You wouldn’t know it based on the most recent GOP presidential debate, in which few questions were asked about the middle class, but the stagnant economy continues to be a major issue for the presidential election. As David Drucker recently noted, polling finds persistently high pessimism among the American public. According to many polls, fewer than one-third of Americans believe that the country is on the right track. Trust in major institutions — especially federal ones — is at record or near-record lows. The average American feels shut out of government and ignored by Washington.
Two recent reports suggest some possible economic sources for this pessimism. A new U.S. Census report on income and poverty shows that, at 14.8 percent, the poverty rate still remains higher than it was in 2007, and has not declined in years.
Beyond the poverty rate, this report also tells a bigger story about the long-term income stagnation, if not outright decline, of the American middle and working classes. According to Census data, the inflation-adjusted U.S. median household income peaked at $57,826 in 1999. The median household income got near this level in 2007, just before the financial crisis, but it has not exceeded it. Census data reveal that, from 1967 to 2000, every peak in median income was exceeded within ten years, but over 15 years have now passed since the last time the peak median income was exceeded.
And we might be slipping even further away from that 1999 peak. The real median income was lower in 2014 than it was in 2009. Though 2014’s median household income was higher than the latest nadir, which occurred in 2012, it also dropped between 2013 and 2014, a fact that suggests we are not necessarily witnessing a giddy upward trend in household incomes.
Nor is this trend of decline confined to the median. The broader trend suggests that incomes for poor and middle-class households peaked around 1999 and have since fallen far from that summit. The Great Recession and its aftermath have been especially cruel to low-income households. Households at the 10th and 20th percentiles saw their inflation-adjusted incomes drop by 11.6 percent and 7.5 percent, respectively, between 2007 and 2014. In fact, households in the 10th, 20th, and 40th percentiles had a higher inflation-adjusted income in 1989, the year of Taylor Swift’s birth, than in 2014, when she released her 1989 album. The median household income was about the same in both 1989 and 2014.
A study released earlier this month by the National Employment Law Project (NELP), which incorporates data from the federal government’s Occupational Employment Statistics, tells a similar story through the perspective of wages. NELP calculates that inflation-adjusted hourly wages, on the whole, fell 4 percent between 2009 and 2014. These losses have been particularly sharp for low-wage workers. Hourly wages for occupations making between $8.84 and $10.97 an hour fell 5.7 percent over that period, and the hourly wages of occupations making between $10.98 and $14.72 an hour fell by 4.7 percent.
As NELP notes, this decline in wages cannot simply be written off as a sign of deteriorating demand for certain jobs. Many of the jobs with the steepest decline in hourly wages are also ones that are projected to grow rapidly by 2022. For example, janitors, home-health aides, and personal aides are all expected to swell in employment numbers, but they also have all lost over 6 percent in their median hourly wages. This report delivers a body blow to those who argue that the United States has a shortage of workers. While special interests clamor for guest workers to act as cooks, landscapers, and computer analysts, the data tell a rather different story: Restaurant cooks experienced an 8.9 percent decline in hourly income, landscapers lost 7 percent, and computer analysts lost 3.6 percent. Declining incomes are not a sign of a deficit of workers.
Economic stagnation has implications for a whole host of issues important to conservatives.
This economic stagnation has implications for a whole host of issues important to conservatives. Representative Paul Ryan (R., Wis.) and Senator Tim Scott (R., S.C.) recently announced a January 2016 South Carolina presidential-primary forum on poverty. Talking about poverty is all to the good, and Republicans can and should have real solutions to the issues facing the American poor. However, lower-wage jobs have a role to play in the enterprise of ameliorating poverty. Starter jobs, often with wages at or just above minimum wage, can provide the initial rung on the ladder of economic opportunity. Jobs such as landscaper, waiter, or retail-store clerk can also provide supplementary income and can help both younger people and more mature adults pay their bills while pursuing further education or job training. But declining wages for these starter jobs often make it harder to climb to the next rung.
This economic hollowing out places further strains on our civic fabric. Every extra hour spent working to make ends meet is one fewer that can be spent helping with homework or volunteering at a food kitchen. Of course, work serves as a valuable buttress of civil society, but deteriorating conditions for the average worker — and especially for the low-wage worker — exact both an economic and a civic price.
Such a price might be especially high for the prospect of integrating immigrants into American society. Harvard economist George Borjas’s new study of the effects of the Mariel boatlift found that the sudden influx of low-skilled immigrants caused the wages of low-skilled workers to plunge by as much as 30 percent in the Miami area. Moreover, many of the occupations with the steepest declines in the NELP report are ones often held by illegal immigrants or guest workers. But this stagnation also affects immigrant households, as Reihan Salam has pointed out. If legal immigrants constantly find their incomes undermined, they will have a harder time integrating into American society and reaching the middle class. Part of being a welcoming country for immigrants means creating conditions that give immigrants a chance for real upward mobility. According to the Center for Immigration Studies, both legal- and illegal-immigrant households use government assistance at much higher rates than native-born households, and this increased reliance on government assistance is a clear sign that immigrants need greater access to opportunity and higher wages.
This economic stagnation has implications for foreign policy, too. Without a resurgence of economic growth, the kind of proactive, vigorous foreign-policy presence desired by many conservatives will likely become less politically and fiscally sustainable. Economic decline lowers tax receipts, which increases the relative cost of military spending, foreign aid, and diplomatic missions. For fiscal hawks, economic stagnation poses a potential threat to the nation’s long-term fiscal solvency.
In the face of these statistics, Republicans need to keep their eye on broad-based economic growth. A pro-opportunity economic policy would not only be a good political message; it would also help reinforce the socio-economic infrastructure needed for a vigorous republic. Of course, there are limits to how much policymakers can affect these trends. Increasing automation, for instance, may create further pressures for some workers and may not be able to be stopped (this automation can provide new economic opportunities, too). But there are plenty of areas where policy can make a difference: Regulatory reform, curtailing guest-worker programs, enacting pro-family tax reform, reforming the medical system so that it offers more flexibility and efficiency, strengthening America’s schools, and other efforts can help foster a dynamic economy in which an increasing number can share in prosperity. The last few years have been full of economic disappointment, but past defeats should not blot out the hope of future victories. Though at times dinged, our republic holds great resources and even greater potential. It will take diligence, policy imagination, and wisdom to realize that potential and help secure the brighter future that so many Americans crave.
— Fred Bauer is a writer from New England. He blogs at A Certain Enthusiasm, and his work has been featured in numerous publications.