The middle class is down for the count. It's become increasingly irrelevant in today's economy. President Obama and Mitt Romney both say they have the right medicine for the economic resurgence of the middle class. They're both wrong, according to a very insightful article by Geoff Colvin of Fortune Magazine. There's nothing either could do from the office of President to solve this problem.
That's a harsh and dismal forecast for a widening group of Americans still facing high unemployment and stagnating pay. Middle class workers are angry, and in large part don't understand who they're angry at or why. According to Colvin:
"The sorry situation of the middle class began long before the financial crisis and recession. Incomes in the broad middle have gone nowhere for more than 20 years after rising slowly but steadily through most of the 20th century. Why? Many theories have been advanced, but the one that holds up best is set out by Harvard economists Claudia Goldin and Lawrence Katz in articles and a book, The Race Between Education and Technology. The economy continually demands higher-level skills from workers, they argue, and for most of the 20th century the U.S. workforce kept up. In 1900 few people stayed in school past eighth grade; by 1970 a large majority finished high school, and many went on to college. American workers became the world's best-educated and earned the rewards.Colvin goes on to explain that the infotech revolution makes upper-class workers more productive. They can earn more, they can buy things more competitively and they can invest more wisely. They get richer. The lower class, on the other hand, hasn't been hurt much by infotech, as their jobs are place-based. They lay bricks and cook in restaurants -- things that require people on site, and haven't been automated.
"Then, in the 1970s, America's level of education stopped rising. The high school graduation rate peaked at 77% in 1969 and has since dropped to about 69%; college rates, too, stopped rising. The economy kept demanding more workers with advanced skills, but we stopped producing more. At the same time, other countries relentlessly educated their people, so the U.S. workforce fell from No. 1 in the world to the middle of the pack. Result: The minority of workers with advancing skills became more valuable, while the broad middle got flat or even falling pay."
Jobs of the middle class, however, have been automated out of existence, making them increasingly irrelevant to the economy. As an example, Alvin Toffler, in his book Revolutionary Wealth calculates that ATM machines have probably replaced 200,000 bank tellers, a job that most would consider middle class. Today, if you carry on luggage, there's only ONE airline employee involved in the entire process of ticketing, payment, printing boarding passes, checking in and boarding an airplane -- the person at the gate who actually scans your boarding pass. One more step in using face recognition to comparing yourself to your government ID photo, and that job's replaced by automation as well. All those jobs in the airline industry used to be considered middle class jobs.
Goldin and Katz lay the problem squarely at the feet of the US educational system. The fix is obvious but clearly not easy. We need a complete overhaul of our education system, starting before Kindergarten. With apologies to those in that profession, what we're doing isn't working, and it's been getting worse for 40 years. I've spent enough volunteer time with educational institutions to know that this is a huge and seemingly intractable problem. It has to be solved locally -- it's something the federal government has clearly demonstrated it has no ability to fix. Of course, the most powerful union in America will need to be dealt with along the way.
The most plausible fix (to me, anyway)? More school. Year-round school. Our 180-day school year originated in an agrarian society that needed kids available for summer farm work. Japanese have 243 days of school per year. Germans have 240. American kids' reading and math proficiency relative to grade level declines at every grade. Why not require, if not of all kids, that at least those kids behind in reading or math take remedial classes in the summer, thereby catching them up with their peers by the fall? The KIP schools, piloted in the Bronx decades ago has proven that year-round school works. Why can't we take advantage of that example?
As business owners, this middle class that's unprepared for the workplace needs of this century should be a critical concern, both economically and ethically. How can we let such a large part of our population continue to decline in prosperity, largely because they don't know any better? What can we do to turn this ship around?
I welcome your comments and ideas.
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