I Guess SOMEONE Had to Dispel the Myth...

...The MYTH of middle-class job loss that is.

And I’m glad it was economist Stephen J. Rose of the Progressive Policy Institute and an adviser to former Secretary of Labor Robert Reich.

After noting that economic change is always “a messy process,” and we are in the midst of changing from a manufacturing-based economy to an information-based one, he gives some historical context, “In 1900, for example, 40% of the U.S. work force was involved in agriculture. Today, that figure is less than 2%, and no serious observer would argue that we are worse off as a result of this transformation.”

Indeed, no serious observer would.

In light of that context he goes on to assail today’s gloom and doomers and other chronic complainers. He derides those who claim that the recent decline in the number of manufacturing jobs has led to the replacement of good middle-class jobs by low-skill, low-pay "hamburger-flipping" service jobs and says that this kind of populist dogma is “bad politics and even worse economics.”

As Rose notes, “The assertion that the American middle-class is disappearing along with manufacturing jobs is, put simply, based on an outdated view of how the economy operates, and is empirically wrong.”

So how does he make such an empirical calculation? Well, Rose explains, “To prove that there has been substantial growth of middle-class jobs, I compare the situation that existed in 1979 with that of 2005. The base year is 1979 because it represents the last business-cycle peak before income inequality and the U.S. trade deficit began to grow quickly in the 1980s. To make the comparison fair, earnings in 1979 are increased by almost 150% to adjust for inflation.”

And the results are nothing short of a staggering blow to the chronic complainers and the nattering negativists. “There has clearly been a sharp increase in female middle-class employment. As recently as 1979, 61% of female workers were in jobs that paid less than $25,000, and only 3% earned more than $50,000 a year. By contrast, more than 36% of new jobs that opened since 1979 for women pay more than $50,000 and only 17% pay less than $25,000.”

And although the results for men, as he notes, has not been as clear-cut or positive, they have been equally profound; To the good, there’s been huge growth in the number of men in high-paying jobs: while in 1979, ONLY 10% of male workers earned above $75,000, fully 34% of new jobs since 1979 have paid this amount or more.

On the flip side, there has also growth in the share of male workers earning less than $25,000 a year, up from 23% in 1979 to 36% by 2005. This rise of low-paying jobs hit less-educated men particularly hard. For those with just a high school diploma, 87% of the new jobs paid $25,000 or less.

Here's Rose’s bottom line: “For three-quarters of the workforce (women and the top half of male earners), economic growth has translated into significantly higher earnings gains, but for male workers in the bottom half of the earnings distribution, the decline of unionized manufacturing employment has led to the drying up of some middle-class jobs for those with no post-secondary education.”

As he notes, “For the clear majority of the workforce, then, the job market has become more welcoming, not less so. But where are these jobs?

“Using a framework that I developed in the 1990s, I find that most of the employment gains over the last 30 years have been in business-management activities (administration, sales, finance and business services) as well as in professional services such as health care and education. While the percentage of U.S. jobs derived from manual work in agriculture, mining, timber and manufacturing has declined, the share of jobs related to low-skilled retail and personal/food services has remained steady.”

The current economic reality is that America post-Jimmy Carter has done a tremendous job of moving from a manufacturing economy to an information one. A more educated population has made a relatively seamless transition to the new economy and its higher paying jobs and as a result over 75% of the population has gained.

For those with a high school education or less, the times have stayed lean or gotten leaner, but the good news there is that education is an almost certain path to a better job in the new economy and a better life!

As Rose notes, “Undeniably, some people have been left out of this middle-class workforce expansion and need help in making the transition to the new economy. In particular, the last six years have seen very little wage growth for the bottom 80% of the workforce. But we should bear in mind that real gross domestic product per person is up over 60% since 1979, and our goal for the job market should not be simply to keep pace with where things stood nearly three decades ago.”

Thanks Stephen J. Rose for noting the improvements brought about since the Carter debacle, by both Supply-Side and Free trade policies.

Imagine that, a Clinton cabinet economist proving that Free trade and Supply Side policies actually WORK, while Carter’s Keynesianism doesn’t!

It just doesn’t get any better than that.

SEE: The Myth of Middle-Class Job Loss in today’s (Wed, October 24, 2007) Wall Street Journal online at http://online.wsj.com/article/SB119318171973969059.html?mod=opinion_main_commentaries