The Case of the Vanishing Middle Class

In this present crisis:  government is the solution or the problem?

“While all four household income groups, as defined by income categories, are expected to grow, it is the lowest and highest groups we expect to see relatively more households by 2040.  The 'hollowing out' of the middle is projected to continue over the next 25 years.”

“Household growth will be strongest in the highest income category, reflecting the expected strength of growth in high wage sectors combined with non-wage income (interest, dividends, capital gains, transfers). Household growth will also be high in the lowest wage category, reflecting occupational shifts, wage stagnation, as well as the retirement of seniors without pension assets. Slowest growth will be in the lower middle category, highlighting concerns about advancement opportunities for lower wage workers."

These rather obvious lamentations that the Bay Area middle class is vanishing are from Plan Bay Area 2040 Regional Forecast – Jobs, Population and Housing.

Planners ascribe this unfortunate situation to occupational shifts, wage stagnation, and retirement of seniors without pension assets.  However, are these reasons for the vanishing middle class or the results of deeper events?  Plan Bay Area 2040 believes the former, but let’s look into the latter.

Organic vs. Planned Cities

The Foundation for Economic Education (FEE) website published an interesting article in August 2014, Smart Growth?  U Cities vs Galaxy Cities.

"San Francisco, Seattle, and Portland are generally considered progressive cities. Well in advance of other cities, they implemented 'smart growth' policies. Now, there is a lot to recommend about these cities, but if you’re not rich, you’ll probably just want to visit."

"To understand how wealth disparities worsen in cities like these, we have to look at clusters of policies that go under the name 'smart growth.' They aren’t the only policies that create U cities, but these three areas drive the U city pattern…:  strict zoning regulations and building codes, rent control and low-income housing subsidies, rail investments preferred over roads."

Why are these three factors main culprits in U cities? 

"The wealthier folks snap up the dwellings in limited supply. Middle-class folks look for housing outside the city, if they can stay in the area at all. The poor, however, stay. They are subsidized to do so."

And, voila, the middle class vanishes.

"Now what about inverted-U cities? We could call these 'fried-egg' cities, but that’s not terribly sexy. I prefer 'galaxy cities' for obvious reasons. The idea behind galaxy cities is that, all things equal, you’ll not only get a fat bell of a middle class on the graph, but you’ll also get a galactic distribution of housing options if you look from above. Some call this sprawl, because more affordable housing extends outward from a denser core, phasing out at the periphery after the suburbs and exurbs."

"Galaxy cities are participatory cities. That is to say, their people participate far more in their evolution than do town planners. They are emergent cities."

So, in the galaxy city model you have people who feel free to search for opportunities, not feel stuck by zoning regulations.

Time for a Fresh Start?

Galaxy cities

Ah, but then won’t you have all these people driving their cars long distances to work, raising the level of greenhouse gases?  That is the scenario presented by Plan Bay Area.  Might we not create a different scenario, one in which cities that evolve organically avail themselves of ride sharing, driverless cars, hot lanes, private van services, and even incentives to bring jobs to them so folks end up working where they live?

U cities are by any standard not a good place to live.  Not for the rich who have difficulty finding good middle class care givers and educators for their children, and not for the poor who are lulled into staying in "poverty traps." It is time to review the real causes of U cities, and stop the unsuccessful treatment of the symptoms.