The middle class is being wiped out financially because the infrastructure that supported the middle class has been yanked out from under it. America previously had a very strong middle class and the country was a world leader in all respects – manufacturing, scientific discoveries, economic prosperity, high rate of home-ownership, excellent employee benefits and a strong dollar based on the gold standard. The working people of the 1970’s had far greater purchasing power than employees have today.
The Downfall of the American Dollar
The erosion of the middle class started discretely in 1971 when the government abandoned the gold standard for a free-floating dollar. Previously, the dollar was pegged at $35 per ounce of gold and this constant value gave true purchasing power to the middle class. With a free-floating dollar, however, the value fluctuates daily and emerging foreign economies forced it into decline. This erosion of value made it more expensive for the middle class to maintain its standard of living so people turned to credit to make up the difference.
The emerging foreign economies were based on manufacturing and, with their new factories and low-wage workers, they were able to manufacture products at a lower cost than their American counterparts. American corporations saw greater profit in closing their American factories and moving overseas. This move was a further push toward wiping out the middle class, as they now had no jobs to pay their increasing debt. Millions of jobs have permanently left the United States.
The Employment Disaster
As the unemployment rate increased, the demand for the remaining jobs became intense. Employers were able to hire highly educated employees at a low salary. Once employers realized they had the upper hand and no longer had to compete for the top employees, they began to abolish employee benefits.
Pensions were the first benefit to disappear. Men and women were loyal to a company for life, and in exchange the company paid a pension when the employees turned 65 years of age. Now the middle class has to fund its own retirement with the declining dollar, increasing debt load and fewer chances for a decent paying job.
Company-paid health insurance was the next benefit tossed aside. Previously, companies paid the health insurance premium for their employees. The employee simply paid a small supplement of a few dollars a week for family coverage, if he had a family. Otherwise, his health insurance was free. This increased financial strain put further stress on a disappearing middle class in several ways.
Americans, who has previously enjoyed good health and the best medical care in the world, could no longer afford to go to the doctor. As a result, Americans have the worst access to health care in the Western world. They wait until a small problem is a major one and then need expensive hospital care for which they cannot pay. This burden falls on the middle class taxpayer.
Companies traditionally gave a two-week paid vacation to their employees every year since the early 1900’s. Today, however, many employees work year-round without ever receiving a vacation. This only benefits the American corporations as they get productivity from the employee for 52 weeks instead of 50 weeks. This put further stress on the health of the middle class because no one can work continuously without a vacation.
Reduced Spending on Education
The declining dollar has reduced spending on education and, as a result, American high school graduates have an inferior education to students in other Western nations. Millions of American students graduate from high school with little more than basic reading and math skills. They have less knowledge than their grandparents do. The result is that Americans are no longer competitive in the global workforce. The emerging foreign economies, however, invested in educating their people and this has caused even more jobs to be permanently lost to our overseas competitors.
The Final Housing Blowout
The final blow to the middle class occurred with the housing crisis. The American dream of owning a home became a nightmare as million of Americans lost the equity in their homes. Today, more than one-half of all mortgages are for a greater amount than the value of the houses. Millions of homes sit vacant as Americans pack up and leave, walking away from piles of debt that have burdened them beyond comparison. Bankruptcy and foreclosure are at the highest rates in our nation’s history, even worse than the Great Depression.
The middle class is not completely without power and there are several things that people can do about the financial crisis. The strongest power that the middle class has is at the voting polls. Simply showing up at the polls, however, will not solve the problem. The middle class needs to become politically involved and elect responsible people to Congress.