6-15-15 – Vermont’s Middle Class Is Hurting

by Rob Roper

I recently wrote about how Vermont is leading the nation in the growth in income inequality, despite of (or, as I believe, because of) the expanding list of progressive policies Vermont has enacted over the past few decades. Two other reports highlight a corresponding fact that Vermont’s middle class is dying faster than every other state but one – California.

One report by the Pew Charitable Trust shows that Vermont’s middle class declined by 5 percentage points (From 52.4% to 47.4%) between 2000 and 2013. The second, by 24/7 Wall Street looks at the more recent time frame between 2009 and 2013, in which Vermont’s middle class income growth declined by 5.9% — the second worst record in the nation. As this report states:

Incomes among the wealthiest 20% of Vermont households grew by nearly 3% between 2009 and 2013, the sixth largest increase nationwide. Over the same period, incomes among middle class households fell by 5.9%, one of the larger declines.

Justice Louis Brandeis said states “serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” That’s good news for the rest of the country as Vermont progressive experiment has blown up in the faces of our middle class. All states have to deal equally with federal policy – it helps or harms all. The differences in outcomes occur at the state level, and our state is doing very badly.

That the middle class is feeling pressure is not unique to Vermont (the pain is just more highly pronounced here), but the Green Mountain State does present an interesting case. The primary reasons cited for the middle class woes on a national level are declining unionism (reducing middle class wages), the collapse of housing market (reducing the value of middle class assets), and a booming Wall Street (increasing the wealth of upper income households, but not middle class households).

But Vermont has not experienced a decline in unionism; if anything legislation has made unions stronger over the period in question. And, Vermont faired far better than other states when the housing bubble burst. So, we’ve got to be doing other things even more dramatically wrong to have the record we do.

Again, policies like community rating and guaranteed issue for health insurance, income sensitivity under Act 60, a significantly higher-than-federal minimum wage, widely subsidized pre-k, generous welfare benefits, a highly progressive income and property taxes, were supposed to make life better for the middle class. Clearly they haven’t helped, and by all accounts have made matters worse.

– Rob Roper is president of the Ethan Allen Institute.