The Rise and Fall of the Social Contract

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The Rise and Fall of the Social Contract

Anywhere from 25% to 66% of households in the U.S. today belong to the middle class, but what exactly determines if a worker or family is considered middle class? How was the middle class created, and which events have had an effect on the middle class over the decades? This paper aims to answer those questions, as well as taking a look at the impact of specific collective bargaining gains and attacks on public sector bargaining.

The middle class is described as those generally having a comfortable standard of living, significant economic security, considerable work autonomy, and rely on their expertise to sustain themselves. But how was the middle class created? One of the largest factors in the creation of the middle class came following the clash between Walter Reuther, the president of the Union of Auto Workers, and Charles Wilson, the president of General Motors. The two began to clash after Reuther headed a strike of 175,000 GM workers in 1945. With the original strike failing, Walter made the decision to invest $3.5 billion to expand GM’s production by 50%. This would later benefit both sides, when after an assassination attempt on Reuther, Wilson proposed a deal where the union workers would receive bonuses of 11% while also profiting 2% per year from the company’s increasing productivity provided that there were no work stoppages for two years.

Between this contract, and the contracts signed by Ford and US Steel, the largest middle class in the world was created. In this new middle class, workers could expect to share in the increased profits made by their companies. During this golden age of the middle class, workers experienced great job security as well as benefits including sick leave, holiday pay, and health insurance. Many companies employing middle-class workers thrived under this new era, but it would not last forever.

One of the first signs of trouble included the recession of 1974...
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