Where is the Middle Class Going?

Jeff Sach’s  a column on the nature of our jobs problem. His key point I think is this

Our growth and employment problems are structural, and need a structural response. . . .

The structural problem is that America has lost its international competitiveness in basic industries including textiles, apparel, and several other areas of manufacturing. The production jobs are now in China, India, and elsewhere, where wages are much lower while productivity is more or less comparable to the US (and where production often involves US companies, using US technologies, producing overseas and re-exporting to the US market). Only US college grads can resist the international competitive pressures; high-school grads have found the labor market fall out from beneath their feet

I don’t think Sach’s diagnosis is quite right but he is identifying the symptoms of a larger syndrome. I like to break the economy into Goods and Government vs. the Private Service Sector.

Goods and Government make up a lot of what we used to think of as the middle class: Textile Workers, Riveters, Machinists, Carpenters, Teachers, Fire Fighters, Police Officers, etc. Not wait staff but not doctors and lawyers either. The middle middle.

I want to contrast the employment in these two super-sectors because its so striking. Here is employment data going back to the end of WWII

Up until about 1975 or so the two super-sectors were growing at roughly the same rate and each commanded about half of the workforce. Then the two started to break apart and private services marched higher and higher while goods and government experienced over going on 40 years of stagnation. Unless something major changes there will have been almost as many workers in goods and government in 1975 as in 2015.

Indeed, if as I suspect, manufacturing and teacher employment continue to trend downward there may be fewer in 2015 than in 1975.

This is not just a story about manufacturing either the ratio of government workers to private service workers had a strong peak in the 70s

While the ratio of goods producing workers to private service has been declining pretty steadily since the 1950s

Preliminarily I might say that up until 1975 the US was running a de facto Nordic Model, where declines in middle class manufacturing jobs were made up for by increases in middle class government jobs.

That stopped around 1975 and since then there has big a large divergence.