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The squeezed middle

The squeezed middle: The pressure on ordinary workers in America and Britain

Edited by Sophia Parker
Gavin Kelly
Jared Bernstein
Copyright Date: 2013
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  • Book Info
    The squeezed middle
    Book Description:

    As wages stagnate but living costs keep rising, the pressure on working people grows more intense. The issue of living standards has become one of the most urgent challenges for politicians in both Britain and America. 'The squeezed middle' brings together experts from both sides of the Atlantic to ask what the UK can learn from the US. American workers have not benefited from growth for an entire generation - the average American worker earned no more in 2009 than in 1975. Now British workers are undergoing a similar experience. No longer can they assume that when the economy grows their wages will grow with it. This collection brings together for the first time leading economic and policy thinkers to analyse the impact of different policies on those on low-to middle incomes and to explain what lessons the UK can learn from America's 'lost generation'. This timely book is essential reading for everyone concerned about the living standards crisis, an issue which could decide elections as well as shaping the future for millions of working families.

    eISBN: 978-1-4473-0895-9
    Subjects: Political Science

Table of Contents

  1. Front Matter
    (pp. i-ii)
  2. Table of Contents
    (pp. iii-iv)
  3. List of tables and figures
    (pp. v-vi)
  4. Notes on contributors
    (pp. vii-viii)
  5. Foreword
    (pp. ix-x)
    Gavin Kelly and Jared Bernstein

    Restoring the link between growth and the living standards of middle-and lower-income families was rightly a focal point of both this and the last US presidential campaign. Now, as the President is sworn into office, the task of seeing through the promise of creating economic security for middle-class America, and reconnecting growth to the fortunes of ordinary working families, must remain at the top of his agenda. Given its centrality to the political economy of both the US and the UK, this issue must define much of politics and policy for the next four years and beyond.

    The backdrop is...

  6. A note on terminology
    (pp. xi-xii)
  7. Introduction
    (pp. 1-14)
    Sophia Parker

    The American Dream – that if you work hard, you get ahead – is faltering. Over the last generation, the US has experienced the loss of mass upward mobility: it is no longer the case that each generation can expect to do better than the last. A growing gap between productivity and pay, a sharp rise in economic inequality, and limited social mobility have combined to create a squeeze on middle-class living standards whose origins stretch back to well before the most recent recession. This economic malaise is not unique to the US, but it is notably pronounced there.

    Historically, the UK...

  8. Section 1: Setting the scene:: a rising tide no longer lifts all boats

    • 1.1 A lost decade, not a burst bubble: the declining living standards of middle-class households in the US and Britain
      (pp. 17-30)
      Larry Mishel and Heidi Shierholz

      Before the bursting of the housing bubble and the catastrophic unemployment and underemployment that followed, the fact that the wages and incomes of most American workers were not keeping up with economy-wide productivity growth was one of the most glaring failures of the American economic model. This decoupling of pay and productivity has been the source of much debate in the US. But it is not a uniquely American phenomenon. From Canada to Australia, and, more recently, Germany and the UK, there is now evidence that similar patterns are beginning to emerge in other developed economies around the world.


    • 1.2 Rising incomes and modest inequality: the high-employment route
      (pp. 31-44)
      Lane Kenworthy

      During the period between the Second World War and the mid-1970s, the US enjoyed rapid economic growth, rising incomes for households across the distribution and a decline in income inequality. Since then, growth has continued, albeit at a slower pace. But, as Larry Mishel and Heidi Shierholz document in Chapter 1.1, the incomes of households at the middle and bottom have risen much less rapidly, both in an absolute sense and relative to the incomes of those at the top.

      This presents a challenge to social democrats. If growth no longer secures rising living standards for low-and middle-income households, is...

  9. Section 2: Policy lessons:: creating quality work, raising incomes and building greater economic security

    • Creating quality work

      • 2.1 Improving job quality in low-paid jobs: care workers in the US
        (pp. 49-60)
        Eileen Appelbaum and Carrie Leana

        Around the seminar rooms of London and Washington, there is much talk about the need for an industrial strategy to support sectors of the economy with the most potential for employment growth. Often, the focus of these discussions is infrastructure investment and green jobs. Below the surface, however, is a nagging concern on the part of policymakers about the sharp decline in the employment-to-population ratio of men in their prime working years. Although this development preceded the recent recession, it was greatly exacerbated by it.

        In part, the decline can be explained by the dominance of women in the US...

      • 2.2 Employment change and economic vulnerability in the US
        (pp. 61-72)
        Françoise Carré and James Heintz

        Since the 1980s, non-standard forms of employment have grown in the US, although detailed data documenting this trend have not always been consistently available. Drawing on earlier work,¹ we show here how non-standard employment produces economic vulnerability in a variety of ways: low and irregular earnings, underemployment and frequent unemployment or unstable labour market participation. Non-standard arrangements particularly affect women workers as a whole. They also disproportionately touch racial/ethnic minorities, primarily African-American workers and Hispanics. Non-citizens, that is, mostly recent immigrants, are also disproportionately affected by non-standard work. All of these groups may thus be exposed to economic risk through...

    • Raising incomes

      • 2.3 New evidence and new directions for promoting labour market advancement for low and modest earners
        (pp. 75-86)
        James A. Riccio

        A decade ago, concern was growing in the UK and the US about the struggles of low earners to remain steadily employed and move up in the labour market. Evidence on welfare-to-work programmes had shown that many participants who exited such programmes, even successful ones, did not work consistently, and many participants who got jobs earned very low wages, typically joining the ranks of the working poor. In the US, the advent of time-limited welfare made families with only a weak foothold in the labour market especially vulnerable. Yet mainstream employment programmes were not well positioned to address this problem....

    • The squeezed middle

      • 2.4 Boosting the pay packets of low- to middle-income families
        (pp. 87-102)
        Daniel P. Gitterman

        Over the last decade, the UK’s tax credit regime has delivered over £175.4 billion into the purses and wallets of low-earning households. The credits have helped to ‘make work pay’ for many, and they have supported thousands of people – particularly single mothers – out of poverty and into employment. But the British tax credit regime is not without its critics. There are crucial gaps between policy intent and implementation, which have led to ongoing problems with over-and underpayments. Also, the interactions between the tax credit system and in-work and out-of-work benefits are complex and confusing, leading to some very high marginal...

    • Strengthening economic security

      • 2.5 Strategies to expand the affordable private rental stock
        (pp. 105-116)
        Keith Wardrip

        Like the UK, the US is a nation of homeowners. Although millions have lost their homes to foreclosure in recent years, 81% of Americans still believe that buying a home is the best long-term investment one can make, down only very slightly compared to 1991.² Home ownership is supported by a policy environment that has encouraged it via a range of fiscal initiatives, and a mortgage market that – until recently – made it easy for most qualified households to obtain a loan.

        But for many in today’s economy, home ownership is out of reach. While the vast majority of the US’s...

      • 2.6 Insulating middle-income households from economic insecurity: why savings matter, and how we can increase them
        (pp. 117-128)
        Joanna Smith-Ramani and Preeti Mehta

        There is a great deal of debate among economists about what impact the recession might have on household behaviour when it comes to saving, debts and spending. The optimists believe that households will continue to borrow to maintain their living standards in the face of rising prices and stagnant wages, fuelling a return to growth. Others are not so sure: they believe that households may start to rein in spending, reduce debt and begin to save more in the face of an uncertain economic future. Certainly, savings rates have increased since the downturn on both sides of the Atlantic. There...

  10. Section 3: Looking ahead:: a cautionary tale

    • 3.1 The path to post-recession prosperity
      (pp. 131-142)
      Tamara Draut

      With the UK economy experiencing a double-dip recession, more questions are now being asked about the merits of the Chancellor’s view that there is no alternative to the current austerity plan. The package of spending cuts and tax rises introduced to tackle the deficit over the last two years represent the tightest five-year squeeze on public service spending since the Second World War.¹ UK public spending is projected to be lower than the US’s as a percentage of gross domestic product (GDP) by 2015.² The UK government’s austerity measures aim, by 2015/16, to eliminate the deficit altogether, and to ensure...

    • 3.2 How US politics is undermining the American Dream, and what it means for the UK
      (pp. 143-154)
      Jacob S. Hacker

      What does it mean to be middle class? Economic experts talk about levels of income: between two and four times the poverty level, for example, or the middle three quintiles of the income distribution.

      When you ask Americans, though, you get a very different answer. First, most Americans believe theyaremiddle class; only a small share say they are poor or rich. Second, what defines the middle class for them – according to decades of polling, focus groups and public discourse – is much broader than income: a job with reasonable pay and benefits; the ability to raise a family without...

    • Conclusion: learning the lessons
      (pp. 155-164)
      Vidhya Alakeson

      The UK has been navigating unchartered waters in recent years. The fall in living standards experienced by families on low to middle incomes has been unparalleled in the post-war era. According to the Institute for Fiscal Studies, families on median incomes have experienced an unprecedented collapse in living standards.¹ The coming years do not present much change in fortunes. Forecasts suggest that, even if robust growth returns after 2017, incomes for the low- to middle-income group in the UK will be no higher in 2020 than they were in 2007.² With growth assumptions having to be revised downwards on a...

  11. Index
    (pp. 165-169)
  12. Back Matter
    (pp. 170-170)