Commonwealth Journal

Columns

January 11, 2012

How do you restore earning power of the middle class?

Somerset — I don't think a story in this yet young new year has chilled me quite so much as the January 2, 2012 story in the Lexington Herald-Leader about General Electric in Louisville planning to hire new workers. With wages dropping domestically, General Electric is proposing to increase manufacturing of appliances. What this shows is the dramatic decrease in the earning potential of the American middle class. This middle class drove the economic engine of the United States for fifty years but when manufacturing jobs shifted overseas it left a gaping hole in the structure of our society. Here is a quote from the Herald-Leader article.

Wages for the new hires, however, are $10 to $15 an hour less than the pay scale for hourly employees already on staff — with the additional concession that the newcomers will not catch up for the foreseeable future. Such union-endorsed contracts also are showing up in the auto industry, at steel and tire companies, and at manufacturers of farm implements and other heavy equipment, according to Gordon Pavy, president of the Labor and Employment Relations Association and, until recently, the AFL-CIO’s director of collective bargaining.

Even when the new hires reach their maximum earning potential they will not be making as much as the workers who have been with General Electric for the long term are now. Truth be told, the benefits won't be as good either. A 62 year old worker is making $31.78 per hour. Let's break it down. For that long term worker that represents a gross pay of $66,000 per year. Enough to raise a family on a single income, buy a house and maybe even afford to send the kids to college. However at $15 per hour that yearly wage comes to $31,000 per year. For a family of four it will be extremely difficult to exist on one paycheck alone, let alone buy a house or send the kids to college. In this scenario it will be hard for this family to break out of the working poor and into the affluent middle class. Children will suffer because of the lack of a stay-at-home family member and child care costs will rise along with other documented societal problems.

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