Education the cure for anxious class

Robert Reich has a name for the disenchanted centre. It is composed of working men and women who cling to the middle as their earning power erodes. Raised in an era of prosperity and relative stability, they are now buffeted by economic change and feel betrayed. The US Labor Secretary calls them the "anxious class".

The anxious class voted for change in 1992 and in the mid-term elections of 1994. They will do so again if they do not perceive that living standards are improving. This is what political pundits predict and what the numbers show. The Republican Party responded by giving the anxious class what it thinks it wants: a "Contract with America" that seeks to cut taxes, social and welfare programmes while reducing government regulation and balancing the budget. Last week, President Clinton tried yet again to reinvent himself by also reaching out to the "forgotten middle class".

The story of the anxious class is really about economics and dramatic change. The self-enclosed economies that used to breed predictable, safe tracks are a thing of the past. Globalism, technological breakthroughs and structural change have swept throughthe US economy with the force of revolution. The hurricane has been building since the late 1970s when a clear pattern began to emerge: the rich got richer, the poor got poorer, and the middle, those in the $24,000-48,000 income bracket, got squeezed.

According to the Census Bureau, real median income in 1993 was $31,241, a 7 per cent decline since 1989. The anxious class has coped with the dramatic corporate restructurings of the last decade by seeking more education and training, turning to lower-paying service-sector jobs and, in many cases, working two jobs. A premium has been placed on education, as the numbers revealed that real hourly wages of those with less than a secondary education or in many cases the equivalent, declined by 25 per cent between 1979 and 1993.

However, those at the high end, in the better paid, university-trained managerial class, are not immune from the same anxieties. During the 1980s, another phenomenon emerged: growing income gaps among people with the same education and experience. According to the National Commission for Employment Policy, wage inequality among college graduates was as great during the 1980s as between college graduates and those with secondary educations.

Additionally, although better-educated high earners bounced back more easily after the last two recessions, they are also working harder. The Economic Policy Institute in Washington found that when salaried incomes from white-collar jobs are calculated on a weekly basis, wages are indeed rising. However, when the additional work hours of professional and managerial employees are factored in, the picture is not as clear. "The question is when someone gets the same salary he used to get when working 45 hours a week and now is working 60 hours a week, do you count that as a lower hourly wage or not?" said Lawrence Mishel, director of the EPI study.

The big problem facing politicans is whether there is anything that government can do. President Clinton and Mr Reich, believe that the new American workplace will be populated by corporate survivors of the current restructurings who will be globally competitive. They will need skilled, flexible, technology-literate workers.

Thus the Clinton administration's conclusion is that more government-sponsored job training and education programmes are a critical key to future economic success. This, of course, is what Mr Clinton proposed to do before he ran into budget ceilings and perennial red ink.

Republicans, on the other hand, think that there is little that government should do. Job training, if it is to occur, should be handled by the private sector. The best way to raise income levels is to promote growth more broadly through deficit reduction, lower taxes and less regulation. Their response is the Contract with America, about which the world will be hearing a lot in January.

One problem with such an approach is that it assumes that the private sector will take on these reponsibilities. So far, it has not. From 1986 to 1991, companies provided training to 35.5 per cent of college-trained employees in their 20s but to only 19 per cent of those with secondary school educations and to 8.7 per cent of high school dropouts.

Admittedly, it is hard to gauge just what sort of skills the US economy will require when the current shakeout is over and the new workplace emerges. However, the statistics so far are clear: the best way to climb out of economic stagnation, they say, isthrough education.