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Obama Fails to Stem Middle-Class Slide He Blamed on Bush

May 01, 2012

Barack Obama campaigned four years ago assailing President George W. Bush for wage losses suffered by the middle class. More than three years into Obama’s own presidency, those declines have only deepened.

The rebound from the worst recession since the 1930s has generated relatively few of the moderately skilled jobs that once supported the middle class, tightening the financial squeeze on many Americans, even those who are employed.

“It started long before Obama, but he hasn’t done anything,” said John Forsyth, 58, a railroad-car inspector and political independent from Lebanon, Ohio. “He kept pushing this change, change, change, and he hasn’t done anything.”

Underlying the erosion of the middle class, defined by some economists as the middle 60 percent of income earners, are trends that stretch back decades, including competition from lower-wage workers overseas and technological advances that allow factories and offices to produce more with less labor.

As a candidate in 2008, Obama blamed the reversals largely on the policies of Bush and other Republicans. He cited census figures showing that median income for working-age households — those headed by someone younger than 65 — had dropped more than $2,000 after inflation during the first seven years of Bush’s time in office.

Yet real median household income in March was down $4,300 since Obama took office in January 2009 and down $2,900 since the June 2009 start of the economic recovery, according to an analysis of census data by Sentier Research, an economic- consulting firm in Annapolis, Maryland.

1% Get 93%

A president who attacked Bush’s policies for favoring the rich has overseen a recovery in which the wealthiest 1 percent captured 93 percent of per-capita real income gains in 2010, according to an analysis of tax data by Emmanuel Saez, an economics professor at the University of California at Berkeley.

On average, families in the top 1 percent saw their inflation-adjusted incomes rise by $105,637 that year from 2009, according to Saez.

While there is no settled definition of middle class, the middle 60 percent of households nationwide in 2010 earned between $20,000 and $100,000, according to the U.S. Census.

In and around Dayton, Ohio, a region that has endured a wrenching shift from dependence on the auto industry to new sources of growth such as distribution warehouses and information technology, disappointment with Obama is often balanced by wariness of his Republican challenger, Mitt Romney.

“I don’t know if there’s anybody I’m going to vote for,” Forsyth said of the candidates.

Limited Opportunity

While the U.S. unemployment rate fell from a peak of 10 percent in October 2009 to 8.2 percent in March, the jobs data that dominate public discussion obscure a shift that has limited opportunity for workers such as Forsyth.

Ninety-five percent of the net job losses during the recession were in middle-skill occupations, such as office workers, bank tellers and machine operators, according to research by economists Nir Jaimovich of Duke University in Durham, North Carolina, and Henry Siu of the University of British Columbia in Vancouver.

The job growth since has been clustered in either high- skill fields inaccessible to workers without advanced education or low-paying industries, they found.

In March, 3.2 million fewer Americans held sales and office jobs than five years earlier, and 1.2 million fewer were employed in transportation and production fields, all areas that typically pay middle-income wages, according to the Bureau of Labor Statistics.

Dayton’s Dreams

By contrast, the number of better-paid managerial and professional employees grew by almost 2 million over that period and employment in lower-paying service jobs expanded by 1.5 million.

In Dayton — the birthplace of aviation and such inventions as the mechanical cash register, the self-starting car engine, the stepladder and cellophane tape — these trends have diminished incomes and curtailed dreams.

Mandy Copeland, a 34-year-old occupational therapy assistant, and her husband, a heating and ventilation technician, have given up hope of trading their three-bedroom ranch house for a home with a basement that they could turn into a recreation room for their three children.

Eighteen-year-old Alex Ray recently decided he would wait on attending a four-year college and instead spend his first year at a local community college. His father, Tom Ray, a 47- year-old information-technology project manager who only recently regained a wage cut his employer imposed during the recession, praised his son for a “very mature” choice that he estimated would save $20,000.

Falling Birthrate

Fewer children are being brought into the world; the birthrate in Montgomery County, where Dayton is located, has fallen every year since 2007, in keeping with a national trend. Even the rituals of death have changed.

To save money, families are increasingly choosing cremation over burial, said Anne Dunbar, co-owner of a funeral home in the Dayton suburb of Springfield. Others are forgoing memorial services for simple graveside ceremonies. Rather than flowers or donations to a charity, 15 to 20 families a year now ask that newspaper obituaries include a plea for contributions toward funeral expenses, she said.

‘The Real Majority’

The challenges facing residents in this Ohio city about 60 miles north of Cincinnati have been emblematic of the issues that have moved centrist swing voters ever since the 1970 publication of “The Real Majority,” a top-selling political analysis. Authors Richard Scammon and Ben Wattenberg created a mythical 47-year-old Dayton housewife to argue that her most pressing concerns had the potential to turn presidential elections.

Today, the most pressing concern for Lisa Meeks, 47, is making herself “more marketable” to potential employers. Meeks, who left her pre-school teaching position because her hours were reduced, now rides the bus to Sinclair Community College in the morning and then boards another bus to get to her new job, working the evening shift as a call-center manager.

“I’m still seeing people struggling,” said Meeks. “You hear people saying, ‘I’ve put in four job applications and I haven’t heard anything back. What am I doing wrong?’”

Though the scale is greater, the workplace shifts that Dayton and the rest of the country are seeing parallel the Bush- era job trends that Obama criticized four years ago, when he said that during President Bill Clinton’s administration “the average American family saw its income go up $7,500 instead of go down $2,000, like it has under George Bush.”

Stopping Downturn

Arriving in the White House during a financial crisis, Obama concentrated on stopping a downturn that many economists feared could turn into a depression. He pressed for an $831 billion stimulus package and an auto-industry bailout. He cut taxes for middle-class workers and backed a health-care overhaul that he said would help middle-income families by keeping medical costs down and easing access to insurance coverage.

To promote a skilled workforce, the Obama administration has stressed support for education, including aid to local schools to reduce teacher layoffs. It has emphasized infrastructure improvements to promote competitiveness and backed clean-energy technologies that could provide future jobs.

Romney says deficit spending to finance the stimulus, uncertainty generated by the health law, and tighter regulation of the financial industry have deterred businesses from hiring. He backs reductions in government spending and tax cuts, including for wealthy “job creators” to spur investment.

Nothing Obama has accomplished in office so far has stopped what Siu calls “the hollowing out of the middle.”

No Overnight Fix

Just 19 percent of registered voters believe the president’s policies favor the middle class, compared with 25 percent who say they benefit the rich, according to a CBS-New York Times poll conducted Feb. 8-13. Still, asked to choose which candidate would do a better job protecting the middle class, 49 percent say Obama and 39 percent Romney, according to an April 5-8 ABC News-Washington Post poll.

“The economic crisis, deep recession and wage stagnation weren’t created overnight and they won’t be solved overnight,” Amy Brundage, a White House spokeswoman, said in an e-mail. “While we are making progress and the economy is growing and creating jobs, too many middle class families are still struggling to recover from the worst financial crisis of our lifetimes caused by the reckless economic policies of the past.”

Fundamental Forces

Siu and other economists attribute the phenomenon to such fundamental forces as the movement of production offshore to lower-cost countries and technological gains that have made U.S. companies more efficient. Even with 5.2 million fewer Americans employed since January 2008, the U.S. is turning out more goods and services than before the recession, one reason corporate profits hit record levels and wealthy investors prospered.

Robots are replacing factory workers. Airport kiosks are taking the place of ticket agents. Intuit Inc. (INTU)’s TurboTax software performs the work of accountants.

“This is early days. We see the next 10 years as being more disruptive than the last 10,” said Erik Brynjolfsson, director of the MIT Center for Digital Business and co-author of the book “Race Against the Machine.” He cites developments in artificial-intelligence technologies such as those in Google Inc. (GOOG)’s experimental self-driving car, International Business Machine Corp. (IBM)’s Jeopardy-playing Watson computer, and Apple Inc. (AAPL)’s Siri voice-recognition software.

Plant Closing

That disruption is being felt in the Dayton area. Thousands of auto workers and employees at related parts manufacturers and machine-tool makers lost their jobs after General Motors Co. (GM) closed its plant in nearby Moraine two days before Christmas in 2008. Less than six months later, NCR Corp. (NCR), once called National Cash Register Co. and founded in Dayton in 1884, said it would move its headquarters to Duluth, Georgia, taking more than a thousand jobs with it.

Unemployment in the Dayton metropolitan region reached 12.4 percent in January 2010, though the jobless rate had come down to 8.7 percent in February.

Some of the lost manufacturing and office jobs have been replaced by growth in warehouse centers that take advantage of the area’s location near the intersection of two interstate highways, said Richard Stock, director of the Business Research Group at the University of Dayton.

Caterpillar Logistics, a unit of Peoria, Illinois-based Caterpillar Inc. (CAT), and Carter Logistics LLC opened distribution centers in the area. Employees at those and other warehouses are paid “above a living wage, but they’re definitely for the most part lower-middle-income jobs,” Stock said.

High Skills Needed

The other major sources of growth have been in information technology, exemplified by Teradata Corp. (TDC), headquartered in Dayton, and Reed Elsevier Plc (REL)’s Lexis Nexis unit, which has a facility in the area, Stock said

Aeronautics and advanced materials manufacturing have also expanded around Wright-Patterson Air Force Base, home of the Air Force Materiel Command and Air Force Research Laboratory, Stock said. GE Aviation, a unit of Fairfield, Connecticut-based General Electric Co. (GE), broke ground last year on a $51 million research center in Dayton.

“Those jobs are at the very high-skilled end, jobs that require quite a bit of education,” Stock said. “There are not too many jobs in the middle.”

As a result, pay has declined. Real average weekly earnings in the metropolitan area dropped to $800 last year from $817 in 2007, according to U.S. Labor Department data analyzed by Stock.

Sitting on a metal bleacher watching her 7-year-old son at an early evening baseball practice, Mandy Copeland reflected on the expectations she and her husband had six years ago when she finished the coursework that qualified her for her occupational therapy job.

“We had pretty high hopes,” she said. “Now we’re just happy we have jobs.”