The first two decades of the 20th century in many respects have been quite similar to the first two decades of the 21st, when widespread technological change was the foundation of a globalizing economy that was increasing productivity and altering the makeup of the workforce. Whole nations were shedding their rural and agricultural roots and giving way to a new industrial future. The new economy generated immense wealth for business leaders, but the era also saw staggering wealth inequality, in part because the new manufacturing jobs of the time were vastly undervalued.
Then, in early 1914, Henry Ford made a staggering wager. Facing constant employee turnover because of the monotony of assembly line work, which was limiting additional productivity gains, Ford bet that higher pay would convince workers to stay — and become consumers of the product they produced. Ford announced that he would more than double the pay of assembly line workers, to $5 a day. It was good pay for its time, and was one of the earliest actions that led to the growth of the American middle class.
Back in the spring of this year, in the early days of the COVID-19 pandemic, quite a bit of attention was given to those we've come to call essential workers — not only first responders, transit employees and health-care workers but also fast food workers; supermarket, convenience store and big-box-store clerks; and restaurant workers and delivery drivers. We showered them with praise and encouragement to keep them moving forward during a difficult period. Their numbers had risen over the last half-century as manufacturing jobs moved across the globe. But for many of them, their pay had not. And after the summer of civil unrest that followed the killings of Ahmaud Arbery, Breonna Taylor and George Floyd, much of the essential-worker encouragement was forgotten and slowly disappeared.
The pandemic has put into stark focus trends in today's economy that recall the economic inequality of 110 years ago. The evaporation of the well-paying low- to mid-skill jobs that once defined much of the American middle class is a greater threat to our society than many of us are willing to recognize. Steps must be taken by both the private and public sectors to re-create the middle class, and the place to start is with the essential workers we rely on now more than ever.
We're in this position because public- and private-sector actions have made the American middle class more vulnerable. Labor protections granted by the federal government in the New Deal era, which helped secure middle-class income gains, have gradually eroded over the last 40 years. As manufacturing jobs dwindled, pathways to the middle class and upward mobility have narrowed as well. Today's corporate response to the need for increased productivity is to rely much more heavily on the leaders at the top of the income spectrum and the laborers at the bottom. We push people out of the middle-class positions and ask others to do more with less.
Back in 2018, Richard V. Reeves and Katherine Guyot of the Brookings Institution advocated some federal policies that could boost the middle class:
- A worker's tax credit, similar to the current Earned Income Tax Credit, that would provide a credit of up to 15 percent of income, capped at $1,500 per year and paid for by a carbon tax.
- A tax credit for first-time homebuyers, funded by eliminating the mortgage interest deduction.
- Up to eight weeks of paid family leave, paid for by a minimal payroll tax.
- College savings accounts, funded by changes to the federal estate tax.
If the federal government were to take on this role, it could potentially free up state governments to contribute more resources of their own to programs that would strengthen the middle class. Child-care costs and access, for example, are a particular challenge for middle- and low-income families, and are a barrier to upward mobility. A state commitment to child care, combined with a federal commitment to workers along the lines of the Reeves-Guyot proposal, would vastly ease families' burdens and serve as a catalyst to a new version of the American middle class.
History suggests that our nation will get through the current pandemic with the economic strength to move forward on issues like these. Indeed, the 1918 flu pandemic came on the scene just four years after Ford Motor Co. instituted its $5-a-day policy, and after that pandemic dissipated more strides were made to secure the middle class.
If we are going to continue to view our nation as committed to its middle class, we need to ensure that multiple pathways are available to achieving that status. Not everyone has the means, desire or inclination to attend college; a path to the middle class should be available for everyone. Otherwise, our expression of gratitude to America's essential workers is simply an admission of guilt from the rest of us. Gratitude is not enough.
Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.