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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 

(II)

COMMITTEE ON EDUCATION AND LABOR 

GEORGE MILLER, California, Chairman

Dale E. Kildee, Michigan, Vice Chairman 

Donald M. Payne, New Jersey 

Robert E. Andrews, New Jersey 

Robert C. ‘‘Bobby’’ Scott, Virginia 

Lynn C. Woolsey, California 

Rube ́n Hinojosa, Texas 

Carolyn McCarthy, New York 

John F. Tierney, Massachusetts 

Dennis J. Kucinich, Ohio 

David Wu, Oregon 

Rush D. Holt, New Jersey 

Susan A. Davis, California 

Danny K. Davis, Illinois 

Rau ́l M. Grijalva, Arizona 

Timothy H. Bishop, New York 

Linda T. Sa ́nchez, California 

John P. Sarbanes, Maryland 

Joe Sestak, Pennsylvania 

David Loebsack, Iowa 

Mazie Hirono, Hawaii 

Jason Altmire, Pennsylvania 

John A. Yarmuth, Kentucky 

Phil Hare, Illinois 

Yvette D. Clarke, New York 

Joe Courtney, Connecticut 

Carol Shea-Porter, New Hampshire 

Howard P. ‘‘Buck’’ McKeon, California, 

Ranking Minority Member 

Thomas E. Petri, Wisconsin 

Peter Hoekstra, Michigan 

Michael N. Castle, Delaware 

Mark E. Souder, Indiana 

Vernon J. Ehlers, Michigan 

Judy Biggert, Illinois 

Todd Russell Platts, Pennsylvania 

Ric Keller, Florida 

Joe Wilson, South Carolina 

John Kline, Minnesota 

Bob Inglis, South Carolina 

Cathy McMorris Rodgers, Washington 

Kenny Marchant, Texas 

Tom Price, Georgia 

Luis G. Fortun ̃ o, Puerto Rico 

Charles W. Boustany, Jr., Louisiana 

Virginia Foxx, North Carolina 

John R. ‘‘Randy’’ Kuhl, Jr., New York 

Rob Bishop, Utah 

David Davis, Tennessee 

Timothy Walberg, Michigan

Mark Zuckerman, Staff Director 

Vic Klatt, Minority Staff Director 

(III)

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

Sa ́nchez, 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

(1)

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. 

2

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 

3

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 

4

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 41⁄2 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. 

5

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.’’

6

[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. 

7

‘‘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 conVerDate 0ct 09 2002 14:35 Mar 08, 2007 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6621 G:\DOCS\110TH\FC\110-2\32741.TXT HBUD1 PsN: DICK
8

ducted 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 

9

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. 

10

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 conVerDate 0ct 09 2002 14:35 Mar 08, 2007 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 G:\DOCS\110TH\FC\110-2\32741.TXT HBUD1 PsN: DICK
11

cerns. 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. Sa ́nchez follows:]

Prepared Statement of Hon. Linda T. Sa ́nchez, 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 

12

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. 

13

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, parttime 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. 

14

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 

15

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. 

16

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 demandVerDate 0ct 09 2002 14:35 Mar 08, 2007 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6602 G:\DOCS\110TH\FC\110-2\32741.TXT HBUD1 PsN: DICK
17

ing 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. 

18

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 winnertake-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 

19

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 

20

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 wellbeing 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 

21

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. 

22

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:]

23

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 

24

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 highperformance 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 

25

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 couVerDate 0ct 09 2002 14:35 Mar 08, 2007 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6602 G:\DOCS\110TH\FC\110-2\32741.TXT HBUD1 PsN: DICK
26

ple 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 

27

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 wellbeing 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 

28

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. 

29

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 41⁄2 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 

30

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 

31

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 middleclass 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 

32

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. 

33

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 

34

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 

35

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? 

36

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 cirVerDate 0ct 09 2002 14:35 Mar 08, 2007 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6602 G:\DOCS\110TH\FC\110-2\32741.TXT HBUD1 PsN: DICK
37

cumstance. 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 

38

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. 

39

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 middleclass 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, alVerDate 0ct 09 2002 14:35 Mar 08, 2007 Jkt 000000 PO 00000 Frm 00043 Fmt 6633 Sfmt 6602 G:\DOCS\110TH\FC\110-2\32741.TXT HBUD1 PsN: DICK
40

though 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 

41

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 

42

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 

43

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. 

44

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 

45

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. 

46

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 

47

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 lowcost 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 

48

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 inVerDate 0ct 09 2002 14:35 Mar 08, 2007 Jkt 000000 PO 00000 Frm 00052 Fmt 6633 Sfmt 6602 G:\DOCS\110TH\FC\110-2\32741.TXT HBUD1 PsN: DICK
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surance 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. 

50

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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