How L.A. thrives without a middle class

With surprising ease. As I write in next month’s issue of Los Angeles magazine, the class division of haves and have-nots is not great social policy. But if you look at the numbers, the economy seems to be holding up remarkably well. For much of the summer, the L.A. County unemployment rate was under the national level, which is quite impressive for such a large, urban region (it went up a bit in August but was still under 5 percent).

Thing is, our economic success is taking place with little, if any, middle class. Here’s how it breaks down: You have the five-figure paycheck-to-paycheck crowd that has lots of debt and little hope of affording a house (or if they do own a house, it’s with minimal equity and a high monthly mortgage). Then there are the well-heeled types who have socked away at least a few hundred thousand bucks. One economist told me it’s “a case of conflicting interests” and those conflicts have somehow kept the local economy going – sometimes even thriving. From the article "Vanishing Point" (not available online):

For those who grew up with Ward Cleaver and the other solid-citizen dads of sitcom land, it’s easy to assume that a middle class life is some preordained right. It’s not. Its widespread presence only took shape in the 1940s, when the post-war economy created a massive workforce in the baby-booming middle-income range. The classification has been interpreted in such different ways over the years that it’s become practically meaningless.

[BREAK]

[Economist Chris] Thornberg agrees – reluctantly – that L.A.’s have and have-not economy has been working. The county's modest unemployment rate is a giveaway – it’s one of the more reliable gauges because the results are based on a simple question: Are you working? That would cover many of the 680,000 workers in the informal economy who don’t show up in the usual surveys that require payroll records or tax filings.