Daily Archives: September 13, 2011

The American Dream and Middle Class Jobs

I know the heat is on the Prez and members of Congress to do something to stimulate the economy and create new jobs. And we’ll find out in the next few weeks whether the American Jobs Act makes it whole or in part through the legislative meat grinder.

In the meantime, many in this country are making the painful transition from middle class to working poor — at best. And in the long run this transition if unchecked will have big consequences for American families, our country and our collective standard of living.

Here’s an interesting and timely story in the NYT about what could become the “new normal” (as the policy wonks love to say) about manufacturing and other jobs, “In Detroit, Two Wage Levels Are the New Way of Work“:

DETROIT — They are a cornerstone of Chrysler’s unlikely comeback: 900 employees turning out a Jeep Grand Cherokee sport utility vehicle every 48 seconds of the working day at an assembly plant here.

Nothing distinguishes them from other workers at the Jefferson North plant, except their paychecks. The newest workers earn about $14 an hour; longtime employees earn double that.

With the economy slumping and job creation once again a pressing issue in the White House and Congress, the advent of a two-tier wage system in Detroit is spiking employment for one of the country’s most important manufacturing industries. The new jobs, which are seen as long term, are being watched closely by economists, executives in other industries and Washington policy makers eager to increase employment in manufacturing and other areas.

For many, the opportunity for steady employment is welcome, even at a lower wage and with no certainty when it might increase.

“Everybody is appreciative of a job and glad to be working,” said Derrick Chatman, who makes $14.65 an hour putting tires on Jeeps after being laid off at Home Depot, working odd construction jobs and collecting unemployment.

What was once seen as a desperate move to prop up the struggling auto industry is now considered an integral part of its future. The demand for $14-an-hour manufacturing jobs is providing Detroit’s Big Three automakers with a ready pool of eager new employees. Last year, Chrysler was flooded with inquiries about the jobs here. It froze the list after receiving 10,000 applications.

The companies say the two-tier wages are paying off. Despite the disparity, there is no appreciable difference in the Grand Cherokees produced on the shift dominated since last fall by the lower-paid workers, the plant manager says. At General Motors, savings from its two-tier workers are crucial to production that began last month of an inexpensive, subcompact car in suburban Detroit.

Two-tier wage systems have been tried in the airline industry and others with spotty success. Usually the lower wages disappear rather quickly when the economy picks up. But the arrival of vastly different wage rates in auto factories is a seminal event in an industry long influenced by a powerful union devoted to equal pay regardless of seniority.

“This is not going away,” said Kristin Dziczek, a labor analyst at the Center for Automotive Research in Ann Arbor, Mich. “It has allowed the Big Three to reduce labor costs without cutting the pay of incumbent workers. Is it good for the health and competitiveness of the companies? Yes. And is that good for job security? Yes.”

If I’m doing my math correctly, a $14-an-hour job gets you to about $30,000 a year. And I expect that this would put you at the bottom, or below, of what defines middle class — based solely on income. (This doesn’t address the other growing trend: That more and more households now depend on more than one wage earner.) Here’s from FactCheck.org:

There is no standard definition, and in fact, an overwhelming majority of Americans say they are “middle class” or “upper-middle class” or “working class” in public opinion polls. Hardly anybody considers themselves “lower class” or “upper class” in America.

It’s possible to come up with a definition of what constitutes “middle income,” but it will depend on how large a slice of the middle one prefers. If we look at U.S. Census Bureau statistics, which divide household income into quintiles, we could say that the “middle” quintile, or 20 percent, might be the “middle” class. In 2006, the average income for households in that middle group was $48,561 and the upper limit was $60,224. But we could just as reasonably use another Census figure, median family income. In 2006, the median – or “middle” – income for a family of four was $70,354. Half of all four-person families made more; half made less.

OK. If a two-tiered pay scale is a trend in auto manufacturing, could other industries — let’s say already lower paying retail and service — be next? We’ll see.

But the point of all this is that unless jobs are created with pay and benefits that allow people to live in the middle or above in terms of “middle class,” more and more people over time will fall out of this classification altogether.

For instance, Pew Charitable Trusts has just released a study — “Downward Mobility from the Middle Class:  Waking Up from the American Dream” — that shows that many children now fall out of the middle class as adults. Here’s from a news release about the study:

A middle-class upbringing does not guarantee the same status as an adult, according to a new report by Pew’s Economic Mobility Project. Downward Mobility from the Middle Class: Waking Up from the American Dream considers potential factors that cause a third of Americans who grow up in the middle—defined as those between the 30th and 70th percentiles of the income distribution—to fall out of the middle as adults.

“A variety of factors, including family background and personal choices, influence downward mobility from the middle class,” said Erin Currier, project manager of the Economic Mobility Project. “This report provides valuable information for policy makers who want to ensure that every child has the opportunity to achieve the American Dream.”

The report measures downward mobility among black, white and Hispanic men and women raised in the middle class in three ways: the percent who fall out of the middle class, the percent who fall 20 or more percentiles below their parents’ rank in the income distribution, and the percent whose income is 20 or more percent below their parents’. Across the three measures, the report finds:

  • Those who are divorced, widowed or separated are more likely to fall down the economic ladder than those who are married.
  • If men and women raised in a middle-class home obtain education after high school, they are less likely to be downwardly mobile.
  • Low scores on the Armed Forces Qualification Test (AFQT) correlate with downward mobility.

The report also finds a gender gap in downward mobility, but it is driven entirely by a disparity between white men and white women. Thirty percent of white women fall out of the middle class, but only 21 percent of white men do.

Additionally, race is a factor in who falls out of the middle class, but only for men. The report finds that:

  • Thirty-eight percent of black men fall out of the middle, compared to 21 percent of white men. In contrast, white, black and Hispanic women are equally likely to drop out of the middle class.
  • Differences in average AFQT test scores are the most important observable factor (of those considered in this report) that account for the large downward mobility gap between black men and white men.

So it’s not just the number of jobs that, with fingers and toes crossed, we will be able to create in the months and years ahead. It’s also about the quality of the jobs and the ability of this nation to maintain a vigorous middle class.