Monday, July 31, 2017

A Word for the Lower Middle Class

By Bill Creasy

The 2016 election of Pres. Trump seems to have happened because of support from lower and middle-class voters, predominantly white and religious ones. Democrats have been advised that they should try to talk to these groups, or they won't win future elections.

This kind of "conventional wisdom" changes every four years. For example, it changed dramatically since 2012 when Obama was reelected, when it looked like Democrats had a majority for the foreseeable future based on the minority voters.

But lower and middle class voters have valid reasons to worry about the current economy (and, increasingly, all classes and races should worry). But some are looking at their problems in terms of ideas that are contradictory and inconsistent. If they want to solve the problems, they need to work out these contradictions. They need to have a realistic perspective on their place in the world and who they are competing against. They need to understand what the government can and can't do for them.

People with less education than a college degree are worried that well-paying jobs are becoming less common. Some of these jobs are manufacturing jobs, and factories are moving to other countries that pay lower wages. In that way, they are competing against low-wage people in developing countries who may have less education but who are just as good at doing routine, repetitious procedures.

Many jobs are also disappearing because of automation, as specialized machines are built that can perform repetitive tasks even more cheaply and reliably than any human can. The factory owner makes a capital improvement to the factory and improves its efficiency so that fewer human workers are needed. The owner gets richer by spending less on labor and makes more products with fewer employees.

No one should be nostalgic about how great these jobs are. Many were boring, stressful, and required no creativity. Coal mining and assembly line work, for example, aren't fun. Given a choice, no one would probably choose to do them. Some of the jobs were well-paid, but only because generations of union members protested and participated in strikes against large companies in order to get better wages and benefits, like paid health insurance or paid vacation. 

Manufacturing jobs are being replaced by service jobs. Union membership is declining. It is more difficult to strike against service employers for higher wages, especially when they are small companies that are competing against other small companies down the street. Striking against one simply drives customers from one business to another. The advantage is that most of these jobs can't go to another country, because they have to be done face to face.  But they are slowly being automated by replacing people with computers or self-service terminals. So wages have stagnated and many employers don't offer benefits. 

This, in a nutshell, is the current situation, and it isn't likely to change for the better by itself. There are many exceptions, since there are specialized jobs people can learn, and there are still small businesses that are being started.  But overall, good jobs are harder to find.

Often it is necessary for a family to be supported by two wage earners, or else children are raised in poverty. If they are raised in poverty and without resources to get an education, they are likely to remain as low income and become increasingly worse off. These effects seem to be reinforcing the class and income levels in the U.S. In spite of the American Dream, rich people get richer, and poor people stay poor. Economic trends support these effects. 

Low income people are right to be concerned about these trends from recent years.  Trump made an effort during his campaign to talk to angry, low-income people. He attracted rallies full of angry people by pointing out the trends that have been developing for decades.   They responded by assuming he was sympathetic to them and would do something to address their concerns.

What can be done? Low-wage employees need enough perspective to understand what competition they are up against, or they will never make informed choices.  Some people are reacting in ways that are doomed to fail. The most obvious recent mistake was voting for Trump. It was clear from Trump's speeches that he didn't have a good understanding of the problem or any concrete plans that would work. His solutions to the problem are useless.  He suggested slogans as solutions that have been tried during the past decades and rejected as simplistic. Building a "big wall" on the Mexico border won't keep jobs in the country. There is little evidence that international trade treaties decreases the number of jobs, and they may actually create jobs. (These things can be hard to measure. There are winners and losers.) 

Ever since the Reagan Administration, low income people and people from southern states have allied with the Republican Party. There are indications that this alliance had to do with reaction against the Civil Rights Act, from which the Democratic Party became associated with politically liberal and minority groups. Perhaps the low income whites simply wanted to associate with wealthy people, hoping that the wealth and good fortune would rub off on them. But the evidence that tax benefits to help wealthy people ever "trickled down" are weak. Wealthy people behave in ways that are generally for their own benefit, as would be expected.

If low income people want assistance with their problems, government is the only entity that can reliably help. The government can set up laws and regulations that blunt the impact of pure capitalism, which is almost guaranteed to favor people who are already wealthy.  But the right kinds of well-thought-out regulations are needed, not just slogans.  Regulations are imperfect, and they will make some winners and some losers.  Low income people will need to demand the particular help that they need.

The Affordable Care Act ("Obamacare") is a good example.  As fewer people receive health insurance from employers, they will need to get insurance for themselves and their families.  Otherwise, they will not receive adequate health care, and the U.S. should be able to provide health care to its citizens.  But the system to provide this insurance to low income people will require government subsidies and taxes on the wealthy.  The system won't be simple or easy to implement.  It has been encouraging to see that citizens have been willing to protest to protect this program.  Hopefully, it will be gradually improved to make it fairer and work better without being repealed. 

Experience from the past century shows that the government can create programs that are good for some things, but may not be good for others.  The government isn't particularly good at creating excess jobs to achieve full employment.  Expecting the government, or the president, to create jobs for "everyone" is probably not going to work well.

The government can create jobs for specific projects that have defined goals, like national defense or infrastructure projects.  It can implement social programs like Social Security and Medicare that private companies have trouble doing.  It can fund basic scientific research that leads to long-term benefits.  Finding the right kind of program to address job losses will be a challenge, but it can be done, as long as affected citizens ask for it in a realistic way.

For better or worse, government works by taxing to take money by force and redistribute it to try to solve social problems. It doesn't have a magical ability to generate business or make productive, meaningful employment.  But that doesn't mean that it should be rejected or dismissed by those wealthy people, like Trump, who can't understand why social problems exist, because they haven't personally experienced them.  There are times when capitalism simply doesn't provide the best mechanism for keeping society healthy and functional.  If it doesn't, then we must think and act to fix it.

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