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Shrinking Middle Class Driving Big Changes in Business

Released: 5-Feb-2014 10:00 AM EST
Source Newsroom: Cornell University
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Edward Baptist and Louis Hyman, professors of history at Cornell University, discuss the economic causes and business impacts of the dwindling middle class in the United States.

Baptist and Hyman have produced one of the first major historical MOOCs, “American Capitalism: A History,” tracing the history of capitalism from the 15th century to today. It is a global history of American capitalism that is designed to help explain how the middle-class market for consumer goods is eroding.

Baptist says:

“Most middle-class people can’t afford to buy big-ticket items as often as their parents could.

“Over the last 40 years, the real, after-inflation value of the middle-class worker’s salary has barely increased. Household debt has soared, but not because of consumption. Families are struggling to cover runaway increases in the cost of higher education for their children and medical care for all family members.

“The rewards for higher education have climbed higher, but state governments have steadily decreased their support for education, making degrees more expensive.

“Voters who reward legislators who cut funds to public higher education are destroying their own futures.”

. . . . .

Hyman says:

“It’s no surprise that the market for middle-class consumption is shrinking, and businesses already know that. Americans want high-end luxury and low-end deals. They are willing to borrow to get it because their wages haven’t risen in 40 years.

“While Banana Republic and Old Navy are growing, The Gap has withered along with the middle class. Outlet Stores, with their combinations of low prices and high-end goods, are killing the traditional mall.

“Everyday luxury, whether cheesecakes or handbags, defines the new economy, even as Americans can’t pay their bills.”

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