President Barack Obama’s State of the Union speech this week confirmed it: The pre-eminent political and economic challenge in the industrialized democracies is how to make capitalism work for the middle class.
There is nothing mysterious about that. The most important fact about the United States in this century is that middle-class incomes are stagnating. The financial crisis has revealed an equally stark structural problem in much of Europe.
Even in a relatively prosperous age — for all of today’s woes, we have left behind the dark, satanic mills and workhouses of the 19th century — this decline of the middle class is more than an economic issue. It is also a political one. The main point of democracy is to deliver positive results for the majority.
All of which is why understanding what is happening to the middle class is urgently important. There is no better place to start than by talking to David Autor, an economics professor at the Massachusetts Institute of Technology. Autor is one of the leading students of the most striking trend bedeviling the middle class: the polarization of the job market. That is a nice way of saying the economy is being cleaved into high-paying jobs at the top and low-paying jobs at the bottom, while the middle-skill and middle-wage jobs that used to form society’s backbone are being hollowed out.
But when I asked him this week what had gone wrong for the U.S. middle class, he gave a different answer: “The main problem is we’ve just had a decade of incredibly anemic employment growth. All of a sudden, around 2000 and 2001, things just slowed down.”