25 March 2009

Shrinking Wages For Middle Class Americans

Originally Posted to Detroit News

WASHINGTON -- The dream of a comfortable middle-class lifestyle is slipping further out of reach for many Michiganians as they've watched household incomes barely grow over the past three decades.

The phenomenon is being experienced across the country, but is more pronounced in Michigan, according to a Michigan State University study, which found that those in the bottom half of the middle class have been hit particularly hard.

Little improvement in recent decades for middle-income households falling between $30,000 and $90,000 has raised alarms for the Obama administration, which has pledged to restore the middle class.

That help can't come quick enough for Dave and Deborah McCreless, who, like about half of Michigan households, fall in the middle-income range.

Dave, a 38-year-old stay-at-home dad in Dearborn, says his family is struggling to keep up with bills -- old student loans, credit card debt, gasoline and electricity, and prescriptions. Deborah, 44, the primary breadwinner who is a personnel officer at Wayne State University, last received a big pay jump seven years ago, he said.

"My father-in-law helps us with the mortgage. Otherwise, we could have lost the house last year," Dave McCreless said.

"It's one thing on top of another, and you can't catch up. There isn't a middle-class dream anymore."

Adding to the unease is the uproar over $165 million in bonuses for executives of troubled financial giant AIG, which hints at the kinds of "class warfare" fights that likely lie ahead over what the federal government can or should do to address income growth disparity.

Nearly 2 million households in Michigan fall into the middle-income range of $30,000 to $90,000 a year, said Charles Ballard, an economist at Michigan State University. Ballard and MSU economist Paul Menchik are studying the embattled middle class.

Those on the lower end of that middle-income spectrum have fared especially poorly.

The lower end of the range in Michigan saw inflation-adjusted incomes only go up 1 percent between 1976 and 2006, Ballard and Menchik found.

In the United States overall, the bottom end of middle-income households saw an inflation-adjusted income growth of 20 percent over the three decades, Ballard said.

The higher end of the middle-income spectrum has increased 22 percent in Michigan, versus 40 percent nationally over three decades, he said.

"Basically, if you are at the bottom (of the middle-income spectrum), incomes haven't changed at all, adjusting for inflation," Ballard said of national and Michigan household incomes between 1976 and 2006.

"It used to be lower-middle-class folks saw increases in their real income in the '40s, '50s and '60s, if you had a high school degree," he added. "But that stopped about 30 years ago."

The wealthy -- those in the top 5 percent of all households -- have seen their income jump almost 60 percent nationally, and in Michigan, more than 40 percent, Ballard said.

The White House's Middle Class Task Force is looking for policy solutions that might include, for example, ways to boost college graduation rates, reduce health care and education costs, bolster labor unions and create "green" jobs that are less likely to be sent overseas.

"This is not something the government can fix all by itself," said economist Jared Bernstein, the executive director of the task force.

"But the government can help to create certain conditions that balance out some of the excesses that helped to get us where we are."

Vice President Joe Biden, who is leading the effort, says the task force's goal is "to get the middle class -- the backbone of this country -- up and running again."

On the other end of the political spectrum, U.S. Rep. Thad McCotter, R-Livonia, agrees middle-class families are struggling, but offers different solutions

"The demise of the manufacturing base is the No. 1 reason for the continuing erosion of middle-class prosperity," said McCotter, who wants the Obama administration to focus more on ways to strengthen and save manufacturing jobs.

"We have to get back to the basics of decentralized entrepreneurial opportunities for people, and the necessity of having a manufacturing base in this country. Those are the two big things that we really need to do," McCotter said.

While not all experts agree on the causes, Ballard and other economists say a number of factors have contributed to stagnating middle-class incomes:

• An economy that rewards education, particularly college graduates, at the same time that college graduation rates in the United States have risen slowly.

• Huge salaries and bonuses of top company officials.

• Competition from lower-wage countries, such as China and India, that has pushed U.S. wages down.

• Declining labor union clout.

• Drop in manufacturing jobs.

In the eyes of economist Timothy Bartik of the Kalamazoo-based W.E. Upjohn Institute for Employment Research, getting a higher education is critical to climbing the ladder and earning a bigger paycheck.

Bartik is alarmed by the relatively slow growth of U.S. college graduation rates over the past three decades.

In 1975, nearly 22 percent of those age 25 to 29 had a bachelor's degree or higher. In 2007, 29.6 of that age group had college degrees.

"Technology has changed in such a way that for workers with a high school diploma or less, their skills are less valuable in the work force," Bartik said.

Terrell Dubose, a 48-year-old shuttle bus driver in Detroit, said he's never had the resources to do more than take a few college courses, so he feels stuck financially with having only a high school diploma.

"The price of everything has shot up, so it feels like you have less," Dubose said. "The rich are taking more of the pie."

Tom Clementson, 57, a laid-off road construction worker in Indian River, said he's staying afloat until he gets back to work because of having unemployment checks, dipping into savings and having paid off his house.

But, as he looks back over the past 30 years, he feels he ran hard to end up pretty much in the same place.

"My income gradually went up, but it got to a point where it just stopped," Clementson said. "You think you are working all those years, and you get three or four years from 60 and you don't know if you will be able to retire."

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