Americans are caught in a vise: On one side, falling wages, on the other, rising costs. In between, the middle class is getting squeezed painfully -- perhaps ruinously. Despite rhetoric on both sides of the political fence, the future of the middle-income economic sector, defined loosely as households earning between $40,000 and $95,000, is sliding downhill. Jobs, as so many AOL DailyFinance readers point out every day, are at the heart of it. One telling statistic: In 1980, 52% of jobs were middle income. By 2010, the figure had dropped to 42%, according to a report from the New America Foundation.
This troubles Robert S. Kaplan, author of the new business leadership book What to Ask the Person in the Mirror. "[The middle class] is the engine of a country's prosperity. Show me an economy with an eroding middle class and you will see broader socioeconomic problems," he says. "Show me a growing middle class, and you will have growth and a healthier country."
As the son of a jewelry salesman growing up in Kansas, Kaplan recalls growing up in a squarely middle-class household, using the same baseball glove throughout his years at public junior high and high school. "We were taught to work hard and be frugal," he says. That hard work helped him climb his way up to vice chairman at Goldman Sachs, which he left in 2005 to teach at Harvard Business School.
Drawing on the business leadership principles he lays out in his new book, Kaplan outlined five ways that business leaders and Washington should address concerns for the middle class.
1. Ask the critical questions. "How do we deleverage and foster economic growth?" is a better question than simply "How do we cut?" argues Kaplan. He advocates for entitlement reform as well as new spending on infrastructure and small business credit support as economic ways to lift middle-income earners. In the coming election cycle, voters should ask two questions: What are these candidates' visions for the middle class of the United States? What do they see as the top three ways to build it? Candidates who cannot answer with real analysis and fact-based plans are probably not strong chief executive candidates, he says.
2. Start with a clean slate. "Try to move beyond the way we used to do things," he says, "and think about how to address our current challenges. ... People do an incredible job of adapting once they face reality." Focus on key priorities such as education, health care and retirement savings.
4. Say "no" to pledges. "In private business, if you took a pledge to not face reality, you would be out of business pretty quickly," says Kaplan. "In this case, Washington needs to take a cue from business. ... If you want to be successful, you don't start with tactics. You start with a vision for how to add value. If you do those things, you will make money."
The risk of pledge-taking politicians, he says, is that they close the door on analysis and new ideas. Compromise is an essential part of leadership; he argues that for the middle class to thrive, it needs "leaders who are willing to be open to debate and argue issues on the merits based on analysis of current problems" rather than relying on election cycle pledges.
5. Insist on a road map. CEOs who don't have a vision and a plan are quickly shown the door by shareholders. Why should it be any different in Washington, asks Kaplan. His definition of leadership -- "searching for what you believe, then having the courage to act on it" -- means that political leaders need to stick their necks out and worry less about re-election. "Put out your plan," he says. Will you get beat up? Yes, but it will also be a starting point for debate and progress toward solutions."
Catherine New is a staff writer with DailyFinance. You can reach her at firstname.lastname@example.org.