On average workers born in 1942 earned as much or more over their careers than any worker born since, according to the National Bureau of Economic Research’s 2017 Niber Working Paper. From 1967, the Middle class’ share of income has dropped from 53.5 percent to about 45 percent today. Ninety percent of metro regions have seen a decline in the middle class while on average incomes in rural America has declined to a much greater degree.
Ever wonder why the middle class is declining in our country, what’s the ramifications, and what can be done about it on a national level and here in the Adirondacks? New York Times bestselling author Peter Kiernan asked the same question, and decided to delve into the issue, and report on what he learned in his new book American Mojo Lost and Found: Restoring our Middle Class. Thanks to the Lake Placid Institute, its board member Ellen McMillin, and her husband John, Kiernan was persuaded to present Saturday morning, July 14, at the Institute’s Adirondack Roundtable.
A young Chinese executive provoked Kiernan’s research when he asked why America’s leadership is letting the country’s middle class atrophy at a time when they and every other developing country is trying to build up their own. He wanted to know what’s our government’s reasoning and game plan? That question left McMillin dodging, sputtering, and tossing out platitudes as he had no good answer, nor had he looked at our shrinking middle class as the outcome of potential intentional action. He did understand that to an outsider, the tearing away of the underpinnings of our middle class certainly seemed deliberate.
One outcome of his research is that he learned that in a sense Marx was right, capitalism unchecked or unregulated will lead to a massive transfer of wealth and power to the few and leave a high percentage of others in poverty as we are currently experiencing. This is not to say that Kiernan advocates for a Communistic form of government or social engineering, far from it; rather he believes that there are actions we can take to expand and strengthen the middle class to the benefit of all who live in our society. Further, he believes that revitalizing our middle class is vital to our nation’s economic and social well being. He also passionately believes that we, everyday Americans, have the power and opportunity to initiate that change, and now’s the time to get cracking.
Kiernan provided frightening statistics about life for many in the United States. He said there are 45 million poor people in the United States and that just above that seam of the poverty line are another 50 million people who are lower middle class, or what he calls in his book “hovering poor,” just a twist away from a life’s knife and living in poverty. As an illustration of how tough it is for many in the United States he said if you combined the population of Los Angeles and Philadelphia, that’s how many people there are in this country between the ages of sixteen and twenty-five that are not in education, not in training, and not employed.
“I felt that the historical context Peter put the decline of the middle class into was very interesting,” said Cathy McGraw, president of the Institute. “He shared, this is what exists, this is how we got there, and what we do about it is up to us. He said we need to fix this problem because a strong middle class is the underpinning of our society. He spoke for a long time and you could hear a pin drop in the room. People were captivated.”
A thumbnail history
Kiernan began by reviewing the roots of the middle class in our society which surged following WWII as leaders in American business, banking, education, and government wanted to thank the 16 million returning veterans and the many women who stepped into the workforce while the men went off to war. Through the GI Bill and many other initiatives, they provided GIs with access to a good education while businessmen like the Levitt brothers made housing affordable. Our country quickly become the major center for manufacturing, food production, finance, advances in technology, education, and health care while much of the rest of the world lay in ruins.
Essentially as a means of creating a customer base for the products being produced, the U.S. government used the Marshall Plan to rebuild Europe and Japan, and established alliances like NATO to protect these investments from Soviet aggression and expansion. Our economy boomed. Men earned enough to be the sole breadwinner, wives managed the homes and educated the kids. All seemed to be going along well except for a problem, these benefits were not universally applied. People of color and other minorities were largely excluded. Soldiers of color, who had experienced greater freedom and respect abroad, returned home desiring the same benefits, and became angered when they were excluded and marginalized.
Their frustration of being left outside the economic boom helped galvanize the civil rights movement resulting in many violent confrontations, especially by those resisting Black Americans efforts to leverage legislative change. At the same time a vast amount of economic resources and political capital was being spent on the Vietnam War. Kiernan said that our economy began to falter as we could not fight the War in Vietnam and the War on Poverty at the same time, both hugely expensive and neither going well. Spending so much national treasure fighting an unpopular war and trying to address poverty led to what Kiernan described as the three uglies, double digit inflation, double digit interest rates, double digit unemployment.
Nixon’s response to addressing the economic malaise was to take us off the Gold Standard, which initially produced an economic boost, but led to catastrophic inflation and drastic drop in the value of the stock market. Fed Chairman Paul Volker, supported by then President Reagan, eventually checked rising inflation. The cure was painful with many businesses like Chrysler going bankrupt. Another outcome was that families could no longer survive on a single income.
At the same time those with wealth and power successfully lobbied for changes in the banking laws, opportunities to reduce the influence of unions, and ever-increasing reductions in graduated income taxes – an economic safety value that made affordable education, healthcare, and investments in infrastructure possible.
Where we are today
“There is not enough growth here in the United States to serve our desired middle class,” said Kiernan. “There is this Newtonian certainty that there will always be a middle class in the United States but that’s not the case. The only certainty is there will be some middle class, but that there will be a very large and growing group of poor, and group of people, from the standpoint of the one percent, that will benefit mightily. 76 people in the world own most of the global assets, they could fit in this room. Left unguided, unchecked, and without some thought on how we feed certain needy areas, and I’m not just talking about the poor, but the middle class, capitalism is the greatest concentrator of wealth ever devised and it’s up to us to manage that appropriately.”
Kiernan said that if you think of the top ten trading ports in the world, the United States has none, China has six, and the port of Shanghai is so big that the top four in the United States combined are not as big. There are 40 or 50 countries in the world that have as the center of their strategic plan building a strong and vibrant middle class and are taking pages from our playbook. The OECD says there will be a billion more members of the middle class outside our borders in the next ten years and the next ten years after that a billion more. 10 times our middle class will soon exists outside the U.S..
He pointed out that as an example the average South Korean works 1,000 hours more per year than the average American. They don’t do that because there’s more money in it, they do it because they believe by doing so their children will be better off than themselves. In China, just under 90 percent believe their children will be better off than themselves while we are at 40 percent and that number is in decline.
The number of kids who attend our public schools each year with no home to go to is larger than the population of Dallas, TX. They live in cars, tents, and shelters, or are crashing at someone else’s home. The average age of a homeless person in New York City is nine years old. Homeless children in New York City alone are enough to fill Lake Placid’s Herb Brooks (Miracle on Ice) Arena seven times over. Next fall 7,000 students will go to Harvard; meanwhile every day of the year, 7,000 kids will drop out of K-12 school each year. Meanwhile, nationwide, only 39 percent of community college students graduate after six years.
Imagine the entire population of Los Angeles combined with the entire population of Philadelphia, that’s how many people there are in this country between the ages of sixteen and twenty-five that are what Peter Kiernan calls neat, they are not in education, not in training, and not employed. They’re doing nothing. Can there be anything more diminished than a twenty-year old who cannot read or do math at an eighth-grade level. There are millions of young Americans like that who represent a one hundred billion dollar per-year anchor on our future; it’s the ultimate teenage wasteland. A lot of these young people will end up incarcerated.
The US has five percent of the world’s population yet twenty-five percent of all the people in prison, be that in a federal, state, or county jail. No country on earth has more children in prison as an absolute number or percent than the United States. The three Ps, prison, parole, and probation include 7.5 million Americans; greater than the populations of Los Angeles and Chicago combined.
“It costs us $120,000 per year to incarcerate a young person in Riker’s Island; twice the cost of sending a person to Harvard including room & board,” said Kiernan. “Surely we can do better. These lost children are our nation’s seed corn and we are wasting several million of them per year.”
Kiernan also said that touting a national four percent unemployment rate is a false indicator of success because it leaves out the population that has given up looking for work and doesn’t segregate out the large number of middle class and our nation’s poor that are working two, three or more jobs in an attempt to meet their basic living expenses.
Rebuilding the Middle Class in the US and Adirondacks
Kiernan said that creating low-level, entry-level jobs will not solve our region’s unemployment and declining middle-class problems. He said his research has shown that raising the minimum wage results in businesses either outsourcing work, reducing their number of employees, or turning to automation to help fill jobs more cheaply. He said every time minimum wages have been raised soon thereafter relative inflation has eaten those gains. Better is to create jobs that enable people have a positive quality of life, recruit and train people to fill those jobs, reduce the costs of healthcare, higher education, and homes for middle and lower income families, and foster profit sharing and other incentives to distribute corporate income more fairly.
Kiernan said a key to rebuilding the middle class is to create jobs that create other jobs. Every high-tech job creates 4.3 more jobs in other services sectors across all income groups, including lawyers, dentists, schoolteachers, cooks and retail clerks, among many others. In infrastructure, it’s close to two to one. The key is educating students for the jobs available; and to do that it requires education, business, and government to work together to identify the skills needed, schools to train the youth, and government to create the incentives and insure that the education is affordable – that the students don’t end up with a crushing debt.
He said, “Nation-wide there are four million fabulous middle class jobs, multiplier jobs. Future jobs. Career building jobs. They don’t need to be created, they exist; they need to be filled. If you doubt it, go to Microsoft, they have 10,000 jobs waiting to be filled. They will be filled. If we can’t fill these jobs in the United States, they’ll fill them overseas. Microsoft and other tech companies can’t stay in business, can’t continue to grow in a market like ours.”
Kiernan said that we graduate 40,000 computer science majors in the United States each year while we are creating 400,000 computer science job openings. These are multiplier jobs. Well-paying jobs. He asked why is it eight percent of the graduates in the United States are in STEM while thirty percent of the Chinese are in STEM? There is no connectivity. We are creating way more jobs in STEM then there are graduates to fill those jobs.
Kiernan feels another key is looking for markets outside one’s region and outside the country as that’s where products and services are needed. To be successful, this approach requires educational, business, environmental, health, agriculture, cultural, and government leaders work together to identify those potential markets and services and then market those services to meet those needs. In our region, in the past, we sold iron ore, lumber, and tanned leather.
Today we depend on prisons and tourism. We are not strategic in our thinking, we are not thinking creatively and broad enough, and the outcome is people, most especially young people, and young families moving out of the region to live elsewhere.
As an example, there are over two million cancer cases each year in China. Their healthcare facilities are not nearly as good as ours. How many of their patients would we need to attract each year put our lead hospitals in the black? Caring for people living with TB provided Saranac Lake on the surrounding communities an economic engine for over for fifty years. What are the health services that we can offer that would attract patients (and their families) here?
Wellness travel, a $500 billion plus industry, is the fastest growing segment of tourism worldwide increasing at a rate of ten percent a year. The Adirondacks used to be a major wellness destination in the United States, now it doesn’t make the top fifty in a Google Search, meanwhile the media is filled with articles about the healing benefits of nature and participating in creative activities. Kiernan would make rebuilding that brand a priority as our location is within a day’s drive of one quarter on the U.S. population, and our wilderness would be very attractive to Europeans, Asians and others.
We are experts in protecting the natural environments, while throughout the world many counties desperately need that expertise. Be the go-to place for people to learn the latest techniques for environmental and species protection.
He said start by identifying the multiplier jobs in one’s region and then matching those jobs with people who can fill them. If one doesn’t have enough skilled people in the region, train people to fill those jobs along with recruiting people to live here and fill them. What skills does the high tech and transportation industries in Plattsburgh need? Global Foundries near Saratoga? He urged the colleges and community colleges in and around the Adirondacks to increase the number of students they train in engineering and computer sciences, which in turn will encourage more high-tech businesses to locate in Plattsburgh and the university communities.
“Be like Houston,” said Kiernan. “Houston is the only city that brings these sectors together to educate their youth for the jobs that are being created by business, it’s called The Greater Houston Partnership. Their question was; how can we make this the easiest place in the country to start a business, get a job, train people, and then let the nation know that we’re doing that?”
“I’m thrilled that the Institute had a speaker to address the growing wealth gap because I think it is one of the most serious issues we face,” said Scott McGraw following Kiernan’s presentation. “I worry about the polarization that we have in this country will hamper our ability to confront any of these problems and that we could lose a generation.”
“I was awe struck by his observations,” said John McMillin. “The health and well-being of the middle class is something that everybody should think and talk about.”
Did he achieve that goal? The response has been a resounding yes.
“I was mesmerized, Peter really packed it in,” said Joan Gignoux. “He presented a lot of things that I had not put together and hadn’t thought of; some shocking things like the number of young people waiting for bail. That was a stunner, plus the number of men that are not even finishing high school. That’s huge. I walked out of the meeting very concerned. I believe he’s right that we have the talent and ability to tackle the income divide and rebuild the middle class, but the depressing thing is I don’t think we are figuring it out at all. We’re putting our focus in the wrong place. Whatever you think the focus should be it’s not there.”
The next Lake Placid Institute Adirondack Roundtable will be held at the Crown Plaza, August 4th at 8:30 am.
Photos, from above: Peter Kiernan address the Lake Placid Institute’s Roundtable and Kiernan with Cathy McGraw, President of the Lake Placid Institute provided.