America's disappearing middle class

It is already clear that one of the great US election issues of 2008 will be the relative impoverishment of the American middle class, defined in the American rather than the British sense to include well established blue-collar workers with families and mortgages.

Republicans who ignore this problem will find themselves talking only to the winners, the top 1% in the income scale - laughablyinadequate as an electoral base. Democrats who propound the usual socialist nostrums to cure it will find themselves ardent proponents of an economics that doesn’t work. A new intellectual paradigm is required.

The declining share of low and moderate income workers in the American pie is undeniable; the relative share of such workers peaked as long ago as 1973. For those with only high school qualifications or less, their absolute earnings peaked in 1973 and have declined substantially since then. From 1973 to 1995, this appeared to be simply a case of the rewards for skills increasing, with low skilled workers suffering increasingly in terms of earnings and job losses compared to those with a bachelor’s degree or better. Since 2000, however, the paradigm has changed, with all sectors of the workforce losing ground in absolute terms, except for the top 1% who have gained essentially all of the modest gains in employee incomes under the George W Bush administration.

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