What Happened to Economic Mobility in America?

It's The Economy Stupid

The plight of two American families in Milwaukee explains the other half of the winner-take-all economy

by David Rohde

Over the last 20 years, two middle class American families -- the Stanleys and the Neumanns -- have done all the right things. Milwaukee natives, they worked hard, learned news skills,  and tried to show their children that strivers would be rewarded.
But their lives -- as captured in an extraordinary Frontline documentary -- are an American calamity. Followed by filmmakers for two decades, they move from dead-end job to dead-end job, one of the couples' divorces, and most of their children spiral downward economically, not up.
The Stanleys and the Neumanns are a microcosm of the middle class that President Barack Obama -- and House Republicans -- will spar over for the remainder of Obama's presidency. And they are part of a global trend. Across industrialized nations, income inequality is growing and people like the Stanleys and Neumanns are the losers.
"Mobility is a two-edged sword," said Miles Corak, an economist at the University of Ottawa who has studied income inequality across countries. "And you're looking at the other edge of the sword."
At the very top, life is getting sweeter. As my colleague Chrystia Freeland noted last month, the global "winner-take-all economy" is intensifying.
A June study found that the number of people worldwide with more than $1 million to invest soared to a record 12 million in 2012, a 9.2 percent increase over the previous year. The number of ultra rich -- the 111,000 people with investable assets of at least $30 million -- surged 11 percent.
The Stanleys and the Neumanns, meanwhile, are falling behind. Whatever your politics, please watch this film. These two families, one black and one white, put a human face on the polarized debate about what is happening to the American middle class.
Conservative viewers may feel that the two couples made mistakes -- failing to go to college, for example, or not moving out of a dying industrial town like Milwaukee. Liberal viewers may see them as victims of a globalized economy that rewards the few spectacularly and relegates the many to low-paying jobs.
Whatever the cause, their spiral is startling.
When filmmakers Bill Moyers, Kathleen Hughes and Tom Casciato, first visited them in 1991, the family's wages from union factory work comfortably supported them. In the early 1990s, however, as Milwaukee factories moved overseas, both of the Stanleys, and Tony Neumann, the Neumann patriarch, lost their jobs. They took lower-paying work and, to makes ends meet, Tony Neumann's wife, Terry, also had to enter the workforce.
Throughout the 2000s, the couples struggled on. Claude Stanley, the Stanley patriarch, waterproofed basements, started his own home inspection business and became a minister. By 2012, an illness has saddled him with enormous medical bills and his business had failed. At 59,  he was a city forestry department worker making $26,000 a year trimming trees and collecting garbage. His wife Jackie became a realtor, but never gained a foothold in a declining housing market. Only one of their five children finished college, paying tuition with credit cards.
After his layoff, Tony Neumann took a low-paying overnight factory job, and rarely saw his wife and three children. His wife Terry worked as a security guard, forklift operator and home healthcare attendant. By 2012, the couple, high school sweethearts, had divorced and lost their home through foreclosure.
The children in both families fared even worse. Those who attended at least some college had steady work. Those who did not had low-paying jobs or no work at all.
Many also had failed relationships. As of 2012, one Neumann son was a high school dropout who had fathered two children with two different women. The other was unemployed and had fathered three children with two different women. Defying stereotypes, the Stanleys, who are black, proved to be a more stable family than the Neumanns.
In one of the film's most wrenching scenes, Terry Neumann visits the house she lost to foreclosure, where she had expected to live out her American dream. The family that bought it at auction for $38,000 looks on as she tours the home, wondering what went wrong.
"The way the economy is going, no, I don't think anybody is going to be financially secure, truthfully," she tells Moyers near the end of the film. "And we'll just work until we collapse and keel over and die."
Recent studies have found that economic mobility is stagnating in the United States. Where one grows up and who one's parents are increasingly determine a child's economic future. And a smaller percentage of Americans escape poverty than their peers in other wealthy nations, including Canada, Germany, Japan, France and Australia.
On Wednesday, President Obama again vowed to change all that. In the first of what administration officials say will be a series of speeches about the middle class, Obama repeated a laundry list of economic proposals that are stalled in Congress. House Republicans, meanwhile, vowed to do everything in their power to block Obama and slash government spending.
Americans, understandably, are tuning out the noise. Washington's deadlock is likely to continue. Yet the problem is real and global.
Corak, the Canadian researcher, said workers like the Neumanns and Stanleys who lack college degrees or specialized skills are struggling across many industrialized nations. Shifting manufacturing jobs overseas to developing nations as well as sweeping technological change has led to stagnant middle class wages.
But a recent study he authored found that the dynamic played out differently in different nations. In Canada, more equal public education and healthcare systems, as well as the lack of a large housing bubble, helped mitigate the impact of globalization. In the United States, meanwhile, families more often struggled on their own.
Corak said the polarization of the U.S. inequality debate puzzled him. Yes, an individual's actions mattered, such as the Neumann's divorce. But global economic trends beyond each family's control affected them as well, as did the quality of public education and healthcare.
"You can still accept that families are very, very important," he said, "without rejecting the economic issues."
On balance, Obama's proposals will do more to aid struggling middle class families than those of far-right House repugicans. White House officials vow that this Obama drive to aid the middle class will be different.
For the sake of the Neumanns and Stanleys -- and millions of families like them -- hopefully they're right.