Making Our Middle Class Stronger
Part of a Series
See also: The Middle Class and Economic Growth by Michael Ettlinger; The American Middle Class, Income Inequality, and the Strength of Our Economy by Heather Boushey and Adam Hersh; The Failure of Supply-Side Economics by Michael Ettlinger and Michael Linden; Video: Once Upon a Trickle Down: The Rise and Fall of Supply-Side Economics by the Center for American Progress and Mark Fiore
The American middle class is in trouble. Incomes are stagnant or falling, while the costs of life’s necessities continue to rise, and the risks of falling behind grow. The weakness of our middle class is a problem not just for those who are struggling but also for all Americans because a strong middle class is essential for a vibrant democracy and a healthy economy—and for our conception of what America is all about.
This report describes 35 policies developed by the Center for American Progress that would strengthen our middle class by helping address the challenges Americans face in achieving and maintaining a middle-class standard of living. This report does not tackle every issue of concern to the middle class or address every problem in our economy. Rather, it focuses on the central pocketbook issues facing the middle class: the financial squeeze Americans face because they are caught in a vice between stagnant incomes and weak job prospects on one hand and rising costs and growing risks of paying for middle class basics such as health care, retirement, housing, and a college education for their children on the other.
The 35 policies detailed in the main pages of this report are the kinds of bold, aggressive action that Americans have been waiting for (see summary table starting on next page) such as lower college education costs, workplace standards that match the needs of 21st-century dual-income families, the creation of more wellpaying middle-class jobs, and reliable and sustainable retirement income security.
Why is action needed? Most Americans see the answer to that question every day. But what they see is also reflected in numbers.
More than 12 million people are unemployed, and the unemployment rate has been higher than 8 percent for three years, the longest sustained period of high unemployment since the Great Depression.
Even for those with jobs, the economy has, for the most part, failed to deliver. Income for the typical household has stagnated over the past few decades and has actually fallen over the past 10 years: Median income for working-age households— meaning half of the population makes more and half makes less—fell by 1.9 percent during the supposedly good economic recovery of 2001 to 2007 and fell by another 4.6 percent during the Great Recession of 2007–2009.
As a result of stagnant incomes for the middle class and rising incomes for the rich, the share of the total national income earned by the middle 60 percent of households has been on the decline for decades. Today it is near its lowest level since the government began keeping track of the statistic in 1967.
At the same time that incomes have stagnated, costs and risks for middle-class families have increased dramatically. According to the Senate Committee on Health,Education, Labor and Pensions, between 1970 and 2009 the costs of gas went up by 18 percent, health care by 50 percent, college by 80 percent, and housing by 97 percent, net of overall inflation. The percentage of Americans who lost ground economically by either experiencing a major loss in income or incurring large outof- pocket medical expenses has rapidly increased over the past two decades, rising to 20 percent in 2010, the last year complete data are available, from 14 percent in 1986, according to research by Yale political scientist Jacob Hacker. Not surprisingly, Americans haven’t been able to put enough away for retirement, and the risk of falling behind in retirement increased significantly—the percentage of working-age households that are at risk of being unable to maintain their preretirement standard of living in retirement rose to 51 percent in 2009 from 32 percent in 1983, according to the Center for Retirement Research at Boston College.
Finally, it is becoming harder for Americans to join the middle class. According to research by Bhashkar Mazumder of the Federal Reserve Bank of Chicago, the likelihood that a child born poor will rise into the middle class has declined significantly over recent decades. As a result, the United States has less economic mobility than other developed economies.
The weakened state of the middle class hurts all of us by stifling our country’s economic growth and undermining our democracy.
A strong middle class is a prerequisite for robust entrepreneurship and innovation— a source of trust that makes business transactions more efficient and a source of sustainable demand that encourages businesses to invest. A strong middle class also promotes efficient delivery of government services, greater political participation, and forward-looking public investments in education and infrastructure.
The issues addressed in this report are central to the strength of the middle class. With such high levels of unemployment, millions of people are falling out of the middle class, and wages are being forced further downward. Yet this report goes well beyond immediate job-creation policies because long before the Great Recession started, the middle class was significantly weakened by the problems of stagnant wages, rising costs and risks, and declining mobility. Long after unemployment returns to more normal levels, the middle class will still face these same basic problems unless we take the kinds of actions recommended in this report.
Indeed, for the past decade that Gallup has been asking Americans about their biggest financial concern, those in the middle class have consistently said they are most worried about not earning enough money, the high cost of living—especially paying for health care, housing, and college—and risks such as maintaining a decent standard of living in retirement and losing their job. Sadly, Americans have also been telling pollsters for the past several years—even before the start of the Great Recession—that they think their children will be worse off than they are.
Recommendations cover a wide range of issues, including higher education, job training, workplace standards, retirement, health care, housing, gas prices, child care, and infrastructure.
Most of the policies in this report have multiple benefits and address more than just one aspect of the challenges facing the middle class—including high unemployment, stagnating incomes, rising costs, increased risks, and declining mobility. Our policies to reduce the costs of college, for example, do far more than just lower expenses for middle-class families. They also reduce the risk students will emerge from college saddled with excessive debt levels and help more people gain the income benefits of higher education. Similarly, our retirement proposal would reduce the cost of saving for retirement, as well as provide greater income security during retirement. Expanding access to preschool for 3-year-olds and 4-year-olds will reduce costs for child care, boost children’s education and later-life experiences, and create teaching jobs.
Even policies that may not seem to obviously address more than one problem facing our middle class often do. Reducing health care costs not only helps families cut down on expenses but also can boost worker income because the high cost of health care has caused many firms to divert money away from wage increases and toward health benefits. Policies that can directly boost incomes such as inclusive capitalism, which rewards workers when firms do well, are also associated with greater job stability and fewer layoffs during economic downturns, providing a buffer against risks. Reforming unemployment insurance will not only help prevent families from falling out of the middle class but will also boost spending and create jobs. And rehabilitating foreclosed properties as rental homes can help create jobs, as well as lower rental costs in certain markets.
Each individual policy in this report would be a big help to the middle class— creating a significant number of jobs, boosting incomes for a large percentage of the population, meaningfully cutting costs for middle-class necessities, and considerably lowering the risks of falling behind—and would go a long way toward rebuilding the ladder of opportunity. Together, our 35 policies approach the scale necessary to start rectifying the income, cost, and risk problems faced by Americans. Our policies will help:
- Ensure middle-class families pay only 15 percent of their income to send their children to college
- Reduce the cost of saving for retirement by nearly half, compared to a typical 401(k) plan
- Lower mortgage payments for millions of families by an average of $2,600 a year
- Restore 500,000 teaching jobs
- Create more than 2 million jobs rebuilding and upgrading our infrastructure
- Guarantee workers access to paid sick days and maternity leave
- Increase access to higher education and job training Ensure that workers receive the overtime pay and benefits they deserve
- Help non-college-graduates gain credentials that boost pay by as much as $225,000 more than comparable job seekers during their lifetimes
- Save middle-class consumers thousands of dollars annually on health care and limit the risk that illness will send them to the poorhouse
- Reduce the cost to parents of quality preschool
Certainly there are a number of other policies that would also be of great help to the middle class—notably the Restore America Act introduced by Sen. Tom Harkin (D-IA) and Rep. Rosa DeLauro (D-CT), as well as dozens of other ideas on the Center for American Progress website and elsewhere.
But our 35 policies, if enacted, would make a meaningful difference in the lives of all Americans. The pages that follow describe these 35 policies. Many of the policies are new; many have not been previously discussed by the Center for American Progress; and most are not yet part of the dominant political conversation. But all of them should be.
In order to succinctly present such a large number of recommendations, we only briefly describe the core concepts of the 35 policies. In the near future we will release individual briefs describing the major new policies in greater detail. We provide cost estimates, where available, for those policies with a significant budgetary impact but do not specifically describe how to pay for them—their costs are consistent with previous plans we have released to achieve long-term fiscal balance by investing now in growth- and prosperity-generating policies, while working to lower our nation’s federal budget deficits over time. This set of middle-class policy proposals is of vital importance to the future our country and should be a top priority for policymakers.
David Madland is the Director of the American Worker Project at American Progress.
- The Middle Class and Economic Growth by Michael Ettlinger
- The American Middle Class, Income Inequality, and the Strength of Our Economy by Heather Boushey and Adam Hersh
- The Failure of Supply-Side Economics by Michael Ettlinger and Michael Linden
- Video: Once Upon a Trickle Down: The Rise and Fall of Supply-Side Economics by the Center for American Progress and Mark Fiore
The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.
Senior Fellow; Senior Adviser, American Worker Project