Saturday, July 24, 2010

Is the middle class being destroyed?

More weekend reading: is the US middle class being destroyed?

From the article:

The rich are getting richer and the poor are getting poorer at a staggering rate. Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a blinding pace.

So why are we witnessing such fundamental changes? Well, the globalism and "free trade" that our politicians and business leaders insisted would be so good for us have had some rather nasty side effects. It turns out that they didn't tell us that the "global economy" would mean that middle class American workers would eventually have to directly compete for jobs with people on the other side of the world where there is no minimum wage and very few regulations. The big global corporations have greatly benefited by exploiting third world labor pools over the last several decades, but middle class American workers have increasingly found things to be very tough.

Don't miss the scary statistics in the piece. And feel free to comment, as always--do you think the American middle class is being destroyed?

8 comments:

Roger said...

There's some really serious cherry picking in the chosen statistics. Most of them are from the last two years, while the US economy has been in a recession. To make a more convincing case, in back over the last 15 or 18 years to include more complete business cycles.

Dymphna said...

yes we're being destroyed, in a couple of years 2010 will look like the good old days

Dave said...

Yes. And it's deliberate.

Deirdre Mundy said...

Hmmm... I certainly FEEL like we're being destroyed, but objectively?

The reasons the article gives seem.... unlikely explanations.

For instance, the complaint about stock ownership--are they only counting direct ownership of stock? What about all those mutual funds and index funds people put their retirements into?

Subjectively, we're struggling. But, for instance, is my family REALLY struggling more than our parents did at this age? OR is it just that we FEEL like we're farther behind because we have 4 small kids and we compare our status to people who only have one or two, or maybe none at all?

I mean, if you're a couple who once would have been middle class (mom at home, small children with unexpected expenses that throw the budget off), chances are that you're now DINKS.... and thus part of "the rich".

Maybe I'm oversimplifying here, but at least looking at our own life, it's the kids who make us feel financially on-edge... because a bad month of broken windows and ER trips and curriculum buys for the coming year puts you in the hole....

Once upon a time, there were lots of people in the same situation... now, very few understand....

Hmm...I'd probably need numbers on this... but I think the articles main thesis "Outsourcing is bad and there is no more American Ingenuity" is a little off....

Deirdre Mundy said...

Also, the "Scary Statistics" seem to be conflating wealth and salary when they define "the rich"

For instance, the number of Millionaires SHOULD be pretty high.. as the boomers reach retirement age, many do have 1 million in the bank-- saved up as a result of a lifetime of thriftiness at middle class wages. (Though the real estate collapsed probably prevented many from becoming millionaires--especially if they planned to profit off their houses.)

OTOH, living 'paycheck to paycheck', doesn't have mean 'the poor.' A lot of high earners are also high spenders.

BUT the lack of savings is also (as my husband points out) a result of low interest rates-- why save in your IRA when the interest rate is down to .29%? When the interest rate is that low, you're actually LOSING purchasing power by saving.... might as well get the new TV now... (Also, it's not always worth it to get out of debt. Our student loans were consolidated at such a low rate that they're basically free money... not worth paying off early....)

And as for 'working longer before retirement?' --Work is how you accumulate wealth. It's the people forced to retire early (due to layoofs+recession) who are falling out of the middle class, not the ones willing and able to work longer....

Part of the problem is that we don't really have a good way to measure class. Is it income? Assets? Stuff? (AC, big TVs, expensive educations, books?) In this article, the author seems to shift freely between metrics so that he can make the most alarmist point possible...

Anonymous said...

A problem with one item on list of factoids provides an example of how unclear the picture is:

• A staggering 43 percent of Americans have less than $10,000 saved up for retirement.

Does that include everyone over 18 years old? Who expects a college kid to have $10 saved for retirement, much less $10,000?

Or this:

• For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.

Could that not just mean many people have recently purchased houses (or taken out home loans) so they still owe most of the mortgage? _ I'm not denying the current housing problems, just pointing out that the statement is open to interpretation.

Now this one:
• In 1950, the ratio of the average executive's paycheck to the average worker's paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.

That is a direct and deliberate result of the Reagan Revolution, which decreed that government was the cause of all things awful, progressive taxation was limiting the economy and achievement of the entrepreneurial American people (never mind that taxation was much higher as a percentage during the Eisenhower years, the Golden Fifties that the right wing worships) and that financial regulation, which since the Great Depression had prevented economic collapses such as we've seen the past two years, was holding us back.

Overall, to the extent that the middle class may be disappearing, it is due to the deliberate activity of the so-called conservatives who were, in fact, ideologically driven radicals working to get the country back to the pre-Depression days of booms and busts, with lots of money for robber barrons. The current SCOTUS is leading us further in that directions, as corporations are now "persons" for the purposes of election fund raising and such.

Anonymous said...

Red,

great piece. I see this going on at mine company, out-sourcing jobs to people who will work for very low wages.

Were on a bad path.

Jasper

Innisfree said...

If you look at household income, it does appear the middle class is shrinking. However, if you look at individual per-capita income, things have not really changed very much in the last fifty years. Why the discrepancy? The two statistics diverged radically in the 70s and 80s with the climbing divorce rate.

a middle class family with working husband and stay-at-home mom divorces into a high-income male earner and a poverty-line single working mom: poof! disappearing middle class.

Furthermore, globalization may "take jobs overseas," but it also brings huge benefits in the form of affordable clothing, automobiles, electronics, furniture, etc. Who thinks we're honestly worse off because consumers have products available to us our grandparents could only dream of?