England's Shrinking Middle Class Struggles to Hold On

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MIDDLESBROUGH, England - "Born of Iron, Made of Steel."

That inscription is carved into the gates at the site of an old iron works here in this provincial seat of 138,000 in northeastern England.

South Tees Industrial Park is a government-subsidized technology and light-industry development. It employs far fewer people than the old steel works did when this town represented a muscular and growing middle class in England that was forged out of the fires of World War II and tempered by the decades of rebuilding and growth that came after.

Today, the residents of Middlesbrough are part of an anxious and withering middle class in the United Kingdom that shares many of the same worries that keep the middle class in America up at night.

"We have some serious, serious times to come."
~Ray Mallon, Mayor of Middlesbrough
On a cold, winter's evening in the courtyard of Middlesbrough Town Hall, anxiety was in the air. The local council was preparing to discuss national government spending cuts and their impact on the municipal budget. Businesses and citizens rely on this government support. It is what holds this place together.

Outside, in the below-freezing temperatures, a small knot of workers from Ayresome Industries were demonstrating against the cuts, their faces framed against the darkness by the lights of a local television crew. Their tiny company, which for almost 90 years has provided jobs to disabled workers, was slated to lose its council funding as part of a national austerity plan. Ayresome's 38 people, who manufacture window frames and industrial brushes, stand to lose their jobs, and given their disabilities and the fact that they live in one of the UK's highest areas of unemployment, they are unlikely to ever work again.

Scenes like this are being played out in town halls around England and Wales. The UK has a budget deficit. The Conservative-led coalition government wants to shrink it via austerity spending cuts.

The result is demonstrations like this, people desperately trying to cling to the lifeboat of work in one of the more unequal countries in the developed world. According to the most recent figures from the Organization for Economic Cooperation and Development (OECD), Britain is more unequal than three-quarters of leading industrialized nations.

To put the age of growing inequality in context, consider that the amount of annual subsidy Ayresome received from the council was around £400,000 ($646,000). That sustained nearly 40 jobs, while the average Goldman Sachs' bonus from last year was about $400,000, according to the Guardian newspaper's business page.

Middlesbrough's mayor, Ray Mallon, arrived at the scene. A colorful local police chief before taking up politics, Mallon listened to the workers, expressed sympathy, then headed up to the council chamber to deliver a report on the cuts he was proposing to the budget.

Mallon told the council that in the two years since the government came into office, "We have made £28 million worth of budget reductions, which included 450 job losses."

Middlesbrough is particularly vulnerable to austerity cuts. More than one third of the town's jobs are in the public sector. And the worst of the austerity measures is apparently not over.

Mallon warned, "We have some serious, serious times to come."

Cuts are coming from every direction as the Conservatives seek to shrink the size of Britain's welfare state. But how can that help a town where, Mallon pointed out, "Two-thirds of welfare recipients in Middlesbrough have jobs. They are working."

It's just that they don't earn enough to get by without help from the government. Take that little bit of subsidy away and the people are left wondering and worrying. Where would Middlesbrough be then?

Mallon is not a leftist. He is a combative Independent. He is all for deficit reduction and breaking the cycle of welfare dependency. He reminded a reporter that he used to share platforms with British Prime Minister David Cameron, back in the day. That was when Cameron was seeking office and said, "More unequal countries do worse according to every social indicator," noting that he wanted to see a Britain that was "more equal."



In 2009, Cameron explained in a speech, "According to almost every quality of life indicator ... per capita GDP is much less significant for a country's life expectancy, crime levels, literacy and health than the size of the gap between the richest and poorest in the population."

But now critics say Cameron is pursuing policies that can only increase inequality. 660,000 public sector workers have lost their jobs since the government came to power in 2010 - a time when the private sector is mostly creating part-time and low paid work. As Mallon put it, the cuts are "too quick, too deep, too savage."

Middlesbrough lies along the banks of the River Tees just before it flows into the North Sea.

In the hills just south of the city, ironstone was discovered in the mid-19th century. There were vast deposits of coal in the same area. With a ready supply of fuel, soon giant smelters were built to turn the iron into steel.

Teesside became Britain's industrial powerhouse. Every piece of steel in the Sydney Harbour Bridge was forged in Middlesbrough and shipped to the other side of the world. The ICI chemical factory and the British Steel plant provided full employment. The tangle of massive metal chimneys constantly belching toxic smoke into the lowering clouds reputedly inspired one local boy, film director Ridley Scott, in his designs for Blade Runner.

There may have been environmental issues in Teesside, but 40 years ago life in Middlesbrough was better, according to Mike Hopkins, principal of Middlesbrough's College of Further Education.

"Forty years ago, Teesside was the third most prosperous region in the UK, now Middlesbrough town is the 8th poorest in the UK," Hopkins said.

Hopkins pins the town's decline on British government failures. "Successive governments pursued the wrong policies. Starting in the 80's, the Thatcher government tilted away from manufacturing towards financial services. Then, during the Labour government they emphasized creative industries."

Gesturing out his window, Hopkins lamented the failure to invest in improved infrastructure for manufacturing.

"We've got this giant chemistry set around us. It could have and should have been sustained into transition by the UK government," he said. "That's what they did in Germany."

Instead, British Steel and ICI no longer exist. They were broken up and parts of them were sold off to private equity firms. There is still steel and chemical manufacturing in Teesside, but these industries employ a fraction of the number of people they used to.

Middlesbrough's recent history perfectly tracks Britain's history of rising inequality. Forty years ago, when Middlesbrough was prosperous, Britain was a much more equal society, as measured by the Gini coefficient.

The Gini Index is a measure for describing wealth inequality. A zero Gini coefficient represents perfect equality. A one on the Gini Index represents one person owning everything. When you get above .330 societies are, by most economists' assessment, considered to be significantly unequal. The UK has a Gini coefficient of 0.340 and the US figure currently is around .450, according to the CIA World Factbook's most recent available data. Both the UK and US rank near the bottom of the 34 leading industrialized countries, with the UK at number 25 and the US at number 32 for inequality.

Britain's Gini coefficient was .250 in 1979, according to a 2011 report by the OECD, so income inequality has increased dramatically. To put these numbers into simpler terms, consider this: In 1979, the top one percent of UK earners took home six percent of national income. Today, the top one percent take home 15 percent of national income, according to OECD figures.

How unequal is British society today? Professor John Hills of the London School of Economics, answered the question with another question:

"Do you get Downton Abbey in the US? We are back to Downton Abbey levels of wealth inequality."

In 1918, when the denizens of Downton were celebrating victory in WWI, the top 10 percent of rich Britons brought home 37 percent of national income. Today that figure is at 40 percent. But in between were decades when wealth inequality contracted, starting with World War II. Throughout these decades, greater equality created a solid middle class.

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