Sunday, April 13, 2008
Middle-Class Dreams May Be Out of Reach for Many
By Tracy Dingmann /
Of the Journal
Americans generally don’t like being put into boxes. But apparently almost everyone wants to be middle class. Studies show more than half of Americans — from lawyers to teachers to janitors — place themselves in that category. Those same studies show that almost all Americans think it’s harder to enter the middle class now than in years past.
But what, exactly, does middle class mean? To many economists, the middle class is simply a construct, peculiar to American society and marked mainly by the acquisition of material things. To many Americans, it is a hard-fought financial, cultural and social goal, achieved after years of hard work and education.
Traditional middle-class symbols include going to college, owning a home and steadily advancing at the same salaried job until retirement. For some, it also means being able to afford good health care, family vacations and college for their children.
Today’s looming specter of bad economic news, from foreclosures to credit crunches and tuition spikes, along with rising food and fuel costs, threaten to price lots of people out of what’s commonly thought of as the middle class. It’s a belief validated by a Pew Research Center survey released this week, which says 79 percent of Americans believe it has become more difficult to remain middle class than it was five years ago.
What are the prospects for those who are building their lives or starting families now? We talk to two people whose views differ widely.
Believing in the dream
Steve Walsh says he fought his way out of poverty and into the middle class with hard work and a solid education. But when the University of New Mexico professor asks students in his innovation management, entrepreneurial education and economic development classes whether they think they can do the same, he gets some disappointing answers.
“I ask them ‘Do you think your success depends on who you know or what you know?’ and they say, ‘It’s who you know,’ ” said Walsh, who is the Alfred Black Professor of Entrepreneurship at UNM’s Anderson Schools of Management and co-director of the technology management center there.
Walsh said his students tell him they are disillusioned not only by the incessant drumbeat of depressing economic news, but also by seemingly endless news of financial scandals, bailouts and abuses of power.
“I worked for 20 years before I got my Ph.D.,” said Walsh. “I worked as an engineer, a manager, a director. I started firms and I was lucky enough for some of them to succeed. I understood the American Dream and believed in my heart that if I tried, it could get better. I would like to know how many of my students feel that way now. Because I just don’t think they do.”
It’s not necessarily cynicism that makes them think that way, said Walsh.
“In many ways, students today are much more aware. I just blindly believed (the American Dream),” he said. “I don’t like the word cynicism. I think these people are simply trying to interpret reality and how it affects them.”
It’s all about choices
Economists have found that the American desire to be middle class — a notion that drives people to buy homes and cars and other material things — is largely driven by whatever brings happiness to the rest of a peer group, said Allen Parkman, an economist and Regent’s professor emeritus at the Anderson Schools of Management. It’s known as “keeping up with the Joneses,” and it often runs counter to what is really happening economically in society.
“The greater issue becomes not the amount that you have, but the amount you have relative to some standard that you set for yourself,” said Parkman.
While many people today say they are not better off than their parents, the overall numbers show otherwise, he said.
The gross domestic product, which measures the country’s economic output of goods and services, has increased about 2 percent annually in the last century.
After observing decades of economic and census statistics, Parkman said he’s found what unites those who are not succeeding in today’s economy.
“They are all people who have just made bad decisions,” said Parkman. Whether they’ve made the choice to drop out of school, buy houses they can’t afford, buy lottery tickets instead of saving, got divorced or otherwise became single parents, they all made decisions that damaged them economically, he said.
Statistics show that much of a person’s economic success is based on his or her family structure, said Parkman, author of “Smart Marriage: Using Your (Business) Head as Well as Your Heart to Find Wedded Bliss” and “Good Intentions Gone Awry: No-Fault Divorce and the American Family.”
Households headed by single parents are at the very bottom of today’s economic strata, he said. People who get married and stay married do better financially than single or divorced people, especially when children are involved.
Education is also key, said Parkman, citing numbers from the 2007 Statistical Abstract of the United States (based on figures from 2003). According to the abstract, men without high school diplomas make an average of $29,100 annually, while men with diplomas average $38,331. Women without high school diplomas make an average of $21,400 a year while women with diplomas average $28,000 yearly.
With advanced degrees, the divide is more dramatic. Men with associate’s degrees earn an average of $48,000, while those with bachelor’s degrees or more earn $81,000.
In that context, those who don’t finish high school are economically doomed, said Parkman.
“Look at the high APS dropout numbers. A lot of them are slitting their throats at a pretty early age.”
Parkman said he has a few simple tips for people who want to retain reasonable economic success and stability.
“If you want to live comfortably, you only have to do three things: Graduate from high school, get married, and stay married. If you look within that subset (of people who are not doing well), you will find that those people have violated those principles.”
More hurdles today
You couldn’t get more of a disagreement from Walsh, who said he vividly remembers his struggle to become middle class. While it was tough, he feels he accomplished it on a fairer playing field than young people have today.
“My first job out of college paid twice as much as my father and three times as much as my mother. I paid for college myself and with scholarships.”
Today it is tough to convince students that going to school will help them develop a career that will sustain them economically. “It’s hard getting people to believe that good education will help you,” he said.
Gone also is the expectation that today’s students will land a job, work hard and be rewarded with longevity. And layoffs, whether highly publicized or not, affect the community negatively, said Walsh.
“When 2,000 people are let go from Intel, or people are let go from the labs, none of these things are good. You’re eliminating a lot of skilled labor jobs, which are the very backbone of the middle class. What does this say to someone who’s bright who’s reading that?”
Credit is another factor that derails many of those who aspire to reach the middle class, said Walsh.
“When I first entered the work force in 1978, I couldn’t get a credit card until I established credit. That is no longer the case. People are given credit before they know how to handle it. I don’t know how well I would have done when I was 22.”
Even if you do everything right, you could be the victim of identity theft and have everything wiped out, said Walsh.
“I have two nephews in their twenties who are going through that right now. Just going through the process of stopping credit fraud affects your credit negatively.” In all, Walsh said he’s convinced the struggle to succeed is getting harder — and blaming it on a person’s poor choices ignores the real inequities and problems in society today.
“My feeling about bad choices is that rich people can make a bad choice and it really hurts them. Middle class people make a bad choice and it really, really hurts them.”
Buck Up, People: It’s Not Really That Bad
Not everyone agrees that the middle class is facing a crisis.
Allen Parkman, an economist and Regent’s professor emeritus at the Anderson Schools of Management, says the media have focused too much on the supposed coming recession and the threats to the middle class.
“Over the last 29 years we have had two minor recessions,” said Parkman. “And now our overall growth rate is not as good as it was. But if you read the papers, you’d think all hell was breaking loose.”
Bad news like mass layoffs is trumpeted, while good news is ignored, said Parkman.
“It sure as hell sounds like bad news when people get laid off. But the local unemployment rate is 3.6 percent, which is fantastic. It is easy to report layoffs as gloomy news without regard for constructive and positive movements.”
As for all the concern for those who are losing homes to foreclosure, the homeowners — who recklessly bought houses they couldn’t afford — aren’t the ones who’ll be hurt, said Parkman.
“Foreclosures will haunt the people who loaned them the money, whose pockets are deeper,” said Parkman, adding that most of the homeowners actually have very little money invested in their houses.
“Their credit rating is screwed. Otherwise, they walk away.”