The Vanishing Middle Class: Prejudice and Power in a Dual Economy

by Peter Temin

When workers were wage earners, there was a social component to their work. Workers saw themselves as a group, and being a member of a stable group fostered morale. Most successful firms gain from the identification of workers with the firm and the extra care and effort that produces. When workers are hired instead by a competitive service company, they have no identification with the parent firm. They have low morale and will not exert extra effort for the parent company’s benefit.

American political and military intervention in Central America stimulated immigration to the United States, since this country has not hesitated to depose Central American leaders who were unfriendly to American businesses. The resulting turmoil diminished national economies in Central America, and emigration northward was an appealing alternative to limited options at home.

There were better jobs available in the United States, and conditions at home often were dangerous and even deadly.9

As technology decreased the demand for labor within factories and finance reduced direct employment by other large firms, foreign competition reduced the number of factories. The massive inflow of Japanese and then Chinese products reduced the demand for American manufactures at the same time that computers changed the nature of factory work. Japanese cars in the 1980s and an abundance...

As a result of improving technology, changing business organizations, imports, immigration, and threats of offshore investments, American wages today are kept down

The growth of Japan and China accelerated the decline of American manufacturing and the demand for unskilled labor in and around factories.

The Great Migration, which as noted earlier ended in 1970, did not lead to integrated housing in the North. As soon as Southern black workers appeared in Northern cities, white families began to move out of the cities.

White flight was responsible for one-half of the increase in segregation in the 1930s.

Prosperous white urban residents continued to leave cities for the suburbs after the Second World War, avo...

Black Americans are a minority of the population and of the low-wage sector, but the desire to preserve the inferior status of blacks has motivated policies against all members of the low-wage sector.

President Reagan reversed fifty years of American domestic policy as he cut back federal grants to local and state governments that the federal government used to help poor people.

The Reagan and Bush administrations reduced city funding, causing federal funding to drop sharply in the 1980s. Nixon’s New Federalism converted federal programs into block grants to states in order to give states more choice in how to spend the money. Reagan then revealed the underlying aim of the New Federalism by reducing and eliminating block grants.

All of these changes in employment, public financing, and private reorganization of labor produced frustration among unemployed and troubled people that came out in the use of cocaine. Federal penalties are heavier for crack cocaine (favored by low-wage African Americans) than for powder cocaine (favored by the FTE sector), and many black users of cocaine received heavy sentences as a result.

The prison population in the United States mushroomed from less than half a million to over two million inmates today, with drug convictions accounting for over half of the increase.

Federal funding that formerly supported jobs in large cities now finances prisons in rural communities. There are now seven million people under the supervision of adult correctional systems, counting those in jail, on parole, or waiting for a court appearance. And although blacks are less than 15 percent of the population, they are 40 percent of the prison population.

If incarceration rates stay the same, one in three black males will go to prison during his lifetime.

Those released from jail are denied access to social programs in most states, preventing many male former prisoners

from advancing in their lives to become good role models.

recidivism

The War on Drugs has been directed primarily toward urban black males, and it has made it harder for them to advance from the low-wage sector.

After they get out of jail, their past convictions preclude their participation in any of the government programs that help poor people get jobs, training, and food assistance.

The assertion that mass incarceration is for social control more than crime control is supported by the continuing rise in incarceration rates over the 1990s while the crime rate fell.

“There is little evidence to believe that the higher [incarceration] rates have caused the reduction in crime in the last two decades.”

This repression falls most heavily on blacks, but it affects whites and Latinos in the low-wage sector as well. After all, the majority of prison inmates are white. But while poor whites are numerous, they are less visible than blacks in public discussions of programs to help the poor.

Reagan’s famous invocation of “Welfare Queens” in his campaign to restrict government funding for the poor was a clear racial reference.

The War on Drugs appears to be a law-and-order program, but its administration focuses on black men. And the resulting conditions of black men are used as examples to discourage other government funding. Even though people generally avoid racial language today, the persistence of race prejudice can be seen in the birther movement that attac...

For the white community, the sense of being forgotten has resulted in self-destructive behavior that increased mortality from alcohol and drugs enough to cause the mortality of poorly educated white men to rise while the mortality of other demographic groups in America was falling.

“The public desire to deter and punish welfare cheating has overwhelmed the will to provide economic security to members of society. While welfare use has always borne the stigma of poverty, it now also bears the stigma of criminality.”

Drug felons are not only barred from voting in many states, but also from the welfare system—marginalizing them more fully from society.

Welfare payments have eroded so that they no longer provide enough funds to live on. Most welfare recipients consequently have to rely on other sources of income to make ends meet.

They are under great pressure to confess to a crime to avoid jail while waiting months and sometimes many months for trials—although this decision often makes them more vulnerable in the future.

In one such Vermont town, when the police found drugs, they only indicted whites 12 percent of the time, but they indicted blacks 87 percent of the time, seven times as often.

Black urban college graduates are not likely to know many people with jobs in the FTE sector or have many school mates who are moving into it. Their chances of finding good jobs are correspondingly lower than for comparable whites, and they have to find jobs in education, social work, or government.

Most white people are unaware of this difference in social capital. They describe their own careers as the results of their own efforts, not recognizing the contributions of families, friends, and even the government. They therefore find it difficult to realize that a poor student in a poor urban neighborhood with poor schools and poor neighbors does not have the same social capital they do.

Fish do not know they are living in water, and members of the FTE sector are not aware of the social capital that surrounds and sustains them.

Public universities have been subject to the same starvation diet for funding as other state spending that benefits members of the low-wage sector.

Declining state support for higher education leads directly to higher tuition charges to students.

Inflation-adjusted tuition and fee charges rose by 250 percent at flagship state universities from 1980 to 2012, by 230 percent for all state university state universities and colleges, and by 165 percent for community colleges.

Tuition increases are a major source of the student-loan crisis that holds back so many young people today.

The combination of students who do not complete college and private colleges that do not deliver degrees that help their graduates gain employment in the FTE sector has left many poor students still in the low-wage sector but now burdened with student debts.

The New Federalism of Nixon and Reagan reduced federal aid to the states, which in turn reduced public support for state universities.

The FTE policies of deregulation and privatization allowed student loans to grow rapidly without government oversight or regulation, leading to widespread abuses of borrowers by the business firms that administer these loans.

The FTE sector enlarged the effect of student loans by making them hard to reduce even in bankruptcy.

This was not inevitable. Other countries do not have this debt problem.

In America, racism has become racecraft, analogous to witchcraft. We no longer believe that witches ride on brooms, but we continue to believe that races have powers that we should fear.

The statement in the Declaration of Independence that “all men are created equal” meant that all white men were created equal. Black slaves were not included. And when slavery was abolished after the Civil War, the presumption that blacks were abominable and lacking in personality endured.

The continuation of discrimination against African Americans has been described as white rage by some historians.

Social Security did not extend to blacks for the first quarter-century of its existence.

African Americans responded to the pressure on them in Southern states by moving north and west in the Great Migration. As described in chapter 2, black workers moved out of the oppressive South to better their lives and employment opportunities. But this move was not always successful, and blacks lost ground relative to whites after the Second World War.

The national unemployment rate for blacks and whites was the same in 1930; the black rate was double that of whites in 1965.