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Creative Destruction the Middle Class, Part 2

Fri, 05/18/2012 - 12:32pm
MICHAEL P. COLLINS, Author, Saving American Manufacturing

By MICHAEL P. COLLINS, Author, Saving American Manufacturing

Mike Collins ImageThis is part two of a two-part piece. Part one can be found here.

3. “Change can result in a gap between those fortunate enough to have the talents, education and connections needed to seize the emerging opportunities, and those forced into narrowly defined, heavily monitored, temporary positions.”

Clearly, the gap between the haves and have-nots is widening at an accelerating pace. The Congressional Budget Office published a chart called “The Economic Polarization of America, 1967 – 1997.” It shows that the after-tax income of the poor and middle class has not increased in 30 years, while the richest 6 percent of our population have enjoyed an unprecedented increase in income. This has turned out to be a much worse problem than the 1987 prediction.

4. “Will people be able to find a variety of attractive opportunities for work, or will only the credentialed elite enjoy such opportunities?”

All evidence points to the fact that the credentialed elite (the top 20 percent of working population in income) will enjoy the opportunities. The credentialed elite include people with technical or professional degrees for the large part. Contrary to popular belief, it is not enough anymore to just get a college degree. To be credentialed enough to command high incomes is more about getting a professional degree with the right training and the right skills.

The real question is: Will people be able to find a variety of attractive opportunities for work? I think attractive opportunities means family-wage jobs that can support a family of four.  

The U.S. Department of Labor publishes a list of the “Fastest Growing Occupations in Occupational Outlook from 2006 – 2016.” These tables show that 18 of the occupation classifications (5,314,000 jobs or 70 percent) are very low pay (below $21,000) or low pay (up to $30,000), whereas 10 occupations or (2,200,000 jobs or 30 percent) are considered high pay ($30,000 to $46,000) or very high pay (over $46,000).

If this 10-year prediction is accurate, then it appears that the average middle-class worker is going to have trouble finding a family-wage job. These statistics do not support the notion that transitioning to a service-based economy is going to be a good thing for at least 70 percent of all future workers and their families.

Consequences of a Declining Manufacturing Sector

The idea that we can transition to a post-industrial economy that will somehow sustain us without affecting living standards is a myth. We are already faced with declining living standards and it could get worse. The evidence shown in the previous answers to the four predictions seems to indicate that the so-called post-industrial transition has not been good for the average worker in terms of living standards or opportunities.

There is no evidence that supports the notion that it is possible to continue economic growth or provide enough good jobs without a strong manufacturing base. Schumpeter’s predictions on creative destruction and great economic change are evidently an accurate description of what is happening to the U.S. economy. He went on to say that this change would go on to foster values that are hostile to capitalism as well.

He says, “There will not be a revolution, but merely a trend in parliaments to elect social democratic parties of one stripe or another.” He suggests that capitalism will eventually give way to some form of socialism or social programs to help the many workers who find themselves in financial jeopardy.

What Is the Answer?

If you are a conservative and don’t like Schumpeter’s prediction of government being the ultimate answer, then now is the time to speak up. Manufacturing has traditionally supplied the family-wage jobs for the middle class and can continue to supply them if we make saving the manufacturing base as important as the war against terrorism.

Am I being overly dramatic? Actually, I’m not — while terrorism can destroy lives, infrastructure and our feelings of security in our own country, the destruction of the middle class of our economy could have a similar — and even more widespread — effect.

If more and more workers get forced into lower paying jobs and face insecure futures, they will vote with their pocketbook, and the only answers are government solutions — perhaps a second New Deal.

Regardless, the answer is clear: We can’t allow manufacturing to decline below the critical mass it will take for manufacturing to continue to support the rest of the economy. Manufacturing is not the total answer to a declining middle class, but for every eight manufacturing jobs created, six other jobs are created in the economy. 

What’s your take? Please feel free to leave a comment below! To read part one of this two-part series, please click here. Michael P. Collins is the author of the book Saving American Manufacturing. You can find more related articles on his website via www.mpcmgt.com.

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