level income for a family of four (about $14,000 a year) rose by 50 percent between 1979 and 1992. In 2002, poverty-level income for a family of four was $18,392.

In 1973, the average worker in the USA earned $9.08 and by 2003, it was $8.33, when adjusted for inflation!

Thus, this new poverty is the experience of constantly slipping standards of living, of "running to stand still." The era of mass prosperity is over -- we are now in an era of mass anxiety, where the American worker is working faster, harder, and longer, and is losing ground.

Why is this happening? Because the structure of the economy in which we live and work has changed dramatically. Large corporations have expanded their operations to every corner of the globe. These "transnationals" have relocated entire industries, moving them away from high-wage, unionized areas in the United States to places with large pools of cheap labor, lax environmental regulations, and governments hostile to democratic labor organizations.

Meanwhile, labor unions, which have been fairly effective at raising the standard of living for working Americans, have had the rug ripped out from under them. The enforcement of our labor laws has been gutted, and it is nearly impossible for workers to exercise their right to organize. The transnational corporations have no loyalties beyond zealous devotion to their shareholders. They have the advantages of international mobility and unlimited resources while American workers, who come attached to families, homes, and communities, do not.  As smokestack industries desert the United States, the American worker is left behind.

We are left with the hope of maintaining a decent standard of living with a job in one of the newly-emerging "service" industries. If only that hope were justified. Over the last decade, the creation of jobs in the United States has occurred mainly in the service sector. Positions are mostly part-time or temporary, wages are low, benefits are few or non- existent, and unions have yet to gain a toe-hold. Yes, our economy has created millions of new jobs, but jobs flipping burgers, entering data, and pushing mops hardly allow people to provide for their families, buy homes, or save for college tuition. Of course, some lucrative jobs have been created over the last decade. A small number of high-wage, high-tech "boutique" jobs have appeared. These jobs require an advanced degree of (costly) education and employ relatively few people. The key words here are "small number" and "few people." Roughly 80 percent of the jobs created in the United States this decade are low-wage and/or part-time. While the experts predict a glowing future for "symbolic analysts" (the 20 percent of the population who will earn their bread by manipulating information in highly specialized ways), they are suspiciously silent about the prospects for the remaining 80 percent. The United States has become a three-speed society with a prosperous minority at the top, a downwardly mobile majority in the middle, and a marginalized minority at the bottom.

It's no surprise, then, that the attitude of the middle class is grim. Over-worked, underpaid, and faced with increasing economic vulnerability, we grit our teeth when the Wall Street Journal tells us that "the whole concept of a job--steady work at steady pay from the same employer--must be discarded, because the old ways of defining work are no longer meaningful." Middle class Americans are angry and frustrated about these changes. But most of us are not directing our anger at the source of our problems: the transnational corporations and the influence their money wields in our democracy. Instead, too many of us are venting our rage at the most marginalized members of our society, people who threaten our sense of social status, order, and authority. We trust political leaders who promise to solve our troubles by slashing programs designed to help the poor.

This racist, sexist politics of scapegoating has always existed in our national life. But it runs against the grain of our highest common ideals-the idea that all people have dignity and value, and are entitled to the necessities of life. During the postwar period of mass prosperity, it was believed that our free-market economy would make possible the achievement of equal dignity for everyone. (Remember the popular slogan of the period: "A rising tide lifts all boats.") But as we've seen, our nation is no longer in a period of mass prosperity, but one of dwindling expectations and decline. The globalization of the market has eroded middle-class affluence, and with it, our generosity. We no longer want to fix the hole in our neighbor's boat when our own boat is sinking.

That's part of why the political climate has become so ugly. Political leaders are tripping over each other in a race to see who can most effectively dismantle the few programs we have created to help each other survive hard times. When the recognition that we owe each other a minimum level of security comes under siege, the attack will not end with the destruction of programs and protections for the destitute. Universal programs like Social Security and Medicare will become relics of the sentimental past, too. As concepts like "justice," "equality," and even "democracy" disappear under rightwing assault, we forget that in the new globalized economy, waging a war on the poor means waging war on ourselves.

Taxes and Incomes

Punitive legislation directed against immigrants and the poor will not return security and prosperity to the middle class. If we really want to return to economic security and restore the fabric of our democracy, we'll need to take a hard look at how resources are distributed in our society.

Source: Democratic Socialists of America (DSA)