How the Other 80% Live

Class war is in the air! Well, not if Obama can help it. Apparently taxes and social policy are about ‘math.’ Nice one, Mr. President. Way to shed your image as an educated liberal, trying rise above the uneducated riff-raff – imply that your opponents don’t know how to do math. But of course, despite the new populist tone to Obama’s proposals, conflict and confrontation just don’t come naturally to this politician. The President’s willingness to invoke class differences might reach a temperature just shy of tepid before he overheats. For any serious discussion of class, it’s best to hit mute on the noise machine and think for ourselves.

At the broadest level, we can represent class in a single graphic. We’ve posted it before, and it’s based on pre-crisis numbers, but that only underestimates the divide:

The reason we like this graphic is that it captures a central feature of class: who has to work to live, and who does not. There are many ways of calculating out or measuring that dividing line, and there will always be people on the margin. But this graph gets at the important distinction. The wealth of the lower 80%, is pretty much all tied up in homes and pension plans, which have to be lived in or saved. Therefore, their wealth is not liquid, or at best, could last only a few months. They have no other reasonable option besides getting a job. The upper 20% not only possesses 85% of the wealth, but also takes in 61% of the income – income easily converted into more wealth (i.e. saved). No doubt those at the lower end of the top 20% could not consume their savings for all that long, at least not at their current rates of consumption, but they could if they lowered their consumption. And the rest could live on their savings – they have a reasonable alternative to working. So as a very rough cut, the 80/20 divide is one take on class. And, as the next graph from Mother Jones shows, it just so happens that the top 20% are the ones who have seen their fortunes improve relative to the rest (see esp. chart on right):

While there is plenty of commentary on the difference between the upper 20% and the upper 1%, and the difference between the upper 1% and the upper 0.1%, and so on, there is less of the bottom 80%. In fact, we led with the bottom 80% to emphasize a point we made last week: while mainstream debates about jobs and stimulus have focused on the unemployed, there are common challenges faced by that ‘bottom’ 80%, even if they are never, or rarely, seen for what they are, a working class.

Of course, there are reasons why it is hard to see that 80% as sharing common interests. They are economically divided, politically fragmented, socially dispersed – and thus easily pitted against each other. Consider the following:

The unemployed

It is reasonable to start with the unemployed, especially the increase in the unemployed. First, it is evident that lion’s share of this rise in unemployment is neither just structural, nor a product of over-generous unemployment benefits. As this BLS graph shows, the ratio of job seekers to job openings, though down from the crisis peak of 7:1, is still at 4:1:

Moreover, as Delong noted a while back, the civilian employment to population ratio has decreased by about 5% since the crisis.

The civilian-to-employment ratio measures the employed civilians relative to overall population. It is a ratio that can help indicate how many people dropped out of the job market altogether. If you add the 4:1 ratio of just those looking for work, and add in the difficult to measure, but clearly increased level, of those who have simply given up, you have severe unemployment. A severity undermeasured by an unemployment rate of 9%.

So what we have, first, is that the unemployed are in their condition not because they are lazy, or spending government hand-outs while they wait for something better, but because there are way too few jobs relative to job seekers. Moreover, second, the official stats very likely undercount the unemployed dramatically. Depending on the calculations one uses to include those who have given up, underemployment is around 12-15% (calculations by Allegretto put it as high as 16.5%). So far, then, something like the bottom 15% of workers are…not even working.

The employed, but poorly paid

Mass unemployment is not just bad for the unemployed. For fear of losing their job, coupled with the already weak bargaining power of labor in the United States, workers accept pay and benefits cuts, or simply don’t make new demands even as prices rise. Anyone who reads the news has seen some version of the statistics. This summer’s Hamilton Project report provided the most direct picture:

The Census Bureau’s recently released Income, Poverty, and Health Insurance Coverage report similarly showed a 6.4% decline in median household income since the recession began in 2007. The median income is now $49,445 (pre-tax), barely double the extremely stingy official American poverty threshold for a family of four of $22,314 (post-tax).

We have not yet found a single, clear graph on the overall decline in benefits. But reports over the past months have documented significant declines in retirement benefits, health coverage, family and medical leave and other benefits, for average workers.

The point of all this math is just to point out that it’s…more than just math. The fates of the employed and the unemployed are linked by their dependence on the labor market, and at the moment, by the weakness of their bargaining power. There is a serious discussion to be had about class, even if the so-called political class doesn’t want to have it.