The Decline of the Middle Class

Is the Middle Class worse off?

As we celebrate Labor Day, there are many op-ed pieces being written about the decline of the American middle class, particularly the “blue collar” jobs that enabled tens of millions of Americans, including workers like my Dad, to earn middle class incomes between the end of World War II and the 1970’s.  My Dad was a printer at the Gannett Company in Rochester, New York, who was a high school dropout in the 1930’s, served in the Army-Air Force during World War II and became a printer’s apprentice in 1946.  He retired in early 1977 at age 58, lived comfortably another 24 years, and died seven years after my Mom, with an estate worth $600,000.

It would be very difficult, if not impossible, for someone else to follow his path today.  As a high school dropout, he would never qualify for an apprenticeship program unless he secured a GED equivalency diploma, which my Dad never needed to do.  There are considerably fewer printer jobs, because, in part, of automated printing and the rapidly declining daily newspaper population.  My Dad kept upgrading his skills throughout his working life, but his employer gave him the funding to take night courses, a less prevalent benefit today among large employers.

Many thoughtful Americans have commented that a significant drop in the Middle Class population is a bad outcome for a representative democracy.  In their views, the hollowing out of the Middle Class reduces the legitimacy of democratic governments, creates the conditions for demagogues to promise unrealistic “solutions” to economic disparity and to drive coercive and corrupt redistribution of wealth.

However, even if we agree with these concerns, which I largely do, it is far easier to catalog middle class decline than to develop workable solutions.  Best-selling business author and founder of Squidoo Seth Godin, in commenting on the decline of middle class jobs, has said that we are reaching the end of an era in which “good people could make above average pay for average work.”  Why?

Various kinds of technological advances have made traditional “blue collar” jobs for people who have not been educated beyond high school obsolete or reduced their numbers.  Technology is replacing people in industries like construction, auto repair and equipment repairs. Consumer electronics products are simply replaced rather than repaired.  Moreover, even when a repair is required, there is more self-diagnosis and repair. We may even see a virtual elimination of the millions of drivers of trucks, trains, buses, limousines, and taxis, when driverless vehicles become more widely used over the next two decades.

State governments have created more certifications, licenses, and other barriers to the jobs that will remain.  One of my uncles, who learned to cut hair in the Army, opened a barbershop and operated it for 30 years.  Today, if he resided in Connecticut, he would have to secure a cosmetologist license and take courses, which would take a year and cost $20,000. Because of professionally protective laws and regulations, the percentage of jobs requiring a license or certification has increased from 5% in 1968 to 33% in 2008.  This is a major and, in my opinion, unnecessary set of entry barriers.

What happens after people drop down from the Middle Class by losing a secure “blue collar” job?  I saw two distinct paths from my experience as Pitney Bowes’ CEO.  We shut down our Stamford, Connecticut, postage meter manufacturing facilities because of the Postal Service mandated a transition to digital ink jet printing technology we did not own and could not license.  We also eliminated many other “middle class” jobs in IT, finance, HR, customer service, and administration.

So what happened to the people we laid off?  I had two very different experiences in Stamford, Connecticut, within a one-week period two years after one of our larger manufacturing reductions in force. One laid-off employee approached me at a store with a smile and told me that he had used his generous severance package and his outplacement resources to explore a different life path.  He decided to start a landscaping and gardening business with his brother. He was happier and receiving more income than at any time in his life, including any time during his 30-year career as a Pitney Bowes product assembler, and thanked me for helping him on this path.

A few days later, on a Saturday, my younger son was competing at a local scholastic chess tournament.  An angry man, dressed in a maintenance worker uniform, approached me.  He told me, in front of my son, that I had ruined his life, and that the only jobs he could get were demeaning minimum wage jobs like the weekend janitorial work he was doing at that school.  He told me that it was my fault that he had not found a middle class job. Thinking back on the “hollowing out” process, I did a great deal of soul searching about what we could have done differently.

In some cases, other opportunities were available, but many displaced employees were unable to take advantage of them.  For example, we migrated from highly engineered mechanical products to software-intensive products.  However, the systems engineer positions to which displaced IT people could have transitioned would have required them to relocate to other regions of the country, something they could not, or would not, do.

Many displaced people did not have the skills, educational experiences or work habits to adapt to completely different jobs.  This was the greatest tragedy, and the issue that American leaders need to confront.  We implicitly and, sometimes, explicitly communicate to people that, if they work hard, reach a level of task mastery, and have great social skills, they will be “safe.”

A “safe” career position can never be an achievable goal.  Maximal “employability” is achievable, not “safe” employment.  The organizations for which most of us have worked, or currently work, are experiencing disruptive change, which will only get more disruptive.

Elected officials who migrate toward enacting “living wage” laws or higher “minimum wage” laws will achieve the perverse result of accelerating the disruptive change against which they are trying to protect people. Higher per-employee costs will simply make more technologically based investments that replace more expensive employees more economically viable.

Ultimately, those who lose their jobs have to find or create new opportunities, but “living wage” and “minimum wage” laws will shrink their opportunities.  Unionizing the population will only delay the inevitable, and, for most people, will simply cause them to get a more generous severance package at an age in which they will still need to work, but will be too old to start over in a new, long term career.

What was the difference between the two laid off men, since both had comparable Pitney Bowes experience and seniority when they lost their jobs?

Not everyone can have a happy ending to a loss job event by falling back on their own resources or the resources the employer makes available to them, but there are no panaceas among externally imposed solutions.  We are most likely to help those who suffer from job losses by getting them to focus on what career matches best with what they know how to do and are passionate about doing.  Freezing them in place simply means that they will become unemployed when they are older, less employable, and more economically vulnerable.

The Pitney Bowes factory workforce was fortunate to be confronted with this problem when the Company had ample retraining and severance resources.  Today, that kind of capital does not exist in many organizations. The world in which we live has finite limits on what we can do to help people transition to the new world.

The sooner we can communicate that and prepare people for it, the better off we will be.