Why the Middle Class Needs a Basic Income
America’s middle class needs a basic income because it is not making enough money.
To clarify, the average U.S. middle-class household income in 2016 was $78,442 a year, the Pew Research Center estimates. That sounds good until you realize that income is for everybody in the household.
The average American household size in America is 2.6 people, ArcGIS estimates. If you divide $78,442 by 2.6 you get an individual income of $30,170 a year.
Moreover on $78,442 a year, the traditional American family of four; wife, husband, and two kids lives dangerously close to the poverty level. For instance, divide $78,442 by four and get individual incomes of $19,610.50 a year.
The 2019 federal poverty level for an individual is $12,490, and the 2019 federal poverty level for a family of four is $25,750, The Balance reports.
The Middle Class is losing Ground
Thus, the middle class is struggling. Additionally, there are cities like San Francisco where $250,000 a year is needed for a middle-class income, The Balance claims.
Plus, the American middle class is shrinking. The US Census Bureau’s 2018 Household Income Study estimates just 45% of Americans are middle class. In fact, Pew estimates the number of middle families fell in 203 of the 229 American cities it studied in 2016.
“The shrinking of the middle class at the national level, to the point where it may no longer be the economic majority in the U.S.,” a Pew release claims. The middle class’s economic power is shrinking because the middle class has less money.
For instance, some middle-class families make as little as $45,000 a year, Pew claims. Hence, members of those households have an individual income of $17,307.69 a year if they have the average size of 2.6 members. Frighteningly, a family of four has an individual income of $11,250; under the poverty level with a $45,000 a year household income.
In the final analysis, America’s middle class has little money, and it is shrinking.
America’s Social Contract is Broken
The middle class is shrinking and making less money because America’s social contract is broken.
The old 20th Century social contract was: surrender part of your freedom for a “good job.” In exchange, you will get a good steady salary, health insurance, retirement, and job security.
That social contract is dead for a variety of reasons. Those reasons include; new technologies, increasing social mobility, the decline of traditional communities, changing values, and a competitive global economy. For instance, the large supply of manufacturing jobs that made that social contract possible are gone, and will not come back.
I think resurrecting the 20th Century social contract is impossible because the world is a vastly different place than it was in 1959. Thus, the efforts of politicians such as President Donald J. Trump (R-New York), U.S. Senator Liz Warren (D-Massachusetts), and U.S. Senator Bernie Sanders (I-Vermont) to recreate the old social contract will fail.
America needs a New Social Contract
America needs a new social contract and writing one will be a brutal battle. Notably, Americans wrote the old social contract in blood.
To explain, it took six decades of labor unrest from the 1890s to the 1950s; and many deaths, to forge the old social contract. The libertarian belief that good jobs with great benefits and high wages were an inevitable result of industrialization is pure fantasy.
Instead workers, unions, and reformers had to fight hard for such benefits. In fact, it was only the fear of fascism and Communism in the 1930s and 1940s that frightened American business into accepting unions. This led to the so-called Treaty of Detroit; which guaranteed good jobs in exchange for labor peace, and the 20th Century American welfare state.
Why the Old Social Contract is Dead
Such a compromise is unlikely in today’s world because employers could replace most workers with machines. For example, the Brooks Institution estimates 25% of US jobs; or 36 million workers, are a high risk of being killed by automation.
In addition, 36% of US jobs; or 52 million workers, have a high risk of being destroyed by automation. If Brookings is correct, automation could kill 61% of American jobs.
Worst of all it is the easiest jobs to unionize that are the easiest to automate away. Consequently, automation and robotization could decimate union strongholds. CNBC claims Brookings’ data shows 55% of the jobs in Kokomo, Indiana, are vulnerable to automation, for example.
“If your job is boring and repetitive; you’re probably at great risk of automation,” Mark Muro tells CNBC. Muro is a Senior Fellow and Policy Director at the Brookings Institution.
Thus, if factory workers strike. Management replaces them with robots and eliminates the union threat by eliminating the jobs. Nor is it just factory workers, it is theoretically possible to replace most office workers, bankers, food service workers, cashiers, retail managers, clerks, accountants, and even truck drivers with robots, algorithms, and artificial intelligence (AI).
Hence, many managers can now tell their workers: “I call the robot salesperson the minute I hear you using the u-word.” As a result, the workers will shut their mouths and do whatever management says.
America Needs a new Social Contract
Hence what America needs is a new social contract written for the modern economy and modern technology.
I think America needs a new social contract based on what Medium writer Conrad Shaw labels “universality.” Shaw and I believe all human beings have universal needs that the government is honor bound to fulfill.
This idea is old, and it is very American. Notably, Thomas Jefferson included universal needs in the Declaration of Independence; America’s first social contract by writing:
“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.”
Shaw defines “universal needs” in today’s world as money (income), healthcare and a safe and clean environment. I will add freedom, safety from crime, violence, and oppression, meaningful employment, dignity, housing, access to information, education, and transportation to those universal needs.
Unfortunately, America’s current economy does not meet those needs for many people. Hence, we need a new social contract.
Andrew Yang’s New Social Contract
I think only one Presidential candidate is proposing a new social contract that meets America’s needs. That candidate is Andrew Yang (D-New York).
In essence Yang’s social contract comprises universal basic income (the Freedom Dividend), universal healthcare (Medicare for All), and wealth redistribution (the Value-Added Tax or VAT). Yang has more radical ideas including the use of tokenized social credits to rebuild communities and taxpayer financed and controlled political campaigns (Democracy Dollars).
Therefore, Yang is calling for a radical restructuring of the American economy and society. Hence, Yang the supposed centrist could be the most radical popular presidential candidate America has seen since Socialist Eugene V. Debs (Indiana) in the early 1900s.
Yang believes America will face violent upheaval and perhaps revolution without a new social contract. In his book, The War on Normal People Yang predicts technological unemployment and income inequality will lead to rioting and terrorism.
Hence, like President Franklin D. Roosevelt (D-New York) Yang believes only radical new social and economic policies can save America from catastrophe. During the 1930s, FDR believed his New Deal was the only thing protecting America from fascism and Communism.
The Middle Class’s low income shows that America’s social contract is broken. Only history will show if we will write a new social contract without shedding a lot of blood.