Is The US Destroying the Middle Class?

With a certain frequency, commentators see fit to worry as to the extinction of the US middle class. One among these, it seems, is one Edward Luce, who composed a piece on “The crisis of middle-class America” for the Financial Times. The piece profiles two families making about $70k/yr each, and worries as to the future of them and families like them. Both are, by coincidence, families of loyal Democrats, and the piece sports the requisite concerns about the potential dangers of tea party barbarians howling at the gates of the US order.

I feel myself in an odd position in regards to such stories. The particular definition of “middle class” picked for the story is a family income threshold which five years ago was frustratingly above our families income, and which now is embarrassingly below it. In this regard, I recognize myself to be uncharacteristically fortunate. However, having recently made a good deal less than this (and coming from a family which never exceeded such a total, even adjusting for inflation) I feel that I have some familiarity with the sort of middle class world being discussed — while I can’t escape the feeling that this seems a very squalid and foreign world to the Financial Times writer.

Added to this sense of class conflict is that Luce seeks to build up his story with juxtapositions of facts which sound like they mean more than they do. For instance, he says:

People in Europe and Canada are subjected to the same forces of globalisation and technology. But they belong to unions in larger numbers and their healthcare is publicly funded. More than half of household bankruptcies in the US are caused by a serious ­illness or accident.

Now, all of these individual facts are true, but they are assembled in a way which suggests things which are not. For instance, you might get the impression from this that it is the cost of medical care which causes most bankruptcies in the US. However, it isn’t. Most people who declare bankruptcy have at least some medical bills, but it is often not the size of the bills but the fact that their income has been disrupted by missed work due to an illness or accident which leads to the series of problems that ends in bankruptcy. This is why illness remains a major cause of bankruptcy in Canada just as in the US, despite the fact that health care is state funded in Canada.

And while it’s true that US workers have much lower union membership levels than in many European countries, it’s not as if the workers in heavily unionized countries in Europe (Greece? Spain?) are not experiencing any uncertainty. Indeed, if anything, the global recession and financial crises has been hitting harder in many of the countries with the most comprehensive union systems and welfare states, and this has been causing greater anxiety because people have planned their entire lives around fixed work and pension benefits remaining in place indefinitely.

Another standard concern is inequality. Certainly, inequality is something which rubs us Americans the wrong way, and as is often observed: inequality is currently at its greatest levels since the “gilded age” of the 1920s. From the sound of the complain, one might imagine that the 20’s were some world nadir of inequality, but in fact, although it’s true that in the 20’s the rich had been getting richer for the last several decades, while an agricultural depression had been afflicting the half of the country which still lived in rural areas for nearly a decade by the time the stock market crashed, the early 20th century was in many ways much less unequal than the centuries which had come before, and certain gave more opportunity for people to move between economic classes.

I was struck recently by the degree of economic and social inequality which used to be utterly unremarked upon when reading Bill Bryson’s At Home: A Short History of Private Life. (To my great annoyance, the Columbus classical station plays NPR news during the commuting hours, which is precisely when I could use a little musical serenity, but the happy result of this was that I heard an interview/book review of Bryson’s latest.) The book centers (perhaps a strong term for its wandering course) around a country vicarage built in 1851 in England which Bryson lived in while writing the book, and while edging gradually into a history of house design and home life, it pauses to examine the history of income trends which allowed the vicar of a rural parish with 250 parishioners too build such a beautiful and lasting structure. The vicar who build the house in 1851 had an income as vicar of 500£, an amount which was 25x the average English household income at the time and which translated into modern terms is $400,000k/yr.

This was real social and economic inequality, of the sort which has predominated through much of history. By comparison, I’m not sure that the degree of variance between the 1920s, the 1950s and today represents a great deal of change, other than the ability of the global market place to make a truly tiny number of people exceedingly rich, and of the global media to then publish the foibles of those rich people widely enough to fuel to our collective envy and astonishment.

8 Responses to Is The US Destroying the Middle Class?

  1. Has Elizabeth Warren’s _The Two Income Trap_ come up here before? There’s a good hour-long Youtube lecture with all you need to know about it. It’s quite relevant, especially in light of the article’s reference to the wife’s housewife mother.

    Warren notes how two incomes push up the price for major purchases while also diverting family resources into supporting the second income.

    If memory serves, the Catholic social teaching of Rerum Novarum regarded the inability of an honest working man to support his wife at home as a sign of unjust inequality. Working from this view, the feminist business model has generated profound economic inequality in the name of gender equality.

    Among the other facts the writer is thatn that male wages especially have stagnated or declined since the 1970s. People are right to wonder why their fathers or grandfathers seemed so much better off economically. They generally were.

  2. Linus says:

    To say that anyone is better off “economically” than another does not really make sense except in a popular and common misuse of the term “economy.” I think you mean to say that our fathers and grandfathers were better off financially.

    Economics deals with the use and/or allocation of scarce resources, which is pretty much all resources. Someone can be very well off financially and be an economic mess (about a dozen celebrity musicians and athletes immediately jump to mind).

    In that context, I would dispute the blanket generalization that our fathers were better off either financially or economically. After all, those days led to these days. Did those men who earned such great union wages set aside money and resources to provide for a time when such work might not be available? Or did they spend it on microwaves, designer jeans, station wagons and lava lamps? Crass conumption has been a proud and common feature of American life from the bottom to the top for as long as I can remember. Whose fault is that? The people who designed and sold the goods, or the people who consumed them with no thought toward tomorrow’s rainy weather? The answer, of course, is both. Not one among us is innocent.

    The FT piece sounds like typical Eurotrash America-bashing. Ask Greece how great “universal health care” (a nonsense term) and a fully unionized labor force is, if you can dodge the flaming trash cans being lobbed through their streets as their economy crumbles long enough to have a civil conversation.

  3. Art Deco says:

    People are right to wonder why their fathers or grandfathers seemed so much better off economically. They generally were.

    My grandfathers both were at the mid-point of their lives in 1930, at a time when the per capita income of the United States was about a quarter of what it is today. Somehow, I doubt their contemporaries were better off than my contemporaries in a brutely material sense. My father was at the mid-point of his life in 1954, when the per capita income of the United States was about 40% of what it is today, so, same deal.

  4. Jenny says:

    I think a lot depends on where you live and how you define middle class. I think that the media tends to represent “the middle class” with examples from the very top and the very bottom of the income bracket, but ignores the vast swath in between the extremes.

    Our income is in the lower 40s with a family of five. From this perspective, 70K borders on being rich. From someone making six figures, 40K is a very small amount of money indeed. What is the reality?

    In our home, money is closely budgeted and we have no debt besides the mortgage. We have two cars, own a house, have cell phones, cable TV, unlimited long distance, broadband internet, a microwave, a dishwasher, and even go out to eat every once in a while. Is that poor?

    A closer look at our reality would reveal that we live far from work (40 miles), so as to afford our house. The ‘new’ car is five years old; the old car is 16. Our cell phones date from the early 2000s — nobody is going to steal those puppies. The TV is from the 90s. Most of our savings cushion comes from our pre-children stash. We put enough in the 401K to make the company match, but our monthly savings is meager and mostly gets eaten periodically by car maintenance. We have zero expectation of Social Security and the college fund is just two or three thousand dollars. Is that sustainable?

    We could cut back on lifestyle a bit to up the savings, but we do have the expectation of making more in the near future. But, to tell the truth, I thought we’d already be making more than we do. How long do we hold out?

    We could become a two-income household, but we do not want to outsource the raising of our children and add the expenses associated with not having an adult run the household. At what point do our ideals and aspiring middle class lifestyle undercut our financial security?

  5. David Jones says:

    I share the same concerns of Jenny… The topic of this post is related also to these posts and the comments contained in them:

    The Next Great Depression

    The Federal Reserve

  6. EMS says:

    I had a reasonable middle-class income when I was working. Did everything right – saved the max I could into my 401(k), stayed 33 years in a job that I didn’t love or hate too badly – it provided a needed security and income (from $7,500 to $60,000 over the 33 years), and since it was a government job, guaranteed a reasonable pension for life. No fancy cars/vacations/eating out, etc. I was looking forward to a nice reasonable middle-class retirement. Until my parents who had only SS income for their retirement moved in (they paid tens of thousands to send their 3 kids to Catholic schools). Worked okay until they both started getting health problems. Then everything went to pieces. My last year of work I was taking care of 2 disabled parents alone, had to borrow heavily on credit cards just to live and keep the house in working order, had to buy a new car I did not need to accommodate the wheelchairs, had to move because Mom/Dad couldn’t walk and do the stairs. Now, on paper, with Dad’s SS and my pension, and 401(k) withdrawal, we’re making a middle-class wage. But all of his SS is used to pay back the money we owe, ditto my 401 withdrawal, and we are living pension check to pension check – not what retirement was supposed to be. In 2 years, the 401 will be completely gone, Dad will probably be dead (Mom died last year), and my $30,000/year pension is the only thing that will keep me from starving. And oddly, compared to many who used to have middle class jobs and now have no jobs, I’m doing well. I now rent in a retirement community where most people did have the middle-class life while they were working. These are folks who made a living in good paying blue-collar/white-collar middle class jobs, and still have decent SS and/or pension income so they can enjoy their retirement years (until they get sick, then forget it). Unfortunately, I think that for years to come, they’ll be the last of their breed. Many middle-class jobs are being outsourced and disappearing, and retirement plans are rapidly becoming 401(k)s where one is forced to gamble on uncertain stock/money markets. We now have executives who vote themselves lavish retirement plans for life and salaries that are 400 times their employees’ salaries. College graduates are living with Mom and Dad because their potential jobs have gone out of the country to maximize the corporate profits. Millions of people are hurting, yet the corporations are sitting on over $1 trillion in cash and not hiring people. And yet many politicians are crying about the poor yacht owner having to pay a luxury sales tax on his million-dollar yacht, and not caring that they are cutting aid to families caring for disabled parents/children. What seems to be missing in the mindset of those in charge is something that was obvious as long ago as Henry Ford of Model T fame – pay your employees a living wage so they can afford to buy your product. America’s wealth was built not on the few rich, but rather on the middle-class who could afford the houses/cars/computers, etc, that they produced – a middle-class that was until recently was growing or holding its own. Now, the rich are getting still richer, and the middle-class is becoming poorer. And neither Obama (a nobody politician who in a sane world would never have come near the presidency) and his abortion-on-demand Democrats nor the no-tax Republicans (unless they pay for unnecessary wars or buy elections – oh, wait – no taxes ever, we’ll let the grandkids pay) have the guts to do something about about it.

  7. Alex says:

    Profile: 27 yr old male that has a Undergrad and soon a master’s education. My first job out of college was making 50k. The average salary in my area for a family of four is 51k and about 30k single. That year I moved into a house after only six months at my parents. I saved roughly 10,000 for my house that is about 97k. My fiancee is a medical student. We do not have children, but we have two dogs.

    In the last 4 years some events in our own lives made us realize how people such as Jenny and EMS live. Both parties are the problem for example after one your I was laid off that job taking another job about 80 miles from my home. For a while that was fine because I was allowed to work from home on some days. Then they got acquired by HP. In the first year I noticed people leaving that were with the company for over 5 years and replaced by those nice VISA carriers. Those in the website and others point the finger to unskilled working being taken by illegals, but this is happening to skilled work as well, but legal slavery if you see how these workers live. At my job I say 2 guys replaced with 5-6 foreigners that made probably as much as the two people that was laid off. They lived in a house next to my co-worker all 6 of them with there families to afford the housing. Later that year, the company changed the terms of my employment to be that I had to come into the office everyday. At that point I decided to leave and go back to school fulltime.

    I understand many people do not have the ability to do this because of the risk to the family. As well we live in a house we know if i lost my job we can still afford it. Then came the forecloses and discounts to purchase just after we purchased our own meager house. We both felt screwed because we did the right thing and saw some friends job into houses they would have never afforded before, yet did not buy a house they could afford without these subsidies. So we live in a middle to lower middle class home and they live were my parents live that took them a decade of savings to move there so I can have the education I was able to receive. ( But life is not fair I guess )

    After I left work my dogs got sick and my fiencee broke her leg from falling down some ice stairs at the grocery story. We now have to spend over 1,000 for her leg and about the same amount for your does going to the vet. Turning around to real people. How do you handle paying 2,000 in one month for these random expenses? Do you have the means to leave your employer. As I said before we got a house that could be paid for if I lost my job using only my fiencee’s loans. As we both see it as her income until she becomes a doctor. So taking that she only makes 20,000 dollars a year in loans ( she was lucky to have a scholarship to pay for all medical school tuition and books. ) We almost missed the mortgage that month if it wasn’t for me always saving over 20% of my income we would have been already behind in our house payments.
    It is scary we do need change that is why I voted for obama. McCain had the same policies as bush, but I see obama and he has the same policies so it seems from clinton. We need new politicians I hope to see people voting not for one issue in the future. To be honest same-sex marriage and abortion should not be in the political discussion never should have gone past the states. I don’t care what you call yourself we all can agree that America and the American Dream is slipping way from both Dem and Republicans. I think we need to first come together as Americans to see what we both agree to be a problem and come up with mutual solutions. It seems that we lost that and our politicians have lost that was well. Why does the republicans say no to everything and also the democrats and make this show for all of us? Why can’t we find some middle ground ever. why are we in a America that one party needs to almost take complete control in order to pass laws that are needed? I think we both can agree we need some change and it starts with the left like myself speaking to many of you that are from the right side of the world to start talking before we expect or elected officials to do the same.

    In the end I think most people want to live with no fear. That takes a good income doesn’t need to be 1 million dollars a year but it is certainly not less than 50k for a family in this country.

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