Labor's last stand? The middle class squeeze

Wisconsin State Journal special report | Fourth of six parts
2011-04-20T06:35:00Z 2015-02-19T17:10:10Z Labor's last stand? The middle class squeezeDOUG ERICKSON | derickson@madison.com | 608-252-6149 madison.com

WHITEWATER — Jeff and Denise Ehren aren't clear on the exact definition of middle class, but they're pretty sure their place in it is shaky.

They both work full time at UW-Whitewater — he's a custodian, she helps run the sports and recreation center — but those jobs together grossed just under $50,000 last year, they said. They've got a mortgage, student loans, credit card debt and a list of side gigs, from bartending to secretarial work.

"I certainly don't feel middle class," said Denise Ehren, 34. "Sometimes I think we should just call ourselves poor and be done with it."

The middle class — that shapeless body that most Americans aspire to and politicians court — has become one of the biggest subtexts to the budget battles playing out in Madison. Union protesters say Republican Gov. Scott Walker's proposals will destroy it. Walker's supporters say his approach very well could save it.

The middle class is a vague term — many economists say household income alone can't define it. Yet a major federal report last year concluded it's getting tougher to earn your way into it, especially as the gap between rich and poor widens. That could be one reason Walker's push to end most collective bargaining for public workers, while cutting their take-home pay, has touched such a nerve.

Although average household income rose in the 1990s, it stagnated in the 2000s, and families now are working more hours for their money and able to buy less with it, said Rebecca Blank, who oversaw the report as undersecretary for economic affairs with the U.S. Department of Commerce.

"It's harder to be middle class in America than it was 20 years ago," Blank told the State Journal.

Six goals

The report defined middle-class families by aspirations rather than income and said middle-class families share six goals: home ownership, a car, college education for their children, health security, some version of a pension and occasional family vacations.

Families at a wide array of income levels can achieve those goals, depending on their determination and the cost of living in their communities, Blank said. But the costs for three of the items — housing, health care and college — have risen faster than incomes, causing the downward pressure on the middle class, she said.

In Wisconsin, the median household income, regardless of family size, in 2009 was $51,237, meaning half of all households earned less and half earned more, according to U.S. Census data. The number was virtually unchanged from the prior three years. The 2009 median U.S. income was $49,777.

‘Unsustainable'

Kirsten Lombard telecommutes most days from her apartment on Madison's Isthmus to her job as a marketing specialist with a technology solutions company in suburban Chicago. She earns about the state median household income, she said.

"I think I'm in the same boat as most people in the middle class," said Lombard, 44, who is single and holds a Ph.D. in historic design from UW-Madison. "Do I wish I had more money? Yes. Am I thankful for what I have? Definitely."

When Walker proposed an increase in health care and pension contributions for public sector workers and a reduction in collective bargaining abilities, Lombard said she viewed it as a long-needed corrective measure.

"Private sector employees have less and less. We're expected to absorb the hits we take, but also protect public sector employees from feeling the effects of the economy," said Lombard, who has been active in the local tea party movement. "That's an unsustainable double burden on taxpayers."

She thinks Walker's approach will build a larger, stronger middle class because a well-managed state budget will encourage business, job creation, entrepreneurship and consumer spending, she said.

Whether Walker's plan plays out that way will depend significantly on who ends up benefiting from any redistribution of money, said Keith Bender, an associate professor of economics at UW-Milwaukee.

"If lower taxes are distributed relatively equally across all income levels, then everyone benefits potentially," he said. "We do know that lower-income people are more likely to spend any increases in income than richer people."

Walker weighs in

Walker, in an interview last week with the State Journal, said if you look over time at both the state and federal level, the middle class has been saddled more often than not with the costs of government.

"The lowest income individuals get all sorts of subsidies and offsets," he said. "High-income individuals have a lot of disposable income. Most of the working middle class has the least room to breathe on this, yet, when property taxes go up 5, 6, 7 percent at a time when most people's incomes are frozen, they're the ones that are hurt the most."

His approach is "about protecting the middle class, middle class jobs and middle class taxpayers" by giving local governments the tools, such as union concessions, to balance their budgets without property tax increases at a time when he's proposing state aid cuts, he said.

The nonpartisan Legislative Fiscal Bureau, in analyzing Walker's proposed biennial budget, concluded last week it would decrease taxes overall but that low- and middle-income people would lose tax credits worth about $49.4 million over two years.

‘Disproportional hit'

The Ehrens, who both have college degrees, say even an additional $5,000 a year would make a big difference to their household budget. Yet the couple, who are both union employees, will give up almost that much annually out of their combined take-home pay due to Walker's budget approach.

"I don't think Walker and his supporters are attacking solely the middle class," said Jeff Ehren, 35. "I think the attack is on the lower half of society, because so much of what is happening with this bill is a disproportional hit."

The disparity between rich and poor will become even more pronounced as unions lose power, he said. That argument — that unions solidified the middle class — carries weight with some historians and economists.

A study this month by the left-leaning Center for American Progress Action Fund in Washington, D.C., purported to find a direct correlation between a thriving middle class and a strong union presence. Each percentage point increase in union membership in a state puts about $153 more per year into the pockets of the typical middle-class household, the study found.

Kenneth Dau-Schmidt, a labor and employment law professor at Indiana University, said wealth inequality dropped substantially after the Great Depression and stayed that way until the late 1970s, the peak years of union membership in this country.

"Can unions really take credit for the development of the middle class? I think they can, or, at the very least, they are kind of an indicator that workers have some power and some balance with management," he said.

Let market flourish

Others see the landscape much differently. Brett Healy, president of the conservative John K. MacIver Institute for Public Policy in Madison, said it's important to distinguish between public and private sector unions.

"Unions originally were established to help a group of individuals come to a reasonable agreement with their employer," he said. "In this case, the employer is the government. So the question I keep going back to is, 'Why do we need to protect these individuals from their own government?'"

As the free market is allowed to flourish, businesses and entrepreneurs will take greater risks, Healy said. "That's the system that will build the middle class in Wisconsin, not a taxpayer-funded government job," he said.

State Journal Assistant City Editor Mark Pitsch contributed to this report.

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