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Broken Promises: Smaller Middle Class Has Less Room for Families

The decline of the middle class suggests fewer people feel they belong to the nation’s economic and cultural bedrock.

After Gabriel Cardenas graduated from high school, he seemed on track to join America’s middle class. He worked at Google in Silicon Valley, enrolled in classes at San Jose’s Evergreen Valley College and took a second job.

But seven years after graduation, Cardenas is no closer to a middle class that has been shrinking for decades. Instead, his career reflects a common storyline in the modern economy. Cardenas was not an employee at the high-tech firm. Instead, he worked there as a contractor, spending his days unloading crates of bottled water, pet food and other goods for the company’s new delivery service, Google Express.

He has not earned a college degree either, since he could only afford to take a few community college courses on the $17 an hour he earned as a contractor at Google. When Cardenas turned 25, he moved back home.

Cardenas isn’t alone. Last year, the middle class shrunk to its lowest share of the U.S. population in four decades, with only 50 percent of Americans living in middle-income homes, down from 61 percent in 1971, according to a new report from the Pew Research Center, “The American Middle Class Is Losing Ground.”

While the middle class was shrinking, two other segments of the American population were growing: the poorest and the wealthiest. Last year, 20 percent of U.S. adults were on the lowest rung of the economic ladder, earning less than half of the national median income or roughly $31,000 or less in 2014, an increase from 16 percent in 1971, Pew researchers reported. In 2015, 9 percent of Americans were at the top, they earned three times the median or more than $188,000 for a family of three, up from 4 percent in 1971.

Cardenas represents a new face of the nation’s full-time workers, people who find themselves in low-paying jobs and left out of the shrinking middle class. In the Google warehouse, Cardenas worked alongside biologists and electrical engineers fresh from college who couldn’t find other jobs during the sometimes anemic recovery from the Great Recession.

“There is a big lack of hope. I don’t think people actually see themselves owning a house, owning much,” said Cardenas, now 27, who says he was recently fired after a successful union organizing campaign at his warehouse. “There is not a path to have stability, to save up and actually be middle class.”

Losing Faith in the American Dream

The decline of the middle class suggests a growing disconnect in the U.S., where fewer people feel they belong to, or have a chance to join, what has been the nation’s economic and cultural bedrock. “The shift out of the middle reveals that a deeper polarization is underway in the American economy,” according to the Pew Research report.

The report confirms what many struggling families have felt for years: The American Dream is moving further out of their reach. In 2014, only 64 percent of people had faith in that dream, the lowest level in about two decades, according to a poll and report by The New York Times.

Both that faith and the middle class itself are being eroded by a complex storm of changes within the nation’s economy, education system and public policies. While the U.S. economy is growing again, for example, too much of that growth is in low-wage and part-time jobs, according to Kyra Greene, a research and policy analyst at the San Diego-based Center on Policy Initiatives.

San Diego’s economy relies heavily on low-paying jobs in the tourism industry – hotels and restaurants – while the city’s cost of living ranks among the highest in the nation, Greene says.

The collapse of housing markets during the last recession also delivered a body blow to the financial security of middle and lower-income families. Falling home values robbed many middle-class families of their primary savings, home equity they could have tapped to weather tough times, Greene added.

“They were hit especially hard,” said Gabriela Sandoval, director of research and chief economic security officer at the Insight Center for Community Economy Development. “A lot of wealth was lost because of the housing crisis.”

As families fell from the middle class, the public safety net that caught struggling households in the past – subsidized housing, public assistance, unemployment aid, public health care and food stamps – was fraying, according to Deborah Scott, executive director of Georgia STAND-UP, an Atlanta-based alliance of leaders that focuses on economic development.

“The services available (today) are not adequate to meet the needs of the communities in crisis. The safety net of good social services, good public policy and basic human services has gaping holes that can’t be filled without a comprehensive approach,” Scott said.

Meanwhile, the soaring cost of a college degree has pushed one of the more reliable tools to gain access to the middle class out of reach for many and saddled others with crushing debt.

“In states like California, all the things that we saw that were important to building a healthy middle class in this country are moving in the wrong direction,” Greene said.

Together, all of these changes help explain why a different analysis by The Pew Charitable Trusts found that those who are born in the bottom or the top of the U.S. economy are likely to stay there.

Signs of Progress

As the nation’s middle class shrunk, however, hopeful signs emerged in two arenas where progress had also stalled: organized labor and the minimum wage.

The ranks of union workers have been thinning since the middle of the last century, when a union job was often a reliable path to economic security. In 2014, only 11 percent of U.S. workers belonged to a union, down sharply from 20 percent in 1983, according to the Labor Department’s Bureau of Labor Statistics.

In the tech industry, however, unions have secured a few impressive wins lately.

Last year, bus drivers who ferry Apple, Yahoo, and eBay employees around Silicon Valley overwhelmingly voted to join Teamsters Local 853. Their first contract raised wages for drivers from $18 an hour to between $24 and $32 an hour and included paid sick leave, vacation time, holidays and overtime pay, according to Tracy Kelley, one of the drivers who helped lead the organizing campaign.

Yahoo, Apple and the other companies deserve some credit for that contract because “they are the ones who stepped up to the plate to pay the extra money,” Kelley said.

Perhaps the most encouraging sign the middle class could grow again is the broad success of local efforts to raise the minimum wage. Even as the federal minimum wage has remained stuck at $7.25, at least 52 cities, counties, and states, from Los Angeles, Calif. to Birmingham, Ala., have raised minimum wages since 2003, according to RaisetheMinimumWage, a project by the National Employment Law Project.

Raising a local minimum wage to $10 or even $15 an hour will not necessarily move a family into the ranks of the middle class, which the Pew Research report defined as households earning between two-thirds and double the national median, between $42,000 and $126,000 a year in 2014 dollars for a family of three.

But, the success of the campaign to raise the minimum wage has tremendous value and could have a “trickle-up” effect as well. The campaign not only raises the pay floor, advocates say, it opens up larger questions about what people need and should earn in the modern economy.

It also reflects a growing realization that many U.S. workers have not seen real raises in years – a typical worker’s hourly wages and compensation have been stagnant since 1979, with the exception of the late 1990s, the Economic Policy Institute reported last year.

“We are in what I would call a wages moment. People are recognizing that we have wage stagnation,” said Lawrence Mishel, president of the Washington, D.C.-based institute.

In California’s Silicon Valley, the idea that many low-wage jobs should pay more is at the heart of a three-point strategy from Silicon Valley Rising, a coalition, and led by Working Partnerships USA to shore up and then expand the middle class. This year, the plan from the San Jose-based community organization includes:

– Launch campaigns to organize contract workers in growing industries, such as bus drivers.

– Push to raise minimum wages and job standards, in more cities. In Silicon Valley, 11 cities have either considered or will consider raising basic wages this year.

– Expand affordable housing, including rent-controlled and subsidized housing, and support policies that prevent displacement of workers living in Santa Clara County.

For some, the campaigns to raise minimum wages, organizing wins and initiatives to broaden subsidized housing are a solid step to stopping the erosion of the middle class. In San Jose, for example, Gabriel Cardenas wants to see greater investment in public schools, stronger laws that support collective bargaining and free community college.

Political engagement and community organizing are important keys to making these changes and expanding the middle class, adds Georgia STAND-UP’s Scott.

“We need to keep making sure people participate in the political process and understand the connection between good public policy and the quality of their lives,” she said.

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