Reimaging The American Middle Class

This is where urban isolation, rural resentment, and upper-middle class frustration converge.

Source: gettyimages.com

My post from Tuesday might seem to be a return to an old issue from the pandemic – recognizing the essential workers who make our economy function every day. But really, it was a prelude to a discussion on rising economic inequality that’s plagued the nation for the last 40 years or more. The loss of manufacturing jobs, particularly in the Midwest, has meant the loss of middle class jobs, and the destabilization of the cities that were reliant on them. But it’s important to remember that manufacturing jobs became middle class jobs because of policy choices at the federal level, and the cooperation of corporations that saw value in investing in their workforce.

This came to light again when I saw a report last week from the Economic Innovation Group, a public policy research organization that’s done considerable work in researching legacy cities and distressed neighborhoods. Their Distressed Communities Index, updated annually, has been a go-to of mine for years.

EIG released a report that offered a proposal for doing what I was asking for more than five years ago – a way to move our low-wage “essential class” workers into the middle class. The idea? A federal wage subsidy.

“Roughly 21 million American workers earn less than $16 an hour. Two-thirds of those workers are women. And among men in their prime working years (ages 25–54), nearly 10 million, or 14 percent of them, don’t have jobs at all. In some states, like Louisiana and West Virginia, one out of five working-age men are jobless.

In short, the labor market has left too many people with either low pay or no pay at all.

Policymakers have tried to help. But the specific ideas they have traditionally suggested to realize the goal of better jobs and higher pay for these workers — from minimum wages to tax credits to Buy American rules to “no tax on tips” — have been poorly targeted, expensive, or likely to cause unintended consequences that undercut other policy objectives.

Luckily, a better idea already exists. Indeed, it has been around for decades. It is the one policy that is efficient, directly helps workers without undermining other goals, and is better aligned with market incentives than other policies: a wage subsidy.”

Behind the paywall, you’ll find details on the EIG wage subsidy proposal, and more on their broader worker policy program to support the American workforce.