USA TODAY International Edition
Can Trump’s middle class revival last?
Absent policy changes, recent decline can resume
For years, Andrew Gehrt, of Greenville, South Carolina, bounced among several low- and mid-wage jobs in food services, retail and sales until he was laid off from a position as a sales rep for a water filter company. ❚ But after being unemployed for a year, the 29-year-old landed a job in September as business development manager for a tech company, at a salary of about $60,000. ❚ “I felt stuck,” he says. Now, “I have a very hopeful outlook for the next five to eight years.”
In his State of the Union address last week, President Donald Trump vowed the country can make its middle class “bigger and more prosperous than ever before.”
Despite economists’ longstanding laments of a shrinking, “hollowedout” middle class, Trump’s pledge didn’t seem so quixotic, at least judging by recent history. The vibrant economy, juiced further by the Trump-led tax cuts and federal spending increases, has lifted employment and wages for workers at all levels, including the middle class. The manufacturing, construction and oil industries – traditional middle-class bastions – have enjoyed revivals the past couple of years.
Yet analysts say America’s middle class will soon resume its long-term decline, largely as a result of automation and the continued offshoring of factory jobs, unless policymakers take dramatic steps to alter that course.
“The trend, left to its own devices, is going to get worse,” says Richard Reeves, director of the Future of the Middle Class Initiative at the Brookings Institution.
Economist Adam Kamins of Moody’s Analytics agrees, adding, “I think it’s a major concern for the U.S. economy.”
Median U.S. income is up
Mid-wage jobs, defined as paying $14.18 to $23.59 an hour, are expected to grow by 4.45 percent from 2018 to 2023, compared to about 6.26 percent growth for both low- and high-wage jobs, according to a CareerBuilder study. Fifty-eight percent of jobs lost during that period will be mid-wage, the report says.
The recent trend has been positive. Median U.S. household income – which includes paychecks as well as Social Security, public assistance and investment income – rose 1.8 percent to an all-time high of $61,372 in 2017,
according to the most recent Census Bureau figures. That followed gains of 5.2 percent in 2015 and 3.2 percent in 2016. Yet after adjusting for inflation, that income roughly equaled the level in 2007, before the start of the Great Recession.
“It’s making up for lost ground, but it doesn’t really get people ahead,” says Elise Gould, senior economist at the left-leaning Economic Policy Institute.
Good news may be ahead
From 2010 to 2018, inflation-adjusted pay rose 1.5 percent for the middle quintile of workers based on earnings, compared with 6.5 percent for the bottom quintile and 2.9 percent for the top, according to figures from Brookings and the Labor Department. That data define mid-wage slightly differently than does CareerBuilder.
Top earners, who overwhelmingly have four-year college degrees, are benefiting from a job market that places a growing premium on higher skills, Reeves says. And low-paid workers have advanced as a result of state minimum-wage increases and social safety net programs such as welfare and food stamps, say Reeves and Jay Shambaugh, director of Brookings’ Hamilton Project. Middlewage workers are, well, caught in the middle. Their struggles, Shambaugh says, have been compounded by wellknown forces: the plunge in manufacturing employment; the sharp decline of unions; stagnating teacher pay; and the meager growth of state and local government jobs amid budget cuts and depleted pension funds.
Here’s the good news: The fortunes of the middle class have brightened recently amid a strong economy. Employers added an average 223,000 jobs a month last year, up from 179,000 in 2017. And unemployment sank to a near 50-year low of 3.7 percent before ticking up recently, leaving businesses struggling to find qualified workers.