Our declining middle class – an International Monetary Fund perspective

On PBS Newshour last night, a news report on the findings by the International Monetary Fund of the declining middle class in America was discussed. Judy Woodruff interviewed the Managing Director of the IMF, Christine Lagarde. Below is a link to the interview. The IMF findings support the concerns raised by several, which indicate the US middle class has declined from 60% in the 1970s to 50% today, a precipitous drop.

She notes that a vibrant, spending middle class has been a key to the economic success of America, as the wealthy do not spend as much and the people in the lower class have less money to spend. She notes this spread creates polarization which leads to mediocre economic growth. One of the things she notes is the aging demographics and the role they play on our economy.

The U.S. population is aging, like in other economies of the world, and, as a result, the participation of active workers in the economy is declining. Now, we cannot stop the course of time, but what policies can do is encourage people who are not joining the workplace, the job market, to actually do so.

And I would point to a couple of policies. One is support given to women. And, by that, I mean maternity leave policy that would help them face the decision of, do I stay or do I go? Second, child care support, and not just child actually, but the kind of support that would help families look after a child or look after an elderly, because, with aging, we will have to support more parents or grandparents.”

She also mentioned two other policies that would aid in our economy. One is the earned income tax credit. She said there seems to be bipartisan support to do something that would help low-income wage earners. The other is an increase in the minimum wage. This would help those in service jobs at least garner more income which would go directly into spending. I like the fact she reiterated a Ted talk theme by a venture capitalist, that when people consume more, manufacturers have to make more and, as a result, have to hire more. In short, consumers create jobs.

She was also asked about today’s Brexit vote and was hopeful the British citizens would vote to remain in the European Union. Since she has been in her position, I have found her to be a voice of reason about our world’s economy and someone who we should listen to. Her comments above are no exception.

http://www.pbs.org/newshour/bb/gloomy-imf-report-on-u-s-economy-cites-dwindling-middle-class-growing-income-equality/