Hedrick Smith, from Who Stole the American Dream? (2012)

from Who Stole the American Dream?

Hedrick Smith

Hedrick Smith is a reporter and editor for the New York Times and an Emmy Award–winning producer for Frontline, on PBS. He was awarded the Pulitzer Prize for International Reporting in 1974. Among his books are The Russians (1975) and The Power Game (1996). The following excerpt from Smith’s 2012 book is taken from Chapter 6, “The Stolen Dream: From Middle Class to the New Poor.”

The world of opportunities that greeted Pam Scholl coming out of high school in Chillicothe, Ohio, in 1971 was a universe apart from the tough economic world that lies in wait for average high school graduates today.

On the Monday after graduation, Pam went to work full-time for the RCA television tube plant that was opening in nearby Circleville. Pam was a well-organized, gregarious teenager, a five-foot-five bundle of energy with a quick smile. In her senior year, she had worked half-time for RCA as a co-op secretarial student. After her graduation, RCA hired Pam for human relations to help build a workforce that grew to fifteen hundred.

“I got $1.75 an hour,” Pam recalled. “I didn’t have a car my first year. But about a year later, I bought me a Vega, a new little brown Chevrolet. It was cheap—$2,500. My car payment was $50 a month and I could fill it up for $5, and run two weeks on that. I thought I was hot. I had a new car and I had a job. I was in HR and I met all the guys.”1

One guy she helped was her classmate Mike Hughes. One Sunday afternoon, Pam tipped Mike off to apply for a job the next day. “Mike came in, he took a test and got hired,” she said. “We took just about anybody who was healthy and could lift things.”

Living The American Dream: 1970s–2000

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“The early seventies were a good time around here,” remembered Roy Wunsch, for thirty-five years a chemical engineer at the local DuPont plant and, later, the Republican mayor of Circleville. “Living standards were going up. Everyone was growing or expanding—all the local plants.” High school graduates were in demand.2

Circleville (pop: 12,000) calls itself “the Pumpkin Capital of the World.” It lies at the heart of the Pickaway Plains, the rich farmlands of south-central Ohio honed smooth by prehistoric glaciers. But despite its small-town façade, Circleville was a magnet for brand-name U.S. corporations because it was close to major transportation arteries. RCA, DuPont, General Electric, Pittsburgh Plate Glass, Owens-Illinois, and Container Corporation all had factories there. Purina processed the local crops.

So towns like Circleville rode the escalator of American economic growth from the 1970s into the 2000s, and middle-class people like Pam Scholl and Mike Hughes lived the American Dream. Each bought a home, raised a family, and moved up the ladder at RCA, enjoying steady pay, good benefits, five weeks of paid vacation a year, and a company-financed retirement plan. From secretary, Pam rose to a $47,000-a-year job as stockroom supervisor. Mike got good technical training and promotions. By 2000, he was a senior quality control inspector making $50,000 to $60,000 a year.3

“I liked working there,” Pam Scholl said, speaking for both of them. “It was great. I knew everybody. It was wonderful.”

Wonderful, but it didn’t last.

2004: The Bottom Falls Out

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The bottom fell out in 2004, even though the U.S. economy was then on the upswing. Facing lower-cost competition from China, RCA sold the plant to the French firm Thomson, which cut back production in 2003 and finally shut down the plant in July 2004. Mike Hughes sensed it coming: The plant was not bringing in as much raw material as it had during boom times.

Even so, the shutdown was a body blow. Suddenly cast adrift in his early fifties, Hughes could not find steady work. He tried changing careers. With federal displaced worker assistance, he was able to take a year’s course in industrial maintenance. But even that did not lead to a job. Hughes pumped out scores of job inquiries but kept being told that despite his long technical experience at RCA, he wasn’t qualified for entry-level manual labor.

Eventually, he took a night job as part-time custodian at a local high school for $13,000 a year. A second part-time job at a local glass company earned him another $4,000. Only his wife’s public sector job at Head Start kept Hughes from sinking below the poverty line.

“What made it difficult for us, we had children coming out of high school wanting to get a college education,” Mike explained. “That’s where my thirty-one years of severance pay went. All of it went to college tuition. I had to choose between my kids’ future and our future.”4

Talking about his predicament, Mike Hughes put on a brave front, papering over his hurt and anger. “I’ve got a home. I got a good pension. I somewhat lived the American Dream,” he said. “They just cut me off. They cut off the dream.”

“The Hardest Thing—Not Being Wanted”

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At first, Pam Scholl fared better than Mike. She found a job as office and traffic manager for a small American Wood Fibers plant. The pay was good, $47,000 a year, until—until they downsized her out of a job in May 2009. Then life went black. By then, she was a single mom, carrying the costs of a home all by herself. For the next eighteen months, the only work Pam could find was three months as a census taker in 2010. Otherwise, she ran through her savings and had to live on unemployment benefits and rising credit card debt.

“The hardest thing is not being wanted—not feeling worthy,” she told me. “I didn’t realize how bad I felt about it, until I got the census job. Even though it didn’t pay that well, it was uplifting to have something to do. I felt like I was contributing to society. The hardest thing is everybody looking at my résumé and saying, ‘What a wonderful résumé you have—all this experience.’ But I have no job. I know I have completed over five hundred applications and I have had only four job interviews, all for much less money than I was making.”

Taking tests for public sector jobs, Pam Scholl ran into other people who had been laid off with her at the RCA plant in 2004. Like Pam, they were still hunting for a steady job. “The same 200 people are there,” she noticed. “We are all taking the test for the same job. The very first test I took was for water meter reader for the city of Chillicothe. That was in June 2009. The job paid $14 an hour, and there were 250 people. The bottom line was, there was not even a job. The job was filled internally.”

A year later, still without a job, she said it was a nightmare not knowing what to do or where to turn. “Oh, it’s horrible,” Scholl told me. “I never dreamed that I would be unemployed for a year. Right now, I am about to sink.” She gave an uneasy laugh that betrayed her anxiety and too many sleepless nights. “I barely stay afloat between charge cards and unemployment benefits. I have depleted my savings at this point, just surviving… . This terrifies me to death.”5

The New Poor—Middle-Class Dropouts of Opportunity

Pam Scholl and Mike Hughes represent a new phenomenon in America: the New Poor. They have become what might be called “middle-class dropouts”—middle-class Americans sliding downscale, people slipping backward late in life, which is the exact opposite of the American Dream. In six short years, those two fell from the middle of the American middle class, the middle 20 percent of all income brackets, into the bottom 20 percent or barely above it, and their stories mirror wide trends in American society.

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As a nation, we have just been through the worst decade in seventy years, with fewer jobs at the end of 2011 than ten years earlier and with the income of the typical middle-class family winding up lower than in the late 1990s.6,7 But the story begins far earlier than this past decade. Millions of middle-class Americans like Pam Scholl and Mike Hughes started their economic decline before the Great Recession of 2008.

Their lives reflect “the long arc” of our economic history. They and millions like them are victims of the long-term stagnation of middle-class living standards since the 1970s. The squeeze they feel marks the long, slow erosion of America’s claim as the land of opportunity. Blacks have been harder hit than whites—roughly 45 percent of blacks born into solid middle-class families had lower incomes than their parents by 2007.8

Their experience has been happening all across America, to real estate agents in Florida, to bank tellers in New York, to computer programmers in Colorado, even to people with Ph.D. degrees. The numbers of New Poor are legion, certainly among the nation’s 6 million long-term unemployed. In 2010, the Census Bureau reported, another 2.6 million Americans slipped below the official poverty line, bringing the total to 46.2 million people—the highest number in fifty-two years.9 “We think of America as a place where every generation is doing better,” commented Harvard economist Lawrence Katz, “but we’re looking at a period when the median family is in worse shape than it was in the late 1990s.”10

Baby boomers in their late fifties and early sixties, like Pam Scholl and Mike Hughes, have been especially hard hit. By late 2011, 4.3 million of them, roughly one in six Americans age fifty-five to sixty-four, were unable to find full-time work, and half of them have been looking for more than two years. As a group, joblessness or contingent work has cost them roughly $100 billion a year in lost wages. “This is new… . It is worse than we have experienced before and it is very widespread,” asserts Carl Van Horn, head of the John J. Heldrich Center for Workforce Development at Rutgers University. “It is going to get worse. You are going to have a higher level of poverty among older Americans.”11

The United States: Low Mobility in a New “Caste Society”

There is growing, and disturbing, evidence that America has evolved into a caste society, increasingly stratified in terms of wealth and income, with people at the bottom almost frozen there, generation after generation, and people at the top more and more frequently passing on the self-fulfilling advantages of high status to their children and grandchildren. Increasingly, privilege sustains privilege; poverty begets poverty.

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“Children born to parents in the top [income] quintile have the highest likelihood of attaining the top,” asserts social scientist Julia Isaacs. “And children born to parents in the bottom quintile have the highest likelihood of being in the bottom themselves.”12

Several countries in Scandinavia and continental Europe, which we used to mock as class-bound hierarchies, have now surpassed us as places where people can move up the social and economic ladder. To gauge such things, experts track how near or far the apple falls from the tree or, in economic terms, how closely the incomes of sons match those of fathers and grandfathers. In those terms, evidence shows that countries like Norway, Finland, Denmark, and Canada offer young people the greatest chances of breaking out of the family mold, and even France, Germany, and Sweden offer young people better chances than America for moving up.13

In fact, America is now classified as “a low-mobility country in which about half of parental earnings advantages are passed onto sons,” reports economist Isabel Sawhill.14 Isaacs adds that “starting at the bottom of the earnings ladder is more of a handicap in the United States than in other countries.”15

One major reason that a caste society is emerging in the United States is that education is no longer the great social leveler that it once was. Just the opposite. Recent academic studies have found that the educational attainment gap between affluent and low-income families has grown by 40 percent since the 1960s, even as the educational gap between blacks and whites has narrowed. “We have moved from a society in the 1950s and 1960s in which race was more consequential than family income to one today in which family income appears more determinative of educational success than race,” reports Stanford sociologist Sean Reardon.16 At the college level, one-half of the children from high-income families completed college in 2007 versus only 9 percent of low-income families—again a wider gap than existed in 1989.17

An important driver of these radically different educational outcomes, scholars have determined, is the significant additional time and money that affluent families invest in extracurricular learning and tutoring for their children compared with what low-income families can afford—a spending gap that has been increasing.18 In addition, the quadrupling of average college tuition and room fees from the late 1970s to the early 2000s has put teenage children of average middle-class families at a large financial disadvantage compared with children of wealthy and affluent families in the basic ability to pay for a college education.19

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America can still point to individual rags-to-riches stories of self-made men and women who leapfrog to success. But for all the glitz of sudden stardom on American Idol, for all the hoop stars and gridiron heroes from the inner city, and for every surprise Wall Street billionaire, the unpleasant truth is that a typical child born at the bottom of the heap in America has far less chance of rising into the middle class or above than one born in France, Germany, or Scandinavia. In fact, one study found that it would take five or six generations, 125 to 150 years, for a child from America’s poverty caste to rise to the middle of the middle class.20

“Being born in the elite in the U.S. gives you a constellation of privileges that very few people in the world have ever experienced,” explained David I. Levine, an economist at the University of California at Berkeley. “Being born poor in the U.S. gives you disadvantages unlike anything in Western Europe and Japan and Canada.”21

Three Decades of Getting Nowhere

Even people who have kept their middle-class status have been stuck in a rut. While the U.S. economy had growth cycles in the 1980s, 1990s, and 2000s, the average middle-class family made almost no headway. The rising tide did not lift all boats, or even most boats. That dichotomy, between the nation’s growth and stagnant middle-class incomes, is captured in a few stark statistics:

Notes

1. Pam Scholl, interview, November 7, 2010.

2. Roy Wunsch, interviews, October 27 and November 7, 2010.

3. Mike Hughes, interview, June 23, 2010.

4. Ibid., June 28, 2010.

5. Pam Scholl, interview, June 23, 2010.

6. U.S. Bureau of Labor Statistics, “The Employment Situation, December 2001,” January 7, 2002, http://www.bls.gov; U.S. Bureau of Labor Statistics, “The Employment Situation, September 2011,” October 7, 2011, http://www.bls.gov. BLS figures show 132.2 million nonfarm jobs in 2001 vs. 131.3 million in September 2011.

7. Census Bureau, “Income, Poverty, and Health Insurance Coverage in the United States: 2010”; “Income Slides to 1996 Levels,” The Wall Street Journal, September 4, 2011.

8. Isaacs, “Economic Mobility of Black and White Families,” in Isaacs, Sawhill, and Haskins, Getting Ahead or Losing Ground: Economic Mobility in America (Washington, DC: Brookings Institution, 2008), 71–80.

9. Census Bureau, “Income, Poverty, and Health Insurance Coverage in the United States: 2010.”

10. “Soaring Poverty Casts Spotlight on ‘Lost Decade,’” The New York Times, September 14, 2011.

11. E. S. Browning, “Oldest Baby Boomers Face Jobs Bust,” The Wall Street Journal, December 19, 2011.

12. Isaacs, “Economic Mobility of Families Across Generations,” in Isaacs, Sawhill, and Haskins, Getting Ahead, 19.

13. Isaacs, “International Comparisons of Economic Mobility,” in Isaacs, Sawhill, and Haskins, Getting Ahead, 37–44.

14. Sawhill, “Trends in Intergenerational Mobility,” in Isaacs, Sawhill, and Haskins, Getting Ahead, 9, italics added; Thomas DeLeire and Leonard M. Lopoo, “Family Structure and the Economic Mobility of Children,” Pew Charitable Trusts, April 2010, http://www.economicmobility.org; Jason DeParle, “Harder for Americans to Rise from Economy’s Lower Rungs,” The New York Times, January 5, 2012.

15. Isaacs, “Economic Mobility of Families Across Generations,” in Isaacs, Sawhill, and Haskins, Getting Ahead, 19.

16. Sean F. Reardon, “The Widening Academic Achievement Gap Between the Rich and the Poor: New Evidence and Possible Explanations,” in Whither Opportunity? Rising Inequality, Schools, and Children’s Life Chances (New York: Russell Sage Foundation, 2011); “Poor Dropping Further Behind Rich in School,” The New York Times, February 10, 2012.

17. Martha J. Bailey and Susan M. Dynarski, “Gains and Gaps: Changing Inequality in U.S. College Entry and Completion,” Working Paper 17633, National Bureau of Economic Research, December 2011, http://www.nber.org.

18. Study by Sabino Kornrich, Center for Advanced Studies, Juan March Institute, Madrid, and Frank F. Furstenberg, University of Pennsylvania, cited in “Poor Dropping Further Behind Rich in School,” The New York Times, February 10, 2012.

19. Will Hutton, “Log Cabin to White House? Not Any More,” The Observer, April 28, 2002, http://www.observer.co.uk/comment/story/0,6903,706484,00.html.

20. Bhashkar Mazumder, “Fortunate Sons: New Estimates of Intergenerational Mobility in the United States Using Social Security Earnings Data,” for Federal Reserve Bank of Chicago, July 6, 2004, published in The Review of Economics and Statistics 87, no. 2 (2005): 235–55.

21. Janny Scott and David Leonhardt, “Class in America: Shadowy Lines That Still Divide,” The New York Times, May 15, 2005.

22. Lawrence Mishel, Joshua Bivens, and Heidi Shierholz, The State of Working America, 2012/2013 (Ithaca, NY: Cornell University Press, 2012), figure 4U, “Hourly Compensation for Production/Non-Supervisory Workers and Total Economy Productivity, 1948–2011”; Mishel, emails, March 29 and April 9, 2012.

23. Ibid. The contrast is sharper when comparing productivity growth and hourly wages only in the private sector. Over this period, private sector productivity grew by 92.6 percent while the average hourly wage rose by only 4.2 percent. This difference is dampened when figures cover the overall economy, because that data includes government workers, whose productivity is assumed not to grow while their salaries rise.

24. Census Bureau, “Income, Poverty, and Health Insurance Coverage in the United States: 2010,” September 2011.

25. Phillips, Wealth and Democracy, 112, 163.

26. Aviva Aron-Dine and Isaac Shapiro, “Share of National Income Going to Wages and Salaries at Record Low in 2006,” Center on Budget and Policy Priorities, March 29, 2007, http://www.cbpp.org.

27. Study by Emmanuel Saez, University of California at Berkeley, cited in “It’s the Inequality, Stupid,” Mother Jones, March–April 2011, http://www.motherjones.com.

28. During recession, the share of the top 1 percent fell, but with recovery that share has been moving back up toward previous highs. Emmanuel Saez, “Striking It Richer: The Evolution of Top Incomes in the United States,” Pathways Magazine, Stanford Center for the Study of Poverty and Inequality (Winter 2008), and updated version of same paper to include estimates for 2009 and 2010, March 7, 2012, http://elsa.berkeley.edu/~saez/saez-UStopincomes-2010.pdf. Also see Thomas Piketty and Emmanuel Saez, “Income Inequality in the United States, 1913–1998, updated,” table A-3, “Top Fractiles Income Shares (Including Capital Gains) in the United States,” http://elsa.berkeley.edu/~saez/TabFig2010.

(2012)