How to Save the Middle Class
Wisconsin leads nation in middle class decline. How can state reverse trend?
Wisconsin now leads the nation in destroying its middle class
According to a recent report from the Pew Charitable Trusts, Wisconsin now leads the nation in destroying its middle class. Defining “middle-class households” as those with income 67 percent to 200 percent of their state’s median, Pew showed Wisconsin leading all other states in the 2000-2013 period in its rate of loss. The finding is shocking, but probably not news to anyone who’s been watching Wisconsin trends in wages, jobs and income. As COWS, a think tank based in Madison, has consistently shown in its annual State of Working Wisconsin, wages have been stagnant, job growth anemic and income has been declining for a long time.
Median worker wages here, for example, are now $17.38 an hour. In inflation-corrected terms, that’s up only 71 cents from 35 years ago — equivalent to an increase of only 2 cents a year — despite a near doubling of worker productivity over the period. Job growth has been pathetic, among the worst in the nation. If Wisconsin had merely kept pace with the rest of the country’s recovery from the Great Recession, we’d have 90,000 more jobs today than we do.
And job quality has declined just as badly. More than a quarter (27 percent) of Wisconsin workers now make $11.55 or less an hour. A full-time year-round job at that wage is not enough to keep a four-person family out of poverty, even on America’s distinctively stingy definition of the poverty line.
Data from the Department of Public Instruction shows, by school district, the share of Wisconsin school children poor enough to qualify for free or reduced-price lunch. In 2001, 24 percent of students qualified. By 2013, that share nearly doubled, to 42 percent. Things got worse in virtually every school district in the state.
Wisconsin could do much better than this, but we’ll have to change our government to do so. Why? Because the middle class in America was never “naturally” created by an economy with no rules beyond price competition, and it won’t be in the future. Private market actors won’t produce those rules on their own. They’ve got other things to do, and it’s not in their short-term interest. The only place those rules can come from is the public — which has a broader and longer-term interest in building communities and a society fit to live in — acting through its government.
What could you do to rebuild the Wisconsin middle class? Many things. But here’s a starter punchlist.
Increase the minimum wage: Twenty-nine states now have state minimum wages higher than the paltry federal $7.25 an hour. Our neighbor Minnesota just raised its minimum wage to $9 an hour and continues to produce strong economic growth. Uniform and strong enforcement of wage standards also can increase income for workers at the bottom of the labor market while leveling the playing field for all business. But Wisconsin’s current government has resisted any effort to increase the minimum wage here, or improve wage enforcement. It should stop doing so.
Invest in ourselves: An economy with opportunities to grow the middle class requires broad access to quality education. That means having a decent educational system, ideally one that starts with pre-kindergarten and continues with opportunities for workers to gain needed skills and degrees in high school, technical schools, college, university and beyond. Wisconsin used to have such a system. Now, at tremendous cost to our future as a state, our government is roundly trashing it. This should stop, too.
Go green: Wisconsin imports nearly all its energy, and most of it is dirty. This drains income from the state and runs counter to where the world needs to go and is, finally, going. Current Wisconsin government has done nearly everything in its power to discourage both energy efficiency and development of Wisconsin’s own clean energy generation resources — blocking the tens of thousands of good local jobs that a determined state effort could create. It should stop being so shortsighted.
Stop throwing away free money: Gov. Scott Walker and the Legislature’s leadership basically hate Barack Obama. That’s fine, I guess. A lot of people do. But while rejecting money from the feds — for improved transportation, health care for poor kids (some $1 billion that could have come from expanded Medicaid) and rural broadband expansion — may score some political points, it also makes the state poorer. The governor should confine his pique and point-scoring to speeches, not let it directly hurt the state’s economy.
To get a middle class, you need a government that wants to build it. Wisconsin doesn’t have such a government now. Draw your own conclusion on what needs to be done.
Joel Rogers is the Sewell-Bascom Professor of Law, Political Science, Public Affairs and Sociology at the University of Wisconsin-Madison, and director of COWS.
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I have some major issues with this entire op-ed… but what I want to know most of all is, what does “leveling the playing field for all businesses” regarding minimum wage even mean?
Captain Obvious would say “leveling the playing field for all businesses” in regards to the op-ed, would mean that certain businesses that illegally pay below minimum wage, would be forced to stop reaping extra profits and follow the law.
How can a business following the minimum wage law compete on a level playing field, if their competition isn’t compelled to do the same?
Tim, if your interpretation is true, then that is a bit of a non sequitur. Regardless of that, do we have a big problem of Wisconsin companies illegally paying below minimum wage?
Wisconsin is now run by people who can’t see beyond knee-jerk ideology–and who refuse to acknowledge what’s not working or why.
“Wisconsin now leads the nation in destroying its middle class.” That’s a stark stat–to go with many others. Kansas shot itself in the foot with similar policies but is reportedly starting to wake up. Wisconsin, including Milwaukee County, just keeps doubling down. It’s beyond me why Walker & Company are driven to make our once-great state more like Mississippi than Minnesota. Green energy, living wages and decent schools are hardly radical ideas.
The very thought that any journalist who would proffer their work to be serious and insightful, while attempting a persuasive argument could label any money as ‘free’ would be totally laughable if not so outright concerning about their perspective and fundamental grasp of basic monetary concepts (Economics is likely scorned in Journalism and Communications degree programs or ‘Too hard” of subjects to be required coursework).
The baseline fact is that America at the Federal Budget level “broke”. Any additional dollar of spending is borrowed (with about 20 to 30% of each those greenbacks coming from foreign sources, tumble that one over in your head in our new reality of geopolitical instability). So far from being ‘free’, each Federal expenditure that occurs in the deficit is actually an enslavement of ourselves and future generations to a lifetime of indebtedness and escalating poverty as we lose flexibility in our future budgeting process as continuously larger percentages go to debt servicing and interest payments.
The sheer blindness of the Left and Progressives to this simple accounting principle should be cause enough for ‘serious’ people to turn them out of office at every opportunity. Bravo to Gov Walker to be astute enough and principled enough to not only recognize this fallacy, but find resources in our Budget in WI (that cannot fabricate mountains of debt in perpetuity) to EXPAND BadgerCare, provide the largest increase (by far) mental spending in WI history and be pragmatic in expanding transportation funds.
The ‘feel good’ policies of renewable energy (the Inconvenient Truth is that Wall Street owns most large-scale RE projects in the US, so those household electric costs flow out-of-state anyways, just into different pockets. I know this as I’m in the RE Project Development business), energy efficiency (while having some merit does not produce nearly the $ returns and jobs that proponents claim) and while a reasonable and legal wage is the premise for every job taker, if the Minimum Wage is unilaterally and dramatically raised (as Federal proposed), the total dollars that those entities take in for revenues doesn’t go up, just that unit labor costs do. The net results is fewer total labor units that can be paid for, resulting in fewer hours per job taker and / or fewer job taker roles in total!
Simple math folks, all across the board. Just dig a little behind the hyped headlines of the Left and their whole Universe comes crashing down.
So the middle class in Wisconsin is actually thriving because this headline is just hype?
CK – The opinion piece is about State issues. The Federal government is in debt that citizens actually own due to decades of funding defense spending without any form of accountability that has bought the nation nothing. $3 Trillion of the debt is owed to the Social Security Trust Fund, another $10 Trillion is owed to pension funds, 401K and IRA, and institutional investors. The remainder is made up of foreign investments. The Pentagon itself cannot account for over $9 Trillion in expenditures during past decades that makes up almost 1/2 the Federal deficit.
The State of Wisconsin is not at fault for this Federal deficit other than electing politicians that continue to scam the public to use fear and hate to continue writing blank checks for defense spending. The State’s role according to the 10th Amendment is granted broad powers to protect the health, safety, welfare, and environment of its citizens. Since 2010, Wisconsin is failing with incredible efficiency in this regard as proven by every measured category.
Wisconsin leads the nation in loss in family income, and working people leaving the state. Wisconsin is near the bottom in job creation. Gutting education and stealing from public employees to reward corporations that move to other states is not a successful formula. Funds stolen from education and public workers in a pay to play scam for Walker’s WEDC is another example of utter corruption and disaster.
I don’t think CK was saying the middle class is thriving, rather that the ideas presented will not make the changes the author hopes they would. I have been chomping at the bit to discuss the ideas presented more in depth since this op-ed was posted… just waiting for some good arguments in favor of them that are worth discussing.
And Marie, most of the decrease in median incomes came during Doyle’s years. Worse yet, only some of that during the great recession. The inflation adjusted median income was in a downward spiral for years before. The Walker years have been surprisingly steady despite the political disruption of the left during that time. In fact, we have finally seen an increase in the last couple years.
Are you sure about that AG? This story says that from 2010 to 2014 the inflation adjusted median income in Wisconsin dropped by 1.1%.
http://www.politifact.com/wisconsin/statements/2015/dec/07/scott-walker/ignoring-inflation-scott-walker-says-incomes-rose-/
During a 35 year work career from 1975 to 2010, I saw the factories disappear one by one every year. During the 2007-08 downturn, two car plants and at least four paper mills closed up. This cost about 50,000 direct and indirect job losses in WI. Walker’s Act 10 cost another 50,000 jobs and compounded each year due to lost wages for public workers that stimulate small business jobs. Disinvestment in education will have thousands more in losses and negative effects for years. This is a state in contraction and in a downward spiral. Your stated data supports this with the huge drop in median family income, the largest loss in the nation. WI is number one in working age people leaving the state.
And there are things government can aide in slowing and turning this trend through policy changes. Stop wasting money on WEDC that is nothing but a pay to play Walker scam with millions leaving the state annually.
One major area I see is a focus on major renovation of the building stock across Wisconsin and high standards for new construction. Tax credits and sales tax exemptions should apply to locally produced materials and services for renovations. The Focus on Energy programs should be tripled in financial support with funding coming from utilities, with an emphasis for comprehensive integrated renovations. This means needed repairs and upgrades to building stock to make them ready for the 21st Century, safe, healthy, durable, and efficient. Repairs are needed beyond efficiency and solar additions.
WI sends over $13 Billion out of state annually to purchase fossil fuels. We could reduce this well over 50% in a few decades by including high levels of consumer side energy efficiency, solar electric, time of use rates with load control of off peak storage with thermal mass electric furnaces, heat pump water heaters, ice making AC equipment, and eventually plug in cars and engine heaters. This would create thousands of skilled and unskilled labor jobs for the reconstruction industry. Over $7 Billion would be saved annually and pumped back into the local economies. These are jobs that could not be exported and makes use of local materials and services through tax supporting polices and Focus on Energy incentives. There would need to be a consumer education component.
This process also flattens the utility load curve, removes peaks and fills the night time valley, and would make use of night time wind turbine energy from Wisconsin and states the west. It would improve the efficiency of the grid system, reduce the line losses, and heat load on equipment on the hot summer days that creates failures. Utilities main approach today is how they can maintain supply side control, and large battery storage development that is much higher in cost that would eventually be passed onto the consumer through rates.
Utilities and energy supply companies do not like this approach since it means downsizing their production business model and decentralizing control over the supply side when they can sell energy at over 25 cents per kWh. CEOs do not get bonuses and raises for downsizing a company even though it is in the best interest of the consumers and benefits long term use of finite resources and extraction. All the political power today resides with utilities and energy companies supported by lobbyists that receive preferential treatment from today’s politicians in Wisconsin and nationwide.
Consumer owned energy efficiency, solar electric, storage and load control are real and can be measured. This approach puts emphasis back on the consumer and jobs. Solar electric is the best investment that can be made and would beat most Wall Street investment. Solar electric has guaranteed returns greater than 10%.
CK and AG, beyond disputing suggestions proposed in the op-ed and other comments, what do you suggest to revive Wisconsin’s middle class?
AG, yes, Wisconsin’s decline has been building steadily but how but how has “the political disruption of the left during that time” (since Walker took office) impacted the economy? Demonstrations in Madison did little to end the dismantling of unions or decline of the middle class.
What are the big economic achievements of Walker’s scandal-riddled, crony-catering WEDC?
How will it help to decimate the civil service system, a backbone of middle-class jobs?
CK, your points could be digested easier if you didn’t bracket them with slams against journalism or the intelligence of people with viewpoints different than yours. The piece is clearly titled “op-ed” and the author is the director of a think tank, not a journalist. If you’d like to have a debate on the merits, let’s do that, otherwise everyone else here will throw you in the same bucket as WCD and look past anything you might say.
Ok- everyone take a deep breath on all sides. A few observations / opinions:
1. If / when officials in WIs cite the state unemployment rate as a successful sign , why is the unemployment rate @ the national level not a sign of success? 2. If WIs. continues to follows Kansas & Louisiana – type public policy re: will we wind up in the same place, economically; and 3. How does Minnesota continue to beat WIs. like a drum economically ? Can / should we unpack this ? It begs the question — are they a better state than we are?
BobD
If we want to GoGreen we should re-commission the, now idle, Kewaunee nuclear power plant. In the past, it produced about 5% of Wisconsin’s total electric needs. It is/was licensed to produce clean and carbon free electricity for 18 more years, through 2033. It shut down because natural gas and coal produced electricity is significantly cheaper, while being as reliable as nuclear. We need reliable 24/7 sources of electricity. Batteries/storage will need to become significantly cheaper for Wind and Solar to become an affordable and reliable base-load electricity source.
JayS, Kewaunee was only carbon-free after you forget about the massive resources needed to build a nuclear power plant. Besides, if it was such a slam-dunk deal… why didn’t someone else buy that rusting pile?
By the way, coal is not cheaper & the electric bills in WI are proof.
@Vincent Hanna, yes the HH income dropped 1.1% from 2010 to 2014 but HH income bottomed in 2012 or 2013 and has risen since. Family income during that 2010 – 2014 timeframe has risen 1.7%.
@Marie, Do you really not think the political disruption caused far more of a drain on WI’s economy than a paycut for teachers ever would? Politicians in the end have far less control over our economy than they’d like to think. However, the massive protests, recall elections, and whatnot cause a psychological effect that cause Business owners and managers to take pause in their decisions.
@David Ciepluch there’s often little point to argue with your ALEC rants, but I’ll point out that the unions did a good job of running good middle class jobs out of the state and country by not accepting the realities of global competition. We’re lucky Kohler isn’t a publicly traded company, that factory would have disappeared long ago with the rest of large manufacturing if they were.
Regarding WEDC, it’s very unfortunate how poorly it has been run because that is one example of a great way for government to directly influence business and job growth. Let’s hope all this scrutiny and new leadership turns it around.
@AG, I have not seen research about any “psychological effect” that protests of Act 10 and recall elections may have had on our business climate. However, there have been numerous articles, with data, about the demoralizing effects that ongoing verbal and other attacks on teachers have had on teacher retention and recruitment here. Cuts in pay and other benefits had been agreed to before Walker’s effort to bust public unions, so that was not the issue. Also, Wisconsin has had a long history of Progressive politics, union activism and even Socialism, so recent “political disruption” hardly came as a surprise to business people. And business also thrived in Wisconsin when those movements were dominant.
Politicians may not have as much control over the economy as they’d like, but the GOP now has a lock on all three branches of government. I would guess those branches collectively have more influence on the economy, and perceptions of the state, than protesters trying to avert the decimation of unions, especially public ones.
One thing often discussed anecdotally, and sometimes backed by empirical evidence, is that Milwaukee and other parts of Wisconsin are not considered great places to draw or retain millennials. That brain drain is something that concerns many businesses. Discouraging teachers from coming or staying may also not be good news for those who depend on an educated workforce. I suspect some people might be happy that the GOP is “winning” so many battles but perhaps less thrilled about the economic outcomes being triggered.
It’s hard to know the extent of parallels between Wisconsin and GOP-controlled Kansas. But now people are reportedly leaving Kansas in droves to escape that political/economic Petri dish. Let’s hope Wisconsin does not also become known as a great place to leave.
http://www.theatlantic.com/politics/archive/2015/06/where-republicans-went-wrong-in-kansas/396398/
http://www.nytimes.com/2015/08/09/magazine/the-kansas-experiment.html?_r=0
Marie, business leaders often cited the uncertainty of WI political situation as a motivation to stay in a hold pattern rather than make investments in their companies. I’m guessing you probably just tend to follow circles that talk about the negative effects on teachers, rather than business.
I like how you throw in the comment saying pay and benefit cuts were agreed to before ACT10… if you meant agreed to in the 11th hour after ACT was already in the works, yes. But it was too little too late by that point, the unions had a strangle hold on the state for too long by that point.
I read various media, including local and national articles on business topics and I talk to people in numerous circles.
If businesses were worried about Act 10, that’s now a long-settled issue, though I’m not sure what you claim business owners had feared. Many business owners fear people having less money to spend.
You don’t seem fond of the author’s suggestions, but what do you think will help rebuild Wisconsin’s vanishing middle class?
Marie, it wasn’t that they had fear specifically, it’s that unknowns around tax policy and the state of the economy makes planning more difficult. Many owners and managers came right out and said they’d prefer having taxes go up a little instead of the uncertainty behind the political environment. So by that point stability was almost more important. Anywho, I think you’re right ACT10 is done with and we’ve moved on. I think that is partly why you’re going to see a steady improvement in our state in the coming years.
There is certainly more we can do. Creating a business friendly climate is indeed very important. However, that just sets a foundation for success, it does not guarantee it.
I would need to write and entire op-ed of my own to discuss what I think we can do. It includes business incentives and incubators, education reform, local and state investments in our communities, and a lot more. I’m encouraged that both our median per capita income and family income is on the rise and our unemployment numbers are at a low not seen in many years (even while we have a higher employment participation rate than the country as a whole).
The best thing our state government can do though is not chase businesses away. Things like higher taxes, more expensive electricity, deep political polarization (I blame both sides for this), and blocking local investments and decision making do exactly that.
To all; thanks for the supportive / clarifying comments to my own. My ‘slam’ of the OpEd piece was directed at the ludicrous notion that the ‘free’ money that Gov Walker smartly and rightly turned down are anything but FREE. And to further buttress the fallacy of that item in this piece is that Medicaid, by it’s very definition “Medicaid in the United States is a social health care program for families and individuals with low income and limited resources. The Health Insurance Association of America describes Medicaid as a “government insurance program for persons of all ages whose income and resources are insufficient to pay for health care” (https://en.wikipedia.org/wiki/Medicaid) has nothing to do with growing the Middle Class in WI or any other State even if the funds weren’t borrowed ad infinitum by whoever occupies the WH.
As far as my ideas to actually grow the Middle Class in WI, there aren’t (sadly) a whole lot of levers that gov’t can pull at any level to grow an economy. People vote their wallets with their feet and WI has been losing that argument for almost 50 years now, regardless of what Party or Policy set is in place in Madison. I myself have moved away twice and yet returned mostly for familial ties, started my own business in MKE’s 3rd Ward to help grow the entrepreneurial base of the City, and now ‘import’ my >$150K/year salary back into WI from Chicago to support my home and family here. I’ve actually done and am doing more to grow WI and MKE’s economy than most Progressives could eve dream of doing as individuals.
WI and the MKE area just aren’t “on the radar” for much inward domestic or investment the way a Texas metro area or even a Nashville market is. Those places are where ‘people want to be’ (and yes M/SP is a weird, cold-weather exceptional place, but the reasons for that are just that, exceptional, and couldn’t be repeated here in WI). People just are either ‘satisfied’ with life here or aren’t and leave. A few hardy souls do find their way here through job transfers or stay after getting a world-class education at one of the many great colleges and universities in the State. But they are the exception. Whether it’s the youthful “brain drain”, people fed up with Winter or retirees who find much more favorable tax treatment in FL, NV, TX or AZ (as my father has), the ‘great sucking sound’ we hear every day are the income, assets and future potential of those dollars and ideas that are never coming back to WI and without the growth that they support, “new dollars’ from outside don’t get invested here either. This all compounds our flat-line (growth) economy.
We do need to do all we can to at least prime the pump a bit (read Tom Still’s or John Torinus’s columns in the various websites and newsrooms on this topic and see some encouraging signs) or learn about what the New North, the Water Cluster or M-WERC is doing or whatever Madison-are start-up of the day is getting funding that are all happening without much direct intervention from State policy or funding. Yes, there are some important support policies put into place in the last 10 years or so (about 25 years too late separate WI from ‘the rest of the field’ the way NC did in the 80’s), and they’ll help stem the tide a bit, but no Net large-scale inflows of people, money or ideas is headed our way.
Epic Systems may likely be the last large-scale start-up enterprise here in WI, one with 1000’s of new jobs in a ‘blue ocean’ market opportunity that can really move the needle and attract money and spin-out more ideas here. There just aren’t going to be many new places to stake-out big ideas and big revenues in the future, ones that already aren’t staked out by the regions and cities in the US that are established places where that process goes on as a way of life. The harsh cold reality is that WI is not in ‘the flow’ of (much) money and markets in the US by about Lake Michigan being about 90 miles too long to the South. Had that quirk of geography been different, that now global hub of trade, transport, people and funds would have been located here in the Dairy State and maybe Chi-waukee would have been governed by the great Socialist (with my honest admiration) mayors that we did have, making Milwaukee a truly special place to live, instead of the Democrat Machine that governed and has now bankrupted that hub to our South. Likely diminishing our place in the global web of commerce a bit further as Chicago goes down the same tubes as Detroit in the coming years.
AG & CK, thanks for sharing some ideas for turning this state and city around. I hope we don’t become a can’t-do city or state just because we lose hope or nerve.
CK, government does pull some levers relating to the economy. An op-ed in today’s JS addresses Ron Johnson’s fervor to continue denying facts about climate change and resist common-sense policies about pollution and alternative energy. Wisconsin stands out for its head-in-the-sand public policies about green energy—with many poor indicators in that sector to show for it. The federal government also keeps subsidizing carbon-based energy companies while keeping the playing field un-level for new energy sources.
When Scott Walker nixed money for a regional train, he squashed hope of Milwaukee having easier connectivity with Madison, our start-up hub, or being along a route from Chicago to Minneapolis/St. Paul. Sadly, ideology trumped potential for business growth and linkage. (Or maybe he’s just averse to change or his big-money backers have other agendas.)
I appreciate your ideas about the middle class, though I hope things are not quite that bleak. I also suspect many entrepreneurs and other professionals who identify as Progressives might dispute your assertion that they’ve done little to grow this or any economy. Yes, we’re a divided state but let’s not fuel those fires. Warren Buffett and many wealthy compatriots proudly wave the Progressive flag.
I hope many people stay open to creative, holistic approaches and policies that are good for business, good for workers and students, and good for building sustainable communities.
Thanks for mentioning Judy Faulkner, founder of Epic Systems and an awesome innovator and success story. I prefer to think Wisconsin is not a lost cause for other potential entrepreneurs. And hugeness need not be the only indicator of success.