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Movin' on Down
By Beverly Goldberg, The Century Foundation
July 3, 2005
When did we become a nation where if you somehow manage to "make it," that is, rise to the middle and even upper middle class through hard work, you are in great danger of sliding back down the ladder of success as you grow older? A nation where you can devote yourself to achieving the American dream, but then wake up and find yourself in the middle of a nightmare in which you are losing most of what you struggled so hard to gain?
Achieving the American dream has become ever more difficult over time, with opportunities for advancement depending more and more on the circumstances into which you are born. Some 42 percent of those born into the bottom 20 percent of families in terms of income end up staying in the bottom, and a mere 7 percent make it to the top.
The reality today is that everyone does not have the same opportunity to succeed. The higher your family income, the better the schools you will attend, the better nourished you will be, the more connections to people who can help you advance throughout your life you will have, and the more likely you are to inherit the means to secure your place on that slippery ladder.
But some, of course, who were not born into wealth have made it a good way up the income ladder. Their families struggled to give them a decent education, they worked hard to get ahead, and they moved on up. This improvement brought with it home ownership, good jobs with some sort of health coverage and pension (though today that is likely to be a somewhat risky 401(k) plan to which they contribute rather than a guaranteed defined benefit plan), and the ability to send their children to even better schools than the ones they attended.
Unfortunately, in today's economy, holding on to this success has become as difficult as achieving it. Workers' wages have stalled, and the small gains touted by the administration (3 cents an hour over the past year, which is about 2.6 percent) do not meet the rate of inflation. What is worse is that not only has the possibility of further growth diminished, but as these workers have grown older and begun to feel somewhat comfortable with their successes, the slide downward to a lower income level all too often begins.
All across the nation the stories are repeated. Fruit of the Loom, Oshkosh B'Gosh, and Jockey International closed up in Kentucky and the number of jobs in the apparel industry, which had supported a middle-class lifestyle for so many, fell from 32,200 to fewer than 9,000. The jobs lost in Fox Cities, Wisconsin, reached 6,300 over the past three years, and those lost in Oracle's recent merger with PeopleSoft affected 5,000 workers.
When reading about the impact of those losses, the hardest hit always seem to be employees over 45. And now GM has announced that it is going to reduce its labor force of some 177,000 by about 25,000, and once again older workers are likely to suffer most, taking longer to find new jobs and rarely finding jobs that pay as much when they finally do.
As Elise Gould of the Economic Policy Institute notes, "Americans over 45 are disproportionately more likely than their younger counterparts to be among the long-term unemployed (those unemployed for 27 weeks or more). Americans older than 45 make up about 14% of the labor force but 37% of the long-term unemployed."
While those older unemployed look desperately for that new job, the mortgages on their homes, the home equity loans they have taken, and the amount of consumer debt they carry become unbearable.
When their severance pay and unemployment insurance run out, first they drain their savings accounts then they start drawing from their 401(k)s, still believing a good, new job will appear on the horizon. To improve their chances while waiting for that comparable position to appear, these hard working people patch together part-time jobs and enter any retraining programs they can find. When the Carrier Corporation in Syracuse closed, it provided tuition assistance to those laid off and that, combined with federal and state aid, has allowed many to train for new jobs.
The problem is that even with retraining older workers are still the last to be hired. Gary Galipeau, 57, took advantage of the Carrier offer and went to college hoping a bachelor's degree in human resources added to his experience as a benefits official for the union at Carrier would make a difference, but he says that when he was interviewed by a headhunter the "subtle feedback was, I'm too old for what they're looking for."
Compounding the problem is the fact that those who do secure new jobs find they do not pay nearly as much as their old jobs did: a business manager for the Sheet Metal Workers Local at Carrier in Syracuse points out, "those who found new jobs took pay cuts of 30 to 40 percent, on average." And that is the story one hears over and over.
For example, after almost a year of looking, Lisa Spinks, 47, of Lilburn, Georgia, one of thousands of technologists who have lost jobs in the Atlanta region, took a job that paid "$10 an hour-about $21,000 a year-as a call center operator. Before that, she had been a computer programmer and software developer making up to $70,000 a year." And now even call center jobs are being moved offshore.
For those who manage to find new work at a lower salary, replacing the savings lost during long periods of job hunting is impossible, and a new round of unemployment, which happens more and more, is even more difficult to withstand. For such people, remaining a member of the middle class is all but impossible.
When the likelihood of falling from the middle class is added to the difficulty of rising to it in the first place, the question is how soon America will be a land of just the rich and the poor, a nation without the stable middle class that has made it a world leader both economically and socially.
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