A new book reveals that the U.S. is becoming two distinct countries, with separate economies, politics and opportunities.
By Lynn Stuart Parramore
April 22, 2017
This post originally appeared on the blog of the Institute for New Economic Thinking.
You’ve probably heard the news that the celebrated post-WW II beating heart of America known as the middle class has gone from “burdened,” to “squeezed” to “dying.” But you might have heard less about what exactly is emerging in its place.
In a new book, The Vanishing Middle Class: Prejudice and Power in a Dual Economy, Peter Temin, professor emeritus of economics at MIT, draws a portrait of the new reality in a way that is frighteningly, indelibly clear: America is not one country anymore. It is becoming two, each with vastly different resources, expectations and fates.
Two roads diverged
In one of these countries live members of what Temin calls the “FTE sector” (named for finance, technology and electronics, the industries that largely support its growth). These are the 20 percent of Americans who enjoy college educations, have good jobs and sleep soundly knowing that they have not only enough money to meet life’s challenges, but also social networks to bolster their success. They grow up with parents who read books to them, tutors to help with homework and plenty of stimulating things to do and places to go. They travel in planes and drive new cars. The citizens of this country see economic growth all around them and exciting possibilities for the future. They make plans, influence policies and count themselves lucky to be Americans.
The FTE citizens rarely visit the country where the other 80 percent of Americans live: the low-wage sector. Here, the world of possibility is shrinking, often dramatically. People are burdened with debt and anxious about their insecure jobs if they have a job at all. Many of them are getting sicker and dying younger than they used to. They get around by crumbling public transport and cars they have trouble paying for. Family life is uncertain here; people often don’t partner for the long-term even when they have children. If they go to college, they finance it by going heavily into debt. They are not thinking about the future; they are focused on surviving the present. The world in which they reside is very different from the one they were taught to believe in. While members of the first country act, these people are acted upon.
The two sectors, notes Temin, have entirely distinct financial systems, residential situations and educational opportunities. Quite different things happen when they get sick or when they interact with the law. They move independently of each other. Only one path exists by which the citizens of the low-wage country can enter the affluent one, and that path is fraught with obstacles. Most have no way out.
The richest large economy in the world, says Temin, is coming to have an economic and political structure more like a developing nation. We have entered a phase of regression and one of the easiest ways to see it is in our infrastructure: our roads and bridges look more like those in Thailand or Venezuela than the Netherlands or Japan. But it goes far deeper than that, which is why Temin uses a famous economic model created to understand developing nations to describe how far inequality has progressed in the United States. The model is the work of West Indian economist W. Arthur Lewis, the only person of African descent to win a Nobel Prize in economics. For the first time, this model is applied with systematic precision to the U.S.
The result is profoundly disturbing.
In the Lewis model of a dual economy, much of the low-wage sector has little influence over public policy. Check. The high-income sector will keep wages down in the other sector to provide cheap labor for its businesses. Check. Social control is used to keep the low-wage sector from challenging the policies favored by the high-income sector. Mass incarceration: check. The primary goal of the richest members of the high-income sector is to lower taxes. Check. Social and economic mobility is low. Check.
In the developing countries Lewis studied, people try to move from the low-wage sector to the affluent sector by transplanting from rural areas to the city to get a job. Occasionally it works; often it doesn’t. Temin says that today in the U.S., the ticket out is education, which is difficult for two reasons: you have to spend money over a long period of time, and the FTE sector is making those expenditures more and more costly by defunding public schools and making policies that increase student debt burdens.
Getting a good education, Temin observes, isn’t just about a college degree. It has to begin in early childhood, and you need parents who can afford to spend time and resources all along the long journey. If you aspire to college and your family can’t make transfers of money to you on the way, well, good luck to you. Even with a diploma, you will likely find that high-paying jobs come from networks of peers and relatives. Social capital, as well as economic capital, is critical, but because of America’s long history of racism and the obstacles it has created for accumulating both kinds of capital, black graduates often can only find jobs in education, social work, and government instead of higher-paying professional jobs like technology or finance— something most white people are not really aware of. Women are also held back by a long history of sexism and the burdens — made increasingly heavy — of making greater contributions to the unpaid care economy and lack of access to crucial healthcare.
How did we get this way?