will the u.s. cease to be a middle-class country?
DESCRIPTION
Peter Berezin's presentation at the 30th Annual Monetary & Trade ConferenceTRANSCRIPT
1
Will the U.S. Cease to be a
Middle-Class Country?
Technology, Demographics
and the Coming Political Storm
Peter Berezin Managing Editor Bank Credit Analyst
April 24, 2012
Global Interdependence Center, Philadelphia
2
INCOME SHARE OF TOP 1% HAS DOUBLED SINCE THE 1970s
10
15
20
25
U.S. TOP 1% (INCOME ABOVE $368,000 IN 2008)
© BCA Research 2012
%
10
15
20
25
%
1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
3
A TALE OF TWO INEQUALITIES
•Well known fact: Incomes at the top of the
distribution have surged.
• Less well known fact: Workers in the middle of
the income distribution have lost ground to
both those at the top and the bottom.
4
MIDDLE-CLASS WAGE EARNINGS ARE BEING SQUEEZED
2.4
2.2
2.0
1.8
1979 1984 1989 1994 1999 2004 2009
2.4
2.2
2.0
1.8
U.S. RELATIVE WAGES FOR MALE WORKERS, AT DIFFERENT PERCENTILES OF INCOME DISTRIBUTION
50/10
90/50
WORKERS AT THE 50TH PERCENTILE OF
THE WAGE DISTRIBUTION HAVE LOST
GROUND AGAINST THE 90TH
PERCENTILE AS WELL AS THE 10TH
PERCENTILE.
© BCA Research 2012
SOURCE: CONGRESSIONAL BUDGET OFFICE.
5
AUTOMATION AND OUTSOURCING OF ROUTINE JOBS IS NO LONGER A PROBLEM JUST FOR LOW-SKILLED WORKERS
• It is useful to break down the skill distribution of the workforce
into three categories:
• Increasingly, the middle group is being pressured by
outsourcing and automation (legal discovery now being done
by computer, radiology being outsourced to India, etc).
A low-skill group of workers doing manual work
(landscapers, restaurant workers, truck drivers).
A middle-skill group of workers doing routine
cognitive work (bookkeepers, legal clerks, certain
types of computer programmers).
A high-skill group doing non-routine cognitive work
(CEOs, professors, doctors, lawyers).
6
TEST SCORES OF U.S. STUDENTS ARE BELOW THE OECD AVERAGE
2009 OECD PISA SCORES*
540
520
500
480
460
440
420
KO
RE
A
FIN
LA
ND
CA
NA
DA
JA
PA
N
NE
W Z
EA
LA
ND
NE
TH
ER
LA
ND
S
BE
LG
IUM
NO
RW
AY
SW
ITZ
ER
LA
ND
U.S
.
SW
ED
EN
GE
RM
AN
Y
IRE
LA
ND
FR
AN
CE
DE
NM
AR
K
U.K
.
PO
RT
UG
AL
ITA
LY
GR
EE
CE
SP
AIN
ME
XIC
O
AU
ST
RA
LIA
*AVERAGE SCORE ON MATH, READING AND SCIENCE.
© BCA Research 2012
7
SIGNIFICANT VARIATION IN STUDENT PERFORMANCE BASED ON ETHNICITY
KO
RE
A
FIN
LA
ND
CA
NA
DA
JA
PA
N
NE
W Z
EA
LA
ND
NE
TH
ER
LA
ND
S
BE
LG
IUM
NO
RW
AY
SW
ITZ
ER
LA
ND
U.S
.
SW
ED
EN
GE
RM
AN
Y
IRE
LA
ND
FR
AN
CE
DE
NM
AR
K
U.K
.
PO
RT
UG
AL
ITA
LY
GR
EE
CE
SP
AIN
ME
XIC
O
AU
ST
RA
LIA
U.S
. (
AS
IAN
S)
U.S
. (B
LA
CK
S)
U.S
. (
HIS
PA
NIC
S)
2009 OECD PISA SCORES* 540
520
500
480
460
440
420 © BCA Research 2012
U.S
. (W
HIT
ES
)
*AVERAGE SCORE ON MATH, READING AND SCIENCE.
8
NON-ASIAN MINORITIES WILL ACCOUNT FOR OVER 100% OF THE GROWTH IN THE U.S. WORKING-AGE POPULATION OVER THE NEXT 40 YEARS
(Million)
U.S
. W
OR
KIN
G-A
GE
PO
PU
LA
TIO
N,
CH
AN
GE
IN
MIL
LIO
NS
PROJECTED CHANGE IN WORKING-AGE POPULATION
-10
0
10
20
30
40
2010 2015 2020 2025 2030 2035 2040 2045 2050
HISPANIC
ASIAN
BLACK
NON-HISPANIC WHITE
-
© BCA Research 2012
+43
+10
+8
-13
9
NO CLEAR PROGRESS IN NARROWING THE ACHIEVEMENT GAP SINCE THE EARLY-1990s
NA
EP
AV
ER
AG
E S
C
AL
E S
CO
RE
– M
AT
H 1
7
YE
AR
S O
LD
SOURCE: U.S. DEPARTMENT OF EDUCATION,
BREAK IN 2004 REFLECTS SHIFT TO REVISED ASSESSMENT FORMAT.
NA
EP
AV
ER
AG
E S
CA
LE
SC
OR
E –
RE
AD
ING
17
YE
AR
S O
LD
260
280
300
320
240
260
280
300
HISPANIC
ASIAN
WHITE
BLACK
HISPANIC
ASIAN
WHITE
BLACK
1978 1982 1986 1990 1992 1994 1996 1999 2004 2008
1980 1984 1988 1990 1992 1994 1996 1999 2004 2008
MATH
READING
© BCA Research 2012
10
HISPANIC EDUCATIONAL ATTAINMENT STALLS AFTER THE SECOND GENERATION
5
10
15
20
25
30
NON-HISPANIC WHITE
NATIVE-BORN
HISPANIC
(1ST GENERATION)
HISPANIC
(2ND GENERATION) HISPANIC
(3RD GENERATION
& HIGHER)
U.S. COLLEGE - COMPLETION RATE % OF
TOTAL
SECOND GENERATION
HISPANIC IMMIGRANTS MAKE
SIGNIFICANT GAINS OVER FIRST
GENERATION IMMIGRANTS, BUT
PROGRESS STALLS
THEREAFTER
SOURCE: 2006 CURRENT POPULATION SURVEY.
© BCA Research 2012
11
THE ELDERLY RECEIVE MORE THAN TWO-THIRDS OF FEDERAL GOVERNMENT TRANSFERS
10
20
30
40
50
60
70
HOUSEHOLDS WITH CHILDREN
ELDERLY CHILDLESS HOUSEHOLDS
1980 1985 1990 1995 2000 2005
% U.S. SHARE OF FEDERAL GOVERNMENT HOUSEHOLD
TRANSFERS, BY AGE AND FAMILY TYPE
© BCA Research 2012
12
OLD AGE DEPENDENCY RATIO SET TO SURGE
SOURCE: CBO LONG-TERM BUDGET OUTLOOK (2011).
20
22
24
26
28
30
32
34
36
© BCA Research 2012
2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033
U.S. POPULATION AGE 65 OR OLDER AS A PERCENTAGE
OF THE POPULATION AGES 20 TO 64
%
13
SPENDING ON THE ELDERLY IS SET TO INCREASE SIGNIFICANTLY
SOURCE: CBO LONG-TERM BUDGET OUTLOOK (2011).
2
4
6
8
10
12
14
16
% OF GDP
MEDICAID, CHIP AND EXCHANGE SUBSIDIES
MEDICARE
SOCIAL SECURITY
© BCA Research 2012
20
12
20
14
20
16
20
18
20
20
20
22
20
24
20
26
20
28
20
30
20
32
20
34
Up 1.3%
Up 2.2%
Up 1.6%
14
THE RISK OF A FISCAL CRISIS IS GROWING
SOURCE: CBO LONG-TERM BUDGET OUTLOOK (2011).
20
12
20
14
20
16
20
18
20
20
20
22
20
24
20
26
20
28
20
30
20
32
20
34
80
100
120
140
160
180
U.S. FEDERAL DEBT HELD BY THE PUBLIC
© BCA Research 2012
15
70
60
50
40
30
1972 1976 1980 1984 1988 1992 1996 2000 2004 2008
70
60
50
40
30
70
60
50
40
30
70
60
50
40
30
HISPANICS*
PERCENTAGE VOTE FOR:
NON-HISPANIC WHITES
SOURCE: POPULATION DIVISION, U.S. CENSUS BUREAU.
* GAP DUE TO MISSING EXIT POLL DATA FOR 1976.
DEMOCRATS REPUBLICANS
% %
% %
THE REPUBLICANS ARE IN TROUBLE
© BCA Research 2012
16
PROPORTION OF MINORITY VOTERS WILL INCREASE STEADILY
80
60
40
20
2010 2015 2020 2025 2030 2035 2040 2045 2050
80
60
40
20
SHARE OF VOTES CAST BY ETHNICITY: NON-HISPANIC WHITES HISPANICS AFRICAN AMERICANS ASIANS
SOURCE: POPULATION DIVISION, U.S. CENSUS BUREAU.
% %
© BCA Research 2012
17
DEMOGRAPHICS ALONE WILL GENERATE A 10-POINT SWING FOR DEMOCRATS OVER THE NEXT 40 YEARS
4
2
0
-2
-4
2010 2015 2020 2025 2030 2035 2040 2045 2050
4
2
0
-2
-4
ESTIMATED SWING IN FAVOR OF:
DEMOCRATS REPUBLICANS
% %
SOURCE: POPULATION DIVISION, U.S. CENSUS BUREAU.
© BCA Research 2012
18
TEXAS TO TURN DEMOCRATIC? IT’S ALREADY HAPPENING!
19
WILL A MORE IMMIGRATION-FRIENDLY PLATFORM SAVE THE GOP?
58 54
51
35 31
29 27
10
20
30
40
50
60
© BCA Research 2012
ED
UC
AT
ION
JO
BS
HE
ALT
H
CA
RE
FE
DE
RA
L
BU
DG
ET
DE
FIC
IT
IMM
IGR
AT
ION
EN
VIR
ON
ME
NT
WA
R I
N
AF
GH
AN
ISTA
N
SOURCE: PEW RESEARCH CENTER, 2010 NATIONAL SURVEY OF LATINOS.
% OF HISPANIC REGISTERED VOTERS WHO SAY THE FOLLOWING ISSUE IS "EXTREMELY IMPORTANT" TO THEM:
20
U.S. MEDIAN HOUSEHOLD NET WORTH
$134,992
$168,103
$18,359 $12,124
$113,149
$78,066
$6,325 $5,677
2005
2009
© BCA Research 2012
160,000
$
140,000
120,000
100,000
80,000
60,000
40,000
20,000
WHITES ASIANS HISPANICS BLACKS
21
HISPANIC VOTE IN 2010 CONGRESSIONAL ELECTIONS
% DEMOCRAT REPUBLICAN SPREAD
GENDER
MALE 65 22 43
FEMALE 62 23 39
AGE
18-29 63 24 39
30-49 62 23 39
50-64 70 18 52
65+ 66 26 40
EDUCATIONAL ATTAINMENT
LESS THAN HIGH SCHOOL 61 20 41
HIGH SCHOOL GRADUATE 63 23 40
SOME COLLEGE OR MORE 67 24 43
HOUSEHOLD INCOME
LESS THAN $30,000 69 18 51
$30,000 - $74,000 63 24 39
$75,000 OR MORE 62 24 38
NATIVITY
NATIVE BORN 61 25 36
FOREIGN BORN 73 16 57
LANGUAGE
ENGLISH DOMINANT 56 30 26
BILINGUAL 71 19 52
SPANISH DOMINANT 68 17 51
22
CONCLUSIONS
• Globalization and technological change is exacerbating
inequality.
• All the growth of the U.S. labor force over the next half-century
will come from minority groups that have traditionally lagged
behind in educational achievement. In the absence of a
significantly improvement in educational outcomes, the U.S. is
likely to experience weaker productivity growth and a further
increase in income inequality.
• American politics is at risk of becoming polarized by age and
ethnicity. If this trend continues, it will undermine democratic
institutions as we know them.
• The best hope is that policymakers will have the sense to
adopt policies that encourage people to think of themselves as
Americans, first and foremost, rather than members of specific
identity groups.