```

[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]

 
                 STRENGTHENING AMERICA'S MIDDLE CLASS:
                    EVALUATING THE ECONOMIC SQUEEZE
                         ON AMERICA'S FAMILIES

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                          EDUCATION AND LABOR

                     U.S. House of Representatives

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

            HEARING HELD IN WASHINGTON, DC, JANUARY 31, 2007

                               __________

                            Serial No. 110-2

                               __________

      Printed for the use of the Committee on Education and Labor

                       Available on the Internet:
      http://www.gpoaccess.gov/congress/house/education/index.html

                                 ______

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                    COMMITTEE ON EDUCATION AND LABOR

                  GEORGE MILLER, California, Chairman

Dale E. Kildee, Michigan, Vice       Howard P. ``Buck'' McKeon, 
    Chairman                             California,
Donald M. Payne, New Jersey            Ranking Minority Member
Robert E. Andrews, New Jersey        Thomas E. Petri, Wisconsin
Robert C. ``Bobby'' Scott, Virginia  Peter Hoekstra, Michigan
Lynn C. Woolsey, California          Michael N. Castle, Delaware
Ruben Hinojosa, Texas                Mark E. Souder, Indiana
Carolyn McCarthy, New York           Vernon J. Ehlers, Michigan
John F. Tierney, Massachusetts       Judy Biggert, Illinois
Dennis J. Kucinich, Ohio             Todd Russell Platts, Pennsylvania
David Wu, Oregon                     Ric Keller, Florida
Rush D. Holt, New Jersey             Joe Wilson, South Carolina
Susan A. Davis, California           John Kline, Minnesota
Danny K. Davis, Illinois             Bob Inglis, South Carolina
Raul M. Grijalva, Arizona            Cathy McMorris Rodgers, Washington
Timothy H. Bishop, New York          Kenny Marchant, Texas
Linda T. Sanchez, California         Tom Price, Georgia
John P. Sarbanes, Maryland           Luis G. Fortuno, Puerto Rico
Joe Sestak, Pennsylvania             Charles W. Boustany, Jr., 
David Loebsack, Iowa                     Louisiana
Mazie Hirono, Hawaii                 Virginia Foxx, North Carolina
Jason Altmire, Pennsylvania          John R. ``Randy'' Kuhl, Jr., New 
John A. Yarmuth, Kentucky                York
Phil Hare, Illinois                  Rob Bishop, Utah
Yvette D. Clarke, New York           David Davis, Tennessee
Joe Courtney, Connecticut            Timothy Walberg, Michigan
Carol Shea-Porter, New Hampshire

                     Mark Zuckerman, Staff Director
                   Vic Klatt, Minority Staff Director

                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on January 31, 2007.................................     1
Statement of Members:
    Altmire, Hon. Jason, a Representative in Congress from the 
      State of Pennsylvania, prepared statement of...............     9
    Hare, Hon. Phil, a Representative in Congress from the State 
      of Illinois, prepared statement of.........................    10
    Kucinich, Hon. Dennis J., a Representative in Congress from 
      the State of Ohio, prepared statement of...................    10
    McKeon, Hon. Howard P. ``Buck,'' Senior Republican Member, 
      Committee on Education and Labor...........................     3
        Prepared statement of....................................     8
        Wall Street Journal article, ``Career Journal: Class of 
          '07 Gets Plenty of Job Offers''........................     4
        Wall Street Journal article, ``Pension Plans Take Healthy 
          Turn--Rising Markets Aid Big Firms' Funds; Failure Risk 
          Lessens''..............................................     6
        New York Times article, ``Looking for the Angry Populists 
          in Suburbia''..........................................     7
    Miller, Hon. George, Chairman, Committee on Education and 
      Labor......................................................     2
    Sanchez, Hon. Linda T., a Representative in Congress from the 
      State of California, prepared statement of.................    11
    Sarbanes, Hon. John P., a Representative in Congress from the 
      State of Maryland, prepared statement of...................    12

Statement of Witnesses:
    Appelbaum, Eileen, director, Center for Women and Work, 
      Rutgers University.........................................    17
    Furchtgott-Roth, Diana, director, Center for Unemployment 
      Policy, Hudson Center......................................    19
    Hacker, Jacob, Ph.D., professor, Yale University.............    14
    Johnson, Kellie, president, Ace Clearwater Enterprises, Inc..    21
        Prepared statement of....................................    23
    Miller, Rosemary, flight attendant...........................    16
    Weller, Christian, senior economist, Center for American 
      Progress...................................................    25

                 STRENGTHENING AMERICA'S MIDDLE CLASS:
                    EVALUATING THE ECONOMIC SQUEEZE
                         ON AMERICA'S FAMILIES

                              ----------                              

                      Wednesday, January 31, 2007

                     U.S. House of Representatives

                    Committee on Education and Labor

                             Washington, DC

                              ----------                              

    The committee met, pursuant to call, at 10:30 a.m., in room 
2175, Rayburn House Office Building, Hon. George Miller 
[chairman of the committee] presiding.
    Present: Representatives Miller, Kildee, Payne, Andrews, 
Hinojosa, Tierney, Kucinich, Wu, Holt, Davis of California, 
Bishop, Sanchez, Sarbanes, Sestak, Loebsack, Yarmuth, Hare, 
Clarke, Courtney, McKeon, Castle, Ehlers, Platts, Kline, Davis 
of Tennessee, and Walberg.
    Staff Present: Tylease Alli, Hearing Clerk; Jody Calemine, 
Labor Policy Deputy Director; Molly Carter, Legal Intern, 
Education; Alejandra Ceja, Senior Budget/Appropriations 
Analyst; Sarah Dyson, Administrative Assistant, Oversight; 
Carlos Fenwick, Policy Advisor for Subcommittee on Health, 
Employment, Labor and Pensions; Michael Gaffin, Staff 
Assistant, Labor; Gabriella Gomez, Senior Education Policy 
Advisor; Ryan Holden, Senior Investigator, Oversight; Lamont 
Ivey, Staff Assistant, Education; Brian Kennedy, General 
Counsel; Thomas Kiley, Communications Director; Danielle Lee, 
Press/Outreach Assistant; Stephanie Moore, General Counsel; Joe 
Novotny, Chief Clerk; Megan O'Reilly, Labor Policy Advisor; 
Lisette Partelow, Staff Assistant, Education; Rachel Racusen, 
Deputy Communications Director; Julie Radocchia, Education 
Policy Advisor; Michele Varnhagen, Labor Policy Director; 
Daniel Weiss, Special Assistant to the Chairman; Andrew 
Weltman, Legal Intern, Labor; Michael Zola, Chief Investigative 
Counsel, Oversight; Mark Zuckerman, Staff Director; James 
Bergeron, Counselor to the Chairman; Robert Borden, General 
Counsel; Kathryn Bruns, Legislative Assistant; Steve Forde, 
Communications Director; Ed Gilroy, Director of Workforce 
Policy; Rob Gregg, Legislative Assistant; Jessica Gross, Deputy 
Press Secretary; Taylor Hansen, Legislative Assistant; Victor 
Klatt, Staff Director; Lindsey Mask, Director of Outreach; Jim 
Paretti, Workforce Policy Counsel; Molly McLaughlin Salmi, 
Deputy Director of Workforce Policy; Linda Stevens, Chief 
Clerk/Assistant to the General Counsel; and Loren Sweatt, 
Professional Staff Member.
    Chairman Miller. The Committee on Education and Labor will 
come to order, and welcome to all of the members of the 
committee and to our panel and to the audience.
    We are here today to discuss the economic squeeze on 
America's families and to learn what we can do to strengthen 
and grow America's middle class. This is a key priority for our 
committee in this Congress, and that is why this is the 
specific subject of our first and second hearings.
    During the first hundred hours, I was pleased that two of 
the committee's bills designed to help hard working families 
passed the House with overwhelming bipartisan support. We acted 
to increase the minimum wage to $7.25 an hour, a long overdue 
increase necessary as more families reach the middle class and 
to help them pay for the basic necessities. Even Wal-Mart 
supported the bill to increase the Federal minimum wage because 
it knows that every dime in increase will be put right back 
into the economy, and as they noted, their customers did not 
have sufficient funds to pay for the basic necessities.
    We also acted to cut the interest rate in half on 
subsidized Federal student loans, a critical boost to those 
students trying to decide whether they can afford to take on 
and pay back a significant debt necessary to finance a college 
education today.
    These are the kind of middle class concerns that we intend 
to focus the Nation's attention on every week in this committee 
and to take action to address these concerns in a way that 
strengthens and expands the middle class. While the business 
pages across America show the profits and productivity are up 
for many corporations, we know that that is only half of the 
economic story. The other half of the story is how middle class 
Americans are struggling to keep it all together as their 
health care bill, gas bills, grocery bills go up faster than 
their wages.
    As I travel across the country, I hear from workers who are 
laid off from good paying manufacturing jobs and wound up with 
new jobs that pay far less than the ones they lost. I hear from 
workers whose companies just dumped their pension plans, 
forcing them to scramble to find another way for security. I 
hear from workers whose basic expenses for housing, food, 
education, transportation and health care are going up even 
while their paychecks stay about the same.
    Today parents are justifiably concerned their own children 
are having a lower standard of living in adulthood than they 
have had.
    In a recent poll, 59 percent of American workers say they 
have to work harder to earn a decent living than did workers 20 
or 30 years ago. Sadly, the American economy has grown more 
unequal than any time since Franklin Roosevelt's New Deal. We 
don't have to accept the middle class squeeze as a fact of 
life. We can promote policies that will make work pay, help the 
middle class become more secure in their health care, more 
secure in their nest eggs and more confident of their future.
    I believe that we can have a strong and growing economy 
that benefits everyone, not just a privileged few.
    Today we are going to hear from a panel of distinguished 
witnesses who will talk about what has made our economy so 
unbalanced, what we can do to make it fair for their workers 
and their families. I look forward to hearing from each of you 
on this issue of paramount importance.
    First, I would like to yield to the senior Republican 
member of the committee, Mr. McKeon, for an opening statement.
    Mr. McKeon. Thank you, Mr. Miller.
    Chairman Miller, I want to thank you for holding this 
hearing today, and I welcome each of our witnesses. This 
committee plays a key role in policies impacting the quality of 
life for all Americans of all ages and of all incomes.
    I am especially grateful to have six of these Americans 
here with us today ready to provide their testimony on the 
state of our consistently growing economy. Mr. Chairman, I have 
never been one to engage in class warfare, and I am not about 
to start here. I have always found that while pitting one class 
against another often makes for good politics, it rarely makes 
for good policy.
    Instead, I would like to focus this morning on where we 
have been, where we are and where we are going from an economic 
policy perspective because frankly, I think Members in both 
parties have a good story to tell when it comes to our economy.
    At the start of this decade the dot-com bubble had burst, 
financial events around the world compounded the problem and we 
found ourselves sinking into a recession. Congress responded 
quickly not by adding more layers to the Federal bureaucracy 
and micromanaging our economy back to health but by cutting 
taxes for every single person in this room and literally in 
every room in America. The years that followed have witnessed 
dramatic economic growth. Even after the September 11th 
terrorist attacks and the launch of the global war on terrorism 
and on that strong economic foundation, we have set into motion 
many important policy reforms, including several that were born 
right here in this very committee room.
    In the wake of the corporate scandals, we enacted the first 
meaningful pension reforms in a generation ensuring workers' 
retirement savings will be there for them when they need it 
while restricting excessive golden parachutes, executive 
compensation accruals and adding stability into a system in 
dire need of reform. And to your credit, although coming late 
to the game and particularly after neglecting to offer a 
comprehensive pension reform plan of your own, many on your 
side of the aisle joined with us last summer to send the 
President a pension bill and send the American people a message 
that we are serious about protecting their retirement savings.
    We have given Americans more control over their health care 
savings than ever before through the establishment of health 
savings accounts, an effort that has gained significant 
bipartisan traction.
    Unfortunately, similar efforts to reign in out-of-control 
medical liability lawsuits and on this committee, in 
particular, to provide small businesses and their workers an 
easier path to access affordable health care have run into a 
partisan wall, but we will keep trying.
    On education, we have laid the foundation for a strong 
workforce through the No Child Left Behind Act. We have worked 
together to put college within reach for low and middle income 
families by extending college savings plans, making college 
tuition tax deductible for low and middle income families, and 
beginning to hold colleges accountable for their role in the 
college cost crises.
    We began strengthening math, science, and critical foreign 
language programs to enhance our global competitiveness, and we 
have modernized our job training system to meet the new 
realities of the 21st century economy. Is there more work to 
do? Absolutely.
    But anyone who ignores the progress we have made, so much 
of it in a bipartisan way, is more concerned with party 
politics than with proactive policy, and I strongly urge them 
to take a closer look at the facts.
    More than 7 million new jobs have been added to our economy 
since August of 2003, spanning more than 3 years of 
uninterrupted job growth. The unemployment rate is holding 
steady at 4\1/2\ percent, lower than the average of the 1970s, 
1980s and 1990s. Many workers' combined earnings of benefits 
have hit an all time high rising some 10 percent since the 
start of this decade. The average 401(k) retirement savings 
plan is now more than 65 percent more valuable than it was in 
2002.
    The pension plans of our Nation's largest employers ended 
2006 with more than 100 percent of the assets needed to pay 
pensions indefinitely, a 20 percent increase in 4 years.
    And analysts project that this year's college graduates 
will enter the most lucrative job market in years, with 
employers planning to hire some 20 percent more graduates this 
year than last year.
    With these thoughts in mind, Mr. Chairman, I would like to 
include in the record two recent news articles published in the 
January 23rd, 2007 Wall Street Journal entitled Pensions Plans 
to Take Healthy Turn, and Class of 2007 Gets Plenty of Job 
Offers as well as a January 28th of 2007 New York Times article 
detailing a sharp increase in a worker's wages.
    Chairman Miller. Without objection.
    [The information follows:]

            [From the Wall Street Journal, January 23, 2007]

         Career Journal: Class of '07 Gets Plenty Of Job Offers

                             By Erin White

    Employers are diving back into the fountain of youth.
    This year is shaping up as the strongest for college recruiting 
since the downturn earlier this decade, colleges report. Traditionally 
heavy recruiters, including management consulting firms, investment 
banks and accounting firms, are intensifying college recruiting 
efforts. They're also facing more competition from other employers in 
such fields as technology, consumer products, government and even 
nonprofits.
    Employers plan to hire 17% more graduates from the class of 2007 
than they got from the class of 2006, according to the National 
Association of Colleges and Employers. That would make this year the 
strongest job market since 2000-2001, the association says. More than 
half of the surveyed employers said they planned to increase hiring; 
only 5% planned a decrease. Salaries were forecast to rise 4.6%, 
according to another survey by the same group.
    ``We now again have the nice problem of having to help some of our 
students choose among multiple job offers,'' says Jack Tinker, director 
of recruiting at the career office of Connecticut College. Mike Hendel, 
interim director for the career center at Carleton College in 
Northfield, Minn., says he, too, is counseling students deciding among 
``two or three really good offers.''
    Behind the increased recruiting are a relatively strong economy, 
growing business demands and heady corporate profits. Employers created 
about 1.8 million additional jobs in 2006. Average weekly earnings rose 
4.5%, compared with a 3.2% increase in 2005.
    Some companies are also planning for future work-force needs as the 
baby boomers' retirement looms. Employers ``are finally starting to get 
the message that [they] really need to do more'' with college 
recruiting as baby boomers age, says Dan Black, director of campus 
recruiting for the Americas at Ernst & Young LLP.
    At New York University, close to 40% of seniors have job offers, 
which is more at this point in the year than in any year since 1998-99, 
estimates Trudy Steinfeld, executive director of career development. 
Salaries are up about 5% to 10% since last year, and companies are 
offering bigger signing bonuses--up to $10,000, she says.
    At the University of Chicago, 119 companies conducted on-campus 
interviews with seniors during the fall quarter, compared with 93 a 
year earlier. Employers posted 180 jobs in that quarter, up from 135 a 
year before. Recruiting mainstays such as management-consulting and 
financial-services firms are active at Chicago, but so are nonprofits 
and public-service groups: About 15 such organizations have expressed 
interest in an April career fair, compared with none at this time last 
year, says Meredith Daw, co-director of career advising and planning 
services.
    At a November job fair in Boston, the 12 sponsoring schools turned 
away at least five employers clamoring for space. At the University of 
California, Los Angeles, officials squeezed 10 additional employers 
into a job fair last week that they had initially limited to 100 
employers. Many of the companies attended a fall fair but need more 
recruits.
    Christopher Bothur, a Connecticut College senior, in the fall 
accepted a job in an analyst-training program at Deutsche Bank AG. 
Earlier, he had spoken briefly with the bank about a possible summer 
internship, but he spent the summer working for the United Nations in 
China.
    When he returned to school, the bank called him, whisked him to New 
York for interviews and offered him a position that will include stints 
in New York, London and China. ``The job kind of fell into my lap,'' he 
says. Mr. Bothur says his base salary alone will be roughly twice as 
much as it would have been at the think-tank jobs he was considering.
    College career counselors say the tone of campus recruiting doesn't 
approach the dot-com era frenzy, among employers or students. Students 
saw older friends and siblings suffer through the downturn earlier this 
decade, and they understand that the job market could tank again. And 
while the economy as a whole is strong, sectors such as housing and 
autos are suffering.
    One employer contributing to the rising demand on campuses is 
accounting and consulting firm Deloitte & Touche. The firm is 
recruiting about 3,300 seniors for full-time positions in the U.S. this 
year, up from fewer than 3,100 last year, says Diane Borhani, head of 
U.S. campus recruiting.
    To attract candidates, Deloitte is raising salaries and signing 
bonuses. Full-time starting base salaries in the U.S. are up about 5% 
on average to as much as roughly $60,000 in certain markets. Signing 
bonuses for new college hires in consulting range from $6,000 to 
$10,000 this year, up from $4,000 to $8,000 last year, Ms. Borhani 
says.
    Employers also hit campuses earlier. Yum Brands Inc., which markets 
restaurant chains including Taco Bell and KFC, sent students welcome-
back postcards and emails in August, the earliest it has ever started 
campus recruiting efforts. ``We tried to be there literally the day 
that they got to school,'' says Misty Reich, Yum's vice president of 
global talent management. Recruiters and senior executives soon 
followed.
    Companies are also trying to make their recruiting efforts more 
personal. The management consultancy Boston Consulting Group sent more 
young employees to campus this fall to talk one on one about life at 
the firm.
    Personal outreach went a long way to recruit Wayne Vonder Heide, a 
21-year-old senior at the University of Illinois at Urbana-Champaign, 
who recently accepted a management-training position at Kraft Foods 
Inc. He interviewed with about a dozen companies last fall, mostly for 
sales positions. ``Just seeing how many jobs are out there was really 
encouraging,'' says Mr. Vonder Heide, an advertising major with a 
business minor. He was confident enough in his prospects that he 
spurned follow-up interviews with about four companies.
    Around Thanksgiving, Kraft offered him a post in Cincinnati. 
Management trainees contacted him and the company invited him to tour 
the office there. He met his would-be co-workers; one took him around 
the city, including neighborhoods popular with young professionals. ``I 
could really see myself getting up every day and going to this office 
and getting along well with all of these employees,'' Mr. Vonder Heide 
says. ``That was a deciding factor.''
                                 ______
                                 

            [From the Wall Street Journal, January 23, 2007]

 Pension Plans Take Healthy Turn--Rising Markets Aid Big Firms' Funds; 
                          Failure Risk Lessens

                            By Theo Francis

    After years of steep underfunding, pension plans are now healthy, 
thanks to several years of double-digit investment gains and rising 
interest rates, separate studies from benefits consultants suggest.
    The pension plans of Fortune 100 companies ended 2006 with 102.4% 
of the assets needed to pay pensions indefinitely, according to an 
estimate expected to be released today by Towers Perrin, a Stamford, 
Conn., benefits consultant. That is up sharply from a low point of 
81.9% in 2002, though still below the 125.8% recorded at the height of 
the stock-market boom in 1999.
    Consultants and pension experts said the change suggests fewer 
pension plans are at risk of failing. That bodes well for workers 
dependent on the plans for retirement income and for the Pension 
Benefit Guaranty Corp., a federally run pension insurer that pays basic 
benefits if the plans aren't able to.
    ``There's no reason why their funding shouldn't have improved--
everything's going in the right direction,'' said Jack Ciesielski, a 
pension-accounting expert who writes the Analyst's Accounting Observer 
newsletter. While some companies faced serious funding shortfalls, for 
many employers ``it was cyclical in nature,'' he added.
    Similar findings are echoed by a separate study of pension funding 
based on 2005 data, released yesterday by benefits consultant Watson 
Wyatt Worldwide. That study found that pensions for a group of 1,000 
companies were about 91% funded in 2005, up from a little more than 80% 
funded in 2002.
    Widespread concern over underfunded pensions and corporate 
decisions to freeze or cut pension benefits has helped pension 
legislation through Congress last year. The legislation was billed as 
shoring up pension plans weakened by a ``perfect storm'' of low 
interest rates and poor stock-market performance early this decade. Few 
provisions of the new law took effect before this year, so any 
improvements they may bring about aren't reflected in the estimates by 
the benefits consultants.
    Towers Perrin's study examined the 79 companies in Fortune 
magazine's list of the 100 largest U.S. firms that sponsored defined-
benefit pension plans. Pension plans are backed by trust funds that 
typically pay retirees a set amount each month for life, or a one-time 
payout based on that stream of payments. A plan's funded status is a 
measure of any gap between the fund's assets and the company's 
obligations under the plan.
    Stock-market gains were the biggest factor in the plans' recovery, 
averaging about 12% in 2006. In addition, rising interest rates likely 
reduced plan liabilities by about 3%, Towers Perrin estimated. Interest 
rates determine how the company converts future pension payouts into a 
liability on its books today.
    Company contributions also improved pension funding, with average 
contributions rising more than fivefold since 1999. But these 
contributions boosted plan funding by only about 1%, Towers Perrin 
said.
    One factor unexamined in the study: How big a role pension freezes 
and cuts have played in improving pension funding. Freezing or cutting 
benefits reduces a company's pension liabilities, which means the 
existing assets cover more of the company's obligations.
    Towers Perrin used publicly disclosed data for each company, 
including asset, liability and asset-allocation figures, and took into 
account subsequent market returns and interest-rate changes.
    Improving plan fortunes could encourage some companies to stop 
contributing to their plans, as many did in the late 1990s; however, 
pension-industry officials say last year's legislation makes that less 
likely.
    Separately, new pension-accounting rules taking effect this year 
mean companies must start reflecting net pension liabilities on the 
balance sheet, instead of recording them in a footnote as they have for 
years. Under Towers Perrin's projections, ``on average, the Fortune 100 
will be booking an asset'' rather than a liability for their plans, 
said Bill Gulliver, Towers Perrin's chief actuary for human-resource 
services.
    The transition from prior accounting rules to the new ones, 
however, mean that the Fortune 100 companies are likely to see a 
combined decrease in shareholders' equity of about $160 billion, 
improved from prior estimates of $245 billion, Towers Perrin said.
    Watson Wyatt's study showed that plan funding improved by about $10 
billion in aggregate between 2004 and 2005. Investment returns improved 
funding by about $114 billion, and company contributions added about 
$51 billion, offset by the growth of benefits for employees in the 
plans, Watson Wyatt said.
    ``The bottom line is, things are getting better,'' said Mark 
Warshawsky, Watson Wyatt's director of retirement research and a former 
Bush administration Treasury official. He said preliminary estimates 
for 2006 show further improvement.
    Still, Watson Wyatt's analysis shows that pension assets were 
invested about 64% in stocks, on average--meaning another sharp 
downturn could wreak havoc with pension funding once again.
                                 ______
                                 

              [From the New York Times, January 28, 2007]

              Looking for the Angry Populists in Suburbia

                           By David Leonhardt

    In his confrontational response to President Bush's State of the 
Union address on Tuesday, Senator Jim Webb of Virginia said that he was 
going to focus on only two topics. One, as everyone knew it would be, 
was Iraq.
    But before he turned to the war, the new senator spoke about 
something else: an economy that he said made it seem ``as if we are 
living in two different countries.'' In one, stock prices, corporate 
profits and executive pay are rising. In the other, the middle class is 
barely scraping by.
    Mr. Webb said the situation was reminiscent of the early 20th 
century, when robber barons were raking in wealth and ``dispossessed 
workers at the bottom were threatening revolt.''
    It was the sort of speech that one might have expected during a 
deep economic slump. Yet it came instead as most workers have started 
receiving significant pay increases for the first time in years and as 
polls show that most Americans think the economy has grown stronger.
    This contrast was arguably the most significant part of the speech. 
As they plan their strategy on Capitol Hill and begin the 2008 
presidential campaign, the leaders of the Democratic Party are betting 
that the temporary swings of the economic cycle no longer have the 
political power they once did.
    Instead, they say, the economic shocks of recent years--
technological change, globalization, the decline of labor unions and 
business icons like Ford Motor Company--have left many swing voters 
feeling anxious and insecure about the future.
    After years of fighting losing battles against tax cuts, Democrats 
argue that this economic anxiety has altered the political landscape, 
making swing voters open to a new role for government--a form of what 
Representative Rahm Emanuel of Illinois has called ``suburban 
populism.''
    With issues like energy policy, immigration and health care having 
gone largely unaddressed in recent years, Democrats see a way to define 
themselves as the party that can help Americans survive the 21st-
century economy.
    An unanswered question, though, is whether suburban populism can 
still have appeal during good economic times.
    ''The little ups and downs of the economy are not what's bothering 
the average American, as much as it is the feeling that there are large 
forces that buffet them around,'' said Senator Charles Schumer of New 
York, whose book laying out an agenda for the party was published last 
week. ``In the past, the attitude was, `Get government out of the way.' 
And now it's, `Gee, I may need it.' ''
    Amy Klobuchar, a freshman senator from Minnesota, pointed out that 
her state had one of the strongest economies in the country, yet she 
still based her winning campaign largely on people's economic worries. 
``They feel insecure,'' Ms. Klobuchar said last week. ``And the point 
of this is, they're right.''
    This strategy certainly has risks. Tax cuts--with a heavy dose of 
optimism thrown in--have been a much better political bet than populism 
for decades now, and Republicans are sticking to this script. During 
his address last week, Mr. Bush described the economy as being ``on the 
move,'' and he is scheduled to visit Peoria, Ill., this week to call 
attention to recent wage gains. Republicans are pushing for an 
extension of the tax cuts passed during Mr. Bush's first term that they 
say are a major cause of the current boom.
    The economy emerged from a recession in late 2001, after the first 
tax cut went into effect, but wages for most workers still did not keep 
up with inflation for much of the next few years. Only in recent months 
has that changed.
    In 2006, the average hourly pay of rank-and-file workers, who make 
up about four-fifths of the work force, rose 4.2 percent, while the 
consumer price index increased only 2.6 percent. The net result--an 
inflation-adjusted increase of 1.6 percent--was a bigger annual raise 
than any that workers received from the late 1970s to the mid-90s.
    The direction of wages has historically been one of the best 
predictors, if not the best, of the public mood, and it, too, has been 
brightening. In a Gallup Poll conducted in mid-January, the share of 
respondents calling the economy excellent or good--52 percent--reached 
its highest level since the Clinton administration.
    But even with the recent increases, the real hourly pay of rank-
and-file workers has risen only 3 percent since Mr. Bush took office, 
according to the Bureau of Labor Statistics. Over the same span, 
productivity--that is, the value of what the economy produces per 
hour--has risen 18 percent.
    Except for a few years in the late 1990s, in fact, pay increases 
have been modest for most of the last three decades, which appears to 
be contributing to the anxiety. In exit polls on Election Day, fewer 
than one in three people said they expected life for the next 
generation of Americans to be better than life today.
    But even if suburban populism has some appeal, Democrats have been 
less clear about how to translate it into policy. During their first 
weeks in control of the House, they have passed bills to raise the 
minimum wage, to cut the interest rate on federally subsidized loans to 
college students and allow government to negotiate with pharmaceutical 
companies over the cost of drugs sold through Medicare.
    But none of the bills has yet passed the Senate, and even if they 
do, they are unlikely to have a big effect on most middle-class 
families--the target audience of the new suburban populism.
    Some Democrats, in the party's center and on the left, are starting 
to push for broader ideas. In his new book, Mr. Schumer calls for 
biometric employment cards to reduce illegal immigration and a 
crackdown on tax evasion by the wealthy, among other measures. Tom 
Vilsack, the former Iowa governor who is running for president, is 
arguing for a push on new energy technology partly to ``elevate our 
economy above global competition.''
    It is still not clear how much can be done by a party that, for at 
least another year, will lack a clear leader. In his speech last week, 
Senator Webb cited two populist role models, Andrew Jackson and 
Theodore Roosevelt, both of whom were presidents, not Congressional 
leaders.
    But the coming year will give the party's leaders a chance to hone 
its message--and to see how long the current economic boom will last.
                                 ______
                                 
    Mr. McKeon. Now is this not utopian, Mr. Chairman? Most 
definitely not. But at the same time, it is unmistakable proof 
that our pro-growth policies are strengthening our economy, 
creating jobs and spurring investment, and we are doing all of 
this without adding new layers of government and disguising it 
as innovation or competitiveness. Rather, we have unleashed the 
entrepreneurial spirit that drives Americans and filled in the 
gaps with meaningful reforms that are making a real difference 
for students, workers, and retirees.
    That is something to be proud of, Mr. Chairman, and indeed 
that is something to build upon.
    [The statement of Mr. McKeon follows:]

Prepared Statement of Hon. Howard P. ``Buck'' McKeon, Senior Republican 
                Member, Committee on Education and Labor

    Chairman Miller, thank you for convening today's hearing, and I 
welcome each of our witnesses. This Committee plays a key role in 
policies impacting the quality of life for all Americans, of all ages, 
and of all incomes. I'm especially grateful to have six of these 
Americans with us today, ready to provide their testimony on the state 
of our consistently growing economy.
    Mr. Chairman, I've never been one to engage in class warfare, and 
I'm not about to start here. I've always found that, while pitting one 
class against another often makes for good politics, it rarely makes 
for good policy. Instead, I'd like to focus this morning on where we've 
been, where we are, and where we're going, from an economic policy 
perspective * * * because, frankly, I think Members in both parties 
have a good story to tell when it comes to our economy.
    At the start of this decade, the dot-com bubble had burst, 
financial events around the world compounded the problem, and we found 
ourselves sinking into a recession. Congress responded quickly, not by 
adding more layers to the federal bureaucracy and micromanaging our 
economy back to health, but by cutting taxes for every single person in 
this room and--literally--in every room in America. The years that 
followed have witnessed dramatic economic growth, even after the 
September 11th terrorist attacks and the launch of the Global War on 
Terrorism. And on that strong economic foundation, we've set into 
motion many important policy reforms, including several that were born 
right here, in this very Committee room.
    In the wake of the corporate scandals, we enacted the first 
meaningful pension reforms in a generation--ensuring workers' 
retirement savings will be there for them when they need it, while 
restricting excessive ``golden parachute'' executive compensation 
agreements and adding stability into a system in dire need of reform. 
And to your credit, although coming late to the game and particularly 
after neglecting to offer a comprehensive pension reform plan of your 
own, many on your side of the aisle joined with us last summer to send 
the President a pension bill--and send the American people a message 
that we're serious about protecting their retirement savings.
     More--We've given Americans more control over their health 
care savings than ever before, through the establishment of health 
savings accounts--an effort that has gained significant bipartisan 
traction. Unfortunately, similar efforts to rein-in out-of-control 
medical liability lawsuits and--on this Committee, in particular--to 
provide small businesses and their workers an easier path to access 
affordable health care have run into a partisan wall. But, we'll keep 
trying.
    On education, we've laid the foundation for a strong workforce 
through the No Child Left Behind Act. We've worked together to put 
college within reach for more low- and middle-income families by 
extending 529 college savings plans, making college tuition tax 
deductible for low- and middle-income families, and beginning to hold 
colleges accountable for their role in the college cost crisis. We've 
begun strengthening math, science, and critical foreign language 
programs to enhance our global competitiveness. And we've modernized 
our job training system to meet the new realities of a 21st Century 
economy.
    Is there more work to do? Absolutely. But anyone who ignores the 
progress we've made--so much of it in a bipartisan way--is more 
concerned with party politics than with proactive policy. And I'd 
strongly urge them to take a closer look at these facts:
     More than seven million new jobs have been added to our 
economy since August 2003, spanning more than three years of 
uninterrupted job growth;
     The unemployment rate is holding steady at 4.5 percent--
lower than the average of the 1970s, 1980s, and 1990s;
     Workers' combined earnings and benefits have hit an all-
time high, rising some ten percent since the start of this decade;
     The average 401(k) retirement savings plan is now more 
than 65 percent more valuable than it was in 2002;
     The pension plans of our nation's largest employers ended 
2006 with more than 100 percent of the assets needed to pay pensions 
indefinitely--a 20 percent increase in four years; and
     Analysts project that this year's college graduates will 
enter the most lucrative job market in years--with employers planning 
to hire some 20 percent more graduates this year than last year.
    With these thoughts in mind, Mr. Chairman, I'd like to include in 
the record two recent news articles published in the January 23, 2007 
Wall Street Journal entitled ``Pension Plans Take Healthy Turn'' and 
``Class of '07 Gets Plenty Of Job Offers,'' as well as a January 28, 
2007 New York Times article detailing a sharp increase in worker wages.
    Now, is this utopia, Mr. Chairman? Most definitely not. But at the 
same time, it is unmistakable proof that our pro-growth policies are 
strengthening our economy, creating jobs, and spurring investment. And 
we're doing all of this without adding new layers of government and 
disguising it as ``innovation'' or ``competitiveness.'' Rather, we've 
unleashed the entrepreneurial spirit that drives America--and filled in 
the gaps with meaningful reforms that are making a real difference for 
students, workers, and retirees. That's something to be proud of, Mr. 
Chairman--and indeed, that's something to build upon.
                                 ______
                                 
    [The statement of Mr. Altmire follows:]

Prepared Statement of Hon. Jason Altmire, a Representative in Congress 
                     From the State of Pennsylvania

    Thank you, Chairman Miller. It is a great honor for me to serve on 
the Committee this Congress and I look forward to working under your 
leadership to address some of the most important questions facing our 
country.
    I would like to extend a warm welcome to all our witnesses. I thank 
you for coming to Washington to testify and am eager to hear your views 
on how we might best help the middle class.
    The purpose of today's hearing is to examine the degree to which 
the middle class, the backbone of America, is being squeezed out and 
left behind. This is a very real issue that, as I am sure all my 
colleagues know, is among Americans' top concerns. I hear it everywhere 
I go back in my district.
    Where once a family on a single income could pay for a college 
education and count on reliable health care and retirement benefits, 
now families with dual incomes are stretched to their very limits and 
leveraged to the hilt. Even as they work harder than ever, the middle 
class's purchasing power is diminishing. Paying for their children's 
college tuition is, for most families, merely a pipe dream. Likewise 
for affordable family health care benefits and a secure retirement.
    Mr. Chairman, this is an untenable situation. America's working 
families deserve more. I am fundamentally committed to ensuring the 
long term health and viability of the American middle class, and I know 
this Congress is as well. We will work tirelessly to improve access to 
higher education and healthcare, to secure Americans' retirement 
benefits, and to guarantee that all Americans share in America's 
wealth.
    Thank you, Mr. Chairman, for your leadership on these issues, I 
appreciate the opportunity to work with you. I yield back the balance 
of my time.
                                 ______
                                 
    [The statement of Mr. Hare follows:]

Prepared Statement of Hon. Phil Hare, a Representative in Congress From 
                         the State of Illinois

    Thank you Mr. Chairman. America's middle-class families are under 
great economic strain. Average incomes have become flat and prices for 
basic needs such as healthcare, housing, energy and education have 
skyrocketed.
    Families are not able to save for retirement or prepare for unknown 
risks or crises. Therefore, our middle class is in great danger of 
eroding, which will have disastrous impacts not only on the U.S. 
economy but also on the global economy.
    It was my goal in coming to Congress to try and eradicate the fear 
workers have of losing their jobs to economic factors; make it easier 
for families to send their kids to college; and ensure everyone has 
access to affordable healthcare. But, how do we do that? I believe 
there is no one solution, but Congress must take measures to create 
economic stability and security through education, income equality and 
business investment in American employees and products.
Questions for the panel
     Mr. Hacker, how do we reverse The Great Risk Shift and do 
we need to tackle the superficial things first, like lowering 
healthcare costs, or address the entire economy as a whole?
     Mr. Hacker, you talk about the erosion of hope and 
opportunity in your statement, which Ms. Miller also speaks to in her 
remarks about struggling to live in the middle class. There have also 
been studies cited today that this sentiment is widespread across the 
United States. How can Congress restore hope in our workforce and 
create opportunities not yet realized?
     Mr. Weller, why are wages stagnant and why are businesses 
not investing in their employees like they used to? What kind of 
incentives can we provide businesses to become more employee or 
American invested?
     Ms. Furchtgott-Roth, your testimony cites strong economic 
growth statistics and a positive prognosis for the future. However, 
this is in direct conflict with the statements of the other panelists, 
especially Ms. Miller who in representing the middle class today. In 
fact many of the constituents I talk to in my district do not believe 
claims about a strong U.S. economy. Which outlook are we to trust and 
do you think this conflict in our information is a cause of the 
problem?
                                 ______
                                 
    [The statement of Mr. Kucinich follows:]

  Prepared Statement of Hon. Dennis J. Kucinich, a Representative in 
                    Congress From the State of Ohio

    Mr. Chairman, as we will hear from today's witnesses, families 
across the nation are experiencing increased financial pressures and 
too often failing to reap the rewards of their own productivity. Many 
middle class workers who have labored tirelessly to support their 
family are now faced with job insecurity and financial concerns. Too 
often, the overriding themes of many workers lives have become themes 
of increasing debts and diminishing protections. The pressure they now 
face largely stems from circumstances beyond their control, 
circumstances that we as Members of Congress must work to rectify.
    Many families of middle class workers now teeter on the edge of 
economic stability. Every American can attest to the growing costs of 
necessities such as home heating oil, child care, and healthcare. As 
wages have failed to keep pace, many workers are placed in a precarious 
financial situation. Forced increasingly to rely upon loans and credit 
cards to make ends meet, families can find themselves one extended 
hospital stay or temporary job loss away from bankruptcy. The system 
designed to protect families in these situations is broken, and must be 
mended by this Congress.
    Outsourcing, once primarily a concern for manufacturing jobs, is 
now a growing concern for white collar jobs as well. Workers in my home 
state of Ohio have long known the consequences for workers when jobs 
are shipped overseas. The effects of trade policies such as NAFTA have 
led Ohio to post the sixth highest unemployment rate in the nation in 
the most recent numbers reported by the Bureau of Labor Statistics. 
Workers and their families are left in an insecure world, with 
diminishing protections and in need of a helping hand.
    No longer can our nation turn a blind eye to the effects of lax 
enforcement of labor laws, inadequate social support systems and faulty 
trade policies. This Congress must take the necessary steps to ensure 
that workers and their families are on stable economic ground. We have 
the ability to better protect and aid our constituents, and we must 
move towards the goal of security for workers as we begin this new 
Congress.
                                 ______
                                 
    [The statement of Ms. Sanchez follows:]

   Prepared Statement of Hon. Linda T. Sanchez, a Representative in 
                 Congress From the State of California

    Mr. Chairman, I thank you for convening this hearing on the state 
of the American middle class. Unfortunately, the middle class is 
suffering the consequences of years of fiscally irresponsible economic 
policy. For working and middle class Americans, our economy presents 
greater obstacles to success than in previous decades.
    The dire straits that many middle class families find themselves in 
are simply not in line with the success and growth in the economy 
overall. In so many areas, the middle class is besieged. But in the 
past twelve years, Congress has abandoned its responsibility to defend 
hard-working American families--building obstacles to their progress 
and blocking Democratic efforts help Americans help themselves.
    Worker productivity is at historic levels: American workers today 
produce 70 percent more goods than they did at the end of the 1970s. As 
a nation, America is richer than it was a generation ago. 
Incongruously, the workers responsible for American increased 
productivity and economic growth have not fairly shared in the wealth 
they have created. As middle class families are squeezed between 
stagnant wages and rising prices for homes, education, and healthcare, 
the income disparity between them and the richest 5 percent of families 
has widened. I salute you, Mr. Chairman for taking on the challenge of 
closing this gap.
    Financial security has also declined for many American families. 
The majority of American families cannot weather an emergency without 
tapping into the equity in their homes--if they are lucky enough to be 
homeowners. Many middle class families have had to borrow more money 
just to make ends meet. Personal savings have depleted, making middle 
class families vulnerable to even brief periods of unemployment or 
substantial emergency medical costs.
    Our healthcare system is in crisis. About 47 million Americans, 
including millions of children, still lack access to health insurance. 
Even for many of the insured, vital goods and services, including 
prescription drugs and annual check-ups, remain uncovered. Working 
families should not have to choose between paying for their medical 
bills and other necessities. Health care spending is expected to 
continue to rise well above inflation for years to come. Unless we take 
action to control these soaring costs, millions more American families 
will lose access to appropriate care that can reduce emergency and 
acute care costs later.
    One traditional path Americans have used to improve their 
circumstances and reach the middle class, the labor union, has been 
hampered and hindered. Workers who wish to organize themselves to 
bargain for better pay and benefits and improve their working 
conditions have faced severe challenges. Too many corporate employers 
engage in systematic and illegal campaigns of harassment and 
intimidation against workers who want to band together to achieve 
common interests and better their lots in life. This practice has even 
spawned its own small industry of private ``consulting'' firms whose 
sole purpose is to coach employers in methods, both legal and illegal, 
of preventing workers from exercising their right to choose to form 
unions. I look forward to addressing this alarming development so that 
more Americans are free to achieve the dream of economic independence.
    We must also work to ease the burden that higher education costs 
pose to middle and working class families. Financial barriers should 
never prevent a qualified student from going to college, and that is 
why America has long since made a commitment to help all Americans 
afford a higher education. Student financial aid is one of the best 
investments that this country can possibly make. There is no better way 
to lift people out of poverty, build strong communities from the 
inside, and give our youth hope for their future than by providing an 
affordable education.
    Fair wages are essential to a just society and to the growth of the 
middle class. In this regard, the 110th Congress is off to a great 
start. We recently passed the Fair Minimum Wage bill to increase the 
minimum wage to a more realistic $7.25 an hour by 2009. But that bill 
is just a down payment. I look forward to working with the Members of 
this Committee to help hard-working Americans rise up and improve their 
lives and lifestyles.
    Our agenda in this 110th Congress must focus on working families. 
America's middle class is working hard and producing more than ever, 
yet is faced with an unprecedented burden of costs and expenses. Our 
success as a country depends on them; their success, right now, depends 
on us. Let's work to ease the burden on America's hard-working middle 
class, protecting the security and opportunity of the American dream.
                                 ______
                                 
    [The statement of Mr. Sarbanes follows:]

   Prepared Statement of Hon. John P. Sarbanes, a Representative in 
                  Congress From the State of Maryland

    Mr. Chairman, I want to thank you for holding this hearing to 
examine the growing struggle of America's Middle Class. I am new to the 
Congress and to this Committee, but I am not new to the plight of the 
Middle Class. In my prior career in health care and education, I have 
witnessed how the most basic of opportunities are increasingly out of 
reach for those families and communities that have traditionally formed 
the bedrock of American society.
    America has long been known as the land of opportunity. The idea of 
the American Dream is that no matter your background, if you are 
willing to work hard and play by the rules, you will be able to provide 
for yourself and your family. In recent years, it seems that this 
promise, this bargain that has long made the American worker the most 
innovative and productive worker in the world, has begun to wear thin.
    I want to share with the Committee a story of a woman I met during 
my campaign. She is the mother of three college age students, a 
professional woman who commutes from Odenton, Maryland to her job at 
one of the federal agencies here in the District. She is the Middle 
Class. She told me she doesn't know how her three children will be able 
to afford college. Then she looked me right in the eye and said 
something that sent a chill up my spine. She said ``I did everything 
they told me I was supposed to do. My husband and I worked three jobs 
between us, we saved our money, and we told our kids if you work hard 
and study, you can make it in America. And now we can't afford to pay 
for college.''
    In this one statement, we hear what so many Americans are saying, 
which is we worked hard and played by the rules, and we believed in an 
America that would reward that, and now we've discovered that it's all 
a cruel trick
    Mr. Chairman, with great facility, this Administration has invoked 
the American dream while cynically advancing an agenda that 
disproportionately benefits the wealthiest among us and calls on 
everyone else to work harder for less. The American people know a bad 
deal when they see one. And they are counting on this Congress to 
restore the bargain with the Middle Class.
    I'll close, Mr. Chairman, by noting this, and it is something we 
should take to heart as representatives who have been called upon to 
serve. In making policy, we should always consider: How does this 
affect the majority of Americans? How does this impact the working 
families of America? If we keep those fundamental questions in mind as 
we do our jobs, we will make good public policy and we will build back 
a strong and vibrant Middle Class. Thank you, Mr. Chairman.
                                 ______
                                 
    Chairman Miller. I thank the gentleman.
    Our panel this morning is a distinguished group of 
individuals. We will begin with Jacob Hacker, who is a 
Professor of Political Science and Resident Fellow of the 
Institution of Social Policy Studies at Yale University. He is 
also a Fellow of the New America Foundation, a former Junior 
Fellow of the Harvard Society of Fellows. He is the author of 
several books. The title of his most recent book is The Great 
Risk Shift: The Assault on American Jobs, Families, Health 
Care, and Retirement. Currently he is heading a Social Science 
Research Council project and cochairing the National Academy of 
Social Insurance's 2007 conference. His articles and opinion 
pieces have appeared in the American Political Science Review 
of American Prospect, the Boston Globe and the New York Times.
    Rosemary Miller currently works as a flight attendant for a 
major airline based in San Francisco. She has completed two 
Bachelor's Degrees and a Master's and chose to go to work as a 
flight attendant in 1990 because of the opportunity to 
structure her schedule, maximize the time spent at home raising 
two children as well as the genuine love of the profession. 
Rosemary is the single mother of two children and lives in 
Reno, Nevada, having to commute to San Francisco for her flight 
assignment.
    Eileen Appelbaum is a Professor and was Director of the 
Center for Women in the Workforce in March of 2002. She was 
promoted to Distinguished Professor in July 2006. Formerly she 
was a Research Director at the Economic Policy Institute here 
in Washington and a Professor of Economics at Temple 
University. She has studied both high road and low wage 
employers. She is the author of, among other books, The New 
American Workplace and Manufacturing Advantage. She has 
recently published a report, ``Achieving a Workable Balance,'' 
which examines employers' experiences and employee leaves and 
turnovers. Dr. Appelbaum has published widely on the economic 
developments in the U.S. and other countries and has authored 
numerous articles on the workforce, part-time employment, the 
service sector of the economy and the labor markets experience 
for women.
    Diana Furchtgott-Roth is a Senior Fellow at the Center for 
Employment Policy at the Hudson Institute here in Washington, 
where she was formally the Chief Economist of the Department of 
U.S. labor from February of 2003 to April of 2005. Previously 
she served as the Chief of Staff of the President's Council of 
Economic Advisers and she is a weekly economic columnist with 
pieces published in the Washington Post, the Financial Journal, 
The Wall Street Journal, the Los Angeles Times, among others. 
And her area of expertise is in labor economics tax policy and 
economic regulation.
    Kellie Johnson is the President of ACE Clearwater 
Enterprises in Torrance, California. ACE Clearwater is a metal 
forming company manufacturing formed and welded assemblies for 
the aerospace and power generation industry. Ms. Johnson joined 
the family business of ACE Clearwater Enterprises in 1984, 
working in all areas from purchasing to production control. Ms. 
Johnson was promoted President in 1989 and by 1995 they doubled 
the annual sales to over $20 million. In 1999, her company was 
named one of America's top 25 small manufacturers by Industry 
Week Magazine. Ms. Johnson sits on the Board of Directors on 
the National Association of Manufacturers and was named a 
member of President Bush's Manufacturing Council in March of 
2006.
    Christian Weller is a Senior Economist for the Center of 
American Progress, where he specializes in Social Security and 
retirement income, macroeconomics and the Federal Reserve and 
international finance. Prior to joining American Progress, he 
was on the research staff at the Economic Policy Institute, 
where he remains a Research Associate. Dr. Weller has also 
worked for the Center for European Immigration Studies at the 
University of Bonn, Germany, the Department of Public Policy at 
the AFofL/CIO here in Washington. Dr. Weller has been a 
frequent guest on news programs and all of the major networks, 
and he holds a Ph.D. In economics from the University of 
Massachusetts at Amherst.
    Welcome to the committee.
    We will hear your testimony. We will begin with an initial 
5-minute presentation by each of the witnesses. The light will 
be green and then it will go to, if everything works right, it 
will go to yellow which suggests you might want to start about 
wrapping up, and then red, of course, is at the end of the 5 
minutes. We will allow you to complete a thought and a sentence 
so it will be coherent.
    And Jacob, we will begin with you.

  STATEMENT OF JACOB HACKER, PH.D., PROFESSOR, YALE UNIVERSITY

    Mr. Hacker. Thank you and good morning, Chairman Miller, 
Ranking Member McKeon, and members of the committee. I am 
honored to speak with you today about the economic condition of 
the American middle class.
    Without mincing words, I believe that the condition can be 
described as serious and unstable. Over the last generation, in 
nearly every facet of middle class economic life, health 
insurance, pensions, job security, family financial economic 
risk has shifted from the broad shoulder of government and 
corporations onto the backs of American families. I call this 
transformation the great risk shift, and I think it is at the 
heart of the economic anxieties that many middle class 
Americans feel.
    The United States, as you know, has a distinctive framework 
of economic security, one that relies heavily on employers to 
provide essential social benefits. But today this framework is 
eroding and risk is shifting back onto workers and their 
families. Employment based health insurance has cracked 
substantially, leaving nearly one in three non-elderly 
Americans without coverage for some time every 2 years.
    Meanwhile, even as pension coverage has stagnated, there 
has been a dramatic movement away from traditional guaranteed 
defined benefit plans towards individual account style, defined 
contribution plans which leave much of the risk and 
responsibility of retirement planning on workers themselves.
    We hear much today about inequality. The growing gap 
between the rungs on our economic ladder. But the shift that I 
am talking about is better described as insecurity, the growing 
risk of slipping from the ladder itself, and insecurity is 
clearly what more and more Americans feel. In an election night 
policy commissioned by the McArthur Foundation--excuse me--the 
Rockefeller Foundation last year, fully three-quarters of 
voters, Republicans and almost as large a proportion of 
Democrats, said they were worried about their overall economic 
security.
    Now let me emphasize that this is--these are not just 
concerns or problems of the poor or poorly educated. Insecurity 
today reaches across the income spectrum, across the racial 
divide, across lines of geography and gender. Increasingly, all 
Americans are riding the economic roller coaster that was once 
reserved for the working poor.
    For example, personal bankruptcies and home foreclosures 
are stunningly more common today than a generation ago, and 
most who experience these dislocations were in the middle class 
before they did. Indeed, the segment of the population most 
vulnerable to these trends are families with children, in part 
because they are drowning in debt. In 2004, personal debt 
exceeded 125 percent of income for the median, married couple 
with children.
    We will hear more at this hearing about the squeeze between 
income and expenses that helps account for rising middle class 
debt.
    But another factor to consider is that incomes themselves 
have become more unstable. Research I have done using the Panel 
Study of Income Dynamics, a study that has tracked thousand of 
families from year to year since the 1990s, shows that not only 
have the gaps between the rungs on our economic ladder 
increased, what has also increased is how far people have 
slipped down the ladder when they lose their financial footing. 
For example, a recent study shows that a chance that Americans 
will spend short periods in poverty has increased substantially 
since the 1970s for every age group. Now it is common to say 
that trends like these either cannot be addressed or that 
addressing them will hurt our economy. I think both claims are 
false.
    The great risk shift is not an inevitable occurrence. In an 
economy as rich as ours there is really no compelling reason 
why we could not shore up and update some of the buffers that 
protect families from economic risk to help them prosper in our 
increasingly dynamic, increasingly flexible and, yes, 
increasingly uncertain economy.
    Which brings me to the second misleading claim, that 
providing Americans with a basic foundation of security will 
drag our economy down. We cannot and we should not ensure 
Americans against every risk they face, but it is a grave 
mistake to see security as opposed to opportunity. We give 
corporations limited liability, after all, precisely to 
encourage entrepreneurs to take risks. If the middle class are 
to make the investments necessary to thrive in our new economy, 
they need an improved safety net. The American dream. The 
economic promise of this great Nation is about security and 
opportunity alike, and ensuring the vibrancy of that dream will 
require providing security and opportunity alike.
    Thank you.
    Chairman Miller. Thank you.

         STATEMENT OF ROSEMARY MILLER, FLIGHT ATTENDANT

    Ms. Rosemary Miller. Thank you, Chairman Miller, for 
inviting me to this important hearing on the challenge facing 
the middle class in this country. It is an honor and privilege 
to be here today. Again, my name is Rosemary Miller.
    Eight weeks ago I began my 18th year as a flight attendant. 
In 1990 I set aside my Master's and Bachelor's Degree and my 
career in education and chose to become a flight attendant 
because it was a profession that would allow me more time at 
home and with my children, and for most of my career I have 
been able to balance the requirements of the demanding full-
time job with the needs of an active family.
    However, in the past several years the airline industry 
employees have been at the forefront of a trend that is 
repeating. It is throughout our economy. We are working longer 
and longer hours for less and less pay. We have seen our 
benefits slashed simply to keep the most basics of health care. 
Our pension pans have been frozen or terminated, and our 
employers have used bankruptcy laws to shred union contracts, 
turning back the clocks on decades of progress we have made on 
turning our jobs into decent, stable careers.
    Since entering bankruptcy, my employer is imposing drastic 
wage and benefit reductions that include requiring me to work 
20 percent more hours for 40 percent less pay. I am away from 
home so often that I am absent from many of the important 
events in my girls' lives that I vowed I wouldn't miss, and I 
am so angry and frustrated that I will to have withdraw the 
very small sum I was able to set aside for the beginning of my 
girls' college careers and use it to pay the mortgage instead.
    I would, however, like to emphasize that I am not here 
today just to speak for myself or my industry. I am here to 
speak on behalf of all of the workers of the middle class, your 
constituents. I could be a nurse sitting here today. I could be 
a firefighter, a police officer, electrician, a plumber. We are 
the people who install your cable TV, who truck your groceries 
from farms to supermarkets, who check you into your hotels and 
who teach your kids. We are the city and county civil servants 
who run your communities, the bus drivers who get you to work 
every day, and we are here to impress upon you what it is 
really, really like in this country's current economy.
    Some economists and bureaucrats in Washington tell us that 
the numbers show the economy is growing, unemployment is low, 
and things look rosy. Well, those numbers don't show the whole 
picture. The reality is that middle class Americans are under 
tremendous strain. We are watching as our wages plummet from 10 
years ago and more. We are watching our benefit packages strain 
and our pensions disappear. Every single day we are having to 
choose between a dentist appointment and the electric bill, 
between prescription medication and groceries, between braces 
for our kids or new brakes for our one aging car.
    Please consider me for just these 5 minutes to be the face 
and voice of millions of Americans who can't be here today, for 
the woman with cancer who says the thought of the senior 
executives at my company taking bonuses at the same time they 
are demanding a 40 percent wage cut from me while I am 
literally fighting for my life makes me sicker than the cancer 
ever has; the pilot with over 30 years of experience who is 
outraged that when he began with his airline there were four 
senior vice presidents on the payroll and at last count there 
were 37; the woman whose husband lost his job of 28 years to 
outsourcing and had to start over for 7.75 an hour. I could 
spend hours telling you these stories, but I know I need to 
move on.
    What do we, the middle class workers of this country, think 
is wrong? Well, we think the executive compensation packages 
that are wildly disproportionate to the contribution that these 
employees make to the overall health is wrong; that a CEO can 
terminate all of the company employees' pensions while keeping 
his own $4.5 million one is wrong. Allowing corporate robber 
barons to reward themselves with pension bonuses upon bringing 
the company successfully through bankruptcy is wrong. 
``successfully'' is a horrible choice of words. How can it be 
successful when so many employees' livelihoods are shattered in 
the process?
    The average worker in this country has to battle for just a 
modest cost of living increase while CEOs who in the 1960s made 
20 times what a worker made now makes 400 times as much. That 
is not just wrong, it is obscene.
    What else is wrong?
    Bankruptcy laws. Something has to be done about health 
care. College costs, pension plans. I have items to say on 
these but I know I need to sum up.
    So what I would like to say is ask you to notice one thing. 
We are people who live modest lifestyles. We are not here in 
our remarks today to ask for new boats or a vacation home in 
Aspen or luxury cars. We are not asking for a 30,000 square 
foot home or cosmetic surgery for a nicer nose. We are just 
here to tell you that we need livable wages. We need a home 
that we can own, affordable health care, comfortable 
retirement, security and reasonable means to provide for our 
children's education. It is unconscionable to me that in this 
country of all others it is such a struggle to simply live 
modestly.
    I know that there are many issues facing our government 
today, but when you, the Members of Congress, walk onto an 
airplane or check into a hotel or send your kids to school, 
when you go to the grocery store or pick up the phone to call 
police, you expect us to be there to do our jobs. Now we are 
asking you to do yours, which is listen to us and hear us not 
because we are Democrats or Republicans or Independent or 
whatever, listen because we are the vast majority of tax paying 
Americans. We are your neighbors, we are your friends, we are 
your own family. And we are here to tell you that we are having 
a really, really hard time out here.
    Thank you again for inviting me to testify. I would be 
happy to answer any questions.
    Chairman Miller. Thank you.

 STATEMENT OF EILEEN APPELBAUM, DIRECTOR, CENTER FOR WOMEN AND 
                    WORK, RUTGERS UNIVERSITY

    Ms. Appelbaum. Thank you very much for inviting me to speak 
to you today.
    Despite strong productivity, growth and expanding economy, 
middle class families are caught in an economic squeeze. 
Incomes have not kept pace with rapidly rising health, tuition 
and housing costs, and in fact we are 5 years past the end of 
the last recession and it is only now that middle class 
families see their incomes rising back to the level they had 
achieved prior to that recession.
    To keep up their living standards, middle class families 
are working more hours and so they are caught in a time squeeze 
as well as caught between the demands of trying to be 
responsible employees and the needs of being responsible family 
members.
    Recent productivity growth in the U.S. has been nothing 
short of remarkable. We have had really exceptional 
productivity growth. In the boom years from 1995 to 2000, 
productivity and real median family incomes rose together. But 
since 2000, despite the fact that productivity has continued to 
increase, real wages have not increased at the same pace. In 
fact, they have been largely flat, increasing only slightly in 
the last 6 years.
    The result is that we have a widening gap once again 
between productivity growth and wage growth. We have been here 
before and we know how the story ends and it is not a pretty 
end.
    The main reasons for this disconnect between wage growth 
and productivity growth are not that difficult to identity. 
This committee has dealt with some of them already. The decline 
in the real value of the minimum wage has undermined the floor 
that supports middle income earnings. The unionization has left 
middle class Americans with no bulwark against greed in the new 
winner-take-all economy. Difficulties organizing unions have 
left many workers without effective representation or voices in 
the workplace. Labor markets, where employers and employees 
once met to negotiate over the distribution of the economic 
pie, are today viewed as a tournament with many losers and just 
a few winners, symbolized by the unseemly increase in CEO pay.
    Many of the occupations that are projected to experience 
large increases in employment over the next 10 years are not 
footloose. They are not going any place else, and yet they pay 
very low wages. The reason is that employers are able and are 
in fact shifting the risks of an uncertain marketplace onto 
their most vulnerable employees, as Dr. Hacker has pointed out. 
The consensus politics of the old Keynesian model has broken 
down because the interest of today's multinationals no longer 
coincide with the national interest in rising incomes, a 
growing middle class and a competitive domestic economy, and 
the accelerated decline of manufacturing capacity in the past 5 
years has not only eroded incomes, but it has undermined our 
ability to compete in world markets. We have a huge negative 
trade balance that threatens not only the U.S. economy but the 
economic stability of the world economy. Even the IMF is 
advising us on this particular topic.
    It is only in the last few months that average group real 
wages have begun to rise. We have seen an increase in the last 
couple of months in median wages, but middle class families are 
still way behind. Productivity increase in the last 5 or 6 
years has risen by 18 percent while hourly wages are up just 3 
percent, and this increase in hourly wages is dwarfed by the 
increase in corporate profits. But my concern is that even this 
small advance in middle class wages is likely to be short 
lived.
    I want to point to a couple of storm clouds on the horizon 
that threaten not just middle class incomes, but are a 
challenge for the sustainable prosperity and growth of the 
economy itself.
    The first, which you may or may not have noticed, is that 
productivity growth has slowed down considerably. After 10 
years of substantial growth, if you look at the third quarter 
of 2005, the third quarter 2006, the latest data that we have, 
that increase of productivity in that year is down to 1.5 
percent. That is where it was from '73 to '95, in that era of 
slow productivity growth. This is a problem that we are going 
to have to think about how we are going to confront. The 
busting of the housing bubble has already shaved a point or so 
off of GDP growth in 2006 and threatens to do more in 2007.
    There is going to be a correction to the ballooning trade 
deficit. If you want to ask me questions about it, I will 
answer. Let me just say that working families need policies 
that support them in the roles as workers and as caregivers 
that make the domestic economy more competitive, that sustain 
growth and prosperity. We need a renewed commitment to full 
employment. It is true that unemployment is low now, but we do 
face storm clouds and we must be sure that we have that 
commitment.
    The correction to our ballooning trade deficit when it 
comes will result in rising prices and declining real wages for 
American workers. If we fight that inflation with rising 
interest rates, we will have rising unemployment. And so I hope 
that we will move in this Congress towards policies that shore 
up the U.S. expansion as they enable the middle class to share 
in the economic fruits.
    Thank you.
    Chairman Miller. Okay. Thank you.

   STATEMENT OF DIANA FURCHTGOTT-ROTH, DIRECTOR, CENTER FOR 
               UNEMPLOYMENT POLICY, HUDSON CENTER

    Ms. Furchtgott-Roth. Thank you very much for inviting me to 
testify today.
    America's economy is in superior shape today. We have got 
the news that GDP grew at 3.5 percent last quarter and 3.4 
percent for the entire 2006, even higher in 2005. And this 
growth was achieved in spite of high oil prices and in spite of 
talk of a housing slump.
    Over the past year, the economy has created 1.8 million 
jobs, of which 1.6 million are in the private sector. This 
Friday I can assure you that more job gains will be announced. 
And the Bureau of Labor Statistics will announce that an extra 
810,000 jobs, approximately, will be added to the count of 
payroll jobs that were created between April 2005 and March 
2006.
    The unemployment rate is only 4.5 percent, down from 4.9 
percent a year ago and lower than all industrialized countries 
except Japan. The number of unemployed was 6.8 million last 
month compared with 7.3 a year earlier. So we are making 
progress. Many people say that the jobs created have just been 
hamburger flipping jobs, but this is not borne out by the data. 
Employment in industry that pay above average wages, such as 
professional and business services and educational and health 
services, are expanding rapidly.
    Why then in this strong economic picture is there talk of 
economic security and dissatisfaction? This economic insecurity 
can't be proved with the data. According to Karlyn Bowman of 
the American Enterprise Institute, the Nation's leading analyst 
of policy rules, people are feeling secure about all aspects of 
the economy with the exception of health care. In other words, 
other than health care, people feel that their economic well-
being is strong.
    One reason for the media angst is the perception that the 
gains are not distributed equally and some people are falling 
behind, but the latest Consumer Expenditure Survey shows that 
differences in per person spending by the lowest and highest 5 
percent of income earnings are dramatically different. Spending 
is very important because it determines our current standard of 
living and our confidence in the future. It shows how much 
money Americans have.
    The top 50 percent of earners pay 97 percent of income 
taxes so all of their income isn't available for income. The 
lower income Americans at the bottom, the bottom percentiles 
receive food stamps, housing subsidies, Medicare and Medicaid. 
So they consume more than their income. Middle class Americans 
have assets in pension and individual retirement accounts that 
are not included in income. Therefore, spending is a far better 
guide to well-being than pre-tax income. Last year Americans in 
the top group spent two and a half times as much as the bottom 
group on a per person basis and 1.8 times as much as the middle 
class. This is not major inequality. And some households with 
low incomes are not poor. A full 30 percent of those in the 
bottom fifth own their home free of mortgage compared with only 
17 percent in the top group. Many are retired in the bottom 
quintile and are living off Social Security, pensions and 
accumulated savings.
    Aside from tax payments and transfer receipts, why is 
spending inequality per person less than many popular measures 
of income equality? There are fewer people per family per 
household in the bottom quintile. 1.7 people. This increases to 
2.5 people in the middle quintile and 2.5 people in the highest 
quintile. Furthermore, people in the highest group have more 
earnings. They have 2 earners per family. So in the lowest 
quintile there are many families without any earners not 
because they can't find jobs, but because many are retired.
    A glance at per person spending over the past 20 years 
shows that all groups are spending more in real terms. Everyone 
has grown richer over the past 20 years. The lowest quintile is 
spending 14 percent more than 20 years ago and the top quintile 
is spending 16 percent more.
    Now a quick look at unemployment shows how lack of 
education affects workers. Last month the unemployment rate for 
adults without a high school diploma was 6.6 percent. It was 
only 2 percent for those with a Bachelor's Degree.
    Reforming education remains the most effective way of 
increasing incomes and there has just been a book published 
called Tough Times, Tough Choices. This is published by the new 
Commission on the Skills of the American Workforce, written by 
a prestigious bipartisan group chaired by Charles Knapp, 
President Emeritus of the University of Georgia, and members 
included New York City Chancellor Joel Klein and also John 
Engler, who is President of the National Association of 
Manufacturers. The report tries to fix our education system. It 
proposes a set of core examinations. It proposes more school 
choice. It proposes more education both for the children and 
for adults.
    So to sum up, in a global economy, education and innovation 
are the keys to high standards of living and job security. We 
can help people gain security in the workforce not by pricing 
them out of a job by increasing mandated benefits and minimum 
wages, but by improving opportunities and upward mobility 
through better education.
    Thank for the opportunity for testifying today.
    Chairman Miller. Thank you. Ms. Johnson.

    STATEMENT OF KELLIE JOHNSON, PRESIDENT, ACE CLEARWATER 
                       ENTERPRISES, INC.

    Ms. Johnson. Good morning, Chairman Miller, Ranking Member 
McKeon, and members of the committee.
    My name is Kellie Johnson, and I am President of ACE 
Clearwater Enterprises located in Torrance, California. I would 
like to thank you for the opportunity to appear today on behalf 
of ACE Clearwater Enterprises, our employees, and to speak 
about how manufacturers are strengthening America's middle 
class by providing high paying jobs and benefits.
    ACE Clearwater was founded by my grandfather more than 50 
years ago. We are a third generation, privately owned family 
business. I am passionate about manufacturing. Manufacturing is 
the engine that drives our economy and has created the middle 
class. I also feel very strongly about education and workforce 
development. Our Nation's ability to maintain its global edge 
in technology and innovation hinges on its ability to educate 
and train people for the jobs of the 21st century.
    ACE Clearwater is a small manufacturer. We employ 172 of 
the best men and women in our industry. But we are crying for 
more skilled workers.
    I am proud to say that we are a preferred aerospace 
supplier. Most of our customers are the prime OEMs, Lockheed 
Martin, Northrop Grumman, Honeywell, Boeing and Textron. 
Demands they put on our supply base is great, and in order for 
us to stay competitive in this global economy we have had to 
continuously reinvent ourselves, make huge investments in our 
engineering capabilities and capital equipment through 
technology on our shop floor. The only thing that is limiting 
us in growth is that we cannot find enough people to fill the 
jobs that we currently have.
    Last year we interviewed 191 people and of those 191 we 
hired 28. These are great paying jobs with great benefits, 
opportunities for career advancement, on-the-job training, 
tuition reimbursement, but we cannot find the people that have 
the skills that industry needs. Currently we have 12 open 
positions. These are our biggest challenges. This is affecting 
the future of my company and the lives of the 172 men and women 
that work in the company.
    As I said, our customers put great pressure on us. In the 
past they would come to us and ask us to build to their 
specifications. Today they come to us with a concept and ask us 
how would you design it. Design it for us, manufacture it for 
us. Once you have manufactured it, we expect a price reduction 
next year. In some cases, our customers expect 6 percent price 
reductions year over year and they expect us to get this 
through productivity gains. We say how can you do that. We do 
it with the men and women on the shop floor that are innovative 
and creative and skilled, that are problem solvers and thinkers 
who know how to make things and embrace the technology that is 
available today in modern manufacturing.
    We know that 70 percent of the new jobs in the future are 
going to require more than a high school education. That is why 
I am reaching out with other manufacturers across our country 
to work with the community colleges to communicate with them 
the kind of skills that industry needs. Recently the OECD 
report placed the United States tenth for people ages 25 to 34 
with a high school diploma. This is a road to failure.
    We need to raise the awareness of our workforce crisis with 
business leaders, educators and policy makers and we need to 
identify solutions at the State, Federal, and local levels that 
will promote communities and drive a skilled workforce. We 
believe community colleges are key in providing active training 
and lifelong learning.
    We also need to encourage young people to get into 
manufacturing. We need to reverse the trend of people that are 
not getting into the math and sciences. We need to develop our 
future engineers and scientists and technicians.
    The National Association of Manufacturers has launched a 
national campaign called Dream It, Do It to try to attract more 
people into the workforce. Young people have a bad perception 
of manufacturing. It is dirty and boring and monotonous, 
dangerous, and that simply is not the case in today's modern 
manufacturing environment. We are constantly bringing second 
and third graders through our shops so they can see firsthand 
the kind of exciting careers that exist in a factory, high 
school students, career teachers, tech teachers. In fact, a 
couple of years ago when we were bringing a high school group 
of students through our machine shop, a supervisor was 
addressing them and talking about his typical day. A student 
raised their hand and said why would I want that job, you stand 
on your feet all day and do the same old thing. I would rather 
make web sites. And our supervisor responded, ``I didn't go to 
college, but I have vocational training, I make $72,000 a year 
and parts that I have designed and built are on the planet 
Mars.''
    Now maybe that kid only heard $72,000 a year, but so what? 
We have to get these kids involved in manufacturing. They are 
our future. Manufacturing is what has created the middle class, 
and we cannot afford to lose it.
    I would invite every member of this committee next time you 
are in southern California to come to ACE Clearwater so you can 
see what we are doing there. It is exciting, it is rewarding. 
It is challenging. You can really make a difference.
    I appreciate the opportunity to speak today, and I welcome 
any questions.
    [The statement of Ms. Johnson follows:]

    Prepared Statement of Kellie Johnson, President, ACE Clearwater 
                              Enterprises

    Good morning, Chairman Miller, Ranking Member McKeon and members of 
the committee. My name is Kellie Johnson and I am the President of ACE 
Clearwater Enterprises located in Torrance, CA. Thank you for the 
opportunity to appear today on behalf of ACE Clearwater Enterprises, 
its employees and to speak about how manufacturers are strengthening 
America's middle class by providing high paying jobs and benefits.
    I am here to speak about an issue I feel very strongly about, 
education and workforce development. Our nation's need to maintain its 
global edge in technology and innovation hinges on our ability to 
educate and prepare people for the jobs of the 21st century. ACE 
Clearwater is a family owned and operated business incorporated in the 
State of California and has been building complex formed and welded 
assemblies for the aerospace and power generation industries for over 
50 years. As a third generation leading our company I can say it is 
more difficult than ever to find the talent we require. We need to 
raise awareness of our workforce crisis with business leaders, 
educators and policy makers. We must identify solutions at the local, 
state and federal levels while promoting policies that strengthen 
communities and drive a skilled workforce. Our 172 employees are in a 
word, awesome, together we make some really incredible components, if 
it can fly, we have parts on it. ACE's customer base includes the U.S. 
Government and virtually all the prime OEM's, cutting edge companies 
like Honeywell, Lockheed Martin, General Electric, Boeing, Northrop 
Grumman and Textron, in addition to many international customers. I am 
proud to note that in 1999, Industry Week recognized ACE Clearwater as 
``One of America's Top 25 Small Manufacturers''. Our current annual 
sales approach $28 million, and our payroll is nearly $120,000 per 
week.
    As you know, the United States continues to be on the cutting edge 
of new technologies, innovative ideas and out-of-the-box thinking, we 
are a very creative country, with a dynamic and highly motivated 
workforce. But we have an URGENT problem, and it requires our immediate 
attention, put simply our workforce is aging and our supply of skilled 
workers is in decline. The manufacturing sector has experienced a 
nearly 40% growth in demand for highly skilled workers, while demand 
for low skilled workers continues to decline.
    We employ a lot of people who like to make things, many have 
hobbies that include model ship building, custom guitar building , and 
even a couple of guys who build radio controlled jets * * * lots of 
folks who, like me, appreciate the shop floor. ACE is a mini city, lots 
of areas dependant on each other, and like any community it requires 
some highly skilled people to keep it growing.
    Our customers used to give us a blueprint and say make this, now 
they give us (CAD) computer assisted drawings and ask us to tell them 
how we can make it better, lighter, faster and cheaper. These 
challenges require a highly skilled and motivated workforce, and to do 
this, America needs to recognize there is a skills gap, and it is 
growing. A recent OECD report on education says it all. The United 
States ranks # 1 in adults 45-64 with a H.S. diploma, we are in 5th 
place with adults 35--44, and a dismal 10th place with adults 25-34 
with a basic H.S. diploma. This is a roadmap to disaster. The reality 
is 75% of new job growth requires some level of post-high school 
training.
    Like any manufacturer, at ACE, our employees are our greatest 
asset. We maintain a competent workforce through selective recruiting, 
training, involvement and empowerment at all levels. Our people are 
integral to the R&D process. For many projects, our people are the key 
to innovation on the factory floor. Responsibility is also important. 
All our employees are empowered to stop the production process and ask 
questions if they feel something is wrong. Our core value is ``We do 
the right thing.''
    According to the Employment Benefit Research Institute, 84% of 
manufacturers nationwide provide health care benefits to their 
employees, a level of coverage second only to government. Accordingly, 
to attract and retain the best talent, ACE provides health, dental, 
vision and life insurance for its employees. We currently cover 75 
percent of employee insurance costs. We also provide a 401(k) plan, of 
which about \1/3\ of the employees participate as well as 7 paid 
holidays. Our vacation package is very generous, with an average 
vacation time of 3 weeks. A typical employee at ACE has been with us 
over 10 years.
    Our benefits package is also very competitive, and we have been 
able to maintain these benefits with minimal affect to employee costs. 
ACE's overall benefits package is equal to 24 percent of our total 
payroll.
    My company, like many others, continues to find ways to provide 
generous benefits in a time when the costs of such benefits realize 
double-digit increases from year to year. A June 2005 Survey of 
executives by Advanced Technology Services indicated that between 2000 
and 2004, increases in benefits accounted for more than half of the 
increase in manufacturing compensation.
    I could tell you many stories about how we work with employees 
during difficult times, but Kimberley is the most recent. She was 
having some problems with her pregnancy and needed multiple doctor 
visits each month during her final trimester. She did not want to lose 
hours by taking off too much time, so we adjusted her work schedule to 
fit her particular need, it was a win-win for everyone. We have also 
had several fathers ask us to do this for them as well. It is in every 
employers best interest to work together to help people when these 
situations arise. We want them back, and we want them excited to come 
to work !
    Manufacturing careers are great jobs with good benefits. In 2005, 
manufacturing employees earned an average of $66,000 a year in wages 
and benefits compared to employees in the remainder of the economy that 
earned about $54,000--a 22 percent difference!
    The manufacturing industry is what makes this country great, and we 
cannot afford to lose it. More than one in six private sector jobs in 
the U.S. depend on the manufacturing base, and manufacturing accounts 
for about 12 percent of GDP.
    While I am proud to share with the members of this committee the 
success we have experienced, all is not well. In fact, ACE Clearwater 
currently has 12 open positions.
    They include: manufacturing engineers, welders, and machine 
programmers and operators. Our biggest challenge is finding skilled 
personnel. We hire summer interns and recruit from several 
universities, technical & community colleges and local high schools to 
train the next generation of engineers and technicians. A shop 
mentoring program encourages senior operators to assist younger people 
in augmenting their skill levels.
    Tony is an excellent example of how we are constantly encouraging 
people to learn new skills, and grow with the company. He started as a 
welding assistant, helping with cleaning the parts prior to weld and 
fitting them up. Eager to become a welder, he approached his supervisor 
with his dream. Practicing during his lunch break, we could see his 
drive and ambition. Through in-house training, and supplemental off 
site instruction paid for by ACE, he is now the lead welder, and helps 
to train others like him.
    ACE Clearwater is doing its best to provide good quality jobs, but 
we must see a resurgence in this country of educational skills programs 
to stress that people can make a great living through the many 
opportunities that manufacturing has to offer.
    We face a daunting challenge. A 2005 Skills Gap survey conducted by 
the National Association of Manufacturers revealed that more than 90 
percent of respondents stated that they could not find enough skilled 
production employees, including front-line workers, such as machinists, 
operators, craft workers, distributors, and technicians, to fill their 
job openings. The same survey also indicated that more than 80 percent 
of respondents could not find qualified workers to fill their job 
openings.
    The challenge for manufacturers is how to attract, retain, and 
motivate a high-performance workforce. The challenge for government is 
how to improve the quality of education in our primary, secondary, and 
post-secondary school systems. There must also be improvement in job 
training programs to address the continuous demands of training and re-
training of workers. In addition, we need to reverse the decline in 
U.S. students who study science and engineering.
    A manufacturing worker today must have math and science skills and 
the ability to problem-solve, think analytically, communicate via 
written and spoken word, and work in teams as well as autonomously. 
However, many job applicants have insufficient reading, writing, and 
communications skills, and they have inadequate basic employability 
skills, such as attendance, timeliness, work ethic, and problem-
solving. Last year we interviewed 191 applicants and hired 28, had the 
proper skills been there I can state we would have hired a lot more.
    Our growth is only limited by our ability to meet our customers 
ever challenging demands. And that means a skilled, motivated and 
excited workforce. Few of the skills needed to succeed in the workplace 
are taught in the schools, nor do students understand how what they are 
learning will translate into their future careers. There must be better 
alignment between education and training systems and the needs of 
employers and the business community. Increased communication and 
collaboration among manufacturers, government, educators, and parents 
would help to alleviate the skills gap shortage.
    ACE Clearwater is doing its part to remain vibrant despite a 
competitive global economy and ever increasing government regulations, 
but its ability to do so in the future is predicated on the 
availability of a highly skilled and adaptive workforce. The 
manufacturing industry is providing economic opportunity to America's 
workers, but as manufacturers suffer, so too does the nation's overall 
economic health.
    Thank you for the opportunity to testify, and I am glad to answer 
any questions you may have.
                                 ______
                                 
    Chairman Miller. Thank you very much.
    Dr. Weller.

  STATEMENT OF CHRISTIAN WELLER, SENIOR ECONOMIST, CENTER FOR 
                       AMERICAN PROGRESS

    Mr. Weller. Thank you very much for inviting me today. It 
is an honor to be here. In my testimony today I will address 
what I consider to be the source of middle class anxieties, the 
rise in economic insecurity.
    In the fall of 2006, the joint report by the Center for 
American Progress and SCIU, titled Middle Class in Turmoil, 
found that within a few years after the end of the last 
business cycle in 2001, all gains made in the financial 
security by middle class families during the 1990s had 
disappeared. Despite an economic recovery that has lasted more 
than 5 years, middle class families are struggling to pay for 
home, health insurance, transportation, and their college 
education due to labor market recovery and higher prices for 
other important items.
    To pay for these necessary expenditures, middle class 
families are borrowing record amounts of money leaving them 
unable to put away much extra cash for rainy days. Families are 
unable to save for an emergency. Job growth of this business 
cycle has been less than one-fourth of previous business cycles 
and real wage growth has been declining for most of this cycle.
    The typical family's incomes did not rise between 2000-2004 
even after increasing median family income in 2005. The typical 
families still had almost $1,300 less than they did in 2000. At 
the same time, the cost of families' top five expenditures, 
medical care, housing, food, household operations, including 
energy, have risen more than twice as fast as the cost of the 
smallest five items. To maintain their day-to-day necessary 
consumption, families took on a record amount of debt 
equivalent to 131 percent of disposable income in the third 
quarter of 2006. The increase in debt to income after 2001 has 
been more than four times faster than the increase in debt to 
income during the 1990s.
    In line with the rise of indebtedness, debt payments have 
also increased to the highest level on record. In the third 
quarter of 2006, families paid on average 14.5 percent of their 
disposable income in interest, up from 13 percent in the first 
quarter of 2001. That is 28 percent faster than the gasoline 
expenditure increase during that same time. The share of 
families capable of weathering this financial crunch has 
decreased. Less than a third of families must accumulate wealth 
equal to 3 months of income. The share of families with 3 
months of income and financial wealth declined from 39 percent 
in 2001 to 33 percent in 2004. This erased all gains in 
financial security made during the 1990s and left families more 
vulnerable than they were in 1989.
    We wanted a control in our study for labor force changes, 
so we created what we called a typical family, a dual income 
earner couple between the ages of 35 and 54 with earnings in 
the middle of the 60 percent of the income distribution. The 
share of these incomes declined from 29 percent in 2001 to 18 
percent in 2004, which is well below the 21 percent recorded in 
1989, which was already very low.
    Declining wealth and fewer savings pose significant risks 
to middle class families facing unemployment. The weakest job 
growth rate since the Great Depression means that people who 
lost their job had a much harder time finding jobs than before. 
Long-term unemployment in this business cycle averaged 17.5 
weeks, the highest average for any business cycle since World 
War II. As a result, a spell of unemployment can be quite 
costly for families. Less than half of all families could 
weather a bout of unemployment in 2004, down from 55 percent in 
2001.
    Within 3 years, all gains in financial security will meet 
according to this measure during the 1990s advantage. Medical 
emergency is an even bigger risk for the financial security for 
middle class families. Ever rising health care costs 
consistently outpace overall inflation leaving more and more 
employers to shift more and more of those costs to their 
employees through higher premiums, co-pays and deductibles or 
to drop health care coverage altogether. As a result, the cost 
of a typical medical emergency jumped to an estimated $3,700 in 
2004 from $2,800 in 2001. The share of families who could 
sustain a medical emergency consequently went from 36 percent 
in 2004 compared to 44 percent in 2001. Again, the drop is 
sharper for typical middle class families and middle income 
dual earners.
    As new data becomes available, we have updated those 
numbers for 2005 and the trends continue despite the trends in 
the labor market.
    This research establishes two crucial policy goals from my 
perspective. First, workers need to see stronger income gains 
in the economic expansion that requires a high minimum wage, a 
level playing field for workers who want to bargain 
collectively in improvements to their income tax credits, among 
other steps.
    Second, I think public policy should help families build 
wealth by strengthening defined benefit plans, improving 
defined contribution plans, raise health insurance coverage, 
among other important steps.
    Thank you very much, and I will be happy to answer any 
questions.
    Chairman Miller. Thank you very much and thanks to each of 
you for your presentation. I think there is enough here to 
stimulate some discussion. So thank you so much.
    And your entire statements will be placed in the record. I 
know some of your written presentations were longer than your 
oral presentations and we appreciate that.
    Let me see if I can get to what appears to me a little bit 
of a different take on this discussion, and this is for the 
entire panel. Aside from tax payments and transfer receipts, 
why is spending inequality per person less than any popular 
measures in equality and, prior to that, if I read this 
correctly and that is a big if, but if I read this correctly, 
the suggestion is that the inequality that we see discussed 
very often in the press and in journals and papers and 
certainly in the halls of Congress and the so-called income 
disparity issues you suggest aren't as they appear because the 
levels of spending among the various quintiles within the 
population are much less than that discussion of disparity and 
on inequality would suggest.
    Ms. Furchtgott-Roth. Right. That is correct, sir.
    Chairman Miller. Okay. What I don't understand and I would 
like others to comment is you suggest that the--for food and 
housing that, you know, that the top 20 percent earners spent 
$3,441 in food per person and then the bottom spend $1,792 per 
person. I don't know that that tells me what they are eating, 
and what have you, and I don't know what percentage of that, of 
their income is dedicated to food.
    And in the other categories on questions of health care, 
again, I don't know the health status of the top quintile and 
the lower quintile. Are you counting insurance payments in 
that? Is that included, insurance, or is that out of pocket 
expenses?
    And then the other one is the idea that there is the 
substantial amount of consumption going--among all of these 
segments of the economy, the question is are people--what is 
the difference in terms of reliance on second earners in the 
family to generate that total household income? And secondly, 
what is--how much of that consumption is backed up by debt as 
opposed to income among those?
    Ms. Furchtgott-Roth. Well, these are really excellent 
questions, and it is a very difficult subject to follow but the 
basic point is that spending for the bottom quintiles is higher 
than their incomes because they receive transfer payments that 
are not listed in income. So for example, we have had people 
say today that CEO compensation is unfair and perhaps what 
Madonna makes after a concert is unfair. But that is not always 
a measure of their well-being because the CEO gets taxed.
    Chairman Miller. But on that point, if I might, the case of 
somebody who gets food stamps, the decision has been made that 
they have insufficient income to provide an adequate diet for 
that family.
    Ms. Furchtgott-Roth. That is right. So what we do is we 
take--we tax the top half, and the top 50 percent, according to 
the Congressional Budget Office, pays 97 percent of the taxes. 
And there are transfers that go to the bottom in terms of food 
stamps, housing subsidies, and you observe in the bottom 
quintiles people spend more than their observed income. People 
in the top quintile spend less than their observed income. They 
can't spend all of their income because they pay taxes.
    So when you look at these things and you also divide it up 
on a per person, per family basis, because there are more 
people per family in the top quintile than the bottom quintile. 
So you wouldn't expect----
    Chairman Miller. With all due respect, when the people in 
the bottom quintile get all done spending their income, they 
have an inadequate diet, health coverage and pension. When the 
people in the top get done spending their after-tax income, 
they have also sheltered a huge amount of income in the 
retirement plans. We have--we don't know the status of their 
health care plans in terms of corporate benefits. And they have 
enough--they have enough discretionary income left over that 
they really in many cases don't spend it even when you lower 
the tax rate. This is not spending in necessity.
    It seems you are comparing a class that is spending out of 
necessity for the necessities, food, health care, and what have 
you, and people who are then spending after they can cover all 
of the necessities and then add on to that. I don't quite get 
what the comparison is.
    If I quickly might indulge, ask leave of the committee if 
we might have a comment from one or two others on this.
    Mr. Weller. I think the issue of spending inequality is 
somewhat an outcome based measure. If we want to look at 
inequality of something that tells us where policy should be 
going, I think mingling in issues such as transfer payments 
skews the picture somewhat. I think overall, at least what our 
research shows, is that families in the middle income, not so 
much at the bottom, are struggling to pay for typical middle 
class items, housing, health insurance, and that explains the 
sharp run-up in debt level. So you have got to remember debt 
levels relative to income rose four times faster after 2001 
than before that. And that cannot be explained with behavioral 
changes or can only be explained with the overall economic 
fundamentals, weak income growth, weak wage growth, weak 
employment growth, the rapidly rising prices. And I would say 
that those measures are a better measure of capturing what we 
want to know where policy should be going in the future.
    Ms. Appelbaum. I don't think it is news to anybody that 
rich people spend less than what they earn and poor people 
spend more than what they earn.
    And to Dr. Weller's point, the middle class has been doing 
this by using their house as an ATM machine, as we know. The 
amount of equity taken out of their houses to support their 
consumption over the last 5 or 6 years has been huge. Now that 
housing prices have stopped rising, this is no longer available 
to them. This is a huge problem for two groups of workers in 
particular: Those who are approaching retirement and who are 
counting on the equity in their houses to make up for their 
lack of pensions and for their lack of their savings, and this 
is a problem of the middle class, not of the wealthy, who in 
fact have been able to save for their own retirements.
    And the second group are people who were encouraged, shall 
we say, to move into subprime mortgages to buy houses at the 
peak of the market at rates that are not going to be sustained 
and will not be able, as we see from the rising foreclosure 
rates, will not be able to make the higher mortgage payments 
they are now being asked to make and who are losing everything. 
They are losing not only their house but all of the savings 
they put into it.
    Chairman Miller. Thank you.
    Mr. McKeon.
    Mr. McKeon. Thank you, Mr. Chairman. As you said, there is 
room for lots of discussion here. I am--the opportunity 
overwhelms me.
    I have listened to each of you, and you each have a 
different story to tell, and you are all experts in what you 
are talking about.
    I spent a lot of time visiting businesses, manufacturers, 
lots of different businesses and I see--I see everywhere there 
is a demand for people to fill the jobs.
    Ms. Miller, you have been caught in a rough industry for a 
few years that have had tremendous problems and especially 
since 9/11 where it is amazing that all of them are still 
around even though most of them are in bankruptcy, or some of 
the large ones are.
    But I talk to people. You mentioned nurses. They are 
paying--around the country they are paying hiring bonuses to 
try to hire nurses from one company to another company. Great 
demand for nurses, great demand for teachers. I talked to a 
school that provides teaching for beauticians and barbers. They 
can't begin to fill the ranks. Truck drivers. They can provide 
40,000 truck driving jobs a year. We can't get enough people 
going into teaching. Everywhere. I see 4\1/2\ percent 
unemployment. We used to consider 6 percent full employment. 
And yet I hear these stories about how bad things are.
    I am wondering where personal responsibility comes into any 
of this. Should the government be responsible for people having 
hard times? When I hear about hard times, I try to think--I 
look at young people compared to when I was young; in fact, I 
have lived too long. I grew up and I know that--how much a loaf 
of bread was and how much a pound of meat, wienies. I used to 
work in a market. A gallon of gas when I was a kid, 25 cents. 
But I also remember the Carter years in the 1970s when we had 
gas lines, and we said that the next year gas prices were going 
to be 3, 4, $5 a gallon.
    And yet always we seem to make it through, and we end up 
consuming a whole lot more. My parents, they struggled just to 
get food on the table, and then I look now, the struggle is a 
bigger house, more cars, bigger cars. You mentioned boats. I 
understand you are not looking to buy a boat but, man, we are 
selling lots of boats. All of these things.
    After listening and reviewing some of this testimony, I 
can't help but notice a common thread through some of it. There 
is an apparent lack of confidence in the American people to 
make decisions for themselves, manage their finances, care for 
their families, plan for their future.
    I must say that this is jarring because it underscores a 
sharp difference in philosophy here in Washington. Some of us 
trust American workers and their families; some of us don't. 
Over the course of the next few years, I think we will see the 
stark difference come into focus time and again, particularly 
on this committee.
    Ms. Johnson, of all the panelists you are the one with the 
most experience in supervising and working with rank-and-file 
workers that we are here to discuss today. What do you make of 
this theme that I have noticed throughout some of the testimony 
today, and do you find that those you work with back in 
southern California are incapable of assuming risk, are ill-
prepared for challenges in the workplace, and ill-suited to 
deal with the new realities of the 21st century, or do you find 
that yourself, like me, a little more confident in the 
workforce?
    Ms. Johnson. I have all the confidence in the world with 
our workforce. I know it is an overused cliche when we say 
people are our greatest asset, but when you look at a small 
company, the labor percentage in terms of cost to sales is not 
that large when you put in raw materials and outside processing 
and the other costs that go into our product.
    We spend numerous hours training our employees. They have 
embraced being cross-trained because they recognize that that 
brings more value to them and more security in their job. Our 
workforce is crying out for training. They want to advance 
their careers, they want to learn how to use new technologies. 
Of course, they want to buy new cars and homes and send their 
kids to college. But my opinion, the workforce that we have and 
the people that I deal with on a day-to-day basis, I have all 
the confidence in the world that they are responsible and 
capable of managing their own lives.
    Mr. McKeon. I have been very concerned about the cost of 
education. The last 20 years it is going up four times faster 
than the rate of inflation. Is that the government's 
responsibility? Why is that happening? Most of that money is 
going to college professors, right? In some cases, football 
coaches. Where can we get a handle on that? How do we rein in 
the costs of education, because it is more and more important.
    We used to lose a lot of jobs going to other countries 
because of low wages. We are going to start losing them because 
we don't have an adequate trained workforce, and they are 
turning out enough people, and they are turning away people at 
schools, and a lot of people can't afford to go to school. How 
do we get a handle on those costs?
    Ms. Furchtgott-Roth. Well, one thing we can do is make more 
use of community colleges. Forty-five percent of freshmen in 
the United States are in community colleges. They have 
vocational training, can stay for a 2-year program, then 
transfer to a State university, or you can just go there, take 
a few classes.
    We spend $15 billion, the Federal Government, on job 
training, and a lot of these funds could be used better by 
channeling them to workers and allowing them to take courses in 
community colleges. Community colleges train most of the 
nurses. They are having to turn away nursing candidates, by the 
way, because their programs are full.
    So expanding community colleges and channeling more funds 
into those is one way out of the education cost squeeze.
    Ms. Appelbaum. If I might just comment on that as well. The 
issue that we can find when we look at higher education and 
compare it as a proportion of income to what other things cost, 
is, as Ms. Johnson has pointed out, manufacturing is the answer 
to productivity growth, so we have had enormous growth. It is 
not clear that you can get those kinds of productivity growth 
in higher ed or in education in general. It is the reason that 
as a country we have agreed to subsidize education. If we left 
it to private resources, just a small fraction of people would, 
in fact, be able to afford a college education.
    I think--I agree with the idea that we have to think about 
how to use resources more efficiently. At the Center for Women 
and Work we have done a lot of work on distance learning and on 
the means to use technology to reach people who are working 
full time at low wages and can't go to school. But the bigger 
problem, it seems to me, is that we have something like 52 
percent--we have 52 percent of high school grads going on to 
postsecondary, including community colleges, but less than 30 
percent graduating with 4-year degrees.
    Chairman Miller. We have got to stop this discussion for a 
second.
    Mr. Kildee.
    Mr. Kildee. We have votes coming up. I don't know the 
answer to this question, but I am not an attorney, so I will 
ask it anyway. How does the status of the middle class--and I 
will address this to Mr. Hacker first--how does the status of 
the middle class in Western Europe or other areas compare to 
the status of the middle class here in the United States?
    Mr. Hacker. It is a very good question, and, in fact, just 
the other day I was giving a lecture to my students comparing 
some of the recent statistics, so hopefully they are at my 
disposal now.
    The first thing to say is that American--middle-class 
Americans, the median American is relatively rich in 
international perspective because we have a much richer economy 
than most other countries. However, if you go even down to the 
lower levels of the middle class, say, people at the 40th 
income percentile, then you actually have many European nations 
have income levels that are higher.
    The most striking difference between the U.S. and Europe 
really has to do with both the security or stability of income. 
It is much more unstable in the United States. People have 
much--have to rely much more on their own initiative or on 
their employers for health insurance, pensions and so on. And 
also it is much more unequal as we all know from the 
comparative statistics.
    Interestingly, most Western European nations have not seen 
the same kind of increase in income and equality that we have 
seen in the United States. It has gone up in some of them, but 
it has certainly not been as dramatic. I think what we can say 
is that the United States has had an enviable economic 
performance compared with other countries, including Europe, 
and that there are strains that we see in Europe that we don't 
see in the United States that are worth taking into account. 
But at the same time the middle-class citizens of European 
countries have greater economic security, clearly, and 
especially if you are--there is less inequality in those 
countries, and especially as you move slightly below the exact 
middle of the income distribution, their standard of living is 
actually in many cases higher than in the U.S. for comparable 
populations.
    Mr. Kildee. Am I right that the fragility of the middle 
class status in this country is something of grave concern? I 
mean, you have a middle-class person, and they have an economic 
crisis come upon themselves, in 2 months they are having a 
difficult time making their mortgage payments; are they not? So 
there is a certain fragility among our middle-class people.
    Mr. Hacker. I think that is the main concern we have heard 
from many of the panelists today and the main concern that I 
have expressed. It is really not denying that Americans are 
richer than they used to be, that is clearly the case, but 
those riches have been accompanied by increasing economic 
risks, and it is thinking about ways in which we can ensure 
that people who have climbed up the economic ladder, who have 
made it into the middle class, can stay there when dramatic 
events occur in their life.
    That is the kind of challenge I think we have to worry 
about with health care, pensions plans, with how to deal with 
the increasing amount of structural employment; that is, people 
displaced from a job for which they develop specific skills and 
then have to gain new skills or spend periods of time outside 
the labor market before they can reenter.
    So we really need to worry about not just the standing at 
any point in time of the middle class, but how secure they are 
against precipitous drops in that standing.
    Chairman Miller. We have four votes on the floor. I am 
going to try to get Mr. Walberg in for a question at this point 
if you would like to. And then we will break and come back, get 
back here at 12:15, and on our side will be Mr. Andrews, Mr. 
Tierney and Mr. Loebsack, Mr. Courtney, Mr. Davis, Mr. Ehlers, 
Mr. Castle, who was here and gone.
    Let me just ask you, does this raise a logistical problem 
with any of the panelists? Can you stay with us if we take a 
break until 12:15? I don't know if people have flights or what.
    Thank you very much. We will be back here and try to start 
right at 12:15 if we get through these votes. Thank you.
    [Recess.]
    Chairman Miller. Thank you for being here and returning 
promptly. We will begin with Mr. Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman. I am sorry I missed 
much of the hearing, but I was in a markup just down the hall. 
Fortunately, I was able to hear the testimony the of several 
individuals, particularly Ms. Johnson, and I just want to 
comment that what I heard from her is right on. It is exactly 
what we are experiencing in Michigan with our manufacturing, 
and I suspect it is a national phenomenon.
    In the old days when I walked in a factory and took a tour, 
there was a whole line of lathes, machinists working on the 
lathes, turning the screws by hand, measuring with micrometers. 
Today when I walk in a factory in my district, there is a 
$700,000 milling machine, computer-operated, and a technician 
operating it who earns 70- to $80,000 a year.
    Times have changed. Schools have not changed, and in 
particular students are not getting the work. I think it is 
very important for us on this committee to recognize that the 
educational institutions have to change to accommodate the 
needs of the world out there that they face now and that these 
students are going to face, and I have been all over the U.S. 
trying to get the message across. We have to change our 
educational system, particularly math/science education. We 
have to prepare the students of today for the jobs of tomorrow, 
and we have just not been doing it.
    There are some schools that are doing a fantastic job, many 
that are not. There are many aspects of the problem, one of 
which is teachers who are good teachers who want to teach math 
and science well, but have never learned it, never been taught 
properly, and have not learned science and math itself, and not 
learned how to teach it properly.
    So I just wanted to go on the record thanking Ms. Johnson 
for her comments and the rest of you as well, their supporting 
comments.
    That is the direction we have to go. I appreciate what No 
Child Left Behind has done. We are now beginning the phase of 
testing in science, but we are not going to count it toward 
yearly progress for some years. I think we should change that 
and start counting it immediately. This is not something that 
can wait, this is something that we have to do fairly soon.
    I would just like to ask Ms. Johnson if she would like to 
make any further comments along that line?
    Ms. Johnson. In regards to the qualifications of teachers 
that are in the field of teaching math and science, I would 
agree that they need to have, in many cases, more real-world 
experience. Math and science, when the children are learning it 
in the classrooms, they need to have the ability--I am not sure 
if I am using the right word--contextual learning so they can 
apply what they learned in the classroom to real-world 
experience. And I think that there needs to be better 
collaboration between industry and education so that we can get 
people that are actually out on the shop floor and utilizing 
the technology that is available and sharing that with the 
teachers so that they have a better understanding of the kind 
of skills that are necessary and how they can better teach 
their children the math and the science and apply it to a real 
skill.
    I am very much supportive of the No Child Left Behind, but 
I feel that no child should leave without a skill, and that 
there should be a clear path for them in terms of whatever 
their life situation is, that they can pursue what fits them.
    In regards to getting industry more involved, I believe 
that there should be better partnership is the only way that we 
are going to be able to proceed and take the next step.
    Mr. Ehlers. Thank you very much.
    Just continuing on that thought, we have developed some 
programs, Mr. Chairman, which I think work very well, the 
partnership programs in the Department of Education, also the 
National Science Foundation, but they have not been adequately 
funded, and the word has gotten out. I think the appropriate 
role of the Federal Government, and without impinging on local 
school boards and State boards of education, is simply to 
provide the professional development for teachers so that they 
get the education they need to properly teach these courses, as 
I call it, for the jobs of the future, and that they feel 
comfortable doing it and can do a good job.
    I have worked with the schools for many years. I never talk 
about or blame the teachers because they simply haven't had the 
opportunity to learn the appropriate subject matter and 
methodology for these courses. But when they do, they are very 
excited about it, and they are eager to do the job properly.
    With that, Mr. Chairman, I yield back.
    Chairman Miller. Thank you.
    Mr. Andrews.
    Mr. Andrews. Thank you, Mr. Chairman. I thank all the 
witnesses.
    Dr. Furchtgott-Roth, in your discussion of the superb 
economy that, in your view, we are experiencing, one of the 
points on which you rely--I read an article you wrote on 
December 11th, 2006, called Richer Than You Think, and in the 
article you say, and I quote, we can see indications of 
prosperity all around us. The boom in self-storage facilities 
catering to middle-class America has come about because our 
possessions have outgrown the capacity of our homes.
    Are there data to support that claim, that the boom in 
self-storage facilities is people that have too much furniture 
for the house they are living in because of prosperity?
    Ms. Furchtgott-Roth. There has suddenly been more and more 
Americans using these self-storage facilities, and they are 
using them to store something--obviously not using them to 
store nothing.
    Mr. Andrews. Absolutely. You would concede, wouldn't you, 
that one of the reasons that people may be doing this is they 
used to live in a larger home, and they lost their job, and now 
they moved to a smaller home and have to store their furniture 
somewhere? Is that possible? Do you have any data on that?
    Ms. Furchtgott-Roth. The rate of home ownership is 
increasing. The average size----
    Mr. Andrews. Do you have any data on your claim that the 
reason self-storage facilities are booming is because people 
are so prosperous?
    Ms. Rosemary Miller. Could I say something?
    Mr. Andrews. I am going to come to you in a minute, but I 
want the doctor to answer the question.
    Ms. Furchtgott-Roth. I think it is a reasonable assumption 
that when people have a self-storage area, then they are 
putting things in it, and the size of our homes is getting 
bigger.
    Mr. Andrews. Do you think one of the reasons might be that 
people can't afford the rent where they used to live, and maybe 
they now moved in with family members because they can't afford 
an apartment? Is that possible?
    Ms. Furchtgott-Roth. I am sure there are people for whom 
that is true, but that is not a systematic problem in the 
American economy today.
    Mr. Andrews. I don't have much time. You are the one who 
made the claim that the reason for this boom in self-storage 
facilities is all this prosperity. Are their data for that 
claim or not?
    Ms. Furchtgott-Roth. There are data showing increasing 
prosperity, increasing purchases. Retail sales were at a high 
last month.
    Mr. Andrews. Are there data that show that the reason that 
more self-storage facilities have opened up is because 
prosperous people need room to store their furniture, yes or 
no?
    Ms. Furchtgott-Roth. It is a logical argument to make under 
the circumstances looking at current economic conditions, and 
it is true systematically about the American economy.
    Mr. Andrews. Does that mean no or yes?
    Ms. Furchtgott-Roth. I am not familiar with all the data 
regarding it, and so I can't answer the question.
    Mr. Andrews. Even though you made the claim.
    If I may, Ms. Miller, the Ranking Member a minute ago made 
a reference, and I am sure it was in good faith because that is 
the kind of person he is, that personal responsibility is one 
of the keys to people achieving more economic success. I wonder 
if you could describe for us a typical day for you with your 
14-year-old, your 12-year-old living in Reno and commuting to 
San Francisco. Can you tell us what a typical day is like for 
you and how much personal responsibility you engage in?
    Ms. Rosemary Miller. It is difficult for me to do anything 
but tell you my own experience and the experience of the people 
that I work with and the experience of people that I speak 
with. I am uncomfortable with the numbers and the confidence 
that so many place in the numbers because those numbers don't 
translate to what is happening in my life.
    The issue of personal responsibility is a very important 
one for me. I put myself through college. I worked six jobs 
from freshman year through the years until I graduated. I grew 
up in a family where none of us, and I come from a big family, 
were able to pay for college. We had to pay for it ourselves.
    I went to college, I got my degrees, and I made a specific 
decision based on my personal priorities, which was my family, 
to join a workforce or a profession that didn't use my degrees, 
but it used my energy, it used my intelligence, it used my 
people skills. And I worked for a company for many years that 
was run by employers who showed personal responsibility.
    Personal responsibility is not just the purview of 
individual workers, it is the purview of the people that run 
companies; it is the purview of the people that represent those 
companies in legal situations and that sort of thing. I look 
back at the 18 years that I have spent at this company, and I 
can't think of any moment where I was irresponsible.
    At this moment in my life, I happen to have no consumer 
debt, which is a personal, personal goal for me, and it is 
not--it is not the norm though. I know that there are people in 
my--peers that have consumer debt and that sort of thing.
    Chairman Miller. It is very difficult for me to interrupt 
you, but I am going to have to because----
    Mr. Andrews. I thank the witnesses. My time has expired.
    Chairman Miller. I am sorry.
    Ms. Rosemary Miller. No worries. Thank you.
    Mr. Kline. Thank you, Mr. Chairman. We have a vote on the 
way.
    Thank all the witnesses for appearing today, and as always 
there is never enough time.
    Just a couple of things. Ms. Miller, I found your story 
very compelling, and since I, like most Members here, fly 
thousands and thousands of miles and many, many hours on 
airlines, on Northwest Airlines, who I understand to be your 
employer, but whoever the large carrier is, and certainly we 
couldn't do that without the professionalism and attention of 
the flight attendants.
    However, just looking at your testimony, you volunteer that 
we could replace ``I'' with ``me,'' and you talk about such 
careers as pilots and mechanics and nurses, like my wife and 
niece, and firefighters. What are you basing that expertise on? 
I understand that you are a flight attendant. Are you a nurse 
and a firefighter and so forth?
    Ms. Rosemary Miller. No. I think what I was trying to say 
is that the person sitting here giving testimony today could be 
one of a number of American workers.
    Mr. Kline. Or could not be. Some of those professions could 
be doing very well, presumably. Thank you. I just wanted to be 
sure.
    You also mention that you are in a squeeze, and you are 
trying to pay for a home and so forth, and yet--and I am sure 
that is true, I am glad you are debt free, but there is no 
question that home ownership is at the highest in this country 
than it has ever been, including for minorities.
    Ms. Johnson, also a very compelling story. I have a small 
manufacturing company in my district run by a woman also, and 
she is having so much difficulty finding employees that they 
have gone to the practice of in the third--what would be the 
third shift starting up the machines, loading them up with 
steel and starting them up, and then turning off the lights and 
going home. I said, don't you even have a night watchman? No. 
They just lock the doors and go.
    And the point is that there is productivity sometimes 
without employees, of course, but mostly her biggest issue--and 
I find it increasingly as I travel around the district--the 
biggest problem that employers are having are finding qualified 
workers. Sounded to me like that was your story.
    Three years ago when I traveled around, the biggest issue 
was the cost of health care. And I am not meaning to imply that 
is not still an issue, but clearly there is difficulty in 
finding employees. How long has this been a concern of yours?
    Ms. Johnson. I have recognized for more than 6 years now 
that we are going to be experiencing a work skill shortage, and 
it is something on my radar for a while, particularly because 
where I grew up in southern California surrounded by the large 
prime aerospace companies. Most of my friends' parents either 
worked for one of those companies or owned their own machine 
shops. And I noticed that so many people that were in my 
generation were not getting--following their parents' 
footsteps, whether it is because their parents felt there was 
something better for them, or, like me, they might have been 
the first child in the family to go to college, and so they are 
pursuing other things.
    So it has been something that I have been addressing and 
realize is going to become a crisis. It has been in the last 
couple of years, for example, we had a minimum average of 10 
positions that remain unfilled.
    Mr. Kline. Let me interrupt for a minute because I am going 
to run out of time, and we do have to go vote. I think that Ms. 
Furchtgott-Roth mentioned that one of the things we can do to 
ease the shortage of employees is have more people go to 
community colleges. And certainly we have, I would claim, some 
of the finest in the country in my district in community 
colleges. Would that apply in your position; graduates of 
technical training or community colleges, would that help the 
situation for you?
    Ms. Johnson. Definitely, yes.
    Mr. Kline. Thank you, Mr. Chairman. I yield back.
    Chairman Miller. Mr. Tierney.
    Mr. Tierney. Thank all the witnesses. I think their 
testimony has been very helpful today in framing this issue and 
the circumstance. We always listen to the data. It is great to 
hear the academics say it, and we want to know how to interpret 
it, but I think, Ms. Miller, your real-life situation 
determines it pretty well.
    I don't think you are alone in that. I know preschool 
teachers at $21,000 a year, people working for General Electric 
who make engines who had their jobs off-shored. I know college 
professors who are now adjunct professors instead of tenured 
professors who are making far less with no benefits. We can go 
on and on.
    I don't think your circumstance ought to be diminished one 
single bit. I think you reflect a great number of people, not 
all of them, and I want to thank you for the bravery of coming 
here and telling this story and how it has helped us identify 
the situation.
    Similarly, Ms. Johnson, I want to thank you. I was a small 
businessman for over 20 years, president of the Chamber of 
Commerce. I think you reflect a whole pile of people out there 
who understand that part of the solution is education. We have 
had a problem with the White House on a serial basis cutting 
vocational and technical education, cutting job training 
programs, and I am hoping there is some reflection here that we 
can work in a bipartisan way to improve that situation. We 
cannot keep chopping millions of dollars off of job-training 
programs and a President saying that vocational education isn't 
a worthy experience, where we know from our experience the 
opposite is true.
    Another thing you haven't experienced, I have aerospace 
companies in my district that have been told by either the 
government, which is their customer, to make it cheaper even if 
it means going offshore to Mexico or overseas to Sweden, in the 
case of Volvo for engines, or, in another circumstance, a 
company that was owned by a Canadian company told them 
basically go north or south, but get cheaper on us.
    So I just want to ask Dr. Appelbaum, tell us a little bit 
about the impact of trade and the trade deficit on jobs and 
people that might, in fact, be in this middle-class squeeze 
that Ms. Miller was talking about.
    Ms. Appelbaum. Thank you for that question. I agree with 
Ms. Johnson about the fact that manufacturing is the engine of 
productivity growth and of innovation, and I am very concerned 
about the fact that we have treated manufacturing with such 
disdain. It is not only that we are not training young people 
to go into skilled manufacturing jobs, it is that we are not 
investing in this country in high-value-added manufacturing.
    And it is not just a problem in terms of middle-class 
incomes, I think it is a problem that is going to come back and 
bite us as a country. We know that one of the things that is 
going to have to happen is that the dollar is going to have to 
fall against other currencies, or, to put it another way, China 
currency is going to have to rise against ours. We had a fall 
of the dollar against European currencies, and we have seen 
just in the last month that that has definitely improved our 
ability to export to countries like Europe.
    But what we really have to see--because our trade deficit 
is unsustainable. We have the IMF telling us that we are a 
threat to economic stability in the world. What really has to 
happen is two things. One is our currency has to fall relative 
to the currencies of low-wage countries, and the second thing 
is we have got to think creatively about enhancing our domestic 
manufacturing capacity.
    A better exchange value will enable us to export, but for 
us to actually be able to carry out those exports, we have got 
to have the manufacturing capacity here. And your point about 
off-shoring is very well taken. As recently as a decade ago, we 
produced--90 percent of the manufactured goods we consume in 
this country were produced domestically, and now we are down in 
10 years to just 75 percent and falling.
    So you raise a very good point there.
    Mr. Tierney. It is big in my district.
    Chairman Miller. We have a minute left on the vote.
    Mr. Tierney. Dr. Hacker, let me just ask you a question 
before you leave. I thought your statement that corporations 
get a liability shield, protection from liability, in a number 
of different ways as well as numerous incentives and tax breaks 
and whatever, why shouldn't middle class and others get some, 
as you, I think, phrase in other writings, structures of 
security that we used to have? If we are not going to get them 
through the employer, if they are going to cut back on defined 
benefit pensions, cut back on contributing to both current 
employee health insurance and retiree health insurance, can you 
give us some direction of what would be an appropriate Federal 
Government role that wouldn't by Mr. McCain and others perhaps 
be seen as a lack of self-discipline? But what might people use 
to help them in those situations?
    Mr. Hacker. Thank you very much for the question. You are 
absolutely right that I think that middle-class Americans, just 
like entrepreneurs, need to have some basic protections against 
economic risks if they are going to have the confidence to 
invest in their futures, to make the choices and the 
investments, the ones that we talk about when we talk about 
personal responsibility that can advance their family and 
advance our economy.
    I don't think this is just an analogy. I mean, if you look 
throughout American history, the periods of middle-class 
prosperity and strength are precisely periods where we invested 
in the middle class: The GI bill for education and home 
ownership; through Social Security and Medicare to ensure that 
people had security in old age and during their working life, 
that they didn't have to fear that they wouldn't be secure in 
old age.
    So I think we need to draw on these positive past examples, 
but update them to our new 21st century economy. I think this 
is actually a place where we could have a really useful 
bipartisan discussion. Both Republicans and Democrats premised 
much of their action in the past on the idea that employers 
would continue to carry out these responsibilities, would 
continue to take on these burdens. We subsidize these benefits 
heavily through the Tax Code. We often tried to regulate them 
to make them work better, and we have seen that even more 
recently with the Pension Protection Act. The one inevitable 
reality about that is that we can't make corporations spend 
money on these benefits and offer them if they do not want to, 
right? We could certainly mandate that they do it, but that 
would only hurt our competitiveness and hurt corporations even 
more.
    So we need to recognize that some of these sources of 
security that are so important to middle-class Americans have 
to move outside that direct employment relationship. I think 
there are multiple ideas out there. We need to have portable 
health benefits, for example, whether that means we expand 
programs for low-income workers, or, as I prefer, that we 
create a new option for middle-class Americans to buy, secure 
public or private insurance; whether it means that we make sure 
that 401K retirement plans are available to all workers even if 
their employers don't offer them and offer new subsidies for 
those plans that are particularly generous to middle-class 
workers and lower-income workers who are most at risk of not 
achieving their retirement savings goals; whether it means we 
try to work around the margins at least of our unemployment 
insurance system to ensure that more than just a third of 
workers who are unemployed are receiving some kind of 
unemployment benefits; and think about, for example, having 
some kind of wage insurance or protection against big drops in 
one's earnings when we lose a job in, say, a high-wage sector 
and have to move into a low-wage sector.
    These are not ideas that are without precedent, they are 
not ideas that would necessarily divide us across ideological 
lines or partisan lines if we have a realistic discussion about 
how we would do it, how we might pay for it, and how this would 
be a new partnership between the public and private sector.
    Ultimately we are talking about a new social contract for 
the American workforce.
    Mr. Tierney. Thank you.
    Ms. Woolsey [presiding]. Thank you for being so patient 
with us and staying. Chairman Miller is going to come back, Mr. 
Loebsack is coming back, and I have a series of questions, and 
then you will probably be free.
    I do have an observation. I can do this now because there 
is nobody that is butting up against my time until somebody 
else gets here. I am sorry I was late, but I was at a Foreign 
Affairs hearing also.
    I was watching the people behind you, the folks, and the 
room was jammed when I first got here to hear your testimony, 
probably most of whom were middle-class folks, and they had the 
saddest looks on their faces, I can tell you. They know what 
you are saying is true. They want a solution, and they can 
watch themselves and know about their kids. I just looked at 
them. I mean, it was just really sadness on their faces. Your 
giving us straightforward testimony is very much appreciated, 
and I thank you.
    Now, Dr. Appelbaum, forgive me, I didn't yet read all of 
your testimony, but I have heard your responses to people, so I 
am asking you a question related to one of your responses, and 
you were talking about and reporting that productivity in the 
United States actually is growing, and that is something for us 
to celebrate.
    So my question is who is paying attention to who benefits 
from this growth, and how much would it help the middle class, 
the working class, if the benefit actually was shared at least 
equally with them?
    Ms. Appelbaum. Yes, that is a very good point. We have had 
10 years now of healthy, remarkably strong productivity growth, 
although I did caution that in the past year it has slowed 
tremendously, so that is a storm cloud that we are going to 
have to keep an eye on.
    For the first 5 years, in fact, middle-class income rose 
along with the productivity growth. We had a brief period of 
shared prosperity, a slight narrowing of wage inequality, and I 
think there was a sense of optimism in the country. Things did 
look like they were getting better; people could see their 
incomes rising. This has disappeared.
    We continue to have the strong productivity growth, but we 
do not have the same kind of income growth, and I think that 
this has created, has contributed a lot to the economic 
insecurity. You can't see yourself getting better off.
    As of 2005, the last year for which we have data, middle-
class family incomes had not yet recovered 5 years after the 
end of the recession to where they had been just prior to the 
recession. We may have made it this year, but that is 6 years 
to get back to where you were.
    I would like to add one thing to the social contract idea 
and to some of these ideas, and I know this is an issue close 
to your own heart. Most families today have every available 
adult in the workforce. They are either single parents, or, if 
you have married couples, they are dual-earner families. They 
rely on the income of every adult in order to make ends meet.
    I think another important aspect of economic insecurity we 
haven't addressed here today is what happens when you have a 
family member who becomes ill; what happens when you have a 
young wife who becomes pregnant; what happens to a couple that 
adopts a child? Suddenly you are in a situation where you are 
caught between a rock and a hard place. You want to be a 
responsible employee, you need to put a paycheck on the table, 
and you have a sick child that you need to care for. And just 
as we introduced unemployment insurance when he left the family 
farm and went to work so there would be some partial wage 
replacement if he lost a job through no fault of his own, we 
have got to think about how to have partial wage replacement 
for people who are facing serious family crises. And I just--I 
think a big part of the economic insecurity is the knowledge 
that one illness--you are just one illness away from not being 
able to pay your bills, going into debt, maybe even losing your 
house.
    Ms. Woolsey. Right. It may not be your own illness. You are 
a perfect straightwoman for me today because then you allow me 
to say as the Chair of the Workforce Protection Subcommittee on 
this major Education and Labor Committee one of my bills is the 
Balancing Act, which actually includes paid family leave and 
many other ways to help working parents bridge that gap between 
work and family.
    So I have a question now for Dr. Weller. My question for 
you has to do with organized labor and labor unions, and what 
do you think is happening with organized labor, and what 
difference do you think that makes to the average working 
person?
    Mr. Weller. Well, the data we presented today and the 
stories we have heard here are the struggles of the middle 
class, and I think the most telling numbers are the ones that 
Dr. Appelbaum just presented that compensation has not kept 
pace with productivity growth. Clearly we need to institute 
policies to help that, to bring that together. The minimum wage 
is a good first step. It helps at the bottom 10, 12 percent of 
the labor market, but it is not a middle-class policy.
    The only policy that we really know that helps to 
strengthen the link between productivity growth and 
compensation growth is unionization. Unions have declined. 
There are less than 8 percent in the private sector in terms of 
coverage. In the public sector they are larger, although there 
are limits to what they can do, and clearly the labor law is 
stacked against unions. The elections for unions are often 
cumbersome. Penalties on employers are miniscule; it often 
takes years until those penalties are imposed, and then often 
they just require back pay.
    I think it is an important first step to really level the 
playing field. I think the Employee Free Choice Act which has 
been promoted a number of years now is an important first step 
to level the playing field for workers who want to bargain 
collectively. It is still a democratically guaranteed choice to 
join a union, not join a union, but we really need to level the 
playing field because unionization is the most powerful tool to 
strengthen the link between economic growth, productivity 
growth and wages.
    Look back at the 1960s. We did have very strong economic 
growth, strong productivity growth, strong profit growth, but 
we also let many families share in the gains of the fruits of 
their labor, and the primary tool here really was the union 
movement, the labor movement and strong coverage in the private 
sector.
    Ms. Woolsey. Thank you.
    We have Mr. Bishop back. So, Mr. Bishop, your turn.
    Mr. Bishop. Thank you very much. Actually, I am not back, I 
am here for the first time. I regret that I was not here to 
hear the testimony, but ironically I was in a subcommittee 
meeting at which we had a spirited discussion on maintenance of 
Davis-Bacon protections. And in my view, Davis-Bacon is one of 
the instruments of public policy that has both built and 
maintained the middle class. And so that debate was, I think, 
apropos of the discussion we are having here.
    I was a college administrator before I came to the 
Congress, and I serve on the Higher Education Subcommittee, and 
I know that one of the discussions that was taking place this 
morning was a discussion about increased debt load. And you 
know that we have just passed a measure that hopefully will 
ultimately take on the force of law to cut student loan 
interest rates. But I guess my question is we are going to be 
reauthorizing the Higher Ed Act hopefully this term, and how 
would you advise us in terms of what we might want to say to 
colleges in terms of their obligation to help students with 
debt counseling, and also what might be their obligations in 
terms of holding down the indebtedness that college students 
will encounter? I don't know who to direct that to. Dr. Hacker.
    Mr. Hacker. What I can say, I think, very quickly, and then 
I would like to hear the opinions of the other members of the 
panel, is that I think that this is an absolutely crucial 
issue. This increasing debt load is one of the most important 
reasons, I think, why people are concerned about the future, 
their future economic security, because simultaneously we have 
come to believe and understand that going to college is a 
critical precondition of success in the market, and yet the 
cost of college has gone up, and the debt loads are coming up.
    I think this is another illustration of the point I was 
making before to Representative Tierney about how some of the 
major risks that people take on like debt are often investments 
in their futures, and therefore I think one thing I would just 
put on the agenda is this is not just an issue of education or 
college, but it is also a question about whether or not people 
have insurance protection, security in their working life, 
because if they are investing in skills to gain access to the 
market, then they are taking on a lot of burden and putting 
themselves at risk at the same time.
    It seems to me that for what we know about the effect of 
debt on student education choices suggest that the greatest 
cost of rising debt really occurs among moderate-income and 
lower-income students. We have seen a major decline in Pell 
grants as a share of the cost of going to college, and there is 
good research to suggest that dropout rates are influenced by 
debt loads and financial burdens.
    So I think the first order of business has to be focusing 
on the students most vulnerable in trying to restore some 
measure of support for college financing at the Federal level.
    Ms. Appelbaum. I think as a country we are going to have to 
decide what we think will make us more competitive in world 
markets and whether or not it is worth spending an increasing 
percentage of our GDP and investing it in, I would say, 
postsecondary training and education.
    As we have heard from Ms. Johnson, I think vocational 
training is important if it leads to high-skill jobs, community 
college, higher education. One of the things that we can say is 
if you went back 20 years ago, you would find that the U.S. was 
among the leading countries in the number of young people that 
we graduated with 4-year college degrees. Now, we have held 
constant our share of college graduates, it has not declined, 
but in the meantime, other countries, if you think of the U.K., 
for example, where 20 years ago a university degree was an 
elite degree, only the elite went to college, it is shocking to 
find that they have a higher proportion of young people 
graduating from universities than we do.
    So if we think we are in a global marketplace, and we think 
that higher education is crucial, I think we are going to have 
to face up to the fact that we are going to have to invest more 
as a country in higher education in order to enable a larger 
and larger proportion of our young people, those who come from 
middle-class families, people of moderate means, to become 
college graduates.
    Mr. Weller. Let me jump in very quickly here. The numbers 
suggest that the typical student loan amount has risen pretty 
much in line with tuition increases, which have been very 
sharp. The important piece, however, is that we now see more 
and more people coming out of college with very high debt loads 
and entering the labor market that has reduced pension 
coverage, especially for the age group of 25 to 35, so we are 
already creating the problems of the future. Essentially we are 
sending people into the labor market with insufficient 
resources to prepare themselves for their own future, 
especially a future where they have to take on more risks than 
in the past.
    Mr. Bishop. Thank you.
    I know one of the concerns I have is if you look at history 
of higher education in our country, it was essentially elitist 
until World War II, and then with the advent of the GI bill and 
subsequently Sputnik and the national investment in 
postsecondary education, it became egalitarian.
    My fear is we are on the precipice of becoming elitist 
again. I also worry about how debt load influences career 
choice, and we are in effect pushing kids--I shouldn't say 
kids--pushing graduates out of perhaps public service careers 
and into careers that they think will be more beneficial to 
them financially. I think we suffer as a country as a result.
    Ms. Appelbaum. I agree.
    Mr. Bishop. Thank you.
    Ms. Woolsey. We have another vote, but we are waiting to 
hear from our Chairman to see if he still wants to come back. 
So in the meantime I do have a couple more issues to discuss. 
One is I don't know if it was Ms. Johnson or Ms. Furchtgott-
Roth, maybe it was one of my colleagues, that said something 
about the professors earn too much, therefore we can't afford 
to pay our instructors.
    Ms. Furchtgott-Roth. It wasn't me, but we do have a 
professor here.
    Ms. Woolsey. We know he doesn't earn too much. He earns 
every penny that we pay him.
    My question would be--and with Ms. Johnson, you know what 
recruiting challenges are--how do we recruit topnotch 
professors when they can go to high-tech industry and get five 
times more and in benefits and the retirement if we don't pay 
them topnotch salaries? And then along with that, how do we 
expect the most important product we have in this country, our 
children, to be educated if we don't pay our educators, our 
elementary and secondary teachers and then on to junior 
college, et cetera, pay them a really livable wage? So have at 
it.
    Ms. Furchtgott-Roth. If I could start, this report: Tough 
Choices or Tough Times. It is on education. It was authored by 
a bipartisan commission, including former Secretary of 
Education Riley; Joel Klein, chancellor of New York State 
schools, and--New York City school system; and it addresses 
this very point, and it proposes dramatically increasing the 
pay of secondary school and elementary school teachers to 
45,000 to 110,000 because it says that--it is suggesting that 
teachers who teach math and science should have B.A.s in math, 
in science, but right now they are getting attracted into other 
fields, and we need to make up for that differential. So this 
is a very real problem on the elementary and secondary school 
level.
    As far as college professors go, there are professors 
competing to get tenure. It is a very competitive process, and 
colleges do not seem to have problems attracting qualified 
professors. But the elementary and secondary school we do have 
problems attracting people in the math and sciences.
    Ms. Woolsey. I thank you.
    I am going to give the seat back to the Chairman. Mr. 
Loebsack would be next to ask questions.
    Mr. Loebsack. Thank you. Catch my breath. I am brand new to 
the Congress, and I was warned about such situations where I 
would have to leave and race for votes. So thank you for 
staying here. Appreciate it very much.
    I just have a couple of questions, I guess first a comment. 
I really appreciate the comments folks made about education not 
just because I am a college-professor-turned-Congressman of a 
4-year college, but we have a lot of community colleges in my 
district, too, and I think they are just fantastic. The other 
day when we sent a press release about the student loan rate 
cuts, my press secretary left out community colleges, and I 
made certain that she put that back in.
    But also I am a person who wouldn't be here today had it 
not been for the opportunities provided to me. I grew up in 
poverty myself. I somehow managed to get a Ph.D. And taught at 
a private college for 24 years. And so the value of education, 
I think it is fantastic. I am here in Congress today on this 
committee because of what I have seen happen in the last 6 
years in particular. I don't want to give too long a speech as 
such.
    But I do have a couple of questions to ask a couple of you 
at this point. For example, Dr. Weller, you mentioned something 
about collective bargaining. Can you elaborate a little bit on 
that, sort of expanded opportunities along those lines?
    Mr. Weller. I think, importantly, collective bargaining--
that the role of collective bargaining has diminished 
substantially. We used to have over a third of the private 
sector labor force covered by collective bargaining by union. 
Now it is less than 8 percent. More collective bargaining would 
strengthen the tie between productivity growth and compensation 
growth, which has weakened substantially in the last few years.
    I think there is another important role of labor unions, 
and that is often overlooked. They are an important labor force 
intermediary. We have talked a lot about education here, and I 
think education is extremely valuable. Community colleges could 
play a much bigger role. When workers are faced with a 
situation where they will lose a job, and we go in and maybe 
you should get more training, they say, what do I train for; 
that job is going to leave.
    Now training through the union is a different entity 
because the union has the connections to the employers. He does 
know where the next few jobs come from, and there is a number 
of interesting efforts in that regard to strengthen the role of 
unions to labor market intermediaries, to combine training 
programs that exist with the needs of employers in various 
industries where the unions are particularly strong such as the 
airlines and others, and I think that is an important piece 
that is often overlooked as a role of collective bargaining.
    Mr. Loebsack. Trade adjustment, community colleges, the 
role they play in that as well.
    Also, I have a question for you, Dr. Hacker. When you 
talked about an improved safety net, can you elaborate on what 
you would mean by that? Are you talking about principally 
restoring the cuts that have occurred the last 6 years or so, 
or something beyond that?
    Mr. Hacker. I am really talking about something beyond 
that. As I said in response to Representative Tierney, I think 
an improved safety net really has to face up to the central 
change that has occurred in the framework of economic security 
we have in the United States, and that is the erosion of 
employer provision of social benefits, the decline in employer 
health insurance coverage, and, I think less recognized perhaps 
but equally important, the shift away from guaranteed defined 
benefit pension plans towards individual accounts styled 
defined contribution plans, which have many merits, but do put 
much more risk onto individual workers, and which the evidence 
suggests leave middle- and lower-income workers in particular 
less well protected.
    So I think that a safety net has to go beyond simply 
shoring up the programs we have, just thinking seriously about 
how we would create a better framework for a more flexible 
economy in which people can freely move from job to job without 
worrying about losing their benefits, in which people have--as 
Dr. Appelbaum mentioned, in which people have two earners in 
the workforce have some flexibility so if there is a need for 
one parent to be at home for a period of time, in which we are 
focused on working-age people, because many of our programs are 
really focused on the aged, who were at one time the most 
disadvantaged segment of the population but now have reasonably 
good protections in many areas.
    So I have talked in my work and in my book about a number 
of options including expanded defined contribution pension 
plans, like universal 401Ks, improved unemployment benefits 
that would also perhaps cover some of these family-related 
events that Dr. Appelbaum referred to; a better health 
insurance framework.
    I think here this is the most obvious place where our 
system really fails both employers and individuals. It is much 
too costly, the coverage is too cramped, and we are seeing more 
and more risk shifting onto individuals, not because I think 
employers generally have bad motives, but because they are 
drowning under these costs. To me those are some of the core 
areas.
    Mr. Loebsak. One question, Dr. Appelbaum. Ways and Mean, I 
believe, yesterday began to talk about trade promotion 
authority, fast track. What do you think about an extension of 
trade promotion authority at this point, because you talked 
about MMCs and trade.
    Ms. Appelbaum. Sure. I think the fast track would be a 
mistake. I think we have to seriously consider each trade 
agreement on its own merits. I am hopeful that going forward we 
are going to see a lot more attention to labor conditions and 
to environmental conditions, but in any case I think blanket 
approval is just not a good idea.
    I think we have got quite a few trade agreements out there. 
We are still struggling to make them work for the American 
middle class, and we need to go slowly as we go forward.
    Mr. Loebsack. Thank you all. Yield back my time.
    Chairman Miller. Thank you very much.
    If I might take the part of the Chair to have the second 
round of questioning here, and if one of you is up against a 
flight schedule, leave.
    But just I wanted to just to clarify a couple of issues 
here. You know, this committee obviously spends an incredible 
amount of time and energy on education and trying to integrate 
this into the workplace and do a lot of work with association 
in advanced manufacturers and the high tech and biotech 
industry, which really have career ladders available to skills 
and education and certainly in our State of California, but at 
the end of the day, in recognizing all of that, and that is 
what we should be doing and need to do to be more efficient, 
when you see people running in and out of doors here when you 
are talking, you wonder what the productivity is.
    You know, somebody said we have the numbers and then we 
sort of had the experience. And, you know, I represent a 
district that was maybe called the first ring of the suburbs in 
the San Francisco Bay area in the East Bay. World War II had 
dramatic growth, dramatic integration of the workforce with 
steel mills, six oil refineries, chemical facilities and all of 
the rest of that, and now biotech and high tech and startups 
and all of the rest of that.
    When you talk to people, they simply are in the process of 
making a series of tradeoffs today, whether they are organized 
or whether they are unorganized. They have a union or don't. 
They are trading hours for health care, which they are going to 
pay more for in this agreement, or they are going to get the 
same health care and they are going to pay more. Pensions are 
open to negotiation. They are trading take-home pay for maybe a 
pension contribution. This is the process of negotiating and 
employers are in different situations.
    But the overwhelming sense, when I talk to my constituents, 
is that this is an ongoing process of which they are continuing 
to slide down the ladder. They simply don't have enough money. 
I attend many conferences on pensions and savings, you know, 
the industry and advertisers and people participate in. And 
yes, we, you know, 401(k)s have grown in value since we started 
401(k)s. But as a retirement vehicle for a population, a number 
of people have 401(k)s. They don't appear to be significant. We 
have to have more incentives. We want automatic enrollment. We 
want employer contributions. We want all of these things, but 
the fact of the matter is, it is not there yet for a lot of 
these people.
    And I just, you know, that is what I think many of us see 
in our districts all of the time when we talk to these 
families. They are running harder and harder. They are being 
responsible. You know what they would really like be able to do 
is educate the kids, make sure they can hold on to their house 
and have a secure retirement and have the wherewithal to keep 
their families together. Kind of a modest American dream, but 
they are telling us they are struggling to do this.
    And, you know, these are good jobs, you know, refinery 
today is an entirely different workplace. It is everybody in 
that steel mill is going to that school hall. They are going to 
Pittsburgh, Pennsylvania to school. They are going to Korea to 
school. They are not about to make another huge investment in 
that steel mill and it is going to require everybody in that 
steel mill to go to school again.
    Those are the same people who are making the investment to 
keep their jobs, and they are telling us, ``I am not holding it 
together, I can't hold it together.''
    Ms. Appelbaum. I think the evidence really supports these 
anecdotes that you are hearing about health care costs are 
going through the roof. The idea that we hear a lot about it 
when we think about--when we hear with the Medicare crisis and 
so on. It is not only in Medicare. Health care coverage is 
exhausting our companies and exhausting our families so that 
shifting of the health care costs on to them is reducing 
people's incomes.
    Everyone understands they need to be saving for their 
retirement. You used to be able to rely on a company pension 
but you can't. At the end of the week, if you have paid for 
food and medicine, there is no money left to save. It is not a 
question that people don't know what they should be doing. It 
is they can't figure out how they are going to pay for it. 
Mortgages are high. Food costs are high. College tuition is 
high. All of the things that people have to pay and to absorb 
your own health care costs, insurance costs, these are--really 
it is beyond the ability of middle class families to really 
support all of this.
    Mr. Weller. I think one of the lessons I have learned is 
that overall compensation has to keep pace with productivity 
growth but on the asset building set on the retirement savings, 
we can make it easier for employers and employees to save 
money. I think on the pension side, I think there is room to 
grow that sector and strengthen that sector, making it easier 
for employers to make regular contributions to the pension 
plans.
    I think the requirements, the regulations are too volatile 
for employers. We can also make it easier for employees to 
participate in automatic enrollment and all of the things that 
were in pension plans.
    I think the next thing we have to address is what happens 
at the end of somebody's career. How do you get people into 
annuities without really charging them tons of money. I think 
that is an important challenge. I am hearing proposals there to 
introduce low-cost annuities. I think we can do it with two 
steps here. You focus on income growth at the same time that 
you make it easier for employers to maintain their existing DB 
plans.
    Chairman Miller. Ms. Johnson, you are on the other side of 
this. I am sure you hear this in your employees. I assume that 
from time to time, they want a raise. Do they want a change in 
whatever that total compensation package is that you offer? 
What is your sense? I mean--and I am stunned like you are. 
There are really few--there are really few skilled machine 
operators in our district, and they are always looking for 
workers.
    Ms. Johnson. When we talk about productivity gains, I think 
that the customer wins, the company wins and the employee wins 
and this is from a small business perspective because when we 
buy a new piece of technology that allows us to make that part 
quicker, faster, cheaper, for our customer. It also creates 
more capacity so we can bring on more work. It also allows us 
to promote someone that was working on an older piece of 
equipment and advances them and trains them on to a newer piece 
of equipment so they can command, you know, a higher salary or 
a pay rate.
    Chairman Miller. What is your sense of when you look at 
your workers? $72,000 is a good salary.
    Ms. Johnson. Then we add 24 percent on top of that in terms 
of what our total benefit package is as well.
    The last 3 years we have provided 8 percent increases in 
payroll year over year every year for the last 3 years is 
between 8 percent. The company has absorbed all of our health 
care cost increases. It is only in the last year that we moved 
from a $10 co-payment to a $15 co-payment so that no other 
costs we have passed on to our employees.
    As a small company, we struggle every single day to keep 
our employees satisfied, because they are our biggest asset, 
and they are what makes us great. But we struggle with, for me, 
a $120,000 a week payroll. The 24 percent added benefit cost in 
addition to the cost of doing business in the State of 
California and some of the constraints that are put on us 
there. We do offer a 401(k) that we have not yet contributed 
to, and we are trying to put together a retirement plan more 
under the lines of a mentoring program. We realize the 
struggles and the challenges that our employees face and we 
don't want to lose them, and we just try to be creative every 
which way that we can.
    Chairman Miller. Thank you.
    Mr. Hacker, did you want to comment on this? I thought you 
were going for your mike. If not, I would recognize Mr. 
Sarbanes because I am borrowing his time here.
    Mr. Sarbanes. Thank you, Mr. Chairman.
    I just have one question, and Dr. Hacker, you may be in the 
best position to answer it.
    There is the individual personal perspective that we bring 
to these issues, and Ms. Miller, you spoke beautifully about 
the perspective, I think is shared by millions of Americans. 
And that is, you know, individuals are hurting, individual 
families are hurting and they are being hit between the eyes. 
But there is another reason to care about what you had to say, 
that doesn't have to do with you personally. It has to do with 
the society, and I am interested in what the public investment 
needs to be to address the issues that are faced by the middle 
class.
    So I am not looking at it from the standpoint of the 
individual, but rather what is good for the Nation, what is 
good to strengthen us and to make us more secure, to use your 
term. Safety and security, that rhetoric has been captured in 
one arena, but if you think of it in terms of people feeling 
strong and secure and what that means to our Nation is just as 
important.
    So a classic example, public investment is what you would 
do, say, the cost of college education with Pell grants and 
other ways of helping people out. What are some other examples 
where public investment could make a tremendous difference in 
terms of building back the strength of the middle class that 
you could site for us. Two or three or four things that fall 
into that category.
    Mr. Hacker. I think there are two things that can be made, 
and we have talked today about personal concerns about job 
security and how strengthened unemployment insurance system or 
wage insurance might help that. We have talked about health 
care costs and how government could help play a role in 
addressing those concerns about taking the concerns off of both 
the employees and employers. And we have talked today about 
work-family strains that Dr. Appelbaum so eloquently 
articulated, and how strengthened leave policies or even paid 
family leave could help.
    What I want to say are two things: One is that I don't 
think that these two perspectives that you articulated are 
actually different in a fundamental way. We care about our 
economy because it serves people and it serves, in particular, 
that great swath of Americans who consider themselves middle 
class.
    So when someone writes me, as one did a while ago, that I 
am sick of working for the economy, I want an economy that 
works for me, I actually think that expresses the overall goals 
that we should have. There is one perspective we should really 
care about, and that is whether the economy is delivering the 
well being and security and advancement for our citizens that 
we all want. And so I think that these are not opposed 
perspectives.
    The other thing I want to just stress is that when we say 
public investment, almost inevitably we have to think we have 
to spend, spend, spend. That is something that is very 
difficult in the current fiscal context. And we know the 
resources of government are not unlimited and it faces lots of 
competing choices.
    I want to highlight in a lot of areas we are talking about 
using government in an insurance role that will, in the long 
term, actually mean our society is not bearing ever escalating 
burdens for certain things. So for health care, for example, 
the evidence is clear that if we had broader insurance, that we 
could also more effectively think about how to control costs 
and improve the quality of health care in that context.
    So too with pensions. There are huge amounts of subsidies 
and moneys that are being poured into our private pension 
system and subsidizing 401(k)s. What is the tragedy here is we 
are still seeing a rising number of Americans who have the 
retirement at risk. We need to find ways to make those 
subsidies work better for middle class Americans.
    So strengthen both defined benefits, defined contribution 
plans in ways that I believe can be done without spending huge 
amounts more but just spending it more effectively and thinking 
how more government's power can be used to ensure that 
Americans have are sharing certain key risks in our economy 
that are common.
    So I just want to make that point because I think it is 
very important that we not lose sight of the fact that a lot of 
this is, in fact, how government can create broad risk rules so 
all of us can share in common those rare and horrible risks 
that really devastate family finances.
    Ms. Furchtgott-Roth. I think he is absolutely right. There 
are all kinds of chunks of money that this government spends 
that are not well used. If you look at Federal job training, 
that is 15 billion. If you give those funds to go to community 
college, that would be better served. If you take health care, 
the President's plan, that would level the playing field, allow 
health insurance plans help the 47 million uninsured that is 
revenue neutral. That is just another way of reallocating 
resources.
    If you look at education, the proposals for increasing 
teacher salaries, better standards, that is also fairly 
relatively neutral because that would mean we don't have to do 
a lot with the remedial children that we have to do today.
    Mr. Sarbanes. If you will indulge me for a few more 
seconds.
    I hear in that sort of the notion of, you know, individual 
choice is trumpeted but that can be--that can serve as a cover 
for creating a society that is about how people can opt out. 
And the risk analysis that you provide, I think, is really 
about how you can create more opportunities for people to opt 
in and share and spread the burden.
    And I particularly like your discussion of what is 
essentially a pact, a bargain between the government and its 
people to try to promote a strong economy and promote 
opportunity. And I will just relate quickly that this was 
brought home to me a few weeks back, a woman came up to me and 
she was talking about the cost of higher education. And she is 
a professional. She lives in Odenton, Maryland. She works in 
the District of Columbia at one of the Federal agencies. And 
she has three children who are college age. And she was 
explaining how difficult it is to pay for this. And then she 
looked at me and she said, ``I did everything they told me I 
was supposed to do.'' and she said, ``My husband and I work 
three jobs between us. We saved our money, and we told our 
children if you work hard and study, you can make it.''
    And now we can't pay for college. And I think she was 
reflecting the views of many Americans who say we worked hard, 
we play by the rules, and we believed in an America that would 
reward that and now we are finding that it is all a cruel 
trick. So we have really got to get back to restoring this 
bargain, this promise with the American people strengthen the 
middle class and lift up the whole society at the same time.
    So thank you for your comments.
    Chairman Miller. Thank you very much.
    My apologies for the delays that took place because of the 
votes. Some of these votes were not scheduled for today but 
they occurred. I really appreciate you giving us the time that 
you gave the committee on this. This is the first in a series 
of hearings on this question of growing and strengthening the 
middle class in this country, and I hope we would be able to 
add you to our faculty from both sides of the aisle as we 
continue this discussion. I am sure at some point it will lead 
to consideration of policy and legislation. So we would like to 
be able to continue to call on your talents and your knowledge. 
And so thank you very much.
    And without objection, all members will have 5 legislative 
days to submit their additional materials for the hearing 
record, and with that, the committee will stand adjourned.
    Thank you again.
    [Whereupon, at 1:35 p.m., the committee was adjourned.]

                                 
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