Perspective: Gore is wise to address middle-class economic anxieties

Gore is wise to address middle-class economic anxieties

By FREDERICK R. STROBEL

Al Gore surprised many people early this month when he unveiled his economic program offering a vision of better times for the American middle class. His opponents immediately scoffed, some suggesting that times have never been better -- with the unemployment rate at 4.1 percent, home ownership approaching 70 percent of U.S. households, and consumer price increases of only about 3 percent annually. The pundits say voters are too content for the issue to get much political traction.

This contentment, however, is illusory. The economic fact is that, in recent years, the American middle class has taken a substantial hit.

The discernible slide of the middle class began in the early 1970s. The U.S. Census Bureau publishes a measure that counts the number of families who earn from between half the median income to twice that level. Based on these calculations, the number of families in this category, considered middle income by the Census and middle class by many economists, fell from 71.2 percent in 1969 to 63.3 percent in 1989. Of those leaving the middle class, 3.8 moved to higher brackets and 4.1 percent to the lower class. And little has changed since then. The average weekly earnings fell -- in inflation-adjusted dollars -- from $315.44 in 1973 to $255.07 in 1995, and, even with the robust economy since that time, rose to just $271.15 in 1999.

Herein lies a major source of anxiety among middle-class families. Yes, they have more income because the economy is roaring and because they are able to work as many hours as they want. But, should a slowdown occur, many families would be in severe economic straits.

Most important, the causes of the economic decline of the American middle class from 1973 to today have not gone away. First, wages fell due to a major increase in the supply of labor consisting of more working wives, record numbers of immigrants and the entrance of the "baby boomers" into the labor markets. Wages also fell as union membership was decimated, declining from 30.4 percent of the workforce in 1962 to nearly 12 percent today.

Then middle-class type jobs were lost as American manufacturers shipped their operations overseas, generally to Asia in the 1970s and 1980s and then to mainland China and Mexico in the 1990s. Corporate mergers and acquisitions flourished, picking up steam in the early 1980s and accelerating still in the late 1990s, which shed many middle-class jobs. With all this, many other middle-class jobs were lost as governments privatized many of their services.

Finally, increased financial burdens on the middle class took their toll. Corporate income taxes fell from 21.8 percent of the total federal tax take in 1965 to 10 percent today. The difference has been made up by the individual taxpayer, as the personal income tax share has risen from 41.8 to 48.6 percent of the total and the Social Security share has gone from 19 percent in 1965 to over 33 percent today.

Further, the consumer was hit hard with rising oil prices in 1973 and 1979-80 and the accompanying higher interest rates that they suffered when they purchased their homes.

Which brings us to today. Oil prices have risen from about $10 per barrel in February 1999 to more than $37 per barrel this past week. Alan Greenspan, maintaining a tight grip on the nation's money supply, is avowedly anxious to see the economy slow down. The oil shocks of 1973 and 1979 brought on severe recessions. And low wages are causing folks to dip into their savings. Consumers averaged record-high consumption levels last year, saving only 2.4 percent of their disposable incomes. Many economists believe they are spending money based on the rising values of their stocks or their homes or both.

Given the fact that the root causes of middle-class decline have not gone away, the case for anxiety in working America is very credible. Gore has hit upon a very real issue. Times are good because the economy is roaring. Should it cease to roar, the middle class and the lower classes are extremely vulnerable to economic hardship in this new America of large corporations, minimal social programs and downsized government.

From a political standpoint, Gore's focus on the middle class also signals a clear break with Bill Clinton's economic approach, which was pro-Wall Street, minimal government, budget balancing and hands off big business. The country can now afford to pay more attention to the middle class as Clinton's policies, aided by a technology explosion, had their measure of success.

Gore is right. In these strong economic times, America's middle class has been left weakened. It deserves our attention.

-- Frederick R. Strobel is the Selby Professor of Economics at New College of the University of South Florida in Sarasota. He is the author of Upward Dreams, Downward Mobility: The Economic Decline of the American Middle Class (1993) and The Coming Class War and How to Avoid It (1999). He can be reached at fredstrobel@home.com.