Losing Middle America?

Is the American Dream of opportunity and increasing prosperity out of reach for the average American worker? What is happening to the American middle class? If the labor market ‘polarizes’ into low- and high-income jobs, what does this mean for continuing inequality in America? What does it mean for the American social contract, and the American Dream?

The opportunity to move up the economic ladder is a central component of the American social contract, or the “agreed-upon social arrangements that provide basic security and access to basic necessities for individuals in modern, industrial societies.” Besides economic opportunity, the social contract encompasses social agreements on access to employment, healthcare, retirement, unemployment insurance, education, as well as labor regulations and civil rights.

America’s existing social contract is inadequate for more and more Americans. While the Great Recession and the housing bubble implosion destroyed the savings of many middle and lower income families and caused mass unemployment, a number of longer term trends have also contributed to the woes of Americans. Stagnating wages, shrinking retirement savings and the loss of defined-benefit plans, rising health care costs that eat into discretionary income, easy credit used to maintain living standards and the subsequent exploding debt of the middle class, and most importantly, fewer decent jobs, have all chipped away at hopes for a better future. This Next Social Contract Initiative series, Losing Middle America, examines the polarization of the labor market, growing wage inequality, and the causes of these phenomena in both the United States and other wealthy countries.