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Economic Equity for the Working and Middle-Class

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By Dr. Philip M. Dodd-Nufrio, Professor, Metropolitan College of New York

Dr. Philip M. Dodd-Nufrio



Dr. Philip M. Dodd-Nufrio is professor of public administration at the Metropolitan College of New York (MCNY).

Contribution by Dr. David Abrahams, Bowie State University.


In a 2018 analysis of government data, the Pew Research Center described class income categories. Their analysis indicated that half of U.S. adults (52%) lived in middle-income households. Roughly three-in-ten (29%) were in lower-income households and 19 percent were in upper-income households.

 

While the great recessions experienced an economic downturn from 2007 to 2009, middle-class American income declined from $62,090 in 2007 to $56,912 in 2012.  Since then there has been a growth from $62,898 in 2016 to $68,703 in 2019. This represents a 9% increase in median household income in the United States. In contrast Richard Reeves of the Brookings Institute found that the top 20 percent of upper-income households rose 95 percent.  

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COVID-19 and Its Economic Impact on the Middle and Working Class

The Pew Research Center conducted a survey in May 2020 and found that lower-income and middle-income adults were under significant financial pressure and were especially vulnerable to the economic fallout from the COVID-19 outbreak. The survey found that 36 percent of lower-income adults and 28 percent of middle-income adults lost a job or have taken a pay cut due to the coronavirus outbreak, as compared with 22 percent of upper-income adults. Further, 23 percent of lower-income adults and 48 percent of middle-income adults indicate that they have rainy day funds that could last only three months. This compares against the 75 percent for upper-income adults. Eliza Griswold (2020) said: there is a slim margin of error: forty percent of Americans do not have four hundred dollars cash to spare in an emergency and would need to rely on credit cards or friends and family to come up with the money."

The September 2020 Bureau of Labor Statistics reports that there are currently 29 million people collecting unemployment benefits. People with jobs deemed non- essential, or that render telework impossible, are without work, and, in many cases, without savings. Permanent job losses are mounting while experts are increasingly warning of a wave of small-business failures, further aggravated by federal aid drying up.

The disaster has become so dire, so quickly, that even the minimum wage, in real terms, is more than 30 percent lower than it was 50 years ago. The bottom line is that less work (brought on by COVID-19) threatens the working and middle class' dignity. COVID-19 exacerbates a crisis for working and middle-class families as they try to afford healthcare, housing, and other necessary living expenses.

According to Takersley (2020), old jobs are not coming back. He states: best hope to create a new wave of good ones (jobs) is to invest in all groups of Americans (and in particular women, minorities and immigrants) who were responsible for the success of our economy at the time it worked best for working people." If we learned anything from the 2008 Great Recession, it is important to act quickly and with enough fiscal stimulus to prevent a prolonged decline. There is an immediacy not only to create good new jobs but to save existing ones. The following policy solutions can prevent a prolonged decline to the working and middle-class and small businesses.

  • Immediately extend unemployment benefits.
  • Guarantee a living wage with moderate minimum wage increases.
  • Infuse money to save small businesses.
  • Make childcare more affordable to help working parents.
  • Invest in manufacturing and American jobs that pay decent wages.
  • Public investment in services and infrastructure to ensure that more families have access to the factors that propel them into the middle class.
  • Accessible and affordable postsecondary education.

The stimulus would be funded through tax reform:

  • Increase the corporate tax rate from 21% to 28%
  • Require a minimum of 15% on a company's book income
  • Rollback income tax deductions from the Tax Cuts and Jobs Act of 2017which President Donald Trump and Senate Republicans spearheaded for taxpayers with income over $400,000
  • Tax capital gains at the same rate as ordinary income for incomes over $1 million
  • Subject earnings over $400,000 to a Social Security payroll tax
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References:

Bennett, J. Fry, R. & Kochha, R. Are you in the American middle class?". https://www.pewresearch.org/fact-tank/2020/07/23/are-you-in-the-american-middle-class/

Brookings Institute. June 5, 2018. Seven reasons to worry about the American middle class". Acquired from: https://www.brookings.edu/blog/social-mobility-memos/2018/06/05/seven-reasons-to-worry-about-the-american-middle-class 

Bureau of Labor Statistics (BLS). (2014).

Griswold, E. (2020, May). How the coronavirus is killing the middle class", The New Yorker.

Sawhill. I. (2020, Mar.). The middle class faces its greatest threat since the 1930s". Barrons.

Takersley, J. (2020, Aug.). The real reasons the American economy boomed after World War II". The New York Times.  

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There is an immediacy not only to create good new jobs but to save existing ones.
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Biden Challenge, Biden Institute, Biden Forum, Middle Class, Philip M. Dodd-Nufrio, MCNY, University of Delaware, UD, ASPA,