FREE ESSAY ON SHRINKING BUYING POWER OF THE MIDDLE CLASS

SHRINKING BUYING POWER OF THE MIDDLE CLASS

The Shrinking Buying Power of the Middle Class
According to the Merriam-Webster's Online Dictionary, the middle class is "a class
occupying a position between the upper class and the lower class; especially: a fluid
heterogeneous socioeconomic grouping composed principally of business and professional
people, bureaucrats, and some farmers and skilled workers sharing common social
characteristics and values (Merriam-Webster). In the United States, their family incomes
would generally range from $25,000 to about $99,999 and the median is about $45,000 per
year (Census). Nowadays, the middle class workers are less likely to work in
manufacturing companies, although there were many of them in factories before three
decades ago. It would seem that the middle class workers are earning a good amount of
money but Louis Uchitelle of The New York Times reports that "In the New York
metropolitan area, you can have six-figure incomes and still feel like you are
struggling" (A1+). The middle class workers have been declining in the sense of living
standard because a middle class lifestyle in the United States has become more difficult
to achieve with each passing year.
The middle class workers emerged during the Industrial Revolution period in the first few
decades of the 19th century (Encarta). The rise of the United States economy has created
new jobs for the middle class workers. The most popular and profitable industry in this
period was the manufacturing industry. Many middle class workers were earning high income
and the economy was prospering from the industry. By the 1970s, the manufacturing
industry has reached its maturity stage and was followed by deindustrialization, which is
the reduction of industrial activities. In their report "Growth in Family Income
Inequality," Chevan and Stokes identify that "industrial restructuring, often called
'deindustrialization', is the single most powerful and direct cause of the growing income
inequality and the declining fortunes of the working classes" (365). During the
deindustrialization period, many middle class workers lost their jobs and the country
suffered from the rapid growth of family income inequality.
The rapid growth of computers and technologies have caused the tremendous growth in
manufacturing productivity, which means that less and less workers are needed for more
production (Philips). Machines and computers replaced the workers' task and jobs. The
manufacturing companies had to progress through technological enhancement to keep up with
the constantly increasing minimum wage. When machines replace workers, the companies and
consumers benefit from lower cost of output but the workers suffer from work
displacement. The output of manufacturing and service industries has grown roughly around
the same rate in the United States but the productivity of manufacturing industry grew
roughly around twice as fast as productivity of service industry (Chevan & Stokes).
Technological changes accounts for these differences. Most of the workers retrenched from
manufacturing companies do not have the capability to work in modern service industries.
As a result, unemployment rate increased and most of the unemployed belong to the middle
class. When the middle class workers lose their jobs, their earnings drop, and household
incomes decline, therefore increasing family income inequalities (Philips).
The United States Census Bureau reports that the percentage of all middle class employed
in the manufacturing industry declined from 26.4% to 17.9% between 1970 and 1990
(Census). As the United States grows richer, people tend to buy less manufactured goods
and relatively more services. This is one of the main reasons why the manufacturing
industry has declined and the economy is shifting to the service industry. Total
employment in the service industry rose from 25.9% in 1970 to 32.6% in 1990. The upper
class, or the richer society, were enjoying a better living standard but the middle
class, especially workers in the manufacturing industry were suffering from declining
buying power and living standards. Practically all gains in household incomes goes to the
rich. Since the early 1970s, National income and wealth have grown but because of the
growth of income inequality, only the top 20 percent of families are in advantage. There
was not much change for the bottom 60 percent and in fact some actually suffered income
loss (Rogers and Teixeira 11). With the rich in control of the economy, the middle class
has to work harder but still lose their buying power and living standards. 
As a result of deindustrialization, the United States unemployment rate has increased.
Chevan and Stokes report "From 1970 to 1990, for example, the U.S. unemployment rate
increased, on average, by 44% (Chevan & Stokes). Economists have long ago related
inflation to the growth of income inequality and inflation. Unemployment has been shown
to have increase income inequality by increasing the rate of inflation. The Inflation
Calculator, based on "Statistical Abstracts of the United States," shows that what cost
$1 in 1973 would cost $2.97 in 1990. While prices have increased significantly, income
level for the middle class remained barely unchanged. When the cost of goods and services
goes up, the same amount of money will buy less of goods and services, which means the
decrease in consumer spending. This means that corporations are less profitable, which
eventually lead to retrenchment of workers and unemployment. According to the U.S. News &
World Report in 1981, "Inflation now appears to be far more discriminating about its
victims" (U.S. News & World Report 39). The "victims" are of course the middle class
workers who were not able to stay ahead of inflation. While these people have struggled
to maintain their living standards, the higher-income people were not even affected by
inflation.
The growth of economy has created additional needs and demand for the middle class.
Welfare has increased together with the economy and is costing more for everyone.
According to Louis Uchitelle, "What stresses them, sociologists and economist say, are
the other outlays of middle-class life: new clothes, child care, lessons for the
children, restaurants, movies, home decoration, computers, big-screen television sets,
stereo systems, Christmas gifts, and savings for college and retirement" (A1+). These
expenditures were considered as luxury a few decades ago but are now essential for every
middle class household. The middle class workers are constantly pressure by these extra
expenses.
According to Uchitelle, "Most middle-income people have only a high school degree or a
year or two of college" (A1+). This statement refers to the lower segment of the middle
class, typically older people who are still working. Relating this to the shift of
economy from manufacturing to services, the lack of education is the main reason why the
middle class workers are losing their buying power. The service sector covers economic
activities such as banking, insurance, medicine and other professional services
(Encarta). They require skilled workers who have obtained a four-year college degree or
at least job training. Without a good educational background, it is very hard to adjust
to the shift of economy. The Economist state "Deindustrialization causes problems in
economies unable to absorb the workers released by manufacturing" (78). Many middle class
workers that have been displaced could not afford to go into college again, especially
with the constantly increasing cost of living in the United States. Even if the workers
did have savings and severance pay, the money would be inadequate to support the family.
With the growth of family income inequality and shrinking buying power of the middle
class, it has been reported that housewives are now forced to work in the labor market,
husbands now have to work as much overtime as possible, and everyone has to save more
than ever before. Even dual income families with workers having more than one job strain
to live a middle class life (Uchitelle A1+). The involvement of housewives in the work
place has attracted more and more females in the labor force. Unfortunately, the growing
number of females in the workforce has further increased family income inequalities.
According to Chevan and Stokes, "because of assertive mating, more highly educated and
higher-income women are likely to be married to men with similar characteristics" (368).
While the income of men in the middle class has steadily decreased over the decade, more
eligible women of the middle class will be married to the upper class men, therefore
causing greater family income inequalities and ultimately the declining buying power of
the middle class. 
The conditions of the middle class workers in the United States seem poor enough and it
will get worse in the future (U.S. News & World Report). We are aware that big companies
are laying-off workers, and unfortunately the first ones to be eliminated are the middle
management people, which are the middle class workers. Corporate officials are
sacrificing the workers' jobs and income for the sake of greater profit for themselves.
The trend is not to have a huge company with thousands of workers but a more efficient
company with an optimal amount of workers. Although the labor market is very tight now,
the demand focuses on the new generations with college degrees. As the economy continue
to evolve into the information age, the middle class will continue to decline as keeping
up with technology is getting more and more difficult for them.
Bibliography
Works Cited
"America's Middle Class: Angry, Frustrated and Losing Ground." U.S. News & World Report
30 Mar. 1981: Volume 90, p39-45
Chevan, Albert and Randall Stokes. "Growth in Family Income Inequality, 1970-1990:
Industrial Restructuring and Demographic Change." Demography Aug. 2000: Volume 37-Number
3, p365-380. Proquest. Gleeson Lib. University of San Francisco, CA. 2 Oct. 2000 
Friedman, Morgan S. The Inflation Calculator. 19 Jan. 2000. 19 Oct. 2000. 
"Industrialization of the North-East." Microsoft Encarta Encyclopedia Deluxe 2000 CD-ROM.
Microsoft Corporation. 1999.
"It's Wise To Deindustrialise." The Economist 26 Apr. 1997: Volume 343-Issue 8014, p78.
Proquest. Gleeson Lib. University of San Francisco, CA. 7 Oct. 2000 
"Middle-class Blues." National Review 7 Nov. 1994: v46 n21 p14 (2)
Merriam-Webster Online. Merriam-Webster Inc. 10 Oct. 2000. 
Philips, Michael M. "Income Gap Between Rich and Poor Grows Nationwide." Wall Street
Journal Dec. 1997. Proquest. Gleeson Lib. University of San Francisco, CA. 7 Oct. 2000 
Rogers, Joel and Ruy Teixeira. America's Forgotten Majority: Why the White Working Class
Still Matters. New York: Basic Books, 2000.
Uchitelle, Louis. "Working Families Strain To Live Middle- Class Life." New York Times 10
Sept. 2000.
United States. Bureau of the Census. 10 Oct. 2000.