Income Gap Widens as American Factories Shut Down: the Case of Reading, PA

Beaver County Blue via AP

June 15, 2014 – READING PA – In August 2008, factory workers David and Barbara Ludwig treated themselves to new cars – David a Dodge pickup, Barbara a sporty Mazda 3. With David making $22 an hour and Barbara $19, they could easily afford the payments.

A month later, Baldwin Hardware, a unit of Stanley Black & Decker Corp., announced layoffs at the Reading plant where they both worked. David was unemployed for 20 months before finding a janitor job that paid $10 an hour, less than half his previous wage. Barbara hung on, but she, too, lost her shipping-dock job of 26 years as Black & Decker shifted production to Mexico. Now she cleans houses for $10 an hour while looking for something permanent.

They still have the cars. The other trappings of their middle-class lifestyle? In the rear-view mirror.

The downfall of manufacturing in the United States has done more than displace workers and leave communities searching for ways to rebuild devastated economies. In Reading and other American factory towns, manufacturing’s decline is a key factor in the widening income gap between the rich and everyone else, as people like the Ludwigs have been forced into far lower-paying work.

It’s not that there’s a lack of jobs, but gains often come at either the highest end of the wage spectrum – or the lowest.

“A loss of manufacturing has contributed to the decline of the middle class,” said Howard Wial, an economist with the Brookings Institution and the University of Illinois at Chicago. “People who are displaced from high-paying manufacturing jobs spend a long time unemployed, and when they take other jobs, those jobs generally pay substantially less.”

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