The anxious society: middle-class insecurity and the crisis of the American dream.

Middle-Class Insecurity and the Crisis of the American Dream 

The American Dream is in crisis. The 25-year golden age that followed World War II has been replaced by an equally long period of economic insecurity for most U.S. citizens. Middle-class Americans saw themselves as part of the "affluent society" of the 1950s and 1960s, but that image has since given way to what is perhaps best described as the "anxious society" of the 1990s.

Conventional measures indicate that the U.S. economy is strong. But the middle class has good reason to feel ill at ease. As economist Stephen Roach put it in the June 16, 1995, New York Times, one of the toughest realities for working families in the 1990s is that "the line between recession and recovery has been blurred as never before." To understand what all the fuss is about, consider the following facts.

* In the past few years, hundreds of thousands of workers have been affected by corporate downsizing. The Associated Press provided an all-too-vivid snapshot of our era when it reported a few months ago on the experience of Bill Means, an engineer at a computer software firm in Ohio. Means was terminated and escorted off the company's property on "Take Our Daughters to Work Day" while his eight-year-old daughter looked on in disbelief.

* According to a Census Bureau report, job search in the 1990s takes longer than it did in the 1980s. The report also finds that workers losing jobs recently have seen their wages drop an average of more than 20 percent upon regaining full-time work.

* The real purchasing power of wages for the average American has been falling since 1973. Average hourly earnings are now lower than they were in 1965; weekly earnings are lower than they were in 1959. Median family income has fallen 7 percent in real terms since 1989.

* No other industrial nation approaches the United States in multiple job holdings. To quote one worker's response to a boast by President Clinton: "Don't tell me about the millions of new jobs created--I've got four of them and I'm not all that impressed."

In the early postwar period, public officials demonstrated their interest in the middle class and the vitality of the American Dream by seeking to reduce the nation's unemployment rate. But today's widespread economic insecurity requires much more. Just as no single statistic of overall national performance can adequately reflect economic reality, no individual policy initiative can reinvigorate the American Dream.

Today the nation's goal can be nothing less than an economy in which everyone has the opportunity to develop and utilize their marketable talents and capacities--an economy that rewards workers with a rising standard of living and the prospect of an even better life for their children. And moving society toward this objective requires a new look at a broad policy landscape. Among the issues that must receive fresh attention as part of such an agenda are jobs, welfare, and the budget.

JOBS

Human-resource professionals talk of two routes to competitiveness: the "high-performance" path and the "low-wage" path. Policies used widely in Europe and the Pacific Rim encourage firms to follow the first of these approaches. In the United States, meanwhile, a policy vacuum has caused most firms to follow the low-wage path. The middle class cannot survive unless America changes its competitiveness course.

In Germany and Japan, for example, taxes and subsidies encourage corporations to compete in ways that involve worker retention, retraining, and the upgrading of skills. In addition, many countries have recently linked clearly defined technology policies to national business-assistance networks modeled after the American agricultural extension service. It's time for the United States to create incentives that encourage job creation through developments of new products, technologies, and markets--and to end subsidies for plant closings and relocations abroad.

The federal government should make tax breaks and certain types of regulatory relief available to firms that do any of the following: allow workers to share in productivity and profitability gains; offer family-friendly employment benefits and work arrangements; and foster employee participation from the workplace to the boardroom. Public policy must also address the fact that this country has one of the worse labor-market adjustment systems in the industrialized world. Free markets have many wonderful features but are seldom efficent when it comes to managing a nation's transition from school to work--and are often even worse at enabling workers to move smoothly between jobs.

The apprenticeship and skill-certification programs found in Germany represent one set of initiatives consistent with a high-performance path. Another successful approach to training is the group of education centers funded by an employer-training tax in Australia and France. There are also effective job-search and relocation-assistance programs in such nations as Sweden and Japan. A common-sense American approach to jobs in the late 1990s requires government, school, and industry collaboration that builds on creative efforts such as these. Also needed are complementary reforms that make pensions portable and ensure the accessibility of health care.

WELFARE

A fresh approach to welfare requires a basic minimum income for those unable to work, a consolidation of programs that provide assistance to those who can work, and an acknowledgement that the public sector must serve as employer of last resort for those seeking but unable to find work. It's time to replace the current alphabet soup of income supports--OASHDI, SSI, EITC, AFDC, WIC, and so forth--with a comprehensive public-assistance program, one tied to the tax system so that it does not penalize people who choose to work. A public commitment to serve as employer of last resort, meanwhile, reflects the realization that there are too many unmet social needs for the nation to accept long-term unemployment.

The notion of treating employment as a "right" has been favored by many Democrats throughout the twentieth century. More recently, Republicans have talked about work as a "responsibility" of the able-bodied. A middle-class perspective would took at it as both. Using the Depression era's Works Progress Administration as a model, federal and state officials could easily enable unemployed workers to make a useful contribution to their communities.

THE BUDGET

Both political parties say they want a balanced federal budget so that the U.S. government will operate under the same constraints as households and firms. But neither party demands a budget that follows the lead of the private sector and distinguishes between consumption and investment. A "capital budget" should be a key element of any policy agenda that seeks to address the concerns of today's anxious society. Not having a capital budget for long-term public investments is like forcing families to pay cash for a new home or requiring firms to purchase a new plant with current income.

The United States devotes a smaller fraction of its gross national product to public investment than any other developed nation.

Our overburdened and often dilapidated public facilities and transportation systems are daily reminders of this neglect. The United States needs an investment-oriented federal policy, and capital budgeting can help move the country in this direction.

Capital budgets are already found in 42 states and about 90 percent of America's municipalities. Such budgeting starts with identifying public-investment needs and developing a multiyear financing strategy. Annual loan and depreciation expenses are then charged against the community's operating budget, which is usually required to be in balance. This type of budgeting has long been practiced by nations both in Europe and the Pacific Rim.

Creative solutions to our current problems can indeed be found. But there are also formidable obstacles. One is the lingering memory of inaccurate analyses of our now 25-year-old economic problem. Washington certainly shares some of the blame for the nation's ills, but the problem is not that the United States has too much or too little government; rather, the ultimate cause of middle-class anxiety is a failure to adapt U.S. social institutions to a new economic environment.

Another obstacle is a political system in which parties seem more interested in feuding than in solving problems. As Senator Bill Bradley stated recently, today neither political party addresses the major concerns of most Americans. It's been a long time since the nation had a credible leader who started with a middle-class standpoint and worked to unite the poor, the middle-class, and the affluent. Yet another obstacle is the fact that years of watching politicians fail to deliver on their promises have left many citizens cynical and alienated from the electoral process.

The current economic situation is unstable; anxiety cannot be the defining characteristic of any society for very long. Middle-class insecurity is real and pervasive. The American Dream is indeed in crisis. Only sensible public action now can put the United States on a new course.