The Destruction of the Middle Class

Updated January 9, 2015

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We've heard the claim that strong labor unions created the middle class, and I assume that means by moving people up from the lower class rather than down from the upper class. I doubt if there is any truth to that assertion. By definition, income increases when production increases - they are two sides of the same coin.  Likewise, the incomes of individual workers increase when productivity increases, and it is education and technology that cause productivity to increase. President Obama seems to agree. In his 2/24/09 address to Congress, he said “the largest middle class in history” was created when “the GI Bill sent a generation to college.” He went off script again in January 2015, speaking of his proposal to offer free tuition to community colleges: “For millions of Americans, community colleges are essential pathways to the middle class.” (source)

I've also heard claims that the destruction of the middle class is due at least in part to a concerted assault on organized labor. However, there seems to be no evidence that the middle class is indeed shrinking. In his December 23, 2007 article 5 Myths About the Poor Middle Class, economist Stephen Rose says that

 . . .fewer people today live in households with incomes between $30,000 and $100,000 (a reasonable definition of "middle class") than in 1979. But the number of people in households that bring in more than $100,000 also rose from 12 percent to 24 percent. There was no increase in the percentage of people in households making less than $30,000. So the entire "decline" of the middle class came from people moving up the income ladder. 

Real median household income (in 2007 dollars) has risen from $38,771 in 1967 to $50,233 in 2007. It peaked in the late 1990s and it has taken 6 years to reach those levels again after the recession of 2001 (Census Report, page 5). The 12.5% poverty rate for 2007 is below the 12.9% average for the 38 years since 1970. The lowest rate for that period was 11.1% in 1973 and the highest was 15.2% 1983 (source).

The "typical GM assembler" makes over $72,000 a year (calculation), so if middle class incomes range between $30,000 and $100,000, all it takes to put the family of a UAW assembly line worker over the top into the upper class is a spouse with a job that pays at least $27,000.

So the rumored demise of the middle class is greatly exaggerated, as shown by the fact that the size of the lower class has not increased. Speaking of which, shouldn't liberals be less concerned about the middle class, where even at the lower end of the income range families have enough to eat and roofs over their heads, and more concerned about the lower class, where real poverty is experienced? I'd like to see everyone do well, but my primary concern is for the really poor - people who don't get enough to eat, who don't have decent homes, who don't have access to health care. Many of these people are in this situation because they can't find jobs, and the reason they can't find jobs is that we don't have a free labor market.

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Unions are Killing Michigan
The Wagner Act
What Economists Think
Why the Market Wage is Better
The Illogic of Collective Bargaining
Market Wage vs. Fair Wage
Imagining a Free Labor Market
Rights and Freedom
Destruction of the Middle Class
Employee Free Choice Act (EFCA)
Job Security
Collective Bargaining and Unemployment
Social Costs of Collective Bargaining
Ending Fringe Benefits
Democrats and Unions
Collective Bargaining in Government