Not a Good Decade to be Middle-Class

Sometimes you have to wonder what the plan is for the middle-class in this country.

It's pretty clear what the plan is for the middle class in Asia. Increasing in size and beginning the transition from saver to consumer must be at the top of the list - all part of a multi-decade process to wean itself from Western export dependence and to ultimately become both the manufacturing and consumption center of the world.

In the U.S., you often hear about all the new jobs that have been created in the last few years - 4.5 million they say. But, with falling real wages, the middle-class must surely be decreasing in size. And, a negative savings rate must now indicate that the transition from saver to consumer is about complete.

It seems there's an ongoing shake-out in the middle-class in the U.S., and for those departing, there are only two directions to go - up or down.

In this story from the Associated Press yesterday, the situation is neatly summarized:

Gary Colflesh, 56, of Bloomingdale, Ohio, said there are few jobs in nearby Ohio or Pennsylvania for workers to move to.

"They're destroying the working class. Why can't people see this?" asked the 38-year veteran. "Anybody who works in manufacturing has no future in this country, unless you want to work for wages they get in China."
...
Economists agree the outlook is changing for workers who moved from high school to good-paying factory jobs two and three decades ago, or for those seeking that lifestyle now.
...
"Those jobs are disappearing," says Patrick Anderson of Anderson Economic Group in East Lansing, Mich. "The ... low-skill, upper-middle-class way of life is in danger."

The ongoing negotiations at bankrupt Delphi Corp, are representative of what is happening with middle-class employment today. Over 30,000 workers could have their pay reduced by more than fifty percent in order to compete with foreign manufacturers.

A reduction such as this, of course, is far superior to a one hundred percent reduction in wages, but nonetheless would present a number of very serious lifestyle adjustments.

The standard of living to which the middle-class have become accustomed appears to be under siege - wage pressures resulting from rebalancing a very unbalanced global trade equation are clearly beyond the control of unions.

From last week's excellent L.A. Times story about job security and pensions, the view of management is clear.

Since arriving at Delphi in July, the former Chrysler executive, who has led other troubled companies such as Federal-Mogul and Bethlehem Steel into bankruptcy, has made a series of incendiary remarks seemingly calculated to push the company's unions to within a hair's breadth of a strike.

"Paying $65 an hour for someone mowing the lawn at one of our plants is just not going to cut it in industrial America," he said at one news conference, a reference to the average combined wages, benefits and pensions of an hourly Delphi worker.

For those younger workers fortunate enough to maintain a middle-class income and lifestyle long enough to retire in coming decades, there will be more surprises in store.

Employers are dramatically revising the long term promises made to their workforce in an attempt to regain their competitiveness with employers overseas who have made no such promises.

"The nation used to have big units of production like the car companies that needed very predictable workforces," said Alicia H. Munnell, a retirement expert at Boston College and former Clinton administration economist. "Pensions helped firms to retain people by raising employees' benefits the longer they stayed, and to signal them when it was time to go.

"But the economy is much more competitive today," Munnell said. "For companies, that means fewer long-term promises like pensions. For workers, it means having to be agile, entrepreneurial. They have to be ready to switch jobs and employers at the drop of a hat and manage their retirement money all on their own."

Managing their retirement money on their own sounds like it's going to be a difficult transition. As Social Security is the primary or only source of income for a surprisingly large number of seniors, it is likely that this will only increase over time, since workers in the U.S. seem to be particularly challenged when it comes to savings.

But that's a problem for another day.

Today's concern is jobs, and in particular what jobs are replacing the higher paying middle-class jobs that have supported the middle-class in the U.S. for generations.

In the 1990s there was lots of talk about "re-training" for new computer jobs, and having looked at the Professional and Business Services jobs created in the previous decade, this seems to have worked out reasonably well. Re-training for computer work was a passable plan to cope with a changing business world.

But, what about today?

There have been lots of new jobs related to real estate, but all indications are that this trend is slowly coming to an end. People will adapt, they say. People will do whatever it takes.

Las Vegas is a good example of people doing whatever it takes - a good example of the modern day middle-class lifestyle. In addition to recent real estate jobs, there has been a steady rise in the number of blackjack dealers and food service workers required to support the businesses in this town.

From part two a recent PBS documentary about the history of Las Vegas, we learn of food service jobs, readily available for those who are eager to "re-train" in this new decade:

In Las Vegas, you can embark upon a career as a food server, which anywhere else in the country is not considered a good job. You can provide very well for your family in these positions that in other places are not considered good jobs.

Pull the tray back behind his head, there we go. May I? May I? Clockwise, OK, clockwise, clockwise.

We train people, the technical skills, how to carry a tray, how to say, "may I take your plate?" as opposed to, "are you done?" You know, how to correctly pour a cup of coffee so that it, it comes within a quarter inch of the top.

You've got to announce: "Coffee?" Coffee and pour.

Our industry demands a level of customer service, of guest service, that is so high that a large part of what we do in addition to the technical skills is train people on focused eye contact, how to relax, how to smile, how to communicate with the guest.

Do you put the butter on the French toast? Do you put the syrup on the French toast? Do you put the powdered sugar on the French toast? Yes, sprinkle the powdered sugar on the French toast.

My goal when I send people out into the industry is that they communicate to the guest that each and every guest is important, not just to me, but that they're important to my hotel, to my restaurant, to my city. We are driven by tourism and if the guest stops coming back, we stop having employment.

This decade is not shaping up very well for the middle-class. It's shaping up wonderfully for the rich - low taxes and reasonable investment returns should sustain that group for years to come.

But, this is not a good decade to be middle-class.