Wall Street’s long occupation of the middle class

October 13, 2011
Last Friday morning, a 24-year-old New Jersey woman told me why she joined Occupy Wall Street. Around her, balding activists in their 50s tried to rekindle 1960s-era protests. Young Marxists flew red Che Guevara flags. The young woman, though, was different. 

She commuted to the protests, she said, while holding down two part-time jobs. She lived at home and helped her schoolteacher mother, who also worked two jobs, support her jobless, 60-year-old father. She asked to be identified only by her middle name – Susan – because she feared her bosses would fire her for attending protests. She didn’t talk of revolution. She talked of correction.

“Like any great nation and country, there are also hitches in the plan,” she told me. “And things that need to be changed.”

Corporate America has gained the upper hand on the American middle class, she told me. A year after graduating from college, she was working as a part-time manager at two different retail chains in New Jersey. The companies use part-time managers, she said, so they don’t have to pay benefits.

“It’s their policy,” she said, “which is why I’m here.”

Beneath the online vitriol swirling between supporters and opponents of Occupy Wall Street  lies a central question: Does Wall Street help or hurt the American middle class?  A variety of forces are slowly gutting the middle class – and a paucity of values on Wall Street is one of them.

The problem is not every bank. It is a growing slice of the financial sector that has become a vast, computerized casino where staggering fortunes can be won or lost in minutes, with taxpayers left holding the bag.

Members of the middle class, of course, played as well. They bought houses they could not afford, dallied in day-trading and saved too little during an era of limitless credit.

“Finance had become the new American state religion,” University of Michigan Prof. Gerald Davis writes in his book “Managed by the Markets: How Finance Reshaped America.” “All the world was a stock market, and we were all merely day traders, buying and selling various species of “capital” and hoping for the big score.”

The middle class, though, is still waiting for its bailout.

As recently as twenty years ago, middle America saw the country’s financial system as its ally. For decades after World War II, a carefully regulated Wall Street – and the American financial industry as a whole – helped create a growing middle class, according to Yale University political scientist Jacob Hacker. A stable financial industry was a vital part of a vast economic boom, reliably providing home, car and college loans to average Americans, as well as capital to the companies that employed them. Not every banker was malevolent; nor was every corporation evil.

The transformation of Wall Street and America over the last thirty has been meticulously documented. The traditional, Jimmy Stewart notion of American banks and business, where companies built products, reputations and payrolls over time, has been eclipsed by a byzantine, non-transparent and insider-dominated financial industry.

The middle class – for me the 60 percent of American household that make $30,000 to $80,000 a year – have seen their median household incomes shrink in real dollars since the Great Recession ended, while Wall Street salaries have surged. A new study by the New York State Comptroller cited by The New York Times found that the average 2010 financial industry salary was $361,330 — five and a half times the $66,120 average salary of other New York City private sector workers. Thirty years ago, financial salaries were only twice as high as those of other professionals.

Suspicion of Wall Street is not limited to the dozens of large cities where small protests have emerged. When I visited Bowling Green, Kentucky last week to gauge how the American middle class was faring in one small city, local businessmen lamented the role of the financial industry in the demise of several local companies. Executives used easy credit to rapidly expand firms, companies over-extended over time and eventually collapsed.

The anger in Bowling Green and Lower Manhattan is about  excess: excessive risk, excessive ambition, excessive compensation. Companies should make profits, average Americans told me. Skilled executives should be rewarded. And businesses should be viewed as irreplaceable engines of economic growth.

Wall Street, though, should not be an all powerful force that pressures companies to live-and-die by their daily stock value. It should not assign inflated values to fledgling companies. And it should encourage, not deter, companies from developing, innovating and employing over the long-term. Most of all, the financial industry should be held accountable for its performance, like everyone else.

That core moral element – the sense that Wall Street is making money for nothing – is the financial industry’s gravest threat. Recent surveys conducted by Edelman public relations found that Americans’ trust in banks plummeted from 71 percent in 2008 to 25 percent in 2011, a dizzying decline of 46 percent. As this chart from the study shows, the public’s trust in the technology industry, meanwhile, remained high.

The response to Wall Street in Washington has been ideological, petulant and tedious. The left has declared all Wall Street suspect. The right has declared the government – and nothing but the government – evil. The Volcker rule announced this week is an imperfect, but positive step forward. As much as possible, average Americans should be shielded from high-risk trading.

In another era, middle class Americans might be less incensed by the vagaries of Wall Street. The shift of retirement savings, though, from pensions to 401(k) stock plans has hurled middle America into the markets. During the 1929 stock market crash, only 2.5% of Americans owned stocks. Today, when 401(k)s and other financial products are included, the number stands at roughly 50%.

As a result, an increasingly volatile American financial industry is helping and hurting average Americans to an unprecedented extent. The middle class is more entangled in Wall Street than ever before in U.S. history. And the American middle class is losing.

Photo: Men dressed in suits walk past members of the Occupy Wall Street movement as sleeping materials hang on a clothes line in Zuccotti Park near the financial district of New York October 13, 2011. Protesters with the Occupy Wall Street movement threatened on Thursday to block efforts to clean up the Lower Manhattan park where they set up camp nearly a month ago, raising concerns of a showdown with authorities.  REUTERS/Lucas Jackson


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A business suit announces that the wearer is a person who never does anything all day that may get it soiled or even stained with perspiration.

It is an easy attitude to adopt for the wearer of the business suit to see himself as the predator and to regard all those wearing more utilitarian cloths as the prey.

The cloths make the man.

Posted by paintcan | Report as abusive

I have read articles and watched the ongoing events surrounding OWS and have a few comments to make. Erin Burnett did remind OWS that the banks had repaid the bail out money, so why are they protesting? Well, Miss Burnett, the banks have not repaid the economy that they broke, they have not repaid the people that lost their jobs etc. Miss Burnett however firmly resides in the 1%, on a contract of several million. So it would appear that it is our own fault for not being able to secure similar contracts! Her Goldman Sachs roots are certainly intact.
I was also very disappointed to see a picture of Wall St execs figuratively and literally looking down on the OWS, while sipping champagne. This brought one ancient phrase to mind “let them eat cake”!

Posted by damienjames0 | Report as abusive

Only idiots blame Wall Street for the long slow decline of the US economy. Manufacturing jobs have flooded off-shore for 30 years. And they are still going.

Software and related intermediate service jobs have flooded off-shore for 20 years or so.

In all cases the lower cost was just to attractive to say no. Even if the Wall Street casino did not exist the problem would be there.

And so middle class manufacturing jobs evaporated. You either fell upwards into more sophisticated graduate level employment (with a proper degree, not these Mickey Mouse degrees given by many US institutions) or more tragically your skill and ability level forced you into the working or unemployed poor.

The problem is compounded with the low quality of illegal immigrants flooding into the US. Just look at their SAT scores – they simply don’t do as well. Whether you think it is politically incorrect or not, facts are facts.

I am no banger of the drum for Wall Street, but come on man get some accuracy in your bloody essays. I am not American (but know it very very well) and I can see what happened. So can many others.

In the mean time this lefty twit Rohde rabbits on about Wall Street and finance. (You can tell he is left because he wins Pulitzer prizes.)

Not only does Reuters use Photoshop to distort pictures they use hacks to distort facts.

Posted by eleno | Report as abusive

Only a fool or one who has had his head in the sand for the past 40 years would deny the slow boil that has been applied to the mass of the People in the United States as their jobs and incomes and quality of life has steadily declined due to greed and ignorance of the so called “best and brightest.” America is a Nation in decline and no amount of mouthing old myths and cliches is going to change the gutting out of the Middle Class..just as Rome destroyed itself with Empire so have our miserable ruling class of autocrats-plutocrats and oligarchist turned the People against the internal rot predicted by President Eisenhower in 1960: “BEWARE THE MILITARY-INDUSTRIAL-CORPORATE COMPLEX….the Enemy is within the gates. I for one pray for a definitive Revolution to clean out the rot within our system.

Posted by johnpatrick46 | Report as abusive

Many of the commenters seem clueless beyond belief. Wall Street is corrupt as are our politicians. If you want to see how corrupt the whole system is and understand it then I would advise you to google for the book by Mullins entitled “The Secrets of the Federal Reserve’. You cand download it for free into your kindle or Ipad and read and weep. Our main problems go back to 1913 when the FED was unconstitutionally created in order to have the creation of money in the hands of bankers instead of congress, where the constitution supposedly puts it.

Posted by Eric93 | Report as abusive

@ eleno Disagree with your slant, old chap. Ironically your comment alludes to the underlying problem of speculative capitalism – veneration of rampant greed. Although you couched this rather delicately as “In all cases the lower cost was just to (sic) attractive to say no”.

Rohde has articulated the genuine anger and revulsion at the viciousness of corporate greed. Interestingly it is not just Wall Street but also financial swilling centres such as London, which have created a climate of cynicism and distrust of speculative capitalism. Cocoa futures anyone?

Posted by scythe | Report as abusive

The government is printing money to create jobs that corporate America uses to ship more jobs overseas. Middle class America pays for this in taxes and inflation. Oh, but we can’t tax the corporations or they will move. Oh, but we can’t stop them from moving jobs overseas or they will move. Wake up America, many of them have already incorportated in the Bahamas to avoid taxes anyway. Corporations need to participate.

Posted by minipaws | Report as abusive

Far too many American Corporations are American in name only. Their loyalty and purpose has little to do with the good of the nation or its people. The People are waking up to the fact that it is not Government but the Plutocrats controlling the economy and the governing of the nation through their Lobbyists and paid for Politicians who have and are ruining the lives of millions of American Citizens. This is a Nation founded for the People not for the aggrandizement of the Corporate structure loyal only to Profit.

Posted by johnpatrick46 | Report as abusive

Tax offshore outsourcing, bring back the job to the US.

Posted by robb1 | Report as abusive

Excellent article.

The accounting profession also has played a role in this. At roughly the same time when the Glass-Steagall act was subverted by the so-called capitalists in corporate America, the highly respected accounting principle of conservatism, which requires “mark-to-market”, was also subverted. The American accounting profession, in a show of extreme cowardice, caved in to the Republican/corporate cabal.

So what we have, since mark-to-market is not even required to pass a CPA audit, is not even capitalism at all, but rather a totally corrupt pea-in-the-shell game.

The assets of American banks are full of dead, toxic assets, being carried at full book value.

Posted by AdamSmith | Report as abusive

The raw fact is that there is us and there is them. They want to harm us. Period. Under all the noise, all the rationalization, it all comes down to conquest.

By the rules of the system we have had since 1789, we lose and we will continue to lose. It does not matter if we outnumber “them” 100 to 1. The system has been gamed so that they win and we lose. Our only option is to change the system entirely, which is likely to happen. It is our only hope of stopping our losses.

If you do not understand this basic point, you miss the core of everything from the Arab Spring through Occupy Wall Street. Hope is dead. Our system is ossified to the point that it cannot be changed from within. If it remains, “we” will inevitably become slaves. It is change or death. We have no choice.

Posted by txgadfly | Report as abusive

Well, i can’t say Wall Street is the only responsible… but it is the most obvious of the responsibles for sure… an obvious target…
The private corporations are the 2nd obvious target… When i first started to hear the term “globalization” 15-20 years ago in high school, the obvious thought was the american, japanese and european companies would spread to the trird world and conquer all… well… the 3rd world protested like hell against globalization… but no one expected that companies would find more atractive to move production to one place while exploring consumers in other places, and in the end for them who cares wich country becomes rich or poor, if there is more profits…
I read something interesting today… Japanese automakers complaining about new Brazil high import taxes… That is like a joke… 10 years ago they would even bother sell cars in Brasil, now all major are building factories there… Playstation 3 after years was “officialy” lauched in Brazil… same for iphone and ipad and many other things…
Even if all brazilian auto makers are foreing, the last taxes aim to protect the country’ jobs, not companies… even the car parts should be made in the country… or taxed…
15 years ago, Brazil used to complain about the american, european, etc protectionism over trade… now is the oposite(brasilian taxes are as high as before)… Because now the balance of trade is shifting to others favour…
With China is even more complicated… if big corporations have interest in bring their own products made in out there(like your computer and cellphone), there is no need to protect themselves with taxes from foreing competition if they are profiting from the same way… even if the mid and small will perish, draging jobs with them…
Even brazilian self textil industry vanished competing with China… all jobs lost… the same seems will not happen with auto industry…
In the end i believe the goverment is the ultimate responsible in the “free” “global” market… companies play to win, govs should play to their countries win too, but they play for the companies, banks… rules should exist to prevent abuses… if they exist, should be aplied… but some people just panic with the words “rules”, “regulation”, “taxes”… “Ask Why”(Enron)

Posted by VonHell | Report as abusive

@VonHell – Good points.

I’ll second VonHell.

An immediate 50% American tariff is needed, on all imported goods.

Someone said to me, “A nation that cannot clothe and feed itself cannot survive.”

That seems reasonable to me.

America needs to re-institute the American tariff. Like the one Alexander Hamilton first instituted to protect American jobs.

We need an immediate 50% tariff on all imported goods into America. New American manufacturers would spring up like grass after a rain.

This would not only create jobs here, it would also enable us to approach a balanced budget.


Posted by AdamSmith | Report as abusive

Wall Street may be part of a problem, but K Street is the rest of the problem. A confrontation needs to be organized where Wall Street spreads cash and makes its deals will DC politicians.

Posted by SanPa | Report as abusive

At 48, lost my corp job to outsourcing, especially after 9/11, now at 58 glad to have a third shift weekend job, so we are just treading water and getting by. But the third shift weekend job has allowed me to watch outsourcing over the past 10 years at one huge, and immediately recognized global company (to mention the name would threaten my current job). It was created in the dot com boom, (subsidiary of another company) and became very successful, then after 9/11, it began the outsourcing–to South America, to Eastern Europe, to India mostly. As I watched this happen it dawned on me “The same damn thing is happening at all other American companies too, right this very minute!” I thought to myself, “The day comes when all of a sudden everyone gets it–they took our jobs and shoved them and brought back the products to sell for premium profits?” Its as if “We’re just caught in a ‘time-warp’ sunami, it can’t be stopped or changed NOW since its really already DONE. While I empathize with all the OWS’s everywhere, the issue is this–the company I watched shipped off, piece by piece, still has one office of its operations still here in the US–the president’s office, and he uses it…when he occasionally is in the country. As for the entirely ONCE created in America, American Corp–they tripled in head count everywhere but in the USA, and that is history, NOW. So, where do we go NOW? I think in about ten more years the USA becomes the factory nation supplying the rapidly rising middle classes of Asia, Europe and India and… Protest all you like, it’s already DONE, over with, and still going. The best opportunity I’m looking at right now (as a former corp trainer) is to move to a foreign country and teach English so… so we can move more American jobs over seas. The opportunity got up and is GONE. So, go there if you need a good job. That’s what I’m going to do. Why? Its all I can do. I quit applying for training jobs several years ago–I was interviewed by a young 20-someone most who visibly tried to hold back their disbelief that “grandpa” thought he could work with “us?” Really, I think this is reality today, and its more of the same tomorrow. Wall Street people will still make a fortune (for a while) because “they” haven’t been outsourced YET! And, I really think that is what is under way right now. The guy who put the sign in the window of his Wall St office that read “We are the 1%” is lost in the fog of his high rise, cause if you work in a suit in an office with a phone and a computer–that can be done anywhere. GUESS WHAT “suits?” YOU ARE NEXT. But you just don’t see it YET or are able to even conceive of it YET. But after the next BIG BUST, your job is gone too. Then you will KNOW what it is like to be one of the 99%. Your time COMETH!!

Posted by WouldChuk | Report as abusive

The middle class are losing the battle! The protests are now way too late. I dont think they will be able to see justice done to them as the whole system is messed up. They cant wring the corporations or cause any turmoil, coz if they do, they are going to lose more and more jobs ! Simple! And the coming wave of more migrants who are more smarter, much efficient will only make the middle class jobs a luxury! So u see this is the reality. End of an American Dream in Squeal!

Posted by IntellectMind | Report as abusive

Life is a problem. But the problem which is caused by capitalism is ironic one. Human beings are not reasonable and moral enough in building economic civilization. And the greedy capitalism is the evidence of uncivilized high class society.

Posted by Cohens | Report as abusive

In your comentary above, Susan summed it up: “The companies use part-time managers, she said, so they don’t have to pay benefits….It’s their policy,” she said, “which is why I’m here.”

The middle class is slowly being turned into a class of laborers that are not working for the afore-mentioned ‘Jimmy Stuart’ dream (nice analogy). Instead they are working to support the protect corporate profit. We all know that profit is a necessary component of a successful business, but so is worker content, job satisfaction and a sense of pride. Corporate America has tossed those values aside in the quest for profit and share value.

This is akin to a body, where the blood is the financing that feeds the body, the tissue is the framework that supports the body and the brain is the corporate structure. None can survive without the others. In this instance, the brain has decided that maintenance and care of the tissue is not necessary. I propose that it is critical to the survival of the system as a whole.

Posted by icfman | Report as abusive

“The middle class, though, is still waiting for its bailout.”

While I agree with many points in the article, to say that the middle class hasn’t gotten a bailout is questionable. The Fed has been doing everything in its power to keep mortgage interest rates at record lows – to prop up home prices, essentially. How is that not a “bailout”? If the housing market were left to function without the Fed’s crutches, home prices would have dropped significantly more…and all those “middle class” homeowners (or, more accurately, homerenters…since many don’t have a whole lot of equity in their houses) would be in deeper pain at this point.

All of these actions have been done at great expense to savers and financially prudent individuals. I was earning >4% on my savings account back in 2007. For four years since, I’ve been getting less than 2%.

Thanks to Ben “helicopter” Bernanke, the only way I can get back to 4% (which is still pitiful for a savings acct, by historical standards) is to gamble a chunk of it in the stock market. And, boy, do I love those wild weekly swings in the market these days!

Posted by NedStark | Report as abusive

@eleno – WOW! this is part of what you said, and I quote “I am no banger of the drum for Wall Street, but come on man get some accuracy in your bloody essays. I am not American (but know it very very well) and I can see what happened. So can many others. ” . So A) you dont live here, b)you dont tell us where you are from, you could be communist for all we know c) who cares what a non american thinks about the american economy. If you were so important, you wouldnt need to type your dinky little rhetoric on here would you.

Posted by itsallwrong | Report as abusive

Well…you said you wanted that gorgeous house for the wife and little ones, so you got it! You also wanted ™Starbuk to pour you a $4.25 bev EVERY morn, and that wish was granted too! What you don’t understand, people of middle earth, is that other people’s wishes were also granted! Like, for instance, ‘Hey Mr. Obama, this is Mr. X at AIG…listen, Ineed about 320mil right away’. POOF! That wish (like yours!) was granted. Problem for you is that.you wish too ‘low’, while others’ wishes are super-high, that’s why they’re supet-rich! You see, you didn’t want to be wealthy and recession-free, otherwise you would have climbed in the warm bed with Washington and played their game, that by the way, has been going on for over a hundred years now. What recession? Ha ha ha ha ha…you aimed too low my friend, and MISSED the financial security target unlike your fellow humans over on the hill in DC, and those guys in their ivory towers at BofA, WaMu, MorganStanley, I could go on and on and on and you still wouldn’t get it!

Posted by Anonymous | Report as abusive

Occupy Wall Street agitators represent something real but may not articulate it. And in the present argumentative narrative they may not say anything that will not have a counter argument or rationale.

The globalization was good for the financial industry. Key jobs of the Financial Industry and the industry itself is not threatened by the same forces that move jobs and other industries from one place to another. Therefore the globalization helped financial industry become colossal while shifting jobs and industrial capacity around the globe.

The key thing is that the Financial Industry – to remain concentrated – still needs muscle power in the shape of a structure backed by military might. This requires that military machine is fed what it thrives on. And one can see that it is being done. Interestingly there is increasing focus on reducing military structure dependence on muscle and legal backing. No need for Congress declaration and increasing uses of drones.

Posted by Rawna | Report as abusive

According to businessinsider.com the top 1% owns 50.9% of the stock, bond and mutual fund market, the next 9% owns 39.4%, the next 40% owns 9.3% and the bottom 50% owns 0.5%. 90.3% of US stocks, bonds and mutual funds are owned by 10% of the population and the remaining 60% of the US population owns 9.8% of the wealth of the markets.

The staqtement that 50% of Americans owns stocks and bonds is a meaningless statistic when the other 50% owns virtually nothing.

Posted by unionlabor1 | Report as abusive