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Source: Bob Davis & David Wessel, "Prosperity: The Coming 20- Year Boom and What It Means to You",1999.

The Golden Age

The rise of the American middle class, 1950 -1973.

No one knew it at the time, but 1973, the Watergate year, was a watershed for the American middle class. it marked the end of a quarter century of unprecedented and broadly shared prosperity and the beginning of a quarter century of living standards that improved so slowly that many people believed they weren't improving at all. For the middle class, it was the end of the Golden Age and the beginning of the Age of Anxiety.

The contrast between the two periods has been particularly disheartening for many Americans. Today's middle class knows how remarkably living standards improved for their parents' and grandparents' generations-the move from a cramped city apartment to a suburban house, from one to two cars, from be beach-bungalow vacations to flights to Europe or Walt Disney World. For decades, Americans measured their economic progress while turning the pages of the family photo album and hearing again the stories of the hardships of their parents' youth. In past times of temporary economic distress, Americans drew reassurance from the certainty that at least they had much more than their parents had had at a similar stage of life. With considerable reason, today's middle-class Americans wonder why they haven't made a similar leap forward. Many worry that the next generation may not make any economic progress at all.

To appreciate why there has been so much anxiety and so little confidence in the American economy, at least until very recently, it's useful to recall how well the American economy performed during the twenty-five years leading up to 1973. Productivity soared, and the benefits were so widely distributed that almost every tier of society enjoyed rising living standards. Not everyone participated equally: many women were relegated to the kitchen; many blacks were forced to live with much less than whites had. But, during the Golden Age, the American economy delivered the goods to the growing American middle class, in ways that it failed to do after 1973.

In this chapter and the next, we tell the story of the American middle class, largely through the eyes of two couples in Chattanooga, Tennessee. One family, the Kerleys, was smack in the middle of the middle in 1973; the other, the Blentlingers, is in the middle of the middle class today This chapter traces the powerful rise in living standards that lifted the Kerleys well above their parents. Chapter 6 describes the Age of Anxiety, in which life for the Blentlingers and the rest of the middle class hasn't improved nearly as rapidly as it did during the Golden Age. The final chapter in this section explains why the much-celebrated computer revolution has failed-so far-to produce a new Golden Age of economic growth and productivity

Chattanooga, a city of about 150,000 people that sits astride the Tennessee River on the Tennessee-Georgia border, is a good place to see how life has changed for a middle class that was created in the unanticipated burst of prosperity that followed World War 11. For a quarter century after the war, economic progress was tangible and obvious. In 1950, 25% of Chattancogals homes didn't have access to a flush toilet. A decade later, only 7% lacked flush toilets. In 1950, hardly any American homes were air-conditioned; by 1970, more than half the homes in Tennessee were. In 1950, fewer than one in ten American homes had a television. By 1973, nearly every home in Chattanooga (and elsewhere in America) had at least one TV and many had more.

Chattanooga's economy resembles that of many other places in America. Although very much a Southern city that still celebrates its role in pivotal Civil War battles fought along its mountain ridges, Chattanooga, for 150 years, has been more industrial than the rest of the South and therefore more resembles the rest of the country than some other Southern cities do. Chattanooga enjoyed a post-World War II manufacturing boom, and then suffered through the wrenching factory downsizing that plagued so much of the country. Once a bulwark of Southern unionism, Chattanooga's unions are quiescent today "Union decline seen as area selling point," a Chattanooga Times headline announced in 1994. Like other cities, it has struggled with rising crime, troubled public schools, recurrent racial tension, and the economic costs of enjoying cleaner air and water.

A wave of downsizing and layoffs swept over Chattanooga in the 1980s and early 1990s, as it did elsewhere, leaving behind a widespread feeling of economic insecurity and betrayal. The Tennessee Valley Authority, the giant government agency created in the New Deal years to electrify the region's farms and small towns, downsized in 1988 and again in 1994. Between 1990 and 1996, it cut its local workforce by 900 people, or nearly 20%. And a new chief executive at the Provident Company, owned by the local McClelland family, took over the troubled insurance company in 1993 and eliminated an entire layer of managers. The bitterness was intense. "A lot of people believe that the McClellands were such strong Christians and, now that the company has lost sight of that, God will not bless the company," said Janet Jobe, who lost a management job after fourteen years at Provident. In a community where layoffs were expected at factories but never at rock-solid white-collar employers, the Provident dismissals unsettled even those who weren't directly affected.

Reflecting a national trend, Chattanooga has moved away from manufacturing to a service economy; that has stranded some people and lifted the fortunes of others. Fewer than one in five workers in Chattanooga is in manufacturing today, down from about one in three in 1970. About 7,500 jobs were lost in manufacturing, most during the 1980s. But, in all, the Census Bureau counted 33,000 more jobs in Chattanooga's Hamilton County in the 1990 census, an increase of 25% from 1970. Some 9,000 jobs were added in retailing, plus 7,500 in health care, and 5,000 in finance, insurance, and real estate.

In 1973, Dennis Kerley, then twenty-five years old, tended machines that wound nylon onto 1,500-pound spools at DuPont & Co., one of the mainstays of the Chattanooga economy. His wife, Ann, stayed home with their two-soon to be three-boys. Each morning, in those pre-cholesterol-scare days, she rose around six o'clock to make him fried eggs, bacon, and grits, and to pack his lunch. Then he drove across town in a gas-guzzling 71 Ford Galaxie. He remembers that the pollution hanging over the Tennessee River valley was sometimes so thick he'd have to turn on his headlights.

The work at DuPont was so dull that Kerley daydreamed about rolling a bowling ball down the plant's vast hallways to see whether he could hit the back wall hundreds of yards away His supervisor made all the decisions. "You were a body or a number to fill a position," he recalls. But the pay was good and, despite occasional layoffs, the job was secure. On his earnings alone, the high school graduate and his 27 year-old stay-at-home wife came close to the median income for American married couples, an achievement that few one-earner couples accomplish today During one ten-month layoff in 1970, Kerley was so sure he would eventually be called back that he didn't bother looking for work. Chattanooga employers, familiar with DuPont's habit of layoff and recall, weren't much interested in workers like Kerley anyhow "At that time," he says, "if you got a job at a good company, you felt you'd be there until you retired. " In July 1973, DuPont employed 4, 100 people in Chattanooga and was on its way to 5,000.

In 1973, Dennis and Ann Kerley didn't feel affluent. They budgeted with extraordinary care and, to save money, drank iced tea instead of Coca-Cola. But they knew they were living a lot better than their parents had, and they had little doubt that their children's generation would do better still. Like other middle-class Americans, they could measure economic progress with their memories; they didn't need to be convinced.

Dennis remembered that his mother, Mary Kerley, and her seven siblings lived in a four-room house as narrow as a one-car garage-and rented out the living room to a boarder. As a child, Mary went barefoot in the summer to save her shoes for the winter. When she married, she vowed she would do better by her children, and she did. Her folks didn't have enough money to buy Christmas presents every year. Mary always had gifts for her children. Mary had to drop out of junior high school; she made sure her children finished high school. But, as Dennis puts it, "It didn't take that much to make her feel that she was a whole lot better off. When Mom looks back [to the 1950s], she thinks she was doing pretty well; I say, No."

Dennis's father, an outgoing man, tried repeatedly to make it as a salesman, but never did. He finally landed a secure job at a Chattanooga flour mill in 1957, and steadily climbed ' the ranks there for twenty-eight years. He didn't make enough to support the family on his salary, though. Dennis's mother worked first at a deli and later at the plant that baked Little Debbie snack cakes.

Until Dennis was seven, in 1955, his family lived in rented houses that sometimes lacked hot running water. That wasn't uncommon. In Chattanooga's Hamilton County, four of every ten houses lacked hot and cold running water in 1950. Though no official tally was kept, an estimated one-third of all Americans lived in poverty at the beginning of the 1950s. "I can remember when they couldn't buy me a pair of shoes, even when I had holes in my shoes. I can remember when we didn't have quite enough of everything. Those were tight times," Dennis says today from the comfort of his 1990s well-clothed, well-fed middle-class life. His wife, Ann, one of seven children, remembers sleeping two, sometimes three, to a bed.By today's standards, Americans didn't have much in the early 1950s, when Dennis and Ann Kerley were growing up. The typical family did not live in houses like those on Leave It to Beaver or Ozzie and Harriet. But the standard of living of American families improved faster in the 1950s and 1960s than at any other time in American history. In 1949, the typical American lived in a family with income only about 25% greater than the poverty line. In 1969, the typical American family's income was 2 ½ times the poverty level. This rapid improvement in living standards for the bulk of American families sharply distinguishes the Golden Age from the decades that followed.One good way to measure the living standard of Americans is to tally the goods and services produced per person. The U.S. economy made available 2.5% more goods and services per person in each year between 1950 and 1973. Each year since 1973, the economy has produced only 1. 5 % more goods and services per person. That may sound like a small difference, but, in automobile terms, it as if the economy sped at 80 mph during the Golden Age, then slowed to 50 mph and has been stuck at that speed ever since.

What accounted for this unique Golden Age? First, labor productivity, or the goods and services produced for every hour of work, rose sharply From 1870 to 1950, productivity increased an average of about 2.0% each year. Then, in the Golden Age from 1950 to 1973, it increased at a brisk 2.7% each year. Wages rose with productivity. Earnings of men who worked year-round, full time, nearly doubled. But since 1973, labor productivity has improved at only about 1% each year. By Census Bureau reckoning, earnings of the typical man working year-round, full time, actually have fallen since 1973, after adjusting for inflation. Women's earnings have risen.

The middle class did well during the Golden Age because prosperity was broadly shared. That accomplishment wasn't celebrated at the time, but seems remarkable in light of today's widespread inequality. The rich had a lot more than the poor, of course, but the gap between them didn't widen significantly from the end of World War II to the end of the 1960s.

During the wartime economy of the 1940s, the difference between the wages of well-paid and poorly paid workers shrank significantly, partly because of government controls. In the prosperous decades that followed, the wage gap remained stable. At the bottom, muscular unions, a rising minimum wage, and a strong demand for lesser-skilled factory workers helped lift wages. With help from the GI Bill, colleges produced enough graduates to satisfy employer demand. Wages of college grads rose at roughly the same pace as those of less-educated workers. And when a glut of college graduates flooded the labor market in the early 1970s, wages for high school graduates rose even faster than those of their more-educated peers.

Workers at DuPont's Chattanooga plant voted to end union representation in 1958, but the company operated under union-style practices anyhow, partly to fend off new union organizing drives. The distance between rank-and-file earnings and managers' earnings was so slim that workers routinely rejected promotions. "Sometimes we'd offer operators the opportunity to be a supervisor," recalls Ray Childers, then a supervisor at a DuPont plant in Old Hickory, Tennessee. "They'd turn it down because the flat-time earnings of a supervisor didn't compare very well to an operator who could work overtime. He could make more money than the boss."The physical monuments to the shared prosperity of the Golden Age are everywhere today: housing developments like Levittown on Long island; the network of interstate highways that stretches from coast to coast and border to border; and the state colleges that still educate millions of ambitious young Americans.

In the 1950s, William Levitt brought Henry Ford's techniques of mass production to home construction. As New York Times architecture critic Paul Goldberger described it, Levitt turned the single-family, detached house "from a distant dream to a real possibility for thousands of middle-class American families." There was no down payment, no closing fee, no haggling. The houses weren't lavish compared to today's designs. Each owner got a kitchen, a living room, two bedrooms, one bathroom, a washing machine, an outdoor barbecue, and an attic, but no basement. Each house came with an eight-inch television set. Across the country, an increasing percentage of American families bought their own homes in the late 1940s and the 1950s, a tangible realization of the American dream. By 1960, 61 % of all the homes in Chattanooga were owned by their occupants, an increase of nearly ten percentage points in a single decade.

Car ownership was another mark of the unaccustomed affluence of the American middle class, and with cars came better vacations. Disneyland opened in California in 1955. Dennis Kerley's mother took her first-ever vacations (invariably, camping trips), and Florida impressed her. "I saw that ocean," she recalls. "It was like nothing I'd ever seen." The number of cars on the road increased by 50% between 1950 and 1960, and by another 50% between 1960 and 1970. By 1960, more than three-quarters of American families owned at least one car, and 15% owned two.

A wealthy Tennessee homebuilder named Kemmons Wilson took his family on a road trip to Washington in 1951, a trip that journalist David Halberstarn later dubbed "the vacation that changed the face of the American road." Wilson was irritated at the lousy and uneven quality of roadside motels. He was outraged that he had to pay extra for each of his children and had to drive away from the motel to find a restaurant to feed them, Assuming that other dads were similarly annoyed, Wilson opened his first Holiday Inn in 1952. Four years later, Congress approved President Dwight D. Eisenhower's ambitious interstate highway construction program that eventually would pave an area equal in size the state of West Virginia, and would route cars away from downtown hotels to locations like those that Wilson favored. By 1964, there were 500 Holiday Inns.

"Life in America, it appeared, was in all ways going to get better," Halberstant wrote in his book, The Fifties. "A new car could replace an old one, and a larger, more modem refrigerator would take the place of one bought three years earlier... Thus, the great fear of manufacturers, as they watched their markets reach saturation points, was that their sales would decline; this proved to be false.... The market was saturated, but people kept on buying-newer, improved products that were easier to handle, that produced cleaner laundry washed more dishes and glasses and housed more frozen steaks."

Optimism and abundance fueled an unprecedented and unexpected baby boom, Returning GIs and their wives made up for lost time: 20% more babies were bom in 1946 than the year before, and the fecundity lasted until 1964. More babies were born in the United States in 1957--4.3 million-than in any year before or since.

In The Affluent Society, which gave a label to the times, economist John Kenneth Galbraith pondered something that economists never before had had the luxury to contemplate: a system that was producing enough food, clothing, and shelter for the bulk of its population. Galbraith observed disapprovingly, in the 1958 book, that contemporary economists and businesses had managed to transfer the sense of urgency once felt for producing food and shelter "to a world where increased output satisfies the craving for more elegant automobiles, more exotic food, more erotic clothing, more elaborate entertainment-indeed for the entire modem range of sensuous, edifying, and lethal desires."

Advertisements sometimes have a way of distilling the mood of a nation; no one has more of a vested interest in plumbing the middle-class psyche than the ad agencies that serve America's corporate giants. A 1958 Chevrolet television commercial opened with a young man, who resembled teen-idol Tab Hunter, rushing out of his house in a white dinner jacket, obviously on his way to a high school prom. His dad, mom, and younger sister watch at the doorway The boy heads toward his jalopy, but suddenly notices a brand-new convertible parked in front of the house. For the first time, the announcer speaks: "If it's happened once, it's happened a thousand times." The boy looks at the convertible, then at his family in the doorway Dad smiles and reaches into his pocket for the keys. The boy drives off to pick up his date, played by then-unknown actress Shirley Knight, who won an Oscar two years later for her performance in the film Elmer Gantry. The announcer speaks again: "What a gal. What a night. What a car. The new Chevrolet." This was a commercial made for an age of economic optimism and ever-greater affluence, even if it exaggerated.

Contrast that message to the advertisements that Cigna Corporation, an insurance company ran in the mid-1990s to peddle life insurance and retirement plans in the Age of Anxiety. A magazine ad, printed in sepia tones like an old-fashioned photo, shows an adult baby-boomer couple sitting on their front porch with two doe-eyed girls, one perhaps five years old, the other seven. "Help," reads the headline. Then in smaller type: "How did your parents ever do it? Pay for the dentist, school, even manage to put a little something aside for the future? Maybe life was once about getting ahead. Today it's more about keeping up. "Then the pitch for the product, followed by the spirit-lifting laugh line-. "So maybe you can do something really extravagant tonight. Like taking in a movie. That is, if you can find a sitter."

As enviable as the economic performance of the Eisenhower years looks today, after twenty-five years of slow growth, it didn't impress John E Kennedy's activist economists in 1961. Even though living standards were improving as the economy rode the ups and downs of the business cycle, Eisenhower had presided over three recessions in eight years. With unemployment at 5.5%-roughly, what passes for "full employment" today-New Frontier economists declared it to be unacceptably high and persuaded President Kennedy to propose a tax cut. Congress adopted it after Kennedy's assassination, and the pace of economic growth quickened, just as Keynesian textbooks had predicted. The results enhanced the confidence of economists-and of a public still scarred by the Great Depression-that experts understood how the economy worked and that a wise government could rev it up. Economists of the era genuinely believed that the post-World War II pace of economic growth could be sustained indefinitely, provided the government was prepared to step in periodically.

At about the same time, the benefits of advances in technology-in air travel, for instance-spread to the middle class. In 1955, only a quarter of all Americans had ever flown on a commercial flight. By 1973, more than half of them had. In 1950, fewer than 700,000 American civilians traveled overseas; in 1973, nearly 7 million did.The jet age arrived at the end of the 1950s, inaugurating quieter, more comfortable, and more efficient airplanes. On August 26, 1959, President Eisenhower traveled on a jet-the first Air Force One-for the first time in his life. He found it an "exhilarating experience," according to biographer Stephen Ambrose. "As the big jet went into its I silent, effortless acceleration and its rapid rate of climb,' whatever doubts Ike had about the wisdom of spending most of the remainder of this term on world travels vanished. He was hooked." Millions of Americans had similar experiences in the 1960s as the airlines deployed jets first on transatlantic and then on shorter, domestic flights. Pan Am wooed the middle class with the first "Fly Now, Pay Later" marketing campaign. Charter airlines offered low fares to popular middle-class destinations such as Las Vegas. And Southwest Airlines, in a tantalizing hint of the fare wars that would come later, offered $ 10 fares on late-night flights between Dallas and Houston. Frank Borman, the astronaut who became president of Eastern Airlines, declared in the 1970s: "We have become mass transit."

For most Americans, the economy worked well in the quarter century after World War II. Their wages rose faster than inflation did. Their jobs increasingly came with health insurance and pensions. They bought houses at reasonable prices and low interest rates nd watched their wealth swell as the value of their houses increased. They looked forward to retiring on Social Security benefits. "This was an era during which the American dream was fulfilled for most families," wrote economists Peter Gottschalk and Sheldon Danziger.

At times, there was an uneasiness about the price of prosperity Sloan Wilson's 1950s best-selling novel, The Man in the Gray Flannel Suit, captured the discomfort of rigid conformity and the gnawing lack of fulfillment. even among those who were materially comfortable. "I don't, know what's the matter with us," Betsy Rath says one night to her husband, Tom, a public relations man for a big New York City company. "Your job is plenty good enough. We've got three nice kids, and lots of people would be glad to have a house like this. We shouldn't be so discontented all the time."

The 1950s and 1960s were not a golden age for many American women, despite widespread improvement in their material well-being. For those who had paying jobs, opportunities were limited and their wages were considerably below those of men. Women made little progress in closing the wage gap, even when they worked at jobs similar to those that men held, Legal barriers to hiring married women vanished almost entirely in the 1950s, but most married women-70% in 1960-didn't have paying jobs. Women's magazines described the married woman as "gaily content in a world of bedroom and kitchen, sex, babies, and home," Betty Friedan reported in The Feminine Mystique. But many women didn't see life from the magazines' perspective.

Friedan called it "the problem that has no name" in her 1963 book, which shattered the mirage that American stay-at-home moms were happy fulfilled, and content. "The problem lay buried, unspoken, for many years in the minds of American women," wrote Friedan, who had become a suburban housewife after the left-wing labor newspaper for which she wrote fired her when she got pregnant. "It was a strange stirring, a sense of dissatisfaction, a yearning that women suffered in the middle of the twentieth century in the United States. Each suburban wife struggled with it alone. As she made the beds, shopped for groceries, matched slipcover material, ate peanut butter sandwiches with her children, chauffeured Cub Scouts and Brownies, lay beside her husband at night-she was afraid to ask even of herself the silent question-'Is this all?

As the baby boomers reached adolescence in the 1960s, discontent spread to the college campuses. Whatever fueled the youthful campus rebellion and unrest of the decade, it wasn't deprivation. The "Port Huron Statement," issued by the Students for a Democratic Society in 1962, began: "We are people of this generation, bred in at least modest comfort, housed now in universities, looking uncomfortably at the world we inherit" (emphasis added).

Still, others lacked that "modest comfort." Blacks were often excluded from the American dream. Dennis Kerley remembers that blacks were admitted to one Chattanooga amusement park, but were banned from its swimming pool. Another park filled its swimming pool with concrete rather than allow blacks to swim in it. Only one in three black households in the surrounding county owned its own home in 1970, roughly half the proportion of white households. The typical black man with a full-time, year-round job in 1973 earned two-thirds of the amount the typical white man earned.

In the 1950s and early 1960s, poverty was hidden and ignored to a degree that is hard to imagine today when welfare, homelessness, and the brutality of urban life are staples of the nightly television news. In1962, Michael Harrington's book, The Other America, made poverty invisible. In the opening paragraphs of the book, Harrington held up a mirror to the middle class: "There is a familiar America. it is celebrated in speeches and advertised on television and in the magazines. It has the highest mass standards of living the world has ever known." Even its anxieties, he wrote, were "products of abundance."

"While this discussion was carried on," Harrington added, "there existed another America. In it dwelt somewhere between 40,000,000 and 50,000,000 citizens of this land. They were poor. They still are."

The reaction to Harrington was extraordinary, especially given today's cynicism about the ability of government to fight poverty There was an almost unbounded optimism about the nation's capacity to cure poverty and all other economic ills. With the middle class taken care of, the only remaining economic challenge was to eradicate "pockets of poverty," as they were called, and that was seen as a manageable task. "The United States," President Lyndon Johnson's Council of Economic Advisers declared in the heady days of the War on Poverty, "is the first large nation in the history of the world wealthy enough to end poverty within its borders." James Tobin, a Kennedy economic adviser who would later win the Nobel Prize (though not for his forecasting ability), put a date on it. His article in the New Republic, in 1967, carried the headline: "It Can be Done! Conquering Poverty in the US by 1976." He was counting on sound macroeconomic policies and a "negative income tax" to help the poor; the government delivered neither. "The promised land receded," Tobin wrote years later. "We'll be lucky to reach it by 2026,"

It wasn't just poverty that would be licked. Recessions would be abolished, too. Believing that the cycle of recession-recovery-recession was over, the government renamed its monthly "Business Cycle Digest," dubbing it "Business Conditions Digest." TIME gushed in 1969: " The amazing U.S. economy may defy even the law of physics: what goes up need not necessarily come down." Fortune ebulliently predicted in 1967 that wages would increase by 150% over the next twenty-five years. (Fortune was off by a factor of six. Including fringe benefits, total compensation for all workers in the United States actually rose by only 25% between 1967 and 1992, and wages for the typical worker rose much less.)

In what would later prove to be the closing scenes of the Golden Age, Paul Wilkes, a New Yorker writer, spent most of 1972 with a family he chose because it was as close to a real-life embodiment of the Census Bureau's average as he could find. The Neumeyers, as he called them in the book he wrote, Trying Out the Dream, lived in suburban Long Island and were modestly fulfilling the American dream. Art was foreman at a small, family-owned manufacturing company Betty didn't work, though she talked frequently about getting a job. Her husband discouraged her: "He said she didn't have to and that she should enjoy herself at home, that she has earned it," Wilkes wrote.

Like many of her suburban counterparts, Betty Neurneyer was restless, and periodically depressed for reasons she didn't understand. Only one of her three children was still at home; she wondered what she would do with the rest of her life. Like many women of her generation, she didn't even know how to drive.

The older two of the three Neurneyer children were rebelling, rejecting their parents' suburban lifestyle. "It has become more and more apparent to Martha and Richard [20 and 18 years old, respectively] that their parents' lives are not the kinds of lives they want to have," Wilkes observed. "Martha does not aspire to be a mother and a homemaker; Richard does not want his life revolving around something as ephemeral as a job, steeped with responsibility, cemented in sureness."

One recurring scene in Wilkes's chronicle of his year with the Neurneyers was Betty's guilt about her malaise. After all, her family had so much more than she had ever dreamed: a three-bedroom home, the first backyard pool in the neighborhood, a week's vacation at the shore or in the mountains each year, and eight cameras, including one for shooting family movies.

Whatever its frustrations, the American economy had paid off for the Neurneyer family. Betty hadn't any doubt about that. Reflecting on how much her circumstances had changed over 22 years of marriage, Betty found her own way to sum up the Golden Age of the middle class: "I love the affluence of being able to rip off a big sheet of aluminum foil and not have to worry about washing it and using it again."

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