Middle class in Georgia fits into Obama’s plans

When President-elect Barack Obama put the fate of the middle class at the center of his presidential campaign, he wasn’t just taking a shot in the dark. A number of reports have shown that income inequality has grown across the nation over the past two decades.

Now, it will be a key issue for the incoming administration as Vice President-elect Joe Biden takes the helm of a new high-level task force aimed at coming up with policies to reverse middle America’s apparent slide. In a televised interview a week ago, Biden said the task force will use a few key questions to measure its progress:

Enlarge this image

Associated Press

Vice President-elect Joe Biden will lead a new high-level task force aimed at coming up with policies to reverse middle America’s apparent slide.

BUSINESS
Latest Headlines:
[an error occurred while processing this directive] • More business news
• Business photo galleries

• Is the middle class growing?

• Is the middle class getting better?

• Is the middle class no longer being left behind?

In Georgia, the answer to those questions up to now has been no, according to data released earlier this year by the U.S. Census Bureau.

While the typical Georgia family’s income hasn’t grown so far this decade, after accounting for inflation, the well-off got better-off.

The number of Georgia households making more than $200,000 a year jumped more than 70 percent between 2000 and 2007, while the number of households making less than $75,000 stayed relatively stagnant. Some of that trend was the result of wage inflation, since the income brackets were not adjusted for inflation since 2000.

Antonita Hall, a 32-year-old registered nurse from Hiram, is feeling the pressure on her middle-class existence.

“We tend to go down because of how the economy is right now,” she said.

Houses in her subdivision are now selling for $30,000 less than what she paid for her home three years ago. Meanwhile, she complained, her health insurance benefits aren’t nearly as generous as those available to her patients who receive government assistance.

Rich getting richer

Other recent census data indicate that the income gap in Georgia has been growing.

The average household income of Georgia’s richest 5 percent jumped more than 10 percent from 2006 to 2007, to $295,244. But the middle 20 percent’s average income rose less than half as much, to $49,139, according to census data. Average income of the bottom 20 percent rose by nearly 9 percent, to $11,293.

Well-to-do Georgians likewise took home a bigger share of total household income last year. The top 20 percent and the richest 5 percent both increased their share of total income in 2007 from the previous year, to 50 percent and 22 percent, respectively.

Those trends were mirrored nationally, where the poorest 20 percent of households now earn only 3.4 percent of total income, a 15 percent drop over two decades, according to the Economic Mobility Project, a research group supported by several foundations from across the political spectrum.

“Despite strong economic growth … income inequality by almost every measure is higher today than in 1984,” the group said in a recent report looking at factors affecting “economic mobility,” the ability of people to move between higher and lower income brackets over time.

Reasons for the growing gap

Several studies in recent years based on tax data have also indicated that the top 10 percent of the nation’s income earners continue to have growing incomes while the bottom 90 percent took home less.

Experts cite differing reasons for the growing gap, partly depending on where they fit on the political spectrum.

Republicans tend to call it a natural consequence of free markets and innovation, such as advances in technology, which drives up the incomes of some but also displaces other industries and workers.

Others argue that the gap has been growing because the affluent have benefited from Bush administration tax breaks. Meanwhile, middle-class and poor Americans have seen their incomes fall behind the wealthy as employers cut health and pension benefits, and the government trims spending on education, health care and child care.

The typical Georgia family hasn’t made any progress this decade, said Sarah Beth Gehl, deputy director of the Georgia Budget and Policy Institute.

Last year “we know was the height of the economic recovery,” Gehl said. But unlike previous recoveries, she said, incomes of typical families last year barely made up ground lost in the last recession in 2001, after accounting for inflation from higher food, gasoline and other prices.

“People went into the current recession basically where they were in the 1990s. That’s troubling,” she said.

In another departure from the past, she said, Georgia’s employment picture has been lagging behind the nation in recent years as its technology and airline industries suffered big hits after the dot-com bust and Sept. 11, 2001, terrorist attacks.

State unemployment outpaces nation

Georgia’s unemployment rate has continued to outpace the nation in the current recession. The state’s jobless rate hit 7.5 percent in November, according to the Georgia Department of Labor, compared with 6.7 percent for the nation.

The Obama administration has pledged to slow such job losses through its proposed economic stimulus package that could amount to as much as $800 billion over two years. As part of that plan, Biden’s White House Task Force on Working Families expects to target middle- and working-class families through policy changes to expand access to education and work force training, and protect retirement incomes.

The next administration needs to tread carefully, said John Zvolensky, the semi-retired former chief executive of Kuhlman Electric, an 800-employee electrical transformer manufacturer.

“I would certainly say be careful,” said Zvolensky, of Greensboro, who was waiting at the Atlanta airport last week to pick up family visiting for the holidays. “Take sage wisdom and advice before you change things. The system works.”

Zvolensky, 67, said he probably fits among the highest brackets, but he doesn’t believe the middle class has been slipping behind. “I can’t see that,” he said.

One yardstick shows a healthy nation

By some measures, middle-income and working families haven’t been falling behind, even though income disparities continue to grow, according to the Economic Mobility Project.

“There’s a pretty good, healthy [American] dream going on,” said Ianna Kachoris, project manager for the group. “Two-thirds of Americans are making more than their parents did.”

The group, which tries to steer a path between the right and left, argues that Americans’ ability to move up or down the income ladder is a less polarizing way to examine income issues than measuring income disparities.

By that yardstick, the nation is relatively healthy. Incomes have grown over the long term, and most Americans are as economically mobile now as decades ago, Kachoris said.

But there are some troubling signs, she added. Black middle-class families have “strikingly high” chances of falling to the bottom income level compared with other races, and low-income children have a somewhat harder time making it out of the bottom income bracket.

She said the group hasn’t determined what factors may be causing those trends. However, she said numerous factors affect individuals’ economic mobility. Particularly important is the person’s education level, health status and “social capital,” she said, including the parent’s education level and whether the person came from a two-parent household.

Three years after getting her accounting degree at Kennesaw State University, Maria Reyes is optimistic that she has a solid hold on the middle class, even though some public accounting firms are shedding jobs and the economy is tanking.

“I think 2009 will be a challenge,” said the 26-year-old Buckhead resident, who works as an auditor for a large corporation. She doesn’t make as much money as she would like, and she believes “there’s no way that I’m going to have Social Security when I retire.”

“But I’m happy. I have a job. I can’t complain,” she said. “I think anything could be possible. You just have to make wise decisions.”