It took just 33 years.
In the mid-1980’s, the middle class accounted for a third of America’s wealth. Housing, education, and health care costs were all within reach for middle-income families. Personal computers and video games were just starting to take off, cable TV was beginning a meteoric rise, and the U.S. was in full recovery after 1970’s stagflation threatened to suffocate the economy.
Fast forward to 2016. Cell phones, streaming services, software, internet access—American families face a pile of recurring bills every month that did not even exist in the 1980’s. But the big budget items have been far more challenging: education (nearly eight times), housing (more than four times), and health care (more than double) costs have exploded relative to wages.
Now? The share of U.S. aggregate wealth for Middle America has plummeted to just 17%. Making meaningful progress is harder than ever. Personal choices, work ethic, disruptive technology, immigration, discrimination, regulation, inequity, taxes, markets, education…there are a host of reasons why the middle class is getting squeezed. But the bottom line is clear: success feels out of reach for most Americans.
We now face some uncomfortable choices.
As the middle class continues to decline in wealth, population, and power, we can resign ourselves to a two-class economy. Historically, two-class economies have always ended in revolution, usually violent.
We could wait for the government to solve the problem by force and redistribution—solutions that have never been tenable in America and would likely increase division, disunity, and class warfare.
Or we can innovate our way out of this with employers taking the lead.
Employers can change compensation structures. Employers can choose to grant their employees stock options and ownership so that when companies have windfall events, more people prosper. Employers can commit to outcome-based compensation that measures progress based on goals instead of dollars.
While there are more challenges than ever, there are also more resources and possibilities. Let’s innovate a solution before one happens to all of us.