Over the past decade, the economy has brought little good news for the middle-class.
The median income of a four-person Pennsylvania family has declined by more than $6,000 since 2000. In many ways, it was a lost decade for working families.
To be clear, the Pennsylvania economy has grown since the start of the millennium, despite two recessions. It’s just that working people are not seeing the fruits of increased productivity. Instead, the benefits are going disproportionately to the top 1% of earners.
The top 1% captured more than half of all income growth in the state between late 2001 and the end of 2007. The Great Recession set them back briefly, but by the first full year of the economic recovery, the wealthy few were on the rise again: in 2010 (the latest data available), the 1% captured a stunning three out of every four dollars of income growth in Pennsylvania.
There are a number of reasons for this lost decade, and they all can be traced to poor policy choices that have been made recently and over the past 30 years.
A lack of jobs is our number one short-term problem. Yet policy choices at the state and federal level have put the brakes on our economy when we should be pressing the accelerator. Cuts in education, infrastructure and other public investments have strangled consumer demand in local communities, increasing Pennsylvania’s jobs shortage by 74,000 jobs in the last 12 months.
Austerity at the state level is a key reason Pennsylvania’s unemployment rate rose over the summer, dropping the state toward the bottom of state job rankings, and eroding the “Pennsylvania Advantage” that had kept our unemployment consistently below the national rate.
Pick virtually any policy area — wage, trade, and tax laws, industry regulation and deregulation, laws governing unions — and you find that policies over three decades have benefited the wealthy few at the expense of middle- and low-income families.
So where do we go from here? Does another lost decade await us?
It does without a change in policy. Economic forecasters project that unemployment will remain too high for most of the decade, with middle-class incomes likely lower in 2018 than at the end of the long 1990s economic expansion.
But past is not prologue when it comes to economic policy going forward. We do not have to stay on a path that is not working for middle-class families.
In some ways, the present moment reminds me of 1936, when the national economy was starting to recover from the Great Depression but still had a long ways to go. The national unemployment rate was twice today’s level, and there was some question about the policy choices that would guide the nation’s next steps. Even under President Roosevelt in 1937, the nation implemented austerity economics that drove 1939 unemployment close to 20%.
Thankfully, after 1937, the country embraced policies that lifted living standards for America’s working families, consolidating the world’s most powerful economy and creating the greatest economic opportunities the world had ever seen. For example, the nation’s first minimum wage was established in 1938 and increased at the rate of inflation plus productivity growth for 30 years.
In the end, the question is “what kind of Pennsylvania do we want?” Do we want a Pennsylvania in which the America Dream of widespread mobility is alive and well? An economy in which people who work hard and play by the rules receive a share of an expanding economic pie? A democracy that is responsive to the broad middle class and to what serves all Pennsylvanians?
We think most Pennsylvanians do believe in opportunity, robust democracy, and economic fairness. To honor these widely shared values, we need a new economic policy direction.
We encourage Pennsylvania’s middle class to demand that their elected leaders commit themselves to broadly shared prosperity. Because, in the end, whether we get the kind of Pennsylvania we all want is a matter of policy choice — and political will.