Middle Class Pain

Stagnant Pay Says It All

Stagnant Pay Says It All
Antonio Perez/Chicago Tribune via AP
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Plenty of American workers, fearful about their financial well-being and their perch in the middle class, believe that economists, politicians and President Obama have it wrong.

Many voters say they greet public discussions about a robust U.S. economy with skepticism because they and their communities continue to feel the effects of losses during the Great Recession. They know that workers haven’t seen wages climb, as promised, even as companies resumed hiring, experienced productivity gains, and pocketed new profits.

In Elkhart, Ind., Obama launched another of those discussions Wednesday. He arrived in the Hoosier State, which he won in 2008 and lost four years later, to mark the merits of his administration’s responses in the wake of the nation’s punishing financial crisis. He said voters face a stark political choice in November if they want progress.

Ticking off a menu of positive statistics amassed over nearly eight years in a city heavily dependent on the recreational vehicle manufacturing industry, the president touted initiatives he helped enact. His first trip outside the White House as a newly inaugurated president had been to Elkhart, where he lobbied Congress to pass a stimulus measure to cushion huge job losses nationwide.

“Recovery will likely be measured in years, not weeks or months,” the president said in Indiana in February 2009. It was at a time when the nation’s unemployment rate hit 8.1 percent, and kept climbing. “But we also know that our economy will be stronger for generations to come if we commit ourselves to the work that needs to be done,” Obama added.

Whether the economy is indeed strong, and whether it will be “stronger for generations to come” are debates at the heart of the 2016 presidential contest.

On the campaign trail, Hillary Clinton says the economic rescue Obama piloted should continue apace, while Donald Trump insists the president’s agenda has been “a disaster” for middle-class families. 

Caught between the two polarities are potential voters, who have thus far reached one noncontroversial conclusion: the economy should be the focus of the next president, followed by immigration and health care.  And respondents ranked “wages, earnings and the decline of the middle class” above terrorism on a list of issues they worry most about in a Gallup Organization benchmark survey released Wednesday.

Middle Class Pain, a new RealClearPolitics series, begins today with Americans’ wallets, where voter resentments across the political spectrum have aligned this year. “It’s made people cynical about government,” the president observed Wednesday. During an interview in Elkhart with PBS's "NewsHour," Obama said wage stagnation remains a long-term trend “we have to tackle.”

“If what you really care about in this election is your pocketbook; if what you’re concerned about is who will look out for the interests of working people and grow the middle class … then the debate isn’t even close,” Obama said Wednesday while hailing Elkhart as a symbol of the country’s economic recovery. The president urged red-state Indiana to spurn what he described as Republican opposition to pro-growth, pro-middle-class policies supported by majorities of Americans.

“I want to have an intervention!” he shouted, putting some energy behind campaign themes he’s expected to revisit dozens of times before November. “Their answers to our challenges are no answers at all.”

Just 103 miles south of where Obama addressed a crowd of 2,000, the city of Kokomo offered a different perspective on Indiana’s challenges. It tops a national list of metro areas, mostly in the Midwest, where double-digit percentage wage declines outpaced the nation, as measured over more than a decade, according to a Pew Research Center study released May 31. The average weekly wage in Kokomo was $839 in the third quarter of 2015, a drop of 13.5 percent from the same period in 2000 (including adjustments for inflation). Another Indiana city, Columbus, made Pew’s top 10 list of hardest-hit metro areas based on paycheck contractions.

Pew’s wage-depressed list hints at the Clinton vs. Trump campaign battlefields this fall. Two cities in Ohio are on the top 10 list, along with three in Michigan, including Flint. Austin, Texas, an oasis of progressive politics in an otherwise conservative state and a city that added more than 300,000 jobs since 2000, saw a 3.6 percent drop in average real weekly wages over a decade and a half. That downshift stood in contrast to oil-patch bonanzas that put conservative Texas cities Midland and Odessa at the top of Pew’s ranking of cities with the largest average paycheck gains over the same period.

Between 2000 and 2015 nationwide, most of the increases measured in average weekly wages emerged after the Great Recession ended in 2009. Late last year, the weekly paycheck in the nation was $974, an inflation-adjusted climb of 6.6 percent from the same third-quarter point in 2008 when the financial crisis struck, according to Pew’s analysis. Over 15 years, average weekly wages in America rose modestly by 7.4 percent in real terms.

The president often hails a national unemployment rate that has been cut in half, to 5 percent, from the peak during the financial crisis. Elkhart’s unemployment rebounded from nearly 20 percent to about 4 percent as the RV industry and other manufacturing rebounded, he noted. But Obama neglected to mention other features of middle-class angst: in Elkhart, for instance, the population dropped by almost 8,000 since 2009, an economic and sociological shift lamented by its mayor this week and common in Rust Belt cities where manufacturing plants have shuttered. The city’s economy did not diversify after the 2008 meltdown, and RV sales, booming at the moment, remain Elkhart’s lifeblood. The city’s real median wages have climbed slightly – but back to a level measured before the economic crisis began.

Indiana Gov. Mike Pence, a conservative Republican who voted against the 2009 stimulus measure while serving in the House, said in a letter to Obama published Wednesday that most of the credit for Elkhart’s prosperity did not belong to the administration.

“There are many reasons for the remarkable economic recovery that has been created in Indiana but I believe most of the credit belongs to the hard-working people of this community and the state,” Pence wrote.

Without more purchasing power and job security, Americans believe Washington’s rosy employment statistics are cold comfort. Obama and his White House team often salute the longest streak of U.S. job creation on record, which occurred on their watch. But the annual pace of growth slowed in the first quarter to 0.8 percent, the weakest growth since the first quarter of 2015, largely related to economic headwinds in Europe and Asia.

The ranks of the very wealthy and the poor in America have been expanding for years. The benefits of middle-class life are less attainable than a decade ago, and more impermanent. People blame politicians and government programs as either too generous or not generous enough; the tax code is uniformly reviled. Some Americans fault free trade and price competition in low-wage countries such as Mexico, China and India. Some think automation, immigrants, and greedy corporate executives are barriers to higher paychecks. People complain about bad schools, costly degrees, unaffordable housing, and rising medical and insurance costs. Some economists debate whether there’s no going back: the exit of higher-wage baby boomers from the workforce occurred as the economy shifted to more lower-skilled, low-wage jobs.

The blame game is loud and scattershot, and open to empirical scrutiny. But in study after study, one conclusion has been undeniable: “The decline of the middle class is a reflection of rising income inequality in the United States,” Pew documented in a report last month titled “America’s Shrinking Middle Class.”

Republican, Democratic and independent candidates are appealing to the electorate on those grounds. Trump’s anti-free-trade, pro-business rhetoric is long on optimism and short on specifics. Clinton, buried in policy specifics, vows to break down barriers to economic fairness. Vermont Sen. Bernie Sanders, competing until the end of the Democratic primary season, wants a dramatic expansion of wealth redistribution. Libertarian Party candidates -- former Gov. Gary Johnson of New Mexico and running mate William Weld, former GOP governor of Massachusetts -- are sorting out economic planks.

Obama, echoed by Clinton from the stump, said Wednesday that Democrats believe “priority number one [is] getting our wages higher.”

He noted his administration had recently updated a Department of Labor rule that will make more than 4 million salaried employees eligible for overtime pay beginning Dec. 1. The administrative change, designed to expand the ranks of the middle class by executive fiat, is opposed by Republicans in Congress, by many in the business community, but is overwhelmingly popular among rank-and-file workers, according to recent polling.

Democrats have for years urged a hike in the federal minimum wage, currently $7.25 an hour, to support the general argument that anyone working full time should be lifted above the poverty line. States and cities are leading the way to gradually increase minimum wage thresholds, noting that regional costs and economic goals should dictate how high the minimums are set. Economists say ample studies exist to support differing arguments about the merits of raising the minimum wage. Unions, the two leading political parties, employers, cities and states, and academics have used various studies.

Another popular paycheck policy backed by Democrats calls for closing the gender wage gap for women, who on average still earn less than men in equivalent positions. The legislative effort is blocked in Congress and unlikely to move in an election year.

The Paycheck Fairness Act, which would update the Equal Pay Act of 1963, passed the Republican-led House but died in the Senate. It was at least the fourth time the measure failed. GOP lawmakers, urged by the U.S. Chamber of Commerce to oppose the bill, believe it would become a gift to trial lawyers because caps on punitive damages would be removed against companies found guilty of wage discrimination.

Another partisan wage impasse deals with the long-term trend of declining union participation. Clinton is relying on strong support from labor unions to help her defeat Trump if she becomes the nominee, as expected after next week’s contests in New Jersey and California.

The president’s message to Hoosiers who pine for “the good old days” of high-wage manufacturing jobs was to organize in their workplaces to be heard by management. 

“Fifty years ago, more than one in four workers belonged to a union,” Obama said at the end of his Indiana speech. “Today, it’s about one in 10. As union membership shrank, inequality grew and wages stagnated. … America should not be changing our laws to make it harder for workers to organize,” he added.

Trump hasn’t released any specific proposals to address flat wages. But he certainly hews to GOP doctrine that wages rise when the economy revs, and that economic growth is unleashed in the private sector when government gets out of the way, reduces taxes and regulations, and allows free market forces to boost competition.

Trump, who has attracted support from rank-and-file workers who may break with their unions’ backing for Democrats, is careful on the stump not to alienate labor interests. He has said his business experience in heavily unionized New York and in non-union Florida encouraged him to focus on worker interests as an ingredient of his business success.

“I have tremendous support within unions, and I have tremendous support in areas where they don’t have unions,” Trump said in February. “Like in Florida, they don’t have very many unions. The workers love me."

Alexis Simendinger covers the White House for RealClearPolitics. She can be reached at asimendinger@realclearpolitics.com.  Follow her on Twitter @ASimendinger.

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