Disturbing Statistics on the Decline of America's Middle Class

In American public life, it's hard to escape the long shadow of the middle class. From politicians to pulpits to the punditocracy, those in the public eye constantly appeal to the solid center of the country.

Mainstream values are described as "middle class," as are common tastes and preferences. Economists often state that the middle class is the engine of commerce, and industries from construction to education to consumer electronics rely on a strong middle class -- with large amounts of disposable income -- to build colleges, fill houses and buy Blu-Ray players. But what if this massive engine ground to a halt?

On the surface, the scenario sounds unlikely. But a growing cadre of economic analysts note the steady erosion of the middle class, and the loss of its massive buying power. In a recent article, my Daily Finance colleague Charles Hugh Smith laid out a fairly clear argument for the disappearance of the middle class, at least in terms of wealth. As Smith notes, the top 20% of the American populace holds roughly 93% of the country's financial wealth, and the top 1% of the country holds approximately 43% of the money in the U.S. Meanwhile, the middle 20% of the population -- what would, officially, be called the middle class -- holds only 6% of the country's total assets. While disturbing, even this minuscule share of the wealth pie dwarfs the bottom 40% of the country, who control less than 1%.

Trouble on the Factory Floor

So how did the middle class become second class citizens -- or, as Smith puts it, "Debt Serfs"? Not surprisingly, the answer is complicated, involving factors like the rising cost of education, the loss of pension funds and affordable health care, falling middle class wages, and the skyrocketing price of housing. Yet one clear answer lies in manufacturing. When looking at the declining American middle class, a good number to start with is 42,400. That's the total number of factories that the U.S. lost between 2001 and the end of 2009. Put another way, this translates into the outsourcing of 32% of all manufacturing jobs in America.

Other numbers illuminate the impact of this massive job drain. At the end of 2009, 15.7 million people were unemployed, while 12.6 million -- 20% fewer -- worked in manufacturing. This represented only 9% of the American working populace; at manufacturing's height in 1960, 29% of Americans were employed in the sector.

This bleeding of American manufacturing represents a massive drop in the products that are made in America: According to one economist, the country currently doesn't produce any television sets. Computer manufacturing in the U.S. employs about 166,000 people; in 1975, it employed almost 300,000. Meanwhile, Asia's computer manufacturing sector has about 1.5 million workers and a single tech manufacturer, Foxconn, employs more than 800,000 people.

If the name Foxconn sounds familiar, it's because the company entered the news earlier this year when twelve of its employees at one factory committed suicide. In the months that followed the suicide cluster, disturbing facts emerged about the facility, which produced Apple iPods. Describing work conditions, factory insiders painted a picture of a profoundly depressed and dispirited workforce slaving around the clock for wages that start at $130 per month. Foxconn employees are often on their feet for eight hours at a time, regularly deal with emotional and psychological attacks, and often suffer workplace injuries.

Economic Déjà Vu

If the low wages, dangerous workplace conditions and a suicidal workforce sounds familiar, it's because that describes the conditions in many American factories in the late 1800's and early 1900's. This situation was largely remediated by the growing power of organized labor, which successfully pushed for minimum wage, collective bargaining, reasonable work weeks, and many of the other rights that today's workers enjoy. Yet, in the past few decades, "the unions" have become an all-purpose scapegoat for inflexible work rules and the rising cost of American-made goods, as low-cost overseas labor has led to massive outsourcing. And in recent years, some of that reputation may be deserved. Yet the fact remains that organized labor did much to create the American middle class.

If the middle class is to rise to anything approaching its former power, American manufacturing must rebound. While the U.S. is still in the upper ranks of the world's largest consumers, its economy is rapidly slipping down on the global list. According to some economists, China's economy is on track to overtake the U.S. by 2040; ten years later, India will also outstrip America. Economic strength requires a strong manufacturing base, but while Asian countries are building theirs, America has slowly allowed its own base to starve.

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U.S. manufacturing output is at an all time high. We produce 25% more manufactured goods than any other nation. The problem is increased productivity has significantly reduced the number of workers needed and the number of companies.

October 26 2011 at 7:38 PM Report abuse rate up rate down Reply
Val Newsome

This is provacative, I am sure that it is based in fact, but what are going to do about it. I agree with the web site, The Activist Middle, and think that we should organize and fight back. We should be careful and look out for ourselves and trust that the answer is in our fighting for it.

August 30 2011 at 9:54 PM Report abuse rate up rate down Reply
Brian Basham

One way to overcome all of the political crap is to pay each member of congress only the medium wage of his or her district. No free medical care. No payoffs from lobbyists. Let them live in the real world.

August 19 2011 at 8:46 AM Report abuse rate up rate down Reply

screw the middle class the middle class has dropped down to higher lower class no raisesd and bills made while money was easy is gone except for politicians who give themselves raisers i think the tax payer should decide what we think they are worth most of them are overpayed some should be fired and some layed off and some jobs such as lt. gov and more should be eliminated then the budget will balance

October 26 2010 at 6:01 PM Report abuse rate up rate down Reply

Time to think ahead about being over qualified for the jobs available. The actual people that make things work is now out of work, Now what ?????

October 26 2010 at 4:13 PM Report abuse rate up rate down Reply

CORPORATE SOCIALISM - I want my country back. What can we do to stop this? America is fast becoming a 3rd world country. The SciFi writers were right. Giant multi-national corporations whose loyalty is only to profit ARE taking over the world with America's Government bending over and helping shovel us all into an economic grave. We have the best Government Corporate Bribes can buy and no one - no one is doing anything about it. I hoped Obama would be the one but he's too nice. He needs to realize that his enemies are never going to like him and he might as well go as radical as he needs to. Why are corporations receiving tax credits to ship American jobs overseas? Why?

October 26 2010 at 2:57 PM Report abuse rate up rate down Reply
1 reply to Marci's comment

You lost your cdountry when you turned to socialism as the answer! American corporations will begin their move out of the US shortly. They will go where corporations are admired & respected because they provide jobs. They allow prople the abilty to buy goods and services! In America, the liberals treat corporations like second class citizens and drive them out. Other countries give huge tax breaks, reasonable building leases, protection against union racketeering and don't force social programs down their throat. Would you stay where idiots like you curse and demonize your very exixtence. It is a global economy and corporations bring jobs for the low paid laborer. Look at all the IPODS being made in China. Does anyone condemn Apple for sending all that work overseas? No! Stop moaning and condemning corporations and stand behind them, support them, ask your government to give more incentives to get them to stay here and stop taxing them into non-existence.

October 26 2010 at 11:39 PM Report abuse rate up rate down Reply

come on america don't you see what's happening!don't buy foriegn goods that used to be made here. don't support the big companies that sold us out to mexico and china. if we don't get the big business lobbiest out of our congress then we WILL lose our country and its average hard working citizens to poverty

October 22 2010 at 2:13 PM Report abuse +1 rate up rate down Reply

come on america don't you see what's happening!don't buy foriegn goods that used to be made here. don't support the big companies that sold us out to mexico and china. if we don't get the big business lobbiest out of our congress then we WILL lose our country and its average hard working citizens to poverty

October 22 2010 at 2:13 PM Report abuse rate up rate down Reply

I only want to say one thing, We got into this mess when Mr Bush was in office so don't blame anyone but him. Do you ever hear Mr Bush say one word about anything. The answer NO

October 22 2010 at 11:35 AM Report abuse rate up rate down Reply

Why is Obama and Hillary trying to sign on with the UN over gun control over americans.............which is an american right.......? do your homework.........it's on the internet.

October 19 2010 at 2:49 PM Report abuse +1 rate up rate down Reply
1 reply to Patty's comment

I think every American that wants a gun should be able to document they are part of an organized militia. In other words, join the national guard. I think we should start the draft again. If you want a gun, serve your country!!!

October 25 2010 at 3:54 PM Report abuse +1 rate up rate down Reply