Real Reason the American Middle Class is Disappearing
There are no quick fixes, but promising paths forward exist
The American middle class is disappearing faster than a plate of donuts at a police convention. Once the formidable backbone of our economy and society, this vast segment of working families now totters on the brink of extinction. From the Rust Belt to the Sun Belt, the middle class languishes like a faded photo forgotten in a dusty album.
As the gap between rich and poor yawns ever wider, the lights flick off in communities across our once-thriving heartland. Where bustling factories and downtowns hummed with possibility, hollowed-out towns now face rampant poverty, addiction, and despair. The American Dream seems destined to die in darkness.
What happened? When did the country that pioneered the middle class concede defeat? How did the land of opportunity become the land of downward mobility?
It didn’t happen overnight. This gutting of America’s core has been decades in the making. A lethal blend of economic, social, and political forces have conspired to hack away at this pillar of our democracy. Let’s examine the key culprits behind the looming demise of the American middle class:
The Hollowed Out Hourglass
Economists divide households into five income groups or quintiles. The middle class traditionally falls in the middle three quintiles — essentially households with incomes from $35,000 to $100,000. This represents a broad swath of America’s teachers, office workers, contractors, civil servants, small business owners, and various professionals.
In the early 1970s, the middle class accounted for over 60% of US aggregate income. But by 2019, the middle class controlled only 43% of income. On the flip side, the top quintile went from controlling 33% to now amassing over 52% of America’s income. This represents one of the most massive wealth transfers in modern history.
This hourglass economy keeps the top safely insulated while even small disruptions can cause the burgeoning bottom to crash through the floor. The rungs supporting upward mobility are cracking, reflected in US social mobility measures that trail most European nations.
The College Education Arms Race
One of the starkest divisions cleaving America’s classes revolves around higher education. Decades ago, college degrees offered smaller income boosts, with many well-paying jobs accessible to high school graduates. Back then, most CEOs lacked college degrees.
But as knowledge work expanded, employer expectations soared. A bachelor’s degree became the new entry-level standard, while advanced degrees conferred greater income gains. As higher education costs ballooned, low and middle-class families struggled to keep pace. Rung by rung, the upward mobility ladder extended as college became essential to scaling the middle class.
From 1971 to 2011, the share of high school graduates enrolling in college jumped from 48% to 69%. However the cost of attending a public 4-year college exploded by over 250% after adjusting for inflation. The college earnings premium grew too, fueling a vicious cycle where lacking a degree left people progressively farther behind. This dynamic has increasingly sorted people based on higher education access.
Manufacturing’s Decline Hits Hard
For much of the 20th century, plentiful manufacturing jobs provided stable middle-class incomes and benefits for high school graduates. However, automation and globalization eliminated many of these positions. Since 1979, US manufacturing employment has plunged by over 7 million, with displaced workers scrambling for new occupations.
Manufacturing’s decline hit Especially hard in smaller cities and towns where factories concentrated and provided an economic ecosystem of supporting jobs. Many of these communities never recovered. The exodus of manufacturing paychecks gutted local tax revenues, hurting public services and infrastructure while opioid abuse, crime, despair, and resentment festered.
Rural and Rust Belt regions bore the brunt of disruption, with urban areas recovering more strongly due to white-collar industries and the migration of younger workers. This left wide swaths of Middle America with hollowed-out towns struggling to replace extinct industries.
The Fraying Social Contract
Government policies and corporate practices once reinforced a prosperous social contract giving workers a reasonable share of output gains. Union representation peaked in the 1950s at over a third of the workforce, providing collective bargaining power.
Progressive taxes ensured that higher-income households paid more. Corporate norms included offering training programs, long-term careers, and pensions. But deregulation, de-unionization, and laissez-faire policies have eroded this landscape. Incomes uncoupled from productivity while executive compensation and shareholder returns capture massive gains.
Fraying employer loyalty and job security meant workers carried more risk. Rapid technological shifts made skills obsolete faster than education systems adapted. These dynamics erode the forces that buttress upward mobility and income security.
The Wealth Snowball Effect
America has created unprecedented prosperity. However capital has concentrated exponentially due to globalization and weaker progressive tax policies. The top 1%’s share of household wealth has nearly tripled since the 1970s. The snowball effect means the wealthy gain opportunities to accumulate further.
Wealth gives access to elite education without debt, financial assets that grow, and capital to invest in ever-appreciating resources like real estate, patents, and equities. Wealth also provides resources to ensure children repeat the cycle.
Meanwhile, the bottom 80% of wealth has declined when accounting for massive debt loads for housing, education, healthcare, and consumption. This makes their finances far more precarious if disrupted by job losses or personal emergencies.
The Technology Tipping Point
Automation and AI are set to generate unprecedented wealth but also disrupt many jobs. Highly educated technical workers will capture disproportionate gains while many traditional occupations get eliminated.
Past technological revolutions eventually created new jobs and opportunities. But the jury remains out if the pace of current innovations will outrun the ability of displaced workers to adapt. Distributions of gains and losses from accelerating technologies is a complex challenge needing creative policy responses to maximize prosperity generation while cushioning against inequalities.
Technology will shape the 21st-century global economy but risks further bifurcating the American workforce if not paired with reforms. Education, public infrastructure, basic research, recalibrating tax incentives, and a stronger social safety net will help navigate the coming disruptions.
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Restoring Shared Prosperity
No single policy blueprint can overnight undo major socioeconomic shifts decades in the making. But maintaining America’s middle class and its promise of upward mobility is crucial. This will require compromises and contributions from all levels of society.
There are no quick fixes, but promising paths forward exist such as improving affordable access to vocational training and higher education, new worker protections like portable benefits decoupled from specific employers, public infrastructure investment, recalibrating corporate and progressive tax policies, and strengthening employee bargaining rights.
Reviving America’s middle would reinvigorate consumer spending, ease societal fissures, and restore faith that hard work and determination once again mean getting ahead. The challenges are great, but so are the collective creativity and resilience that built the largest economy in the history of humankind. America possesses the resources and social ingenuity to recreate an economy where everyone’s effort and contribution are valued and the American Dream is restored.
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