TAX CUT NO CURE FOR MIDDLE CLASS ECONOMIC WOES

The strong economy of the past few years has lifted the fortunes of most working families. At the bottom of the wage and income scales, workers whose living standards declined steadily over the past 25 years have benefited from both the tight labor market and the increase in the minimum wage. At the top of the income ladder, the wealthy have continued to enjoy wage and income growth and have reaped huge gains from the growth in the stock market. But what about the middle? Neither the minimum wage nor the stock market does much for workers in middle-income families.1 The tight labor market has helped those in the middle class, but the gains have been modest compared to the benefits received by those at the bottom. From 1989 – the year the economy peaked before slipping into the early 1990s recession – to 1993, the income of the median family fell. It began to rise in 1994, and by 19972 it stood at $44,468 – about $300 (in 1997 dollars) above its 1989 level. Yet middle-class hourly wages have been stagnant over this period, and so the gains that have accrued to middle-class families have come mostly from working more hours. While the 1998 data will surely reveal further income growth for the median family, living stan-dards have not improved as much as the highly touted nature of recent economic growth might suggest. Three key features of the labor market have continued to buffet the progress of middle-class families eve