Middle class decline looms over final years of Obama presidency

[DALTON,Georgia] Barack Obama enters the final two years of his presidency with a blemish on his legacy that looks impossible to erase: the decline of the middle class he has promised to rescue.

The revival of middle-class jobs has been one of Mr Obama's mantras since he took office in 2009 fighting the worst economic crisis in generations. It was a major theme of his last State of the Union address and is expected to feature in the one scheduled for Tuesday.

Mr Obama's administration can take credit for stabilizing the US economy, which is growing again and last year added jobs at the fastest clip since 1999.

But for the middle class the scars of the recession still run deep. Federal Reserve survey data show families in the middle fifth of the income scale now earn less and their net worth is lower than when Obama took office.

In the six years through 2013, over the recession and recovery that have spanned Mr Obama's tenure, jobs have been added at the top and bottom of the wage scale, a Reuters analysis of labor statistics shows. In the middle, the economy has shed positions - whether in traditional trades like machining or electrical work, white-collar jobs in human resources, or technical ones like computer operators.

The trend is in plain sight in Dalton, Georgia, a manufacturing hub 145 km north of Atlanta. Massive factories that made it "the carpet capital of the world," were slammed by the collapse of the housing bubble. During the recession, with machines idle, they began investing heavily in new technology and are now laying plans to restore some lost jobs.

But the new positions are more skewed to the high and low end, and there will be fewer of them per dollar of output than before the recession, said Brian Anderson, president of the Greater Dalton Chamber of Commerce. "We can produce a whole lot of new carpet with not a lot more people," Anderson said. Companies have spent between US$1.5 and US$2 billion on retooling and innovation, reducing demand for labor, while higher than average regional unemployment continued to hold down wages, he said.

Firms like flooring giant Shaw Industries pared jobs - dropping 5,000 from a pre-recession labor force of 28,000 - but with new technology have rebuilt revenue to near previous levels. The company is boosting wages for master mechanics to around US$30 an hour, but feels no pressure to increase wages for the unskilled positions it retains.

The heavy investment in robotics and mechanization has raised expectations, said Paul Richard, Shaw's vice president of human resources. "It has put more emphasis on associates that can bring technical skills." Ahead of Mr Obama's annual address, the business community is expecting the president to press for passage of the Trans-Pacific trade treaty, though a debate rages within the Democratic Party over whether that would create more middle class jobs than would be lost to increased imports.

Others say he may seek more overtime pay for mid-level salaried workers, propose a higher federal minimum wage, or renew calls for major infrastructure spending.

Mr Obama has proposed expanded access to community college education and improved family leave policies, while some of his allies have called for an outright wealth transfer from the top to the middle.

For Mr Obama's legacy none of that may matter.

The forces at work in the American economy appear so entrenched that Mr Obama may be remembered as the president who pulled the nation from its worst downturn since the Great Depression, but failed to arrest deepening economic inequality.

REUTERS