Is the middle class an endangered species?
After losing ground for four decades, middle America increasingly looks doomed. Here’s how it happened
http://www.salon.com/2012/10/24/is_the_middle_class_an_endangered_species/
This is likely to be a rambling post, brace yourself… I have felt in my gut for a long time that the middle class was endangered and on the wane and had read most of the stats the article refers to in bits and pieces over the years. However, having it presented in such a monolithic, organized block really drives home the current situation. I can no longer claim to be a member of the middle class, though. While I grew up in a middle to upper middle class environment, once I had recovered from my bout with homeless destitution (I was _really_ stubborn about giving up more than a decade of education and experience to switch to a career in IT) it only took a couple of years to elevate into the upper middle class and today we are certainly in the top 5%, likely even in the top 2.5% depending on how one measures things. Still, intellectually I think middle class and financially, because of our very substantial investment in our second home construction efforts (shameless promotion) we largely live paycheck to paycheck (the decisions that lead to this state have been a subject of review a number of times, believe me!). As a consequence, I still think a lot like someone in the middle class. Even my education (BS in Biochem, MBA) doesn’t make me feel that much better off since it is largely irrelevant to my current career (though I am sure having a graduate degree helps to check some boxes that enable my resume to get reviewed by hiring managers, so it is not _totally_ useless). I have often had an acute feeling that I am really not that much better off than my parents were 40 years ago. While my parents were always cagy about their income (something I don’t really understand, but emulate to a certain degree because it seems to a social requirement) I figure that back in the late ’70s they were probably right at the median ($50K based on the article). Interesting (horrifying) to me is that today’s median income is, wait for it, right at $50K. According to the article inflation has averaged 2.5% each year since then which according to a spreadsheet I quickly assembled means that the median income should be over $100K today (about $115K if my spreadsheet is to be believed). That would just be to keep pace with inflation, yet I am quite certain that as a percentage of income houses, cars and education have increased much faster than inflation in that same period.
If real wages have actually shrunk by over half in the last generation, yet our economy has grown, where is all that money? The article also shows it, and I am sure to none of my reader(s) surprise, it has gone almost exclusively to the top 10% with the bulk of the gain going to a fraction of the top 1%. I believe I am a bit better off than my parents were when I was a kid, not a lot, but a bit. I have more education (that I am _still_ paying for (with about a decade more to go!)), more cars (that are all _at least_ 10 years old and all with over 100K (a couple over 200K) miles) and more houses (though my parents did own lots of property over the years, they only built once and we rented while that was under construction (note that my wife and I built our own second house almost exclusively ourselves, by our own hands, while my parents paid someone else)). My income is higher than I estimate theirs was, inflation adjusted for today, but that doesn’t account for my very strong impression that costs for big ticket items has gone up faster than inflation (the a fore mentioned education, cars and houses), so really I feel largely in the same gross financial/economic/societal role that my parents held when I was a kid (30-40 years ago). However, now I estimate that rather than being at the median I am certainly in the top 5% likely top 2.5%. That is a huge demographic shift where median ‘real’ income/purchasing has shifted all the way to the top! That, to me, is unequivocal endangerment of the middle class species!
I agree strongly with the sentiment expressed by the author that our country need not have traveled down this path to have achieved the same ends (meaning the globalization of our economy). I believe it is largely (perhaps nearly exclusively) attributable to the short-term thinking of executive decision makers (corporate as well as political) that has lead to our current situation. As Henry Ford is said to have said: “I want to pay my workers enough that they can buy one of my cars”, a strong middle class leads to a strong consumer class (day job vs night ‘job’, insofar as our economy is concerned) which leads to a strong economy which leads to higher achievement all around (meaning the rich get richer also). However, as I have babbled before, once someone has achieved a certain level of wealth they no longer really care about society’s ability to do well, indeed they are actually incentivized to do harm to the economy. The short-term thinking (aimed at maximizing quarterly stock prices) that has engulfed our decision makers means that a thousand bucks a year from now is worth less than ten bucks today. That attitude is largely due to the decision makers who elect/appoint decision makers (i.e., corporate boards and political voters) thinking incredibly short-term as well and failing to reward anyone for successful long-term decision making. A bonus in the hand is worth more than 10x (or 100x) a bonus promised next year! Particularly when you won’t be here next year and your rival will instead.
Is there any remedy? Well, within our current political system I would have to say no. Unless the sheeple suddenly start voting for people who have their best interests at heart and I just don’t see that happening. Perhaps the oligarchy will realize that they need to throw a few bones to the ‘middle class’ and will (re)create the illusion that the government actually looks out for the little guy, thus staving off the inevitable for a while, but I don’t see much need for that either. The sheeple have been so proven to be trivially lead-able that it would be a mark of insanity for anyone in power to even think that they could fight against the tide, even from within the oligarchy. I have babbled about the looming ‘apocalypse‘ a number of times (two good examples here and here) and while my definition of the apocalypse (see the second post) is really not that apocalyptic, it sure means that life sucks for the non-oligarchy. I personally might be a bit lucky in that by maintaining the ’70s middle class standard (thus having moved up the food chain to arguably the top 2.5%) I can be one of the few who attach themselves to the oligarchy as the rest of the nation wallows in deprivation and depression, but that isn’t a source of happiness to me as I would rather be in a society where everyone benefited from the economy, not just the very top.
Of course, if I am really lucky, I will look back on these posts in a decade or so and wonder how I could have been so wrong at predicting bad times. I would really _really_ like to be wrong! Happily wrong! Willing to lose an expensive bet wrong (which won’t cost me much because the economy will be cooking along (indeed, I probably won’t be able to collect if I win, so rather pointless to bet)). I can’t bring myself to be enthusiastic about the prospects of being wrong though. The frog has sat so long in the heating water that it is now frog soup!
