I rarely write about political strategy. I am a proud economic wonk. There are others who are far better at presenting issues and ideas in a politically appropriate or opportune way. However, as I have watched and written about the Bush "boom's" progress, it has become alarmingly apparent that Republican economic policies are toxic to the growth and nurturing of a healthy and viable middle class. The current structure of the American economy is clearly biased for the wealthy and against the middle class. Below I will outline the basic problems the middle class faces.
Jobs
Although Bush loves to talk about his jobs numbers, his record stinks. The Bush's compound annual growth rate in establishment employment is .6%, the lowest of the last 40 years. In addition, the jobs market has lost 2.8 million manufacturing jobs and 550,000 information service jobs - jobs that helped to create and sustain a middle class. The top ten areas of job growth for 2003-2005 pay $9000 less than the top ten areas of job loss during 2001-2003.
More importantly, the jobs market is slowly resembling a barbell, with low-paying and high-paying jobs and little in between:
The labor market's gains are beginning to take on the shape of a barbell, with growth weighted heavily at the two ends of the pay scale. During the current expansion, the bulk of new jobs have come in either the highest-paid of five broad occupational categories - management and professional - or the lowest-paid, services. Together the two sectors now account for more than half of all jobs. (The other three major categories are sales and office work, construction and natural resources, and production/transportation.)
Stagnant Wages
In January 2001, non-supervisory wages - which represent the wages of 80% of the workforce - were $14.28. These wages were $16.49 in March 2006 for an increase of 15.47%. Over the same time, the nation's inflation index increased from 175.1 to 199.8, for an increase of 14.10%. That means the average person has seen their pay increase 1.37% in 5 years or a compound annual growth rate of .26%. I don't know about you - but that would thrill me to no end.
According to the Census Bureau, median national income was unchnaged from 2002-2004. According to the same report, the poverty rate increased each year for the last 4 years.
It's not as though corporations don't have the money to give bigger wages. According to the Federal Reserve's Flow of Funds, undistributed corporate profits were 192 billion in 2001 and 418 billion in the third quarter of 2005. Corporate profits now account for the largest percentage of national income in the last 40 years:
U.S. corporate profits have increased 21.3% in the past year and now account for the largest share of national income in 40 years, the Commerce Department said Thursday.
Strong productivity gains and subdued wage growth boosted before-tax profits to 11.6% of national income in the fourth quarter of 2005, the biggest share since the summer of 1966.
For all of 2005, before-tax profits totaled $1.35 trillion, up from $1.16 trillion in 2004 and just $767 billion in 2001.
Meanwhile, the share of national income going to wage and salary workers has fallen to 56.9%. Except for a brief period in 1997, that's the lowest share for labor income since 1966.
Health Care
This is a huge expense that is increasing and taking a larger percentage of income. According to Kaiser Health the average annual payment for a single person is $3695 and a family is $9950. According to the Census Bureau, median household income in 2004 was $44,389, making average premiums for a single family 8.32% of annual income for a single person and 22.41% for a family. Employer and employee typically share this expense. However, as companies look to increase profits, expect them to continually increase employees' contribution to health care.
According to the same Kaiser Health report, health insurance premiums have increased between 2 and 5 times faster than inflation for the last 5 years.
The total number of the uninsured has increased from 40.9 million in 2001 to 45.5 million in 2005.
Of the people who don't have insurance, 70% state the primary reason is cost.
Medical Bills are a serious problem for many people:
Nearly one-quarter (23%) of adults report problems paying medical bills within the past year, and more than six in ten of these (61%) have health insurance. One in five adults (21%) reports currently having an overdue medical bill, and almost as many (19%) report experiencing serious financial consequences in the past five years due to medical bills
Education
Suppose you want to improve your chances of getting a better job by going to college. The chances are you will graduate with a ton of debt, which will prevent you from bettering your financial position.
The average one-year cost of instructional expenses at state school in 1999-2000 was $11,917. Educational costs have increased since this report.
Students are increasing their debt load to pay for college. A 2003 Nellie Mae report titled College on Credit, documented that the average amount of debt in 2002 for an undergraduate degree was $18,900 while the median amount was $16,500. Payments on these figures comprised an average of 9% of after-college income and a median of 6% of after-college income.
Graduate school loans are a larger burden. The average total debt was $91,000 for law and medical students, and their payment comprised 18% of their income. The average debt for business degrees was $39,500 and their payments comprised 8% of income. The same numbers for education degrees was $32,200 and 11% respectively.
The primary reason for this increased use of debt to finance education is states have decreased their funding for state schools. Between 1988 and 1998, the average annual state-sponsored school tuition increase was 4.1%. Over the same period, state appropriations -- which comprise 33.4% of total state school revenues -- decreased 1% annually. As a result, tuition as a percentage of total state school revenue increased from 22.7% to 31.1% from 1988 - 1998. In other words, the cost of state education is falling more and more on students as opposed to the state governments.
It's time for the Democrats to once again become the party of the middle class. We need to develop new pathways to the middle class and protect those who are already there.