The Shrinking Middle Class: How We Got Here, And Why

My Comments: Yesterday, I posted Part I of a three part series from the staff of Fortune magazine. I was struck by it’s relevance in today’s America in terms of it’s expose of where we are as a nation, both politically and economically.

In my opinion we have roughly two years to figure out whether or not we want economic prosperity for the masses, or whether we are OK with the idea of turning ourselves into a Middle East type country, run by an elite few with the rest of us scarfing up leftovers from the floor.

It’s taken us roughly 75 years from the end of the Great Depression to get us where we are today. It’s now time to decide if what was started back then is meaningful, and correct some of the mistakes, or say to hell with it. My choice is to find a way to keep moving us into a future that benefits all of us.

The Fortune Staff \ December 24, 2018

Part II – Most Americans consider themselves part of the “middle class,” but no one can agree on what term that means. The problem? If sizing up the middle class is difficult enough, it’s even harder to say that circumstances within this group have changed. But they certainly have. As you’ll discover in this Fortune special report, life has gotten more difficult for the millions of people within the middle class. We dispatched more than 50 people to discover why the American dream has been fading for far too many.

In this section, we dissect the growing income gap by asking experts how we got here—and why. What we learned: Chasing the American dream was once exhilarating; now it’s exhausting.

The Gig Economy Squeezes Workers

For millions of Americans, work brings income but none of the secondary benefits—such as health insurance, paid holidays, or retirement contributions—associated with employment. Though many folks who forgo benefits do so by choice for the autonomy and flexibility (and some are able to plan for retirement independently), a recent McKinsey survey of 162 million non-payroll workers in the U.S. and Europe classified 23 million as “reluctants,” who would prefer to be in the regular workforce (26 million more were characterized as “financially strapped”).

App-based gig employers like Uber and TaskRabbit have helped drive the ratio of payroll workers to contract or freelance workers from 8.3 to one in 1997 to six to one today. This arrangement often overlaps with hardship. A 2018 study of California gig-economy workers conducted by the Public Religion Research Institute found that 48% struggled with poverty. It also found that gig workers reported higher rates of abusive labor practices and racial discrimination than those who worked as employees.

There is also anecdotal evidence the gig economy is taking a punishing toll on workers. In New York City, eight cabbies have committed suicide in 2018 alone—spurring some to highlight the fact that Uber and Lyft have driven down wages.

As the gig economy has expanded, so, too, have initiatives to improve the labor conditions that go with it. Most notably, there are calls for a “portable benefits” regime that would oblige companies like Uber to make mandatory contributions to a health or 401(k) pool that would follow workers across different gig jobs. There is support for such a regime in Congress, notably a bipartisan bill from Senators Mark Warner (D-Va.) and Todd Young (R-Ind.), but the initiative is currently stalled. According to the Brookings Institution, the best hope for workers is now with state and city governments, including a Washington State proposal that would require companies that rely on workers taxed under 1099 status to make contributions to nonprofit “benefit providers.” Still, there’s a long way to go before these “gigs” equate to jobs. —By Jeff John Roberts

Because Being Strapped is Exhausting

Linda Tirado caused a firestorm in 2013 after a blog post detailing her experience trying to make ends meet went viral—and some conservative critics accused her of not being poor enough. It led to the publication of her book, Hand to Mouth: Living in Bootstrap America, which details the contradictions that many Americans bouncing back and forth between technically “poor” and barely middle class are facing: You can go to private school and end up not making enough to live on. You can be married to a veteran and not be able to afford dental care. You can work 16 hours a day and struggle to keep the lights on. We asked Tirado what three things she wishes people better understood about this increasingly common existence:

  • Low-wage work is Chronically Stressful: “People can very easily imagine having to stand 20 hours in a row one day. But they can’t imagine what it’s like to be on day 14 of that, or then to get a one-day break and go back to another 16 days. The cumulative impact is that you’re more and more exhausted as time goes on.”
  • It’s Expensive: “If you’re buying a roll of toilet paper for 99¢, you’re paying an insanely inflated price. But upfront, you only have to pay 99¢. Now if you’ve got $50 and you can go to Target and get a multipack, you’re buying it at 19¢ a roll. And that same economy of scale applies to everything else.”
  • It Defies Labels: “There’s this genteel poor that we’re seeing more and more of. This middle-class poor where they don’t have $400 in the bank for emergencies. But they do have access to $50,000 on a credit card, so they’re keeping up appearances, and they wouldn’t think of themselves as poor.” —By Lisa Marie Segarra

Our Neighborhoods Are Failing Us

The South Shore neighborhood boasts a lakeside park with commanding views of Chicago’s skyline. It’s only a 25-minute commute by train from the downtown Loop, the kind of short hop that young professionals crave. It features stately brick homes that sell for $500,000 and up, magnets for academics and doctors.

What South Shore doesn’t have, however, is a supermarket. It hasn’t had one since 2013, when grocery giant Safeway shuttered its Dominick’s subsidiary and closed all its stores. More than five years later, the hulking storefront at Jeffery Plaza that neighbors still call “the Dominick’s” remains vacant. For many residents, its emptiness is a dual affront: It’s a symbol of the hollowing-out of the local middle class and an obstacle to working people struggling to get ahead.

“This has always been a ‘first house’ neighborhood,” says Carlo Rotella, a Boston College professor and South Shore native whose history of the area, The World Is Always Coming to an End, will be published in April. Its orderly brick bungalows were financial ­cornerstones for thousands of middle-income families—including those of Oracle cofounder Larry Ellison and Michelle Obama. But ­Rotella estimates that 3,000 South Shore residents lost factory jobs in the 1960s and 1970s. And more recently, the Great Recession hammered the area’s teachers, managers, and service workers, leaving many upside-down on their mortgages.

As families left town or slipped down the economic ladder, household income in South Shore dropped; among residents with jobs, incomes now sit about 40% below the national average, according to Census data. That helps explain why the Jeffery Plaza location is the only one of 11 former Dominick’s in Chicago that hasn’t been acquired and reopened by another grocery chain. Not coincidentally, South Shore residents travel an average of 2.9 miles to buy groceries, a greater distance than residents of any other Chicago neighborhood, according to research by the JPMorgan Chase Institute.

That’s a modest inconvenience for upper-income professionals. But it’s been “the biggest disruption to our ­middle-class and working families, and our poor families,” says Val Free, lead steward of the Neighborhood Network Alliance, a community activism group. A six-mile roundtrip can be a prohibitive time suck for hourly-wage earners, especially if they’re juggling childcare or depending on public transit. So more households shop at local bodegas, where selections are small, and where higher prices eat into lean budgets. Among the few reliable local sources of good produce: the charity food pantry at St. Philip Neri, the Catholic Church around the corner from the Dominick’s.

This summer, a city ­commission approved a $10 mil­lion tax subsidy to bring a retailer to South Shore, but a deal remains elusive. To local activists, getting a grocer is an existential necessity. “We have a lot of smart people in the community, we have some of the best transportation in the city, and we have the amenities we need to attract younger families,” says Free. But to nurture the middle class, she adds, “you need strong business corridors.” —By Matt Heimer

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