Remember the Middle Class Task Force? Gee, how could you have forgotten? President Obama set up this group shortly after taking office in 2009, to identify the strains weighing on mainstream Americans and come up with solutions. So far, the MCTF has issued nine reports.
The middle class is still struggling, however, which is why Obama has returned to the question of how to help them. In his recent speech in Galesburg, Ill. — billed by his advisers as the kickoff to a series of freshly recycled ideas on how to boost the economy — Obama bemoaned “the erosion of middle-class security” and said we need more jobs, more investment and more-affordable education if we want to strengthen the backbone of the U.S. economy.
Obama’s economic proposals, while unlikely to get much of a hearing in Congress, are mostly sensible ideas that economists think would, in fact, help the economy. And there’s a wealth of data showing that quality of life has been slipping for many Americans. Yet political jawboning has also created a whole mythology around the concept of the middle class and what it takes to keep this heaving creature alive. If Obama is going to instigate yet another public debate about the welfare of this population, then it’s worth rethinking what the middle class is and what will determine its future.
Who are the middle class?
There are many ways to define “middle class,” but if you limit it to households between the 20th and 80th income percentiles, it would include families earning somewhere between $20,000 and $102,000 per year. That would be about 65% of all U.S. households, or roughly 205 million Americans. Polls show that the percentage of Americans who consider themselves middle or working class is between 80% and 90%. There are a lot of qualifiers: A household income of $50,000, which is roughly the median, goes a lot further in St. Louis than it does in San Francisco, for instance. But however you measure the middle class, it includes a lot of people.
That’s the problem. It’s very difficult to generalize with any accuracy about such a large group, and that’s why the mythology of the middle class has strayed far from reality in some important ways. Here are three myths that distort the way we understand and talk about the middle class:
It rises and falls in unison. The middle class is generally considered to be one monolithic group of Americans bound together by unbreakable socioeconomic forces and destined to experience the same fate. Yet the modern economy is nothing like that. In fact, a defining characteristic of today’s economy is fragmentation: the disaggregation of economic interests into smaller and more-specialized groups that may each face prospects dramatically different from other groups.
In real terms, that means middle-class people who have the skills needed in today’s economy — which might be scientific or technical training, data-crunching skills or a knack for shameless self-promotion — are likely to get ahead the way we think middle-class people are supposed to. They’ll get good jobs, earn raises and promotions, go on nice vacations and have enough money left over to save for retirement. Location matters, too: Your prospects are much better if you live in a coastal city, a tech hub or any area with lots of economic activity.
There are also middle-class people, by contrast, whose skills are stale, who are deeply rooted in declining cities, and who are simply unwilling to do something unfamiliar to enhance their prospects. They’ll continue to fall behind, even if they remain above the 20th income percentile and technically are part of the middle class. It's not necessarily easy or cheap to break away from the forces of decline, but the alternatives are often even less appealing.
Globalization is only for foreigners. Another differentiator that segments the middle class into winners and losers is the extent to which people participate in the global economy. If you work in a multinational corporation, help develop new technology, peddle information via the Internet or deal with products that are exported or imported, you have some exposure to the global economy.
That’s good news.
The concept of the U.S. economy as a discrete ecosystem bound by national borders has become a fiction. More than ever, growth comes from trade, and that genie is not going back into the bottle. In some fields, the best opportunities may even be overseas, and the more people who are unwilling or unable to go there, the more advantages are enjoyed by those who are.
When we harken back to the glory days of the middle class, we tend to recall an era when the U.S. economy was dominant, wealth generated in America mostly stayed in America, and you could have a rewarding career even if you stayed in one place the whole time. For better or worse, those days are over. Middle classers who are willing to go where the opportunities are can still discover prosperity. Those who don’t, won’t.
Nobody can get ahead when the middle class is declining. The most pernicious consequence of the declining-middle-class narrative may be the impression that it’s not even worth trying. If the whole middle class is falling behind, what’s the use of trying to be one fish swimming against a school of millions?
This , of course, is the tyranny of statistics. Many people forget that it’s quite possible for their own income to rise even if median income is falling. Just about anybody can be an exception to the rule. In fact, there are still millions of middle-class Americans who are getting ahead, despite the overall direction of this group. Silicon Valley is booming, with no end in sight to the digital revolution. There’s a shortage of skilled tradesmen such as welders and electricians in some areas. Once-beleaguered firms such as Ford (F) and GM (GM) are hiring engineers and paying good salaries. And many firms want workers who have gone to the trouble to garner multiple skill sets, such as a technical specialty along with foreign-language proficiency.
It’s true that it has gotten harder to earn a good living. But it’s also true that opportunity still exists for those determined to find it. Forget government programs: The best way to really strengthen the middle class might be to instill an ironclad will to succeed, no matter what it takes.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.