To the extent that there's a social contract in America, it centers on work. If polls are to be believed, most Americans think that all full-time workers should be paid enough to keep themselves and their families out of poverty, that all Americans should have an opportunity to make the most of their talents and abilities, and that -- regardless of what their parents do or fail to do -- their young children should be adequately housed, fed, and educated, and should receive the medical attention they need so that one day they can become fully productive members of society.
To achieve these ends, America has created a patchwork of programs and services: a minimum wage, an Earned Income Tax Credit, unemployment insurance, welfare, job training, child care, Medicaid, low-income housing, and food stamps. Several of these were started in the 1930s, when a quarter of America's adult working population was jobless and just about everyone felt that he or she was in the same precarious boat. Some of these programs have been whittled away in recent years, as the middle class has gained ground. A 60-year guarantee of aid to families with children but no breadwinner was terminated in 1996. Almost all of these programs are now underfunded, relative to the need.
Almost by definition, this patchwork is not an integrated system. Eligibility standards vary considerably, depending on the program. There are too many overlaps, as well as too many instances where families fall through the cracks. Supports suddenly disappear when families reach certain income levels, creating disincentives to upward mobility. The patchwork's administration is clumsy, fragmented, and overly bureaucratic. Needy families often don't know how to gain access to various parts of it.
It is not difficult to conceive of a series of programs that would function properly, as a system; several of the articles in this special section of The American Prospect have pointed out how such a system might work. But how could it ever be enacted? Politics involves much more than a set of generally accepted ideals. It requires coalitions prepared to fight for a share of a limited budget against other coalitions that are fighting for theirs, and legislators prepared to go to battle in favor of measures that may impose costs on groups that will fight furiously to avoid them.
Politicians know only too well that the poor rarely vote. By contrast, high-income taxpayers who would shoulder much of the cost do vote and are politically active. I recall meetings during the first years of the Clinton administration at which policy advisers presented elegant ways of reforming the welfare system, replete with child care, job training, health care, and temporary income supports for people who left welfare and went to work. The proposed system had many of the admirable characteristics that the authors of the preceding articles would commend. But I also remember the price tag. That system would have required more money than the welfare system was then spending. President Clinton concluded that the public would never support it. How could he justify spending more on welfare reform than the nation was already spending on welfare?
Today's public and political leaders seem even less willing to act on behalf of the poor and the working poor. Even something as simple as adjusting the minimum wage upward to take account of inflation is difficult to pull off now, given the clout of the small-business lobby. The last time the minimum wage was raised, in 1996, corporate support was purchased at the cost of tax breaks whose value exceeded the total estimated cost to business of the wage increase. This time, presumably, the bribe would be much higher. Meanwhile, the Earned Income Tax Credit, whose concept was practically invented by Milton Friedman, is now under attack for inviting “fraud and abuse.”
Chances for expansion seem dim; Democrats in Congress have done all they can do to protect it as is. At the same time, federal support for job training continues to decline. Despite the creation of a new system for the unemployed -- featuring one-stop shopping for job-search assistance, job counseling, unemployment insurance, and job training -- funds for job training have dropped substantially from their levels in the 1990s. Health care and child care for low-wage workers have fallen victim to state budget cuts and a Republican Congress more interested in exerting U.S. military force abroad than supporting low-wage working families at home.
But what if the problem is understood in much broader terms than helping the poor get good jobs and maintain their families? Suppose the nation's ideals about work and fair reward are perceived to be in jeopardy for working people in the middle as well as for the poor. What's the possibility for the creation of a new coalition -- comprising the anxious middle class and the working poor -- to obtain the work supports they and their families need?
Over the years, Republicans have shown themselves to be adept at driving a political wedge between the middle class and the poor. They've used welfare, affirmative action, and immigration to make the hard-pressed middle think that their economic difficulties were attributable to poor blacks and Latinos. Yet these particular “wedge” issues aren't nearly as effective as they once were. After all, the guarantee of welfare is gone. Most of those who used to be on welfare rolls are now working, though still poor. Legal immigrants have become such a large portion of the population that politicians are courting them instead of bashing them. Americans are accustomed to a diverse workplace.
At the same time, the economic problems facing middle-class America have grown. The typical American worker now faces many of the same challenges as does someone who is working and poor. Indeed, middle-class workers are beginning to understand that they can suddenly become poor. Job losses, sicknesses or accidents, divorces or separations are pushing into poverty many Americans who had been earning middle-class wages. It's hard to drive a wedge between people who face almost identical economic perils.
New data paint a vivid picture of the pressures facing middle-class working families. According to an upcoming paper from the Economic Policy Instiute, since 1980, wages for middle-income men -- those smack in the center of the earnings ladder -- have been flat at about $15 an hour, adjusted for inflation. Meanwhile, wages for high-income men in the top 5 percent of earnings rose nearly one-third, from $32 an hour in 1980 to $44 an hour in 2003, taking account of inflation. At the same time, the costs of health care continue to soar as employers shift those costs on to employees via higher co-payments, deductibles, and premiums. As a result, a significant percentage of working Americans are now facing “sticker shock” when it comes to obtaining health insurance. Many are in danger of losing it.
Another trend points to less and less job security for middle-income Americans. The Bureau of Labor Statistics' (BLS) recent survey of displaced workers shows that the rate of layoffs has continued to grow, in good times and in bad. The rate of layoffs between 2001 and 2004 was higher than it was during the 1990–91 recession. The rate was also higher in the boom years of the late 1990s than in the boom years of the late 1980s.
The BLS also found a troubling trend when it examined subsequent jobs that workers took after they had been laid off. During the most recent period, almost 60 percent of displaced workers reported that they were earning less in their new jobs than in the jobs they had lost. By contrast, between 1991 and 1993, 46.6 percent of those who got new jobs said they were earning less than in the old job, and in the boom years of 1997 through 1999, only 42.2 percent said they earned less.
These trends should not be surprising. They're consequences of longer-term structural changes in the U.S. economy. Globalization and technology are boons to consumers, but they have also kept a lid on middle-class wages while making middle-class jobs far more precarious. Companies now have many ways to lower their costs. They are under more and more intense competitive pressure to do so. With wages comprising two-thirds of those costs, these businesses have every incentive to go offshore in search of cheaper labor, or to buy from suppliers that are already offshore. Alternatively, they will buy technology that can do jobs more cheaply than their employees.
In political terms, these trends mean that middle-class working families now have much more in common with the working poor than they have had at any time since the 1930s. Indeed, middle-class working families are discovering that they need many of the same things as the working poor, such as a wage floor that keeps them from falling into poverty if their luck turns bad, affordable health care and child care, and effective training to get the next job or to upgrade their skills.
So is it now possible to create a coalition of the working middle class and the working poor that's strong enough to claim such supports? Perhaps. But even if conservative Republicans can't as easily drive a wedge between the anxious middle class and the poor, they will seek to distract many middle-class working Americans from acting in their own economic interests by deploying divisive social and cultural issues. They've done it before.
To win back the White House and Congress, Democrats will have to keep the debate focused on jobs, wages, and health care. To the extent that Democrats are successful, they can also lay the foundation for a coalition of the anxious middle and the working poor -- a coalition capable of giving all Americans the income support and opportunities for upward mobility that are essential to the American dream.