In Texas (Like The Nation) The Middle Class Is Shrinking

The Republicans like to point to Texas as an economic "miracle" created by Republican economic policies. That is simply not true. While Texas has had some significant job creation, far too many of those new jobs are low-wage jobs. Jobs that pay a middle class wage are a smaller percentage of the state's jobs with each passing year. Here is how Mechele Dickerson describes it in the Austin American-Statesman:

Gov. Greg Abbott’s 2016-17 budget plan praises the state’s “unparalleled” successes in leading the nation in both job creation and economic opportunity. Likewise, President Barack Obama’s final State of the Union address reflected on how the U.S. economy stabilized and grew during his two terms as president.

Despite this mostly rosy economic news, middle-income households are struggling and will continue to face significant economic challenges.

The good economic news is that the U.S. unemployment rate remains at 5 percent, and more than a quarter of all states raised their minimum wage for 2016. The Texas unemployment rate has been lower than national averages for about nine years, while unemployment rates in cities such as Austin and Dallas are at historic lows.

Despite lower unemployment rates and minimum wages that should help lift more people out of poverty, middle-income households are not getting ahead.

A recent Pew Research Center report shows that for the first time in almost 45 years, middle-income households — which earn between $42,000 to $126,000 — now account for less than 50 percent of total U.S. households. (see chart above)

Perhaps more disconcerting is the fact that rich Americans are flourishing financially at the expense of middle- and lower-income workers. That is, rich households received 49 percent of total income in 2014. That is a dramatic jump from 29 percent that they earned in 1970. During this same period, the share of total income for middle-income households dropped from 62 percent to 43 percent.

This trend probably will continue. Most job growth will come from occupations that pay relatively low wages, according to recent data assembled by the Bureau of Labor Statistics and the Federal Reserve Bank of St. Louis. Many jobs that have helped propel workers into the middle class — positions that involve routine or repetitive tasks, such as postal clerks, executive secretaries, bookkeepers, accountants and auditing clerks — will continue to shrink during the next 10 years. On the other hand, jobs that pay low wages — such as home health aides or retail and fast food workers — will proliferate.

What does this mean? It means that the dwindling of middle-income jobs — along with the proliferation of lower-income jobs — has gutted the middle class. It is creating an economically polarized society. And this polarization can be found in Austin, Dallas, Houston and San Antonio: four of the 10 most economically segregated large cities in the country. In fact, Houston now has one of the highest levels of income inequality in the nation. This is not something Texans should be proud of.

Houston’s employment picture typifies the economic plight of the middle class. Data released by the Federal Reserve Bank of Dallas show that the unemployment rate in Houston is below national levels, but that the city lost jobs in the professional, scientific and technical services industries. Whereas the number high-wage jobs such as those for lawyers and engineers decreased, jobs in the lower-wage sectors — such as retail and hospitality services — are booming.

Ironically, many lower- and middle-income Americans may appear to be better off now than they were in the 1980s because the relative cost of small-dollar items — such as clothing, cellphones, TVs and computers — has dropped. Despite relatively lower prices for these mass-produced products, costs for the services workers need to attain and remain in the middle class — such as college, health care and child care — have soared.

So what should Texas do? State officials have implemented economic development plans that have encouraged businesses to create more jobs for Texas workers. But if Texans want to maintain a middle class, we will need more than jobs that pay at or slightly above the minimum wage. To help Texas workers achieve the middle-class goal, Texas businesses must provide middle-income jobs. Texas politicians must be willing to support policies that provide affordable housing — rented or owned — for middle-income households. Politicians need to keep college affordable and help workers find safe and affordable child care. Until Texans can afford to pay for the services that will help them become and remain members of the middle class, middle-income workers will continue to fall behind.

(Dickerson is the Arthur L. Moller Chair in Bankruptcy Law and Practice at the University of Texas School of Law.)