Chapter 5 The Middle Classes

Historical Development of the Middle Classes

Although the classes in the middle are seen as the backbone of American society and other economically developed societies, the emergence of these classes is a historically recent occurrence. Prior to the advent of industrial capitalism, agrarian societies consisted essentially of two classes: the landed aristocracy, who controlled most wealth, and the remainder of the populace, who worked the land as poor peasants, living in degraded and deprived conditions. As commercial activities and industrial production replaced agriculture as the major economic pursuit, a merchant class, or bourgeoisie, gradually replaced the landowners as the most powerful class, and their wealth increased commensurately.

The middle-class nature of the United States is both an objective fact and a subjective mood.

As to the former, most people are neither at the top of the class hierarchy nor at the bottom. Two-thirds of American families have incomes between $25,000 and $150,000. While this certainly represents a broad range, it is a range whose components are clearly separated from the top 10 percent, who own most of the society's wealth, and the poor, who hover below or near the poverty line. In an economic sense, then, it is quite accurate to describe the United States as a society in which most people are "in the middle". But the middle-class idea is also a state of mind; it is how people see themselves regardless of their actual economic position, and it is reflected in their attitudes and values. As described in Chapter 3, the classes in the middle consist of at least three specific categories: the upper-middle class, the lower-middle class, and the working class. It is also the case that most of the mobility that occurs in the class system occurs within and between the units of this middle range. Rare are the rags-to-riches cases, with individuals moving from the bottom of the class system to the top. The most common forms of mobility are short-range, incremental moves that occur mostly within the working, lower-middle, and upper-middle classes.

Industrialization and the Changing Class Structure

Growth of the Working Class The predominance of farmers and farm laborers as part of the workforce began to change as society moved more fully toward industrialization. By the end of the nineteenth century, the shift toward an industrial workforce was clear and irreversible. Automation drove many farmworkers from the land, where their labor was no longer needed. Machines could do the work of men more efficiently and cheaply. Moreover, the lure of better-paying jobs in factories in the urban areas was very strong, serving as an additional push for workers off the farms. (As Jeremy Rifkin explains, despite the fact that nearly half of all people on earth still farm, we are rapidly moving toward a world without farmers as technological changes in the production of food continue to advance. Consider that one farmworker in 1850 produced enough food to feed four people. Today, one farmer produces enough to feed seventy-eight people. Marx described capitalism as a system marked by a social division between those who owner the means of production-the factories and machines of the newly emergent industries-and the workers, whose labor produced the wealth of capitalism but who were dispossessed of power since they were not owners. Marx saw a continuing drop in the standard of living of industrial workers who, he felt, would be increasingly exploited by the capitalists. For many decades, the conditions of industrial Europe and the United States seemed to confirm Marx's dismal picture. The new industrial owners expanded their empires while their workers long hours under oppressive and often unsafe conditions. Steelworkers employed in the great Carnegie steel mills in western Pennsylvania, for example, labored twelve hours a day, seven days a week, constantly exposed to workplace hazards and debilitating injuries. For their toil, they earned about $10 a week, just above the poverty line of $500 a year/ The annual earnings of Andrew Carnegie, by comparison, were the equivalent of the wages of almost four thousand steelworkers. The New Middle Class By the 1920s the United States had become a thoroughly industrialized society, and its workforce reflected that transformation. In addition, white-collar jobs, those in the service sector, began to grow with increasing speed. This contributed in great measure to the emergence of a large middle class in the mid-twentieth century. This new middle class was made up mainly of salaried white-collar workers working not for themselves but for employers, often as part of large, bureaucratic organizations. Marx had not anticipated the development of such a category of labor. The emergence of a large white-collar sector of the labor force was brought about by the increasing concentration of the means of production into fewer and fewer large corporate enterprises. No longer were small, family-owned-and-operated firms the dominant form of business. Production and distribution became more complex and national in scope. As a result, smaller firms, with fewer resources, were unable to compete against large corporate enterprises, which were organized in bureaucracies with hundreds, perhaps thousands, of workers occupying highly specific work roles and led by a managerial elite.

The Changing U.S. Economy and the Classes in the Middle

In recent years the intermediate classes have been profoundly affected by what has been referred to was economic restructuring. Jobs, income, and wages have all been impacted by the advent of a global economy and by what has been called a third Industrial Revolution, in which occupations and the very nature of work itself are being transformed by new technologies. These changes have affected each of theintermedivte classes in different ways. Those in the upper-middle class have generally prospered, while those in the working class and, to a lesser degree, the lower-middle class have been the losers. To better understand the current status of these classes, we need to briefly trace the major developments of the American economy and its workforce over the last few decades. The Growth of the Middle Classes The Great Depression During the 1930s, the United States, along with most other industrial societies, endured the most severe economic depression in its history. Capitalist economies had traditionally experienced periodic swings in which an era of prosperity was followed by recession, which, in turn, was followed by recovery. This pattern did not hold up in the 1930s, however, and the result was an inability to stimulate demand. Falling prices led to falling wages and extremely high unemployment. Some saw this as the beginning of the end of the capitalist system. Efforts of the Roosevelt administration to jump-start the economy through massive public spending programs did put many people back to work, but these measures were, in the end, not effective in ending the depression. Not until the United States entered World War II did the economy finally recover from this most serious economic crisis. Starting in 1941, jobs became plentiful as the society prepared for the war effort. Factories that were converted into war production facilities needed workers. Plants that previously had made automobiles and kitchen appliances now produced tanks, jeeps and airplanes. The recruitment of hundreds of thousands of men into the armed forces led to a labor shortage at home.front workforce. The Postwar Years Following the war, it was feared that the United States would once again be plunged into an economic depression. With the end of the conflict and the return of soldiers and sailors into the domestic workforce, images of an oversupply of labor resurfaced. What emerged instead, however, was a thriving economy that gave rise to a twenty-year period of great prosperity. The demand for consumer goods that had been denied people during the depression and the war stimulated the economy and led to a tremendous industrial expansion. Returning to civilian life, men and women married in recored numbers, giving rise to the so-called baby boom. Those new families created a demand for new housing. The old housing stock of the central cities could no longer support the expanding population, which sought a more placid environment in which to raise families. This they found in the suburbs. The movement to the suburbs was boosted as well by the construction of a superhighway system in which expressways now enabled workers, whose jobs were still located mostly in the central cities, to commute back and forth. Another factor that prevented a return to economic depression was the maintenance of a strong military. The army and navy had been disbanded after World War I, but at the end of World War II, the perceived threat of the Soviet Union and the onset of the Cold War provided the rationale for the continued support of a huge military establishment. The manufacture of weapons, therefore, became a mainstay of the American economy, providing jobs and income to thousands and generally providing a society wide economic stimulus. American prosperity was also the result of the fact that the United States had emerged from the war as the only advanced society with its industrial infrastructure still in place. Americans at home had been unaffected by the fighting, unlike the Europeans and the Japanese, whose industrial bases were left in shambles. The United States, as a result, became an economic superpower unchallenged by any nation. It would be many years before Germany, Japan, and others would be able to present serious economic competition. The upshot of this great economic boom was a substantial expansion of the middle classes. Rising productivity in the 1950s led to rising wages and higher family incomes. Many entered the middle class for the first time, gaining their piece of the American Dream: a secure and well-paying job, a relatively comfortable home in which to raise a family, and the availability of an unprecedented variety of consumer goods. No image better reflected the American optimism of the 1950s than the television sitcom of that period Ozzie and Harriet. Here was the prototypical middle-class family: station wagon parked in the driveway of their suburban home, where their teenage boys were growing up in a world that promised nothing but continued prosperity. That was the prospectus not only of the general public but also of economic and social forecasters. Economic expansion seemed unlimited, and Americans had every reason to believe that prosperity and economic supremacy in the world would continue not only for their generation but for their children and grandchildren as well. The Post-1973 period of Economic Restructuring The unrelenting optimism of the 1950s and 1960s (the latter decade was one of great social turmoil, but economic prosperity for the middle classes did not abate) was halted by events and economic developments starting in the 1970s. The year 1973 is often used as a historic watershed. The OPEC oil embargo occurred in that year, and the American economy was forever changed afterward. The oil-producing nations, mostly of the Middle East, imposed for a time an embargo on oil shipments to the United States and subsequently placed limitations on the amount of oil for American export. Suddenly, the United States discovered that it was heavily dependent on outside sources for its economic well-being; no longer could it assume that its huge domestic market was unthreatened and its dominant place atop the world's economies unchallenged. In a sense, this market the introduction to Americans of the global economy.

The Classes in the Middle and the Occupational Structure

It is not an exaggeration to claim that nothing influences a person's life more than his or her occupation. Occupation not only determines the economic, power, and prestige aspects of social class but generally defines the parameters of a person's social life, cultural style, residential patterns, and consumer preferences. It is also the main cue that others use to view and make judgments about individuals. In looking at the three classes in the middle, perhaps the major distinguishing feature separating them is their different place in the occupation structure. The Upper-Middle Class Sometimes referred to as the "new class" or "professional middle class", the upper-middle class is made up of those who hold they decision-making positions in various institutions. They are the doctors and lawyers, engineers, technicians and scientists, university professors, media editors and producers, corporate executives, financial managers, high-ranking government bureaucrats, and, at the lower end, schoolteachers. As Ehrenreich describes them, the two major subgroups of this stratum-professionals and managers-have largely interchangeable skills and often move back and forth from one category to the other. Moreover, the two categories occupy the same part of the social landscape, living in the same neighborhoods, functioning in the same social circles, and intermarrying. Above all, among those of the upper-middle class there is an emphasis on formal education, for themselves and their children, and on the establishment of a stable career leading eventually to a comfortable retirement. As white-collar workers, members of the upper-middle class, like many others in the intermediate state, do mental work. But they are at a level of power and authority that clearly sets them apart from the other classes. They enjoy much autonomy in their jobs and are able to make independent decisions rather than respond routinely to the commands of others. Moreover, their jobs require, almost by definition, a college degree, which in itself gives them a higher social standing and presents them with substantial economic advantages. Common occupational and educational experiences create a lifestyle and a set of consumer preferences that distinguish the upper-middle class from others. For example, professionals and managers at the upper end of this stratum typically own spacious suburban homes, drive upscale cars, and generally engage in trendy consumer behavior. Politically, the upper-middle class is characteristically liberal on social issues such as abortion and civil rights but is generally conservative on economic issues of taxation and wages. Those of the upper-middle class are more politically active than are members of other classes. They vote more consistently and are more apt to participate in the electoral process in other ways as well, such as contributing money to political campaigns. Studies have also shown that the upper-middle class is more active in voluntary associations. Moreover, much of the social life of upper-middle-class families is an outgrowth of their occupational lives, and the two are commonly combined. The country club or the dinner party often becomes a setting in which clients are entertained or colleagues are consulted. The Lower-Middle Class As one of the intermediate strata, the lower-middle class is the most difficult to define precisely since it is made up of so many disparate elements. It is a collection of occupational categories consisting mainly of small business owners and white-collar workers, including middle-level managers in the business world, paraprofessionals (nurses and legal workers), middle-level government bureaucrats, nonmetal sales workers, secretaries and clerks, and medical technicians. In terms of income, those in the lower-middle class span a broad range, according to specific occupation, but what is common to all is their relative lack of significant wealth. They are dependent primarily on their jobs for income and ordinarily do not own substantial assets aside from their homes. Workers of the lower-middle class---with the exception of small business owners---exercise little power in their jobs. They ordinarily respond to the authority of managers and professionals of the upper-middle class. Most within the lower-middle class have more than a high school education, but a college degree is not necessary to meet the qualifications of most of their occupations. Junior college or vocational training may therefore be the more common form of post-secondary schooling in this class. As with the upper-middle class, relatively common incomes and occupational statuses, along with common educational experiences, create a distinct lifestyle for the lower-middle class, along with corresponding consumer preferences. Those of the lower-middle class are politically active, but not in the same way as the upper-middle class. Participation, though strong and common, does not usually extend much beyond voting. This is quite different from the political activism of the upper-middle class, who are participants at a higher level and who are more directly engaged in the political process. The Working Class What has traditionally characterized the working class more than anything else is the nature of its occupational role: blue-collar work, that is, work involving manual or physical labor. The skills of the working class, however, vary widely. At the top are skilled tradespeople and craft workers, such as carpenters, electricians, and plumbers. In the middle are those with mechanical skills, who, like most of the working class, work for an hourly wage. Tool-and-die makers, machinists, repair persons, and the like constitute this sector. At the bottom of the working class are those with few or no skills, who perform routine, perfunctory roles in factories or shops. These workers are usually referred to as. operatives and constitute the largest element of the working class. Although the working class is still composed in large part of factory workers at different skill levels, starting around the 1960s, certain economic and technological forces began to emerge that led to a decline---which continues---of blue-collar occupations. The educational level of the working class is limited by comparison with the lower-middle class and especially with the upper-middle class. Predictably, members of the working class possess little in the way of productive property, ordinarily owning only their homes and cars. Income, however, can vary among the different categories within the working class. Those at the top, the skilled tradespeople, may own their own businesses and thus exhibit some of the characteristics of the lower-middle class. Those are the bottom, the unskilled, may be one short step from the poverty class and may in fact drift in and out of the working-poor category. The working-class subculture has been the subject of many studies, and the pictures that emerges is one in which members marry younger and families are strongly patriarchal. That traditional structure is breaking down, however, as working-class wives are now commonly part of the labor force, contributing their wages to family income. Indeed, like families in the other intermediate classes, working-class families today more often than not consist of two wage earners. As that has occurred, wives have asserted more family power. The consumer, housing, and leisure patterns of the working class are quite distinct from those of the other intermediate classes. Although these are often stereotyped and subject to a kind of upper-middle-class ridicule, there are identifiable features of the working class that may be said to constitute, roughly, a working-class lifestyle. As part of urban communities, working-class neighborhoods are clearly recognizable, made up of modest single-family dwellings or perhaps mobile homes. Leisure activities are also likely to differ noticeably. Whereas the upper-middle class and, increasingly, the lower-middle class may play gold or ski, the working class will more often bowl and hunt. Vacations among the working class are not likely to include foreign travel, as vacations frequently do for the upper- and even lower-middle classes, but more typically consist of road trips, perhaps in a recreational vehicle. Work, for the working class, is separated from other spheres of life. Unlike the upper-middle class, where work and leisure are often combined, people "leave the job at work." Rather than realizing much personal fulfillment from one's occupation, as is typically the case among professionals and managers of the upper-middle class, working-class people, particularly the unskilled, ordinarily engage in boring and routine tasks, not those that present personal challenges. In their politics, working-class people are a kind of mirror image of the upper-middle class: conservative on social issues but liberal on economic issues. Except among union members, however, they tend to be less politically active than either of the other two intermediate classes. Moreover, American working-class people are less politically active than their counterparts in almost all other contemporary industrial societies. There is no major socialist or labor party in the United States catering primarily to working-class interests, as there is in most Western European societies, as well as Canada and Japan. One explanation of this phenomenon is that American workers are no less committed than the classes above them to the idea of individual achievement. And as has been pointed out many times, workers generally have hopes of eventually establishing their own business and becoming their own boss. Thus, there is little sympathy among them for socialist ideas. There is no gainsaying the capitalist system among workers so long as most see themselves as future capitalists. The Blurring of Traditional Occupational Categories Today the blue-collar / white-collar distinction is no longer as meaningful as it once was, and as a result, the division between the lower-middle and working classes is, at times, hazy. It is not at all clear where the lower end of the lower-middle class begins to diverge from the higher end of the working class. Many white-collar jobs that in previous times would have been clearly distinguishable from blue-collar ones have been downgraded in skills and wages. Some have referred to a "proletarianization" of white-collar workers, implying that there is no longer a significant difference between many blue and white-collar jobs. White-collar jobs at the lower status levels have been deskilled, that is, reduced to repetitive, routine tasks that involve little brainpower. Consider a cashier in a fast-food restaurant or a department store. Little more is involved than taking the customer's payment, punching a few keys on a computer-connected cash register, and giving customers their receipts. Cashiers needn't even calculate the transaction since the cash register will do it for them. These routine tasks are not essentially different from unskilled blue-collar jobs, where workers perform a simple function repeatedly. Bank tellers are another illustration of deskilling--in handing commercial transactions today, they do little more than operate computer keyboards, entering a few items of information. Indeed, machines have brought bank tellers to the point of eventual extinction. Consider that their numbers dropped by fort-one thousand between 1985 and 1995 and that most of those who remained were converted to part-time positions. The first ATM was installed at a bank in 1971; by 2000, almost 11 billion transactions were processed at four hundred thousands ATMs. At the same time, the rise of a category of technicians has further blurred the distinction between white- and blue-collar workers. As Robert Reich describes them, "These workers often wear ties or dressed (as did their white-collar predecessors). But they also often work with their hands, use tools and monitor machinery (as did their blue-collar predecessors)." These are the people who design and test computer systems, repair copy machines, operate hospital equipment, and so on. In fact, as the nature of blue-collar jobs shifts toward the service sector, an increasing number of people with college experience are filling them. In 1973, only 12 percent of factory workers had some college training; by 2000, that figure had risen to 36 percent. In fact, many of the traditional blue-collar jobs done in the past by workers with only minimal education now require computer and other skills that call for at least some training beyond high school.

The MIddle Classes: Lifestyles, Desires, and Debt

Today many among the intermediate classes find themselves unable to satisfy their material needs and teeter precariously on the brink of economic disaster, living from paycheck to paycheck. This is not difficult to explain for those among the working and even lower-middle classes. Moreover, many of theses families have been severely impacted by the Great REcession, having suffered financial hardships, including loss of steady income, that were never anticipated. Curiously, it is apparent even among upper-middle-class families, who have continued to experience relative prosperity in recent years. How can this paradox be explained? The New Consumerism Economist Juliet Schor (1998, 1999, 2000) has written extensively on this issue and has offered several explanations. First, she describes a national culture of upscale spending, which she calls the "new consumerism." Increasingly, in this view, people acquire their consumer aspirations not just from their colleagues and peers but also from what they see on television and movies and in various forms of advertising. Rather than comparing their status and lifestyle with their neighbors and "keeping up with the Joneses," as in previous decades, "people are now more likely to compare themselves with, or aspire to the lifestyles of, those far above them in the economic hierarchy" (Schor, 1999:43). This higher standard is introduced primarily by the mass media, which expose people to upscale lifestyles. The new consumerism is also founded on the endless introduction of new products and on continually rising standards: "What we want grows into what we need, at a sometimes dizzying rate" (1998:6). puzzling aspect of the new consumerism is that it affects not, as might be expected, only the poor and those families with limited incomes but, as noted above, those that are solidly part of the lower- and, especially, upper-middle class. Schor explains that 27 percent of households making more than $100,000 and nearly 40 percent of those earning between $50,000 and $100,000 a year say they cannot afford to buy everything they really need. The important word here is need. As people earn more money, they compare their status not with others like themselves but with those who have even more. Hence, to try to keep up they are constrained to buy more, fueling the cycle of consumerism. Social essayist Roger Rosenblatt has written that "if one were to ask a couple making $40,000 per year before taxes and a couple making a pre-tax $200,000 what class they were in, both would answer (honestly and persuasively) not only that they belong to the middle class but also that they are just scraping by" (Rosenblatt, 1999:16). Economist Robert Frank (2000) has described this paradox as middle-income families "experiencing unprecedented levels of economic distress, largely because they are trying to keep up with a living standard they cannot afford" (64). Frank refers to a "spending cascade" in which "top-earners—the people who have fared the best in the current economy—initiate a process that leads to increased expenditures on down the line, even among those whose incomes have not risen" (2005:141) Some hold that increasing levels of consumption are the product not of emulation of the wealthy and celebrated, but of the nature of the contem-porary market system, which impels people to redefine themselves continu-ally by changing experiences and lifestyles through their purchases (Holt, 2000; Thompson, 2000). In a related argument, Benjamin Barber suggests that ever-increasing consumption is systemic, driven by the appeals of advertisers and marketers whose intentions are not to satisfy true needs but to invent or create them. Moreover, contemporary consumerism is based on a child-like ethos, which he calls "infantilization." Producers and sellers, Barber writes, hope to "rekindle in grown-ups the tastes and habits of children so that they can sell globally the relatively useless cornucopia of games, gadgets, and myriad consumer goods for which there is no discernible 'need market' other than the one created by capitalism's own frantic imperative to sell" (2007:7). Work-and-Spend Related to the new consumerism is the emergence of a "work and spend" cycle. When given the choice between shorter hours and longer hours with more pay, workers almost always opt for more pay. That increase in income is usually spent on more material goods, but those goods are unable to provide long-term satisfaction, leading to further spending and, consequently, the need to continue working longer hours. To pay for the material goods that are increasingly seen as essential, major breadwinners have often lengthened their workdays and families have required a second income earner. The typical American family worked eleven more hours a week in 2006 than in 1979 (Williams and Boushey, 2010). Moreover, Americans work considerably more hours than Europeans and even more than Japanese workers (Mishel et al., 2009; Greenhouse, 2009). Americans, then, continue to acquire more material possessions but find themselves with insufficient time and, therefore, less opportunity to enjoy them. To Schor, Barber, and others who share their view, the paradox of the current American economy—arguably the most prosperous in history—is that its major beneficiaries remain unfulfilled. People are caught on a "posi-tional treadmill," continually pressured to maintain consumer parity with others. They must work harder and longer and often go into debt simply to keep pace, despite the fact that they consume more and more. As Schor argues, "We should be articulating an alternative vision of a quality of life, rather than a quantity of stuff" (2000:29). Consumer Debt With upscale competitive consumption has come a steep rise in consumer borrowing. In the last decade, families have run up debt in record propo-tions. Starting in 2000, in less than ten years consumer credit had grown by $1 trillion, or about $4,400 for every adult (Sullivan, 2009). Moreover, the largest increases in debt occurred not only among low-income families, but also among those in the middle classes. More than three-quarters of American families now own debt in some form: home mortgage, credit card balance, or installment loan. The mortgage boom of the 1990s and early 2000s allowed more families to build wealth by buying homes, but this, of course, led to increasing debt. When the housing bubble burst in the late 2000s, the value of those homes declined, leaving many families with mortgage payments that exceeded what their home was actually worth or forced them into foreclosure. An increasing number of middle-class families expressed real anxiety about their ability to sustain a lifestyle to which they had become accustomed (Pew, 2008b; Weller and Lynch, 2009). The Two-Income Trap Elizabeth Warren and Amelia Warren Tyagi (2003) challenge the commonly held assumption that the financial plight of mid-dle-class families is a product of out-of-control spending, addicted as those families are to consumerism. Rather, middle-class families are at risk of going into serious debt because of expenses incurred in consuming items that have become staple elements of the middle-class standard of living: good housing and quality schools for their children. Housing and education, they explain, are not unrelated. Middle-class parents today understand that education is the single most important factor in upward mobility. They are therefore determined to provide the best possible education for their children. To do this, they must live in those communities with the best quality schools. Because all families with children seek the same objective, this drives up the price of housing in such communities. It is mostly high mortgage payments and tuition for schools from prekindergarten to college, therefore, not expensive food, electronics, travel, and entertainment, that drain family budgets and lead to an ever more precarious financial state. Curiously, Warren and Tyagi explain, it is the now-common dual-earner family that is most negatively affected by this bidding war for the best neighborhoods and schools. The conventional wisdom would assume that having two breadwinners instead of one—as was most common in the past—would provide more financial security for families. However, with two incomes, families are inclined to take on more expensive fixed expenses, specifically homes in better areas, medical insurance, more spacious auto-mobiles, better quality day care for their young children, and tuition for older ones. But these financial obligations leave them with less discretionary income than in the past and more vulnerable to a financial disaster that may arise when a job is lost or a medical emergency arises. Before middle-class women began to enter the labor market in large numbers, the stay-at-home wife served as a safety valve, able to enter the job market when and if needed or to act as a backup caregiver. Because both she and her husband are now working, however, that is no longer possible. So, many such families find themselves going deeper into debt in their efforts to support their home, children's schooling, and other components of their lifestyle. Hence, "the two-income trap." Warren and Tyagi document a ballooning rate of bankruptcy in recent years and, surprisingly, find that most families that file for bankruptcy are "solidly middle class." Again, they conclude that this is the result not of overconsumption, but of efforts to meet the demands of the middle-class lifestyle in the face of a job loss, a medical problem, a family breakup, or a combination of these. The ease with which consumer loans can be acquired— second mortgages, credit cards, and the like—merely exacerbates the problem. As noted earlier, over three-quarters of U.S. households have debt, most commonly home mortgages and home equity loans, installment loans (such as for automobiles), and credit card balances. The End of the New Consumerism? The easy access to credit (and its attendant debt) that has characterized the American capitalist economy in recent decades has contributed mightily to the character of its consumer culture. Are we now entering an era marking the end of the dominance of the consumption ethic in the United States (and much of the rest of the developed world)? Some maintain that the severe economic crisis that began in 2007, fueled by collapsing credit mar-kets, will ultimately lead to a down-scaled commercial culture in which indiscriminate buying and selling will be modified into a more rational system based on real rather than created needs. The loss of income and wealth that fell on the middle classes as a result of the severe recession of the late 2000s would seem to compel this change. Families in the middle 60 percent sustained greater losses than those in the top and bottom 20 percent, largely as a result of the sharp drop in housing values. Most of middle class wealth is held in the form of home equity, which dropped in 2010 to a median of $75,000 from $110,000 in 2007 (Bricker et al., 2012). In this view, families—particularly those of the intermediate classes—will become more conscious of spending patterns and begin to conserve and scale back consumption. Paco Underhill, a marketing consultant who has written extensively on consumer behavior, asserts that excessive consumerism based on debt that had characterized the past three or so decades will not return (2009). This will impact the middle classes more than either the rich or those at the bottom of the class hierarchy, both of whose consumption patterns have been only minimally affected. Those who are downwardly mobile are apt to be most profoundly impacted in their consumption patterns by the economic downturn, but others are also likely to consume more cautiously and with less concern for matching the spending of their peers (Cave, 2010; Frank, 2009; Goodman, 2009).

Formation of the Middle Classes in the United States

Nowhere else in the Western world did the middle classes develop as thoroughly and as early as in the United States. Although colonial leaders did constitute an aristocratic elite of sorts, an American landed gentry never really existed. (The antebellum southern planter class, however, displayed some of the characteristics of a landed aristocracy.) There was no sharply divided system of aristocracy and peasantry, which had typified European societies. Hence, it was the classes in the middle, made up of independent farmers and entrepreneurs, that seemed to predominate almost from the outset. As the French politician and writer Alexis de Tocqueville observed in the 1830s, ". . . the social state of America is a very strange phenomenon. Men there are nearer equality in wealth and in mental endowments, or, in other words, more nearly equally powerful, than in any other country of the world or in any other age of recorded history" From the beginning, farmers, who were the numerically dominant group until the end of the nineteenth century, owner their land. They were joined by small business owners-producers, tradesmen, merchants--who formed another part of the American middle. The most important fact linking farmers and merchants was their possession of the property. As owners of their enterprises, they worked for themselves. Moreover, the ownership of property was widespread rather than characteristic of just a small portion of society. The middle class that arose in the late eighteenth and early nineteenth centuries, then, was. composed basically of entrepreneurs. This class of entrepreneurs epitomized the American ideology of individualism and free enterprise.

Postindustrialism

Starting in the 1960s, a service economy began to emerge, in which most workers no longer labored in factories but instead provided services of one kind or another. The United States and other advanced industrial nations entered into what has been called postindustrialism. Unlike a traditional industrial society, postindustrial society is characterized by the production mainly of services and information rather than finished goods. This means that the majority of workers are white-collar rather than blue-collar, and many are professional, managerial, and technical workers. Postindustrial society is driven by knowledge, not so much of a practical kind, as was the case in industrial society, but of a theoretical or abstract nature. Thus, scientists, engineers, and academics play a critical role in maintaining the socioeconomic system. As service workers became numerically dominant, industrial workers began to decline as a part of the labor force. In 1959, 40 percent of American workers were in the service sector and 60 percent were in manufacturing; by 1985, the ratio had reversed itself, with almost three-quarters in the service sector. This change was brought about by a shift in consumer patterns. Today, Americans spend more on services, including health care, education, and good service, than on manufactured goods, such as housing, appliances, and automobiles. In 1990, three times more was spent on health and medical care, for example, than was spent thirty years earlier. As personal services have become a greater proportion of consumer spending, a correspondingly greater need for service rather than production workers has developed.

The Shrinking Middle

Starting in the mid-1970s, new socioeconomic patterns led to profound changes for the intermediate classes. Economists, sociologists, policymakers, and commentators began to speak of the U.S. stratification structure as "shrinking" in the middle. The basic idea is that those in the middle classes were being pushed up into the professional and managerial category, or they were being pulled down into the ranks of low-level service workers, many of whom were now part of the working poor. With some minor fluctuations, those overall trends have been unbroken for the past four decades. And, they continue to unfold ever more clearly at the present time. This middle-class squeeze, or bifurcation, can be seen in the development of a two-tiered wage structure and in family income patterns. Income and Wages As pointed out in Chapter 3, inequality in American society is growing. The gap between those at the top and those ate the bottom has been widening for the last three decades, and those in the middle have found it more difficult simply to keep pace. As some have described it, the United States is increasingly emerging as a two-tiered society: those who are doing well and are enriching themselves and those who are falling farther behind the successful people. Work itself is no longer a guarantee against poverty or downward mobility. Most of those who find themselves in a declining economic position are in fact employed. Regardless of the definition applied or the unit measured---households, families, or individuals---the proportional size of the middle has been steadily decreasing. Looking at wages is one way to track the middle-class decline. While workers' wages increased consistently from he 1950s to around 1973, from that point forward they were stagnant except for those at the very highest earning level. The real (inflation-adjusted) average hourly wage for production and nonsupervisory workers (80 percent of the workforce) in 2007 was $17.42, compared to $16.88 in 1979; the real average weekly earnings had actually fallen to $590 in 2007, about $10 less than in 1979 and over $30 less than in 1973. The stagnation of wages for most of the last forty years among the working class and part of the lower-middle class has created a growing fissure between them and the upper-middle class. Although the latter may also depend on their salaries for income, they are ordinarily able to supplement them with interest, dividends, capital gains, and other nonwage sources. Some of the gap between high- and low-wage workers is explained by education. Generally, the greater the level of education of the occupational group, the more wages have risen. Thus, workers at the high end of the labor force, professionals and managers, whose jobs require college degrees, have fared better than those with no college. By 2007, the real hourly wage of college-educated men was almost double that of high school graduates. Since 1979, median family income for middle-income families declined more than 13 percent, but for professional-managerial families, it rose more than 7 percent. Not only has the wage gap widened, but merely keeping pace demands greater effort. Two-wage-earners families have become the norm, and thus family income, though hardly changed from 1973, is now most often the product of two workers. Indeed, Thurow has proclaimed that the "one-earner middle-class family is extinct". Many families in the middle have discovered that two incomes are essential merely to keep pace with the standard of living to which they have become accustomed. With both parents working, a new context for raising children has been created, placing additional pressured on families. The curious side of income and wage polarization during the past four decades is that it occurred at the same time that most economic indicators were, by and large, positive: except for recessions in 1981 and 2001, productivity rose, corporate profits soared, and the stock market gained enormously. Furthermore, inflation was steadfastly under control, and unemployment was held in check. In brief, until the sever downturn beginning in 2007, the American economy, overall, appeared to be functioning well. None of this affected the precarious economic position of most workers, however. These developments demonstrated that a productive and growing economy does not necessarily translate into improved living standards for most families. A popular metaphor describing the effects of a growing economy is "a rising tide lifts all boats." From the late 1970s, however, only the yachts were rising; the other boats were trying hard to simply stay afloat. The Decline of Middle-Income Jobs Much of the explanation for the increasing bifurcation of income is attributable to the fact that the workforce is becoming more of a two-tiered structure---those whose jobs are in demand and who earn a good wage and those whose jobs are insecure and who earn a wage that often is not enough to support a family. What has occurred is an expansion of jobs at the top of the occupational hierarchy, particularly among professional, managerial, and technical workers, and at the bottom among service workers performing low-skill jobs that pay correspondingly low wages. Jobs in the middle of the occupational hierarchy have, as a result, declined. During the 1980s and 1990s, the economy provided jobs for more and more people, including large numbers of women and immigrants who entered the workforce. In an analysis of census data, sociologist Reynolds Farley (1996) showed that many, perhaps most, o fates new jobs were low-skill and low-paying but that there was also a rapid growth of new jobs at the high end of the wage scale. What had seemed to develop, then, was a growing gap between high-paid, high-skilled workers not he one hand and low-paid, low-skilled workers on the other. The deep recession beginning in the late 2000s resulted in the massive loss of jobs at all levels, even among highly-skilled white-collar workers. But the bifurcated structure of the workforce remained basically unchanged. This occupational bifurcation has been especially evident in the service sector, where over two-thirds of Americans now work. Service occupations are extremely varied, ranging from unskilled workers at the bottom, to clerical workers and salespersons in the middle, to highly trained. professionals like doctors and lawyers at the top. Obviously, these jobs are considerably different in pay, skills and prestige. In recent years, the most significant growth has occurred month the bottom portion of the service sector, those jobs requiring few skills, paying minimum wages, and offering little opportunity for upward mobility. The low end of the service sector includes such jobs as fast-food workers, kitchen workers, hospital workers such as orderlies and nurse's aides, nursing-home workers, maids, and child-care workers. However, significant growth has also occurred in the top portion of the service sector, including professionals and managers---hence the growing split between those at the top and those at the bottom, leaving a reduced middle. The effects of a declining middle have hit well-paid blue-collar workers especially hard. Many have lost their jobs as a result of downsizing, mechanization, or globalization and now work precariously at jobs that pay a fraction of what they were previously earning. Many having lost their jobs, find themselves chronically under- or unemployed. This has been especially evident among older workers who cannot easily retain or are simply passed over for younger workers entering the labor force who are prepared to work for a sharply lower wage. In addition, many workers today are temporary or part-time employees, hired or fired on the basis of seasonal or contingent needs where there is a built-in time limitation to the work. As the labor needs of employers change, the status of workers is thrown into jeopardy. Hence, the regularity of work is no longer assured. Retail sales personnel, for example, may be asked to work only those hours during which they are most needed. Employers commonly prefer to hire workers on a contingent basis so that they can adjust their wage costs to the the utmost efficiency. This provisional nature of work has affected not only those workers nearer the bottom of the occupational hierarchy but also many at the higher end, even professionals. It is estimated that about 30 percent of all U.S workers are now contingent workers---part-timers, temporaries, or subcontractors. In short, the middle-class squeeze does not appear to be slowing down. The future of the classes in th middle will show a split along lines of skill, educational level, and wages. Low-skilled jobs in the service sector requiring little education or training and paying low wages continue to grow, while jobs at the higher end of th e occupational hierarchy requiring at least a bachelor's degree and paying relatively well are also on the increase. Many among the latter, however, will find themselves pushed down in income and status. Many older workers, accustomed to high wages and job security, have lost their places in the labor force and face the real possibility that they may never find employment again. They may lack the specific skills and qualifications needed for jobs different from those they had previously occupied and may be too old to make retraining practical. Moreover, they are less attractive to employers who are inclined to favor younger workers more easily trained, more technologically proficient, and less demanding. Economic insecurity, then, not only threatens the traditional working class but is a concern of the lower-middle class and even, to some degree, the upper-middle class. Americans at all points within the intermediate classes are apprehensive about economic issues. Will their income enable them to maintain their lifestyle? How secure is their current job? What will be their occupational future? Economic Restructuring and the Classes in the Middle What accounts for the changes in the American economy that have led to shifting patterns among the intermediate classes in recent years? During the last four decades, the United States has been engaged in economic restructuring---the radical shift from what had been a manufacturing-based economy to a service-based economy, with its resultant effects on the labor force. These developments have been the result primarily of two major factors: the emergence of new technologies and the development of a global economy. Technological Changes Each historical period has produced innovations in production that have displaced workers. The development of mechanical forms of labor forced workers out of jobs that machines could perform more efficiently and cheaply. The notorious Luddite movement of the early nineteenth century in England, for example, was a response to the fears of workers that machines would replace them and thus divest them of their livelihood. The Luddites were bands of workingmen in England's industrial centers, especially textile manufacturing, who rebelled against the introduction of knitting machines, power looms, and owl-shearing machines (to which they attributed their low wages and high unemployment) by wrecking the machinery. Today, it is workers in the manufacturing sector who have experienced the most serious decline as a result of new technologies. Increasingly, computers and robots do what workers once did. On automobile assembly lines, where workers once welded body parts together, robots now do the same tasks, only more efficiently. Since 1980, the number of automobiles made in North America has increased by 65 percent while the number of workers in the automobile industry has declined by 34 percent. This trend has affected not only unskilled and semiskilled workers but also skilled production workers. Jeremy Rifkin bluntly claims that by the middle of the twenty-first century, "the blue-collar worker will have passed from history, a casualty of the Third Industrial Revolution and the relentless march toward ever greater technological efficiency". Computer have changed the very nature of industrial production. Indeed, "computers," writes economist Sheila McConnell, "may be the most profound technology since steam power ignited the Industrial Revolution". In the past, large-scale industries made for low production costs. That is no longer the case. As a result of computer technology, the flow of materials, their quality, and changes in them can be managed more easily and efficiently. Moreover, manufacturers can deliver a larger variety of goods more quickly. Sales data can be gathered more rapidly and with less effort, making it possible to transmit such information to manufacturers, who can respond quickly with finished goods. Workers, too, can be managed more effectively. Unlike the impact of changing technologies of the past, which affected only specific industries, computers affect all industries and job categories. During previous periods of mechanization and the development of new industries, old jobs that were destroyed were usually replaced by new jobs into which displaced workers could move. Thus, as blue-collar workers were phased out, the service sector usually absorbed them. Some, like Rifkin (2004), believe that the computer revolution, however, has rendered sale in Los Angeles as quickly and as easily as if they were produced in Chicago. Trade, then, has become increasingly internationalized. In the globalized production process, many large corporations no longer actually engage in the manufacture of their products. Instead, they become primarily marketing organizations that turn over their production activities to suppliers, many of whom are located abroad. This is a phenomenon referred to as "outsourcing." Management, along with actual production, has been internationalized. Electronic communication systems, including telephones, computers, and interactive television, make it possible for organizations to conduct their business from anywhere to anywhere. As a result, vast resources in different parts of the world can be managed from a home base. Most important, financial capital can be moved around the globe at the press of a key. People and organizations in one country invest in others. Capital may be moved almost at will wherever it can yield the greatest return on investment. International flows of capital thus continue to grow. The result of all these technological changes is a world, as economist Lester Thurow has described it, in which "for the first time in human history, anything can be made anywhere and sold everywhere" (1996:115). American businesses and their workers consequently find themselves in competition with businesses and workers in other countries. Transnational Corporations The major units of the world economy are corporations whose operations span the globe. These are massive companies whose scale far exceeds that of other economic units. The wealth of corporations like General Electric or ExxonMobil exceeds the wealth of many nations of the world. These transnational (or multinational) corporations are spread out like octopus arms, with manufacturing and sales dispersed in numerous world locations. Most of the largest U.S. corporations operate as much abroad as they do in the United States. Consider some of the corporate names that we think of as "quintessentially American." Procter and Gamble—a company that provides products that most Americans use on a daily basis, from toothpaste to soap to toilet paper—today derives over half of its revenue from outside the United States as do other familiar business names like Intel, Apple, Caterpillar, GM, Ford, Otis Elevator, and Pfizer. Two-thirds of the sales of Coca-Cola, perhaps the most widely known of all American consumer goods, are made abroad, and the worldwide operations of McDonald's, another American corporate icon, far outdistance its U.S. domestic business (Gumbel, 2008). Even MTV has had regional production centers in Europe, Brazil, Japan, and India since 1987. These and hundreds of major corporations like them may fly the American flag in front of their world headquarters located in the United States, but they are "American" only in their origins. They are world firms. American corporations are not alone in this globalizing trend. Japanese, German, French, British, Korean, and other transnational firms have become familiar global names. Honda, a Japanese company, manufactures cars in Ohio, which are then exported to and sold in Japan. Almost all electronic appliances bought by Americans, such as TVs, microwave ovens, and stereo equipment, are manufactured by Japanese or Korean firms whose factories are in East or Southeast Asian countries. Nestlé, a Swiss firm best known for chocolate, derives almost all of its revenue from outside Switzerland. Whether we buy gasoline from Shell (Dutch/British), mobile phones from Nokia (Finnish), aspirin from Bayer (German), HDTVs from SONY (Japanese), or shoes from Nike (American), we are participating in the global economy. Reich's Model Economist Robert Reich, the former U.S. secretary of labor, has offered a model of how the U.S. workforce has been restructured as a result of the world economy. The model helps in explaining how the dynamics of globalization have impacted the American classes in the middle. Reich suggests that traditional occupational classifications (white-collar, blue-collar, professional, managerial, etc.) no longer make sense in the context of the global economy. American workers (and workers in other countries as well) are today increasingly subdivided into three distinct categories: symbolic analysts, routine production workers, and routine personal ser-vice workers. Each has been affected differently by the emergence of an internationalized labor market. Those whom Reich refers to as symbolic analysts are professional and managerial workers, who make up much of the upper-middle class. Reich calls them symbolic analysts because they are workers who "solve, identify, and broker problems by manipulating symbols" such as scientific formulas, legal arguments, and marketing strategies (Reich, 1992:178). They are highly trained and possess valued skills, making them adaptable to changing conditions. As a result, they are strongly competitive and can command high salaries in the international labor market. They have generally prospered in the global economy. Doctors, lawyers, engineers, publishers and editors, investment bankers, financial consultants, and top-level managers are typical occupations that fall into this category.3 They make up about 30 percent of U.S. jobs Routine production workers are the traditional blue-collar workers, whose work consists of repetitive tasks and who are usually paid on an hourly basis. As noted earlier, many white-collar workers' jobs also have become increasingly routinized as a result of computerization. Obviously, the skill level of routine production workers is much lower than that of symbolic analysts, and their educational requirements are correspondingly reduced. Most important, routine production workers are in competition with similar workers worldwide and are therefore apt to be most negatively affected by the vagaries of the global economy. They constitute less than 20 percent of the American workforce, and their numbers continue to decline; thirty years ago they made up fully one-third of the labor force (Mishel et al., 2009). In the first decade of the twenty-first century, the United States lost millions of manufacturing jobs, few of which are likely to reappear (Dohm and Shniper, 2007; Goozner, 2004; O'Toole and Lawler, 2006). Those whom Reich calls routine personal service workers are, like production workers, doing simple and repetitive tasks. They too are usually paid on an hourly basis, and their skill and educational level is low. The major difference between them and routine production workers is that they are not in compe-tition with similar workers in other countries. Their jobs involve personal services, which cannot be supplied from abroad. In a sense, they are in com-petition against machines rather than against foreign workers. Restaurant workers, hospital workers, janitors and maids, secretaries, auto mechanics, and security personnel are among the typical occupations of this category. They constitute around 30 percent of the workforce, and their numbers are increas ing rapidly. Routine personal service workers are disproportionately women and ethnic minorities and, in some areas, illegal immigrants. And unlike the wages of symbolic analysts, the wages of these workers have stagnated. The split in the intermediate classes, then, can be seen as one in which the upper-middle class, consisting mostly of highly trained workers and professionals, drifts farther away from the other two sectors, whose economic status becomes increasingly tenuous and whose occupational prestige declines. The Decline of Labor Unions The common end of all firms in a capitalist system—maximization of profit—is accomplished in large measure by lowering the costs of production. Labor is a critically important cost which business owners try to keep in check or drive down; workers seek to do the opposite. Where labor unions are strong, wages are driven upward. Unions put pressure on employers to keep wages high and improve the conditions of work. It is the threat of a strike that serves as the unions' weapon in this struggle. The 1950s and 1960s represented the apex of U.S. labor union strength. In the mid-1950s, about 40 percent of private sector workers and 5 percent of public sector workers were union members (Freeman, 1994). In 1970, unions still represented 31 percent of the workforce. By 1983, however, the percent-age had declined to 20, and today less than 12 percent of workers are union members; among private sector workers, union members account for less than 7 percent (Bureau of Labor Statistics, 2012). This is the lowest rate of unionization among all countries of the developed world (Visser 2006). Several factors account for the decline. Most important, unions lost their strength as the educational attainment of workers went up and manufactur-ing employment declined (Farley, 1996). As the American workforce shifted from manufacturing to service, it shifted from what had traditionally been the most heavily unionized sectors of the economy: automobiles, steel, and transportation. When those industries were at their peak after World War II, wages increased and inequality in income generally declined. With the turn toward service industries and the increasing movement of production abroad, the power of labor unions began to ebb. Although unions gained membership among some service workers, especially state and local government employees and health care workers, they lost far more in shrinking manufacturing industries. More competitive markets, too, helped to reduce union power. With the domination of a few large corporations in various sectors of the economy ("oligopolies"), producers had been able to more readily accept union demands for wage increases, the cost of which could be passed on to consumers. With globalization and deregulation of various industries starting in the late 1970s, however, competition became more intense and companies in response began to reduce their workforces. "Unionized companies that failed to trim payrolls lost market share to unionized companies that did," explains Robert Reich. "And both lost consumers and investors to companies that were nonunionized from the start" In addition to the loss of jobs in the manufacturing sector, antilabor policies and actions of the Reagan administration during the 1980s further weakened labor unions. In 1981, the Professional Air Traffic Controllers Organization (PATCO) attempted to strike in response to what it saw as inadequate work-ing conditions and benefits. As government employees, the air traffic controllers had to bargain with the federal government. The Reagan administration not only rejected their demands but fired those controllers who went on strike, vowing not to rehire them. This action set the tone of labor relations in the 1980s. A combination of high unemployment, automation, overseas production, and an unsympathetic federal administration reduced the threat of strikes, the traditional union weapon, as workers suffered job insecurity. Their major concern was simply holding on to their jobs rather than fight-ing for higher wages. As a result, they were disinclined to strike and more apt to accept concessions in their bargaining with companies. Whereas during the 1960s and 1970s work stoppages averaged almost three hundred per year, in the 1980s they averaged only eighty-three, and during the 1990s and 2000s, less than forty Some hold that the decline of American labor unions is a major factor which has contributed to the continued wage decline of the last three decades (Freeman and Katz, 1994; Mishel, 2012c; Noah, 2012; Western and Rosenfeld, 2011). During the years of high labor union membership, all workers ben-efited from union power, even those who were not organized. In order to avoid unionization, companies would often pay nonunion workers as much as their union counterparts or at least would keep wages competitively high. It is of note that in other advanced industrial countries, the precipitous decline of union membership has not paralleled that of the United States. In Canada, the UK, and Germany, for example, union membership, despite decline, remains more than double that of the United States. This has trans-lated into a greater voice for workers in matters of public policy and has been an important factor in explaining the much more generous social welfare policies of those countries, as well as tougher regulations governing plant closings and worker retraining Downsizing, Outsourcing, and Offshoring Downsizing Downsizing is a popular term referring to the tendency for large corporations to cut their workforce, with the objective of becoming more efficient and profitable. In large measure, this has occurred in response to the global economy, in which American firms must now compete on a worldwide basis, no longer unaffected by economic trends in other countries. Lost jobs have been mostly in manufacturing, that is, typically blue-collar occupations. But downsizing has also affected the high-status jobs of upper- middle-class managers and professionals. In a global economy, downsizing is practiced by all companies, even those that are profitable (Thurow, 1999). Although replacement jobs are usually found for displaced workers, they are often not comparable in salary or prestige. For many, then, downsizing has meant downward social mobility. Managers or professionals with what had been secure and well-paying jobs may find themselves with jobs paying half of their former salary, with fewer benefits and virtually no security. Lower-middle- and upper-middle-class people have therefore begun to more fully comprehend the economic insecurity that has always plagued the poor and some elements of the working class (Newman, 1999). As noted earlier, this development became particularly acute in the economic downturn of the late 2000s, when millions of American workers, many of them in high- paying, high-status occupations, suddenly found themselves unemployed or in sharply downgraded jobs. Much of the downsizing phenomenon is a result of the technological changes discussed earlier. U.S. Steel, the largest producer of steel in 1980, once employed 120,000 workers; by 1990 it employed only 20,000 but was producing about the same amount of steel (Rifkin, 2004). Similarly, in almost every other area of the workforce, companies can do as much or more with fewer workers. Between 1990 and 1995, ten of the largest corporations in the United States (including GM, Boeing, General Electric, IBM, and Sears) laid off almost 850,000 workers, 29 percent of their entire workforce, yet productivity rose dramatically among those ten (Koretz, 1997). Almost all of the largest industrial corporations in the United States made additional massive job reductions in the late 2000s. Globalization has also contributed to downsizing. By sending work abroad, transnational corporations cut their need for workers in the United States. Labor Mobility and Outsourcing The globalization of economic processes has led to a tremendous expansion of labor mobility. As noted above, the common end of all firms in a capitalist system—maximization of profit—is accomplished in large measure by lowering the costs of production. An important cost is labor, which is held in check by minimizing wages.Today, labor costs are controlled by transnational corporations through the easy movement of capital. If a U.S.-based appliance manufacturer pays its workers an average of $15 an hour to produce refrigerators in Illinois but could produce the same refrigerators in Mexico where it pays workers an average of only $2 an hour, obviously, it will be in the company's interest to move its refrigerator production to Mexico (Greenhouse, 2009). Of course, other factors—such as workers' training and skill level, transportation costs, and the like—are involved in the decision about where to produce. The cost of labor is a critical factor in production and therefore provides a strong incentive for companies to transfer operations to other countries. In seeking out the cheap est cost of labor, firms naturally gravitate to low-wage areas, moving their facilities from location to location. As noted earlier, most large corporations today utilize outsourcing as a means of helping to reduce labor costs. Most simply, outsourcing is the sub-contracting of various aspects of production to other, smaller, companies, thereby enabling corporations to reduce their workforce. Increasingly, these companies are located abroad, where wages are considerably cheaper than in the corporation's home country. Offshoring The impact of sending jobs overseas has been felt mostly by blue-collar workers, especially those in manufacturing jobs. Starting in the early 2000s, however, this trend became increasingly apparent among white-collar workers as well. Not only are jobs requiring limited skills being exported, thousands of well-paying high-tech jobs are being sent to countries such as India, Russia, Ireland, and China, where highly trained workers are able to perform tasks for a fraction of the salaries of U.S. workers (Greenhouse, 2009; Lohr, 2006; Miezkowski, 2003). This trend has been referred to as offshoring. Virtually every type of work done in a large corporation—accounting, financial analysis, customer service, engineering, procurement, training, and research—can now be outsourced and managed to some degree offshore Demographic Factors Immigration In the last three decades, immigration to the United States has increased greatly. So great have the numbers been, in fact, that the flow has reached proportions resembling the classic period of immigration to America of the late nineteenth and early twentieth centuries. How have these newest immigrants had an impact on the labor market and, in particular, on the place of the working and middle classes? Social scientists have debated the economic effects of immigration. Whereas some argue that immigrants constitute an added burden to an already swollen labor pool and drive down wages, others contend that the jobs they typically hold are those that native workers shun and, furthermore, that they create as many jobs as they take. Similarly, while some maintain that the new immigrants overburden the social welfare system, others hold that they pay in taxes more than they collect in benefits (Borjas, 2001; Camarota, 2007; Card, 2009; Congressional Budget Office, 2005; Lowenstein, 2006; Swain, 2007). The newest immigration appears to favor some sectors of the economy and harm others. Most of the immigrants from Mexico (the largest single group) and the Caribbean are unskilled and take their place at the lowest occupational levels. They benefit employers in labor-intensive industries, such as fruit and vegetable harvesting, clothing manufacturing, or other work areas calling for cheap labor, but they depress the job opportunities of native low-status workers, especially African Americans (Mishel et al., 2005; Pear, 1997). Not all the new immigrants come as unskilled workers, however. A large segment of some groups, particularly Asian Indians, Chinese, and Filipinos, are highly trained professionals and managers whose economic impact is far different from that of those who enter with few occupational resources. Many immigrant doctors, for example, staff large city hospitals, which would find it difficult to operate without them. The United States has also increasingly relied on immigrant engineers and other highly trained scientific workers (Muller, 1993; Burton and Wang, 1999). Consider that more than a third of U.S. residents holding Ph.D.'s in science and engineering are foreign-born (Wulf, 2005). Table 5-2 shows the broad range of jobs within the American workforce occupied by large numbers of immigrants. Notice that there are both high- and low-skilled occupational groups Women in the Workforce Women have entered the workforce in massive numbers during the last four decades, as a matter of both necessity and choice. Two income earners have become crucial in families trying to maintain a standard of living that most Americans have come to expect. Moreover, the rise of single-parent families has meant that women in such contexts must support their families through their work. The entrance of women in the world of work in substantial numbers has affected not only women specifically but also the labor market as a whole. Women have often been prepared to accept lower wages than men, and this has contributed in some part to the failure of wages to rise in recent years. Some claim that the entrance of large numbers of women into the labor force in the 1970s was, in itself, a contributing factor in wage declines. Walter Russell Mead, for example, notes that "when one woman went to work, the household income rose; but as millions of women went to work, labor became cheaper" (1998:34). Others such as Robert Reich, however, assert that Mead has it backward. Rather than women helping to bring down wages, it was low wages that prodded women into the workforce in order to maintain family incomes (1998). Public Policies and the Shrinking Middle In addition to economic restructuring, globalization, and demographic trends, public policies have contributed significantly to the shrinking middle classes. As we saw in Chapter 3, government measures in the 1950s and 1960s—decades that marked the greatest expansion of the American middle classes—moved the class structure toward greater equality. That the share of income going to the top 20 percent of families declined in the 1950s and 1960s while the share going to the bottom 20 percent increased was due in large part to changes in tax policies and other government actions that benefited those at the lower end of the class hierarchy more than those at the top end. Many of those policies were reversed in the 1980s and 2000s, exacerbating the bifurcation that had been brought about as a result of economic restructuring in the global economy. We will explore in more detail the impact of public policies on the class structure and on social inequality in general in Chapters 9 and 12. Here it is important to note, however, that increasingly, sociologists and economists have come to see changing government policies as the major factor in explaining the stunning increase in class inequality of the past three decades, particularly the shrinking middle. Revolutionary changes in technology and the advent of the global economy are undeniable forces that have altered the class system, but, in their view, it has been changes in the rules of the American capitalist political economy—the loosening of government controls on corporate power, an increasingly regressive tax system, the overwhelming influence of money in politics, the declining influence of labor unions—that has enabled the capitalist class to expand enormously its wealth and power while leaving middle-class families with more and more economic insecurity (Hacker, 2006; Hacker and Pierson, 2010; Krugman, 2007; Kuttner, 2007; Reich, 2007, 2010). Other advanced capitalist societies, they point out, have been subject to the same technological and economic changes, but have not produced the enormously widened gap between a super-rich few and the remainder of the class system, as has occurred in the United States. The impact of public policies on the class system, particularly those in the middle, can be seen in comparison with Canada, a country as close as any to the United States not only geographically but culturally as well. The same technological and demographic developments and the same expansion of globalized markets that have affected the United States in the past several decades have been at work in Canada, but the effects on the class structure have not been the same. Although inequality, as in the United States, has increased in Canada, it has not done so at near the U.S. level, nor have the Canadian middle classes been as negatively impacted. The explanation for these differences, explains political scientist Jacob Hacker, is the effect of Canadian public policies, providing a more generous and substantial social safety net for those below the very top, a tax system that has not rewarded the wealthy at the expense of workers, and a stronger union movement aided by a more accommodating government. "Runaway inequality and its negative effects have been much more limited in Canada than in the United States," writes Hacker, "a striking contrast that has much less to do with market forces than it does with political realities that have made Canadian leaders more responsive to the concerns of less affluent citizens"

Figure 5-1

The changed nature of the labor force during the last century can be seen in Figure 5-1. Note the radical decline of farmers and farmworkers and the equally sharp increase in professional and service workers.

Summary

The middle, or intermediate, classes comprise three fairly distinct components: the upper-middle, lower-middle, and working classes. Each differs in income, occupation, education, and lifestyle, but together they are far apart from those at either upper of the lower extreme of the America class hierarchy. The emergence of the middle classes is a relatively. recent historical phenomenon, but nowhere did they develop as thoroughly and early as in the United States,. The American middle classes have experienced significant changes during the last two hundred years. Until the mid-nineteenth century, the majority of Americans were farmers and small business owners. The industrial revolution gave rise to a blue-collar workforce, which remained numerically dominant until the 1970s, when white-collar workers predominated. In the current postindustrial economy, most workers are providing services, not producing things, but the service sector comprises a wide range of occupations,extending from high-status to low-status. The upper-middle class is made up of those who occupy high-status jobs with much power and authority that set them apart from the other classes in the middle. The lower-middle class is a diverse stratum, consisting mainly of small business owners and white-collar workers such as middle-level managers, clerks, and bureaucrats. The working class are blue-collar workers who occupy jobs with a range of skills. increasingly, the blue-collar / white-collar distinction is less meaningful as the character of work becomes similar for many of the occupations in these two sectors. The 1950s and 1960s marked a period in which the classes in the middle expanded greatly. Rising wages and general prosperity led to the fulfillment of the American dream for many. Starting in the 1970s, however, a deep fissure began to emerge between the upper-middle class and the lower-middle and working classes. For the latter, millions of jobs in the manufacturing sector were eliminated and replaced by poorer-paying jobs in the service sector. The former paid well, whereas most of the latter, by comparison, paid little. This shift was brought about by a combination of the emergence of a global economy in which American workers now had to compete with foreign workers, new technologies that facilitated the replacement of workers with machines and computers, and the decline in numbers and power of labor unions. by comparison, the upper-middle class thrived in the new economy. The protracted economic recession that began in 2007 has negatively affected each of the intermediate classes, though obviously the working and lower-middle classes have been more severely impacted. One of the curious aspects of the intermediate classes is that despite rising family prosperity, particularly for the upper-middle class, many fam-ilies find themselves in a precarious economic situation. This is a result of what has been called the "new consumerism," in which people's material standards and aspirations continually rise as they observe the lifestyles—mainly through television—of those more affluent than themselves. This, in turn, produces pressures to consume ever more.