How the Loss of Middle-Skill Jobs Killed the Middle Class

As the jobs that fueled the rise of the middle class in America ebb away, so does the cohort it helped create

May 25, 2014 at 2:00PM

Americans are feeling decidedly less middle-class these days, and with good cause.

According to a recent study by The New York Times, the U.S. has lost its status as home to the wealthiest middle-class population in the world, passing that particular torch to the Canadians. The poorest Americans have lost ground, as well, earning less than their poor counterparts in Europe.

This fact has not gone unnoticed by the American public.

Earlier this year, the Pew Research Center polled over 1,500 adults about this very subject, and found that only 44% now identify themselves as members of the middle class. Only six years ago, in 2008, 53% considered themselves as part of that socio-economic class.

What accounts for this change in attitude?

The jobs picture has changed, and not for the better
Loss of jobs is the predominant answer, but it's more complicated than that. As the Great Recession sucked eight million jobs out of the economy, most Americans have suffered from economic insecurity, often caused by being unemployed for some period of time.

One of the biggest problems is not only the great number of jobs that were lost, but the fact that most of them were middle-skill jobs – the type that paid pretty well, but did not require a college degree. And, to make matters worse, those kinds of jobs are not coming back in great numbers, even as unemployment seems to be easing.

Middle class loses ground in the job market
That's because job growth has left the middle-skill sector behind, with high-skill and lower-skilled jobs taking the lead. For the middle class, this has often forced a move into lower-paying jobs – a phenomenon called "job polarization".

Why is this happening? The loss of manufacturing jobs has been a huge factor. As the Bureau of Labor Statistics pointed out in 2011, these kinds of jobs had been in decline since the 1970s, but accelerated greatly during the 2007 to 2009 recession. And, while some analysts have pointed to technology as a killer of middle-wage jobs, that phenomenon isn't new, either.

The biggest issue seems to be that, over the past few years, employers have considered there to be a skills gap between the jobs being offered and the competency level of applicants. Compounding the problem is a general unwillingness to provide training that would enable the unemployed to fill these vacancies, as well.

Things are beginning to change...finally
That appears to be slowly changing. The Department of Labor is making more than $50 million available for retraining efforts specifically aimed toward matching willing workers with middle-skill jobs.

In states like New York and New Jersey, young people – many with four-year college degrees – are being trained to fill these jobs, primarily in manufacturing. New Jersey alone estimates that there are 50,000 jobs in the manufacturing sector that are just waiting for trained workers. Using DOL grant money, mobile training labs are making the rounds of community colleges, training students in skills such as metal fabrication. 

These types of jobs – which pay between $40,000 and $60,000 to start – are precisely the sort that is needed to rebuild the American middle class. It will take time to repair the damage wrought by the Great Recession, but restoring the middle-skill job market is the perfect place to start. 

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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