“The U.S. is a middle-class nation,” says the opening sentence of A New Contract with the Middle Class, an essay by Richard Reeves and Isabel Sawhill that was recently published by the Brookings Institution. “Since our nation’s founding, the American Dream has always been based on an implicit understanding - a contract if you will - between individuals willing to work and contribute, and a society willing to support those in need and to break down the barriers in front of them.” The essay is part of the Future of the Middle Class initiative launched by Brookings in November, 2018.
Why focus on the middle class? The reason, notes the essay, is that this is how the majority of Americans define themselves. “An aristocratic leisure class and a welfare-dependent underclass are equally unappealing to most Americans.” It’s why paid work is seen as so important. Americans want a society where everybody has the chance to “make something of themselves.” Joining the middle class is the very core of the American Dream, - the promise that anyone can get ahead and achieve success and prosperity through talent and hard work.
Who is in the middle class? While there are multiple definitions, most are based on income, partly because data on income are widely available, and it’s easier to come up with concrete, quantifiable definitions. But also because income tends be highly correlated with other attributes of social class, such as educational level, job status, consumer preferences, behaviors, aspirations, and cultural tastes.
The essay defines middle class as those in the middle 60% of household income distribution. “To be middle class, a household of three would have an income between $40,000 and $154,000,” - neither poor nor prosperous. “The middle class, by our definition, is diverse: 59 percent white, 12 percent Black, 18 percent Hispanic, and 6 percent Asian. Within a few decades, whites will make up the minority of middle-class families.”
The post-WWII years saw the interests of business and society converge, based on a pragmatic, mixed model of capitalism with a predominantly private sector economy but with an appropriate role for government. It was a time of economic prosperity and growth, where many workers earned decent salaries as well as health and retirement benefits. Broad economic growth led to good profits for companies, and decent livelihoods for their employees, making it possible for a growing portion of the populations, - including blue-collar workers, - to achieve a middle class life-style.
But the 1970s, ushered a shift toward a neoliberal model of capitalism which advocated the primacy of shareholder value for business, a nearly universal trust in markets, and a highly circumscribed role for government policies and regulations. The social contract, - the implicit agreements and expectations that govern the relationship between individuals and institutions, - changed considerably, with many workers having to assume greater responsibility for their economic outcomes while facing deteriorating employment prospects and a challenging, uncertain future.
Over the past few decades, automation and globalization have hollowed out America’s middle class. “Middle class families are working harder, with too little to show for it,” notes the Brookings essay. “A new contract with the middle class must be faithful to the spirit of our history but oriented towards the challenges of today’s economy and society. It should ask more of government as well as of Americans. A better future for the middle class is no longer just an important aspiration. It is an existential necessity.”
A new contract with the middle class should be underpinned by three key principles:
Partnership. Paraphrasing John F Kennedy’s famous quote from his inaugural address: don’t just ask what your country can do for you, also ask what you can do for your country. For example, college should be free in exchange for national service; health care should be better, but we must take more responsibility for our health; incomes should be higher, especially for those who are working.
Prevention. The contract should anticipate the consequences of failures and act early to prevent them. For example, we should invest in health rather than health care through improved nutrition and social services; provide universal access to contraception and reproductive health to give every child a strong start; and prevent parents, especially working mothers, from losing ground in the labor market by helping with childcare.
Pluralism. “America is a large, varied, changing society. Individuals and communities differ, often greatly, in terms of what they want from life. This kaleidoscopic diversity is one of our greatest strengths. As far as possible, policy should embrace and even encourage a plurality of opinions, approaches, and goals. … The ability to respect others, across lines of class, race, and politics, is a necessary skill in a diverse republic.”
The Brookings essay includes concrete recommendations in five key areas which its research has determined to be the core ingredients for a good quality, middle class life: money, time, relationships, health, and respect. Let me briefly summarize the key points in two of these areas, money and health.
Money. A strong middle class is one that’s prospering economically. “As nations grow richer, those riches should be broadly shared.” But, according to the Congressional Budget Office, “The middle class has experienced much slower income growth than both the affluent (who have seen rising wages) and the poor (who have been helped by an expanded safety net). The household incomes in the middle 60 percent of the distribution have grown only about half as fast as those in the bottom and top 20 percent, once taxes and transfers are taken into account.”
The increased digitalization of the US economy has contributed to the polarization of employment and wage distributions over the past several decades. Job opportunities have expanded in both high-skill, high-wage occupations and low-skill, low-wage occupations, while contracting for middle-skill blue- and white-collar occupations that have been more susceptible to automation and offshoring.
The Money recommendations are focused primarily on rewarding work. First, cut income taxes by raising the standard deduction for most middle-class families, - specifically married couples making less than $100,000 a year and single individuals making less than $50,000. This would result in an average tax cut of around $1,600 for middle-class families.
The second recommendation addresses the increasing relationship between a good education and a well-paying job. The essay recommends two years of tuition-free education at a public higher education institution, - including technical and vocational colleges, - in exchange for completing a year of full-time military or civilian national service.
Health. “It hardly needs saying that the U.S. health care system is in urgent need of reform, especially in order to bring down costs. But in the heated debates about health care it is too often forgotten that the state of our health is intimately connected to our economic resources and opportunities, the structural inequalities we face, the relationships we form, and the respect we are paid. … In that sense, every page of this contract is about health.” According to the essay, US policy debates about health are unbalanced in three key ways:
Health often takes second place to health care. “It is clear that what scholars label “social determinants” of health - economic resources and opportunities, education and skills, communities and neighborhoods and housing and the built environment - deeply influence health.” The essay references recent research on the determinant factors of health outcomes. Based on data from 45 states, the research showed that the biggest contributions to health outcomes were socioeconomic factors at 47% and individual health behaviors at 34%, while the contribution of clinical health care was only 16% and physical environment was 3%.
Mental health is treated separately – and less effectively – than physical health. “Mental health trends in the U.S. are deeply troubling. Suicide rates are at their highest level in half a century, with sharp rises among middle-aged whites in particular. Mental health conditions now account for 35 percent of claims for Supplemental Security Income or Disability Insurance.”
We need mental health parity with physical health. Mental illness should be recognized, not stigmatized. Since early detection allows for more effective treatment, mental health screening for depression, substance use and other disorders should be widely available, as should quality therapy for those who need it at no cost.
Chronic health conditions are often neglected by comparison to acute health problems. “Our physical health is worsening on many fronts, too. Two in five Americans are now obese, and obesity is associated with many chronic health conditions, including, according to the CDC, “diabetes, hypertension, high cholesterol, cardiovascular disease, stroke, arthritis, and certain cancers.” One in ten Americans already have diabetes. That number could rise to 1 in 3 by 2050 if current trends continue.
“There are many reasons why the physical health of our nation is deteriorating. But two stand out: diet and nutrition. We are eating and drinking our way to diabetes, heart disease and, all too often, an early grave. Over the long term, nothing could improve Americans’ physical health more than improving diet and nutrition – and especially, reducing sugar consumption.” Therefore, just like we have imposed taxes on alcohol and tobacco to help moderate consumption, the US should impose a national tax on sugar-sweetened drinks.
“America can only be as strong as the American middle class,” notes the Brookings essay in conclusion. “We believe that the new contract we have described here, based on the core principles of partnership, prevention, and pluralism, holds out the promise of a better future for the middle class - and therefore for the nation.”
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