The Journal Sentinel Denies Middle Class Decline

A recent Milwaukee Journal Sentinel editorial minimized concerns about increased economic inequality when it suggested: "If the middle class is shrinking, it may just be because some of its former members have moved up...There is no doubt that many people feel under stress because of smaller wage gains in recent years and rising costs. But the middle class is holding its own."

That argument is a pretty hard sell since, contrary to the Journal's claims, 90% of Americans have seen their incomes fall and only the extremely wealthy have experienced significant increases. Not since the Roaring Twenties have the rich been so much richer than everyone else. And we all know how that ended up!

But even without the newest numbers, the Journal's argument is a dubious notion in the dairy state where household income fell more than in any other state over the past six years (-2.2%) and health care costs are more than 20% above the national average. Milwaukee has the nation's 7th highest poverty rate, ranking even higher than even pre-Katrina New Orleans, the 4th highest child poverty rate, and the highest (or 2nd highest) African American unemployment rate (44%).

The most recent numbers only further weaken the Journal's argument

In 2005 while the economy grew at a 3.25% rate and productivity by 2.1%, 90% of Americans' real market income (i.e., income aside from government transfers) actually fell $172 (-0.6%).

All income gains went to households in the top 10%, people earning above $100,000. Moreover, the higher up the income scale—say, the top 1% and above—experienced the largest gains of all.Income growth for households within the 90-95th percentile was up a modest 2.2%. But wealthy households did much better. In fact, income growth among the top half of the top 1% (a group whose average annual income is already $1.8 million) soared 16%!

300,000 Americans earned almost as much income as the bottom 150 million Americans. They received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980.

The top 10 percent of Americans collected nearly half (48.5%) of all reported income in 2005 up from roughly 33% in the late 1970s. It is only slightly below the Gilded Age peak of 49.3% in 1928.

The top 1% received 21.8% of all reported income in 2005, doubling their share of income in 1980.The top tenth of a percent and top one-hundredth of a percent recorded even bigger gains in 2005 over the previous year. Their incomes soared by almost 20% in one year, largely because of the rising stock market and increased business profits.

The result of these trends is that, in 2006, the share of national income going to wages and salaries (51.6%)was at the lowest level on record.Increased health care and other benefit costs do not explain this redistribution since the share of national income going to total employee compensation in 2006 — 64.0 percent — is also near an all time low.

What, then, explains all this? Well, follow the money!

Corporate profits captured a record 13.8 percent of national income in 2006. In the early 1990's corporate profits were less than 10%.

These trends lead to two clear conclusions. First, the factors driving inequality—diminished union presence, globalization, surging CEO pay, upper income tax cuts—are funneling growth to the top of the income scale and dramatically shaping the economic fate of America's working families. Second, these trends argue against additional regressive tax cuts that favor the wealthiest and exacerbate the seriously skewed pre-tax income distribution.

Milwaukee has been hammered by a loss of blue collar middle class jobs. From Tower/A.O. Smith to Delphi, working men and women aren't just feeling stressed as the Journal suggests. They are actually losing union jobs and their foothold in the middle class.

Nationally, according to the Bureau of Labor Statistics, more than 30 million people have been forced out of jobs since the early 1980s. Most have seen their incomes decline! While nearly 50 million new jobs have been created during this period they are mainly at lower pay. Among those who have lost work, only a third held new jobs two years later that paid as well as those that were lost. Another third were in jobs that paid, on average, 15% to 20% percent less than their previous employment — while the final third had dropped out of the labor force entirely.

Michigan, which shared the dubious distinction with Wisconsin of experiencing a decline in household income, reported a jump in net out migration last year: some 42,300 people left, up from 29,700 in 2005. That was far and away the largest outflow from the state since 1984, during the Rust Belt's deindustrialization crisis. In some Michigan neighborhoods that had been home to auto workers, the New York Times reports, houses are now selling for less than the prices of some of the vehicles rolling off of assembly lines in Detroit, Dearborn, Lansing and elsewhere in the state.

Economic inequality and insecurity are growing. Dissatisfaction with these developments was a key factor in the Democratic take-over of Congress. The Journal's denial of these realities is a triumph of ideology over reality that trivializes the plight of Wisconsin's working people.