America’s Middle Class Crisis: The Sobering Facts

[Gonad the Barbarian]

Two recessions, a couple of market crashes, and stubbornly high unemployment are all wreaking havoc on America's middle class.

In the accompanying interview, The Daily Ticker's Aaron Task discusses the state of the middle class with Sherle Schwenninger, director of economic growth and American strategy programs at the New America Foundation. Schwenninger's recent report "The American Middle Class Under Stress" has some stunning facts that highlight the struggles the average American is having getting a decent-paying job and keeping up with rising cost of living.

Here are just some of the sobering facts:

-- There are 8.5 million people receiving unemployment insurance and over 40 million receiving food stamps.

-- At the current pace of job creation, the economy won't return to full employment until 2018.

-- Middle-income jobs are disappearing from the economy. The share of middle-income jobs in the United States has fallen from 52% in 1980 to 42% in 2010.

-- Middle-income jobs have been replaced by low-income jobs, which now make up 41% of total employment.

-- 17 million Americans with college degrees are doing jobs that require less than the skill levels associated with a bachelor's degree.

-- Over the past year, nominal wages grew only 1.7% while all consumer prices, including food and energy, increased by 2.7%.

-- Wages and salaries have fallen from 60% of personal income in 1980 to 51% in 2010. Government transfers have risen from 11.7% of personal income in 1980 to 18.4% in 2010, a post-war high.

The bottom line is simple says Schwenninger: The middle class is shrinking, which threatens the social composition and stability of the world's biggest economy. "I worry that we're becoming a barbell society - a lot of money wealth and power at the top, increasing hollowness at the center, which I think provides the stability and the heart and soul of the society... and then too many people in fear of falling down."

http://finance.yahoo.com/blogs/dail...le-class-crisis-sobering-facts-141947274.html

There is a good video embedded at the above link, as well as a slideshow here:
http://growth.newamerica.net/sites/...cydocs/26-04-11 Middle Class Under Stress.pdf

One obvious takeaway here is that increased government spending on the poor and middle class is a symptom and not the problem itself. Simply cutting that spending without addressing the core issues prompting it will only make the situation worse.

 

[Texashiker]

As the jobs that supported the middle class go to china, and other third world countries, what do we "really" expect?

That 20 year old guy working at gamestop or best buy today, might have worked in a shipyard, or factory 30 years ago. But the factories are gone, and with them our ability to create middle class jobs.

As I drive through Beaumont Texas, all I see are low wage jobs being created. Jobs that might pay 7 or 8 dollars an hour - not enough to support a family or buy a home.

The same thing is being repeated all over the nation. Not only has our society become disposable, so have our skills.

 

[drebo]

One obvious takeaway here is that increased government spending on the poor and middle class is a symptom and not the problem itself. Simply cutting that spending without addressing the core issues prompting it will only make the situation worse.

Bullshit.

The middle class is shrinking for three reasons: government expansion of the lower class, rising prices caused by inflation, and increased tax liability caused by increased government spending.

You're putting the cart before the horse, and anyone with a brain can see that's not the case.

When the government rewards people for not working, what do you think they do? They take lower paying jobs or they don't work at all. Additionally, what do you think happens to all the middle class people making $20-$30/hr when minimum wage goes up? They don't see any increase in wages, and yet costs go up all around them. Their buying power sinks further toward the lower class.

You claim that jobs are increasingly paying less...that would mean that CGS should go down, which means that prices should go down. Yet we've seen the opposite. And don't give me this bullshit about CPI or inflation being stable. I KNOW for a FACT that prices in the grocery store are higher and that prices at the pump are higher. That is INDISPUTABLE. Lower house prices are not indicative of deflation or lower overall prices. Housing was in an artifically inflated bubble, remember? That can only mean that either jobs aren't paying less, as you claim, or that inflation is running rampant. The more things cost, the less buying power one has. Less buying power = lower class.

And I don't think I should even need to address the third. The government has placed the tab for all its lavacious lifestyle and crazy spending squarely on the shoulders of the middle class. Government's refusal to adopt a flat/fair tax style has placed an unsustainable burden of tax on the middle class. The middle class doesn't make enough and can't afford to spend money on someone to find tax loopholes for them. Their livings aren't made from dividends or capital gains. They are taxed at the highest effective rate and it's not sustainable.

The government is destroying the middle class. Every new service, every new spending measure supposedly done to help the middle class, is another nail in the coffin. The government thinks that taxing the middle class, wasting half the money on bureaucracy, and then spending what's left on a service supposedly to help the middle class is a good idea. Hell, most of the time, the middle class doesn't even qualify for that service. Here's an idea...why not let the middle class keep that money in the first place. Then there will be no need for this government service.

We all know why they do it, though. Ratings. Popularity. Politicians can turn around and say "look at all the stuff I did for you, reelect me!" People don't realize that they're paying more for the services of the government than they actually get from them. All so that career politicians can have private plane rides and government-paid $50k cars for their kids to drive around in.

No, you've got it backwards. The government is 100% responsible for the decline in the middle class, and it's entirely intentional.

 

[Doc Savage Fan]

Service based economy FTL. We've made our bed...now we're sleeping in it.

 

[IceBergSLiM]

well destroying the middle class has always been the goal though right?

 

[Texashiker]

The middle class is shrinking for three reasons: government expansion of the lower class, rising prices caused by inflation, and increased tax liability caused by increased government spending.

Why didn't you list job lose?

From the 1940s - early 1980s, southeast Texas has several companies that built everything from offshore drilling rigs, ships, barges, tug boats,,,,, to parts for bridges. One local company employed close to 1,000 people - they built parts for bridges during construction of the interstate highway system.

Over the past 3 decades the welding shops have been sold several times. The current company is a shell what once was a boom town.

High school kids that did not want to go to college could go to work in one of those shops. In a few years they were making enough money to support a family, and buy a home.

Today, high school kids go to work at a local restaurant, or retail outlet, and make a fraction of what the same age group was making 30 years ago.

Its not just government waste, or taxes, there has been a lot of job lose in the past 30 years.

 

[Jhhnn]

The same thing is being repeated all over the nation. Not only has our society become disposable, so have our skills.

But if you listen to Rep Ryan, the obvious answer is to give "job creators" yet another tax cut, a really big one, raise taxes & cut benefits for the rest of America to, uhh, "cut the deficit", yeh, that's it...

Who disposed of who? And what do we still believe in that allows it to continue?

 

[Texashiker]

And what do we still believe in that allows it to continue?

This is a good question "what do we still believe in that allows it to continue?"

I think its the 2 party system. Most people believe their political party has the answers. When election time comes up, people blindly go to the ballot box and vote.

If the people would introduce a 3rd party to congress, so that no 1 party could ever hold majority vote, I think things would start to change.

 

[dmcowen674]

America’s Middle Class Crisis: The Sobering Facts

There is no middle class, Bush and Co knocked that out long ago.

 

[EagleKeeper]

There is no middle class, Bush and Co knocked that out long ago.

So does that make you lower or upper class?

 

[Axon]

Lower, personally. Maybe it's because I live in NYC.

 

[Craig234]

But if you listen to Rep Ryan, the obvious answer is to give "job creators" yet another tax cut, a really big one, raise taxes & cut benefits for the rest of America to, uhh, "cut the deficit", yeh, that's it...

Who disposed of who? And what do we still believe in that allows it to continue?

One problem is the false language. For example, a "tax cut" for the rich isn't. It's a "tax transfer" from the rich to everyone else.

Those taxes don't just go away, we no longer owe the money - the taxes are 100% offloaded onto the public, who now owe them - plus interest.

"Privatize gains, socialize losses". The rich have skyrocketed in income for decades.

 

[wuliheron]

One obvious takeaway here is that increased government spending on the poor and middle class is a symptom and not the problem itself. Simply cutting that spending without addressing the core issues prompting it will only make the situation worse.

Its the predictable boom and bust cycle of a capitalist system. After a slow 30 year decline we've finally gone bust. We also had to restructure the economy the last time we went bust during the great depression. This time we've just been doing it slowly over the last 30 years instead of all at once.

The core issues are the same as always. Bubble economies, mechanization, and globalization out pacing our ability to create jobs. The last big economic boom began in the 1920s when companies began building all the cars, washers, refrigerators, etc. that we've all come to know and love. Today electricity and electronics alone account for a quarter of the world economy.

What we need now is new technology to take it to the next level and some say it will be robots and cheap renewable energy among other things. Why ship all this crap halfway around the world when it is almost as cheap to make it at home.

 

[GTaudiophile]

And let's not forget that America's middle class in many cases has itself to blame...

-Buying a McMansion on meager income
-Buying a car (SUV?) for each household member
-Buying luxury cars on meager income
-Paying for more bling?
-Putting stuff over important things like education and health care
-Cable TV/Internet/Data Smartphone plans for all
-Credit card debt
-Zero savings
-Having too many children


Short-sighted planing/budgeting and greed at all levels is to blame here.

 

[piasabird]

Well we could start an initiative to reward companies that are run by people who hire americans. We could also start an initiative to stop paying any kind of aid medical, childcare, etc that pays people to have children. Then it would not matter if people came from Mexico, because it would be illegal to hire them, and they could get no benefits so they would probably leave.

I think we should also prosecute undocumented workers in a different way. Anytime we find people have employed illegals and have not paid their full taxes and paid the the proper wages, we should go after those companies for racketeering and tax evasion, just like we did for organized crime.

Last of all is taxing products like computers, electronics, and other things like car parts and automobiles that are imported from overseas. We should also remove the labels on products that are only assembled in america unless 90% of the product is actually manufactured in the USA. If some japanese company imports all its part from overseas, they should not have the right to claim it was made in America, based on being assembled in America.

 

[brencat]

And let's not forget that America's middle class in many cases has itself to blame...

-Buying a McMansion on meager income
-Buying a car (SUV?) for each household member
-Buying luxury cars on meager income
-Paying for more bling?
-Putting stuff over important things like education and health care
-Cable TV/Internet/Data Smartphone plans for all
-Credit card debt
-Zero savings
-Having too many children


Short-sighted planing/budgeting and greed at all levels is to blame here.

I completely agree. We are all individually responsible for budgeting and living within our means as well as building a reserve for a layoff or unexpected expenses.

On the other hand, many people are not destined to go to college. And if you do end up going, your grades had better be top notch in this economy or you will be a college grad without a job.

There are a lot of things wrong with this economy. And pay structure has partly to do with it. The difference between the top 2% and top 0.01% is so massive that it upsets me when I hear statistics lumping a $250-thousandare living in high cost/high tax NJ/NY/CT in with a CEO bringing in $45 million per year and paying a 15% or less effective tax rate (while the guy making $250k is paying ~ 28-30% or more).

The pay structure and marginal rate % at the truly high end ($750k and up) needs to be gradually increased and we need to phase out the 15% cap gains favorable rate for the same high earners to create the disincentive for companies to pay these ridiculous comp packages to the top 10 or so employees of public companies.

 

[soulcougher73]

 

[Axon]

And let's not forget that America's middle class in many cases has itself to blame...

-Buying a McMansion on meager income
-Buying a car (SUV?) for each household member
-Buying luxury cars on meager income
-Paying for more bling?
-Putting stuff over important things like education and health care
-Cable TV/Internet/Data Smartphone plans for all
-Credit card debt
-Zero savings
-Having too many children


Short-sighted planing/budgeting and greed at all levels is to blame here.

Accountability...in America? Pfft.

 

[matt0611]

Bullshit.

The middle class is shrinking for three reasons: government expansion of the lower class, rising prices caused by inflation, and increased tax liability caused by increased government spending.

You're putting the cart before the horse, and anyone with a brain can see that's not the case.

When the government rewards people for not working, what do you think they do? They take lower paying jobs or they don't work at all. Additionally, what do you think happens to all the middle class people making $20-$30/hr when minimum wage goes up? They don't see any increase in wages, and yet costs go up all around them. Their buying power sinks further toward the lower class.

You claim that jobs are increasingly paying less...that would mean that CGS should go down, which means that prices should go down. Yet we've seen the opposite. And don't give me this bullshit about CPI or inflation being stable. I KNOW for a FACT that prices in the grocery store are higher and that prices at the pump are higher. That is INDISPUTABLE. Lower house prices are not indicative of deflation or lower overall prices. Housing was in an artifically inflated bubble, remember? That can only mean that either jobs aren't paying less, as you claim, or that inflation is running rampant. The more things cost, the less buying power one has. Less buying power = lower class.

And I don't think I should even need to address the third. The government has placed the tab for all its lavacious lifestyle and crazy spending squarely on the shoulders of the middle class. Government's refusal to adopt a flat/fair tax style has placed an unsustainable burden of tax on the middle class. The middle class doesn't make enough and can't afford to spend money on someone to find tax loopholes for them. Their livings aren't made from dividends or capital gains. They are taxed at the highest effective rate and it's not sustainable.

The government is destroying the middle class. Every new service, every new spending measure supposedly done to help the middle class, is another nail in the coffin. The government thinks that taxing the middle class, wasting half the money on bureaucracy, and then spending what's left on a service supposedly to help the middle class is a good idea. Hell, most of the time, the middle class doesn't even qualify for that service. Here's an idea...why not let the middle class keep that money in the first place. Then there will be no need for this government service.

We all know why they do it, though. Ratings. Popularity. Politicians can turn around and say "look at all the stuff I did for you, reelect me!" People don't realize that they're paying more for the services of the government than they actually get from them. All so that career politicians can have private plane rides and government-paid $50k cars for their kids to drive around in.

No, you've got it backwards. The government is 100% responsible for the decline in the middle class, and it's entirely intentional.

This post pretty much sums up my position about what the government has and is doing to the middle class. Stop taking our resources by taxing us 30% + and putting it into programs that don't help us! (and most of the time go to help the rich and the politcally connected).

 

[GTaudiophile]

I completely agree. We are all individually responsible for budgeting and living within our means as well as building a reserve for a layoff or unexpected expenses.

On the other hand, many people are not destined to go to college. And if you do end up going, your grades had better be top notch in this economy or you will be a college grad without a job.

There are a lot of things wrong with this economy. And pay structure has partly to do with it. The difference between the top 2% and top 0.01% is so massive that it upsets me when I hear statistics lumping a $250-thousandare living in high cost/high tax NJ/NY/CT in with a CEO bringing in $45 million per year and paying a 15% or less effective tax rate (while the guy making $250k is paying ~ 28-30% or more).

The pay structure and marginal rate % at the truly high end ($750k and up) needs to be gradually increased and we need to phase out the 15% cap gains favorable rate for the same high earners to create the disincentive for companies to pay these ridiculous comp packages to the top 10 or so employees of public companies.

If I were in charge of education reform, a dual-track system would be one of my policies. One track prepares a student for a trade/service and the other track prepares a student for University.

 

[p0nd]

And let's not forget that America's middle class in many cases has itself to blame...

-Buying a McMansion on meager income
-Buying a car (SUV?) for each household member
-Buying luxury cars on meager income
-Paying for more bling?
-Putting stuff over important things like education and health care
-Cable TV/Internet/Data Smartphone plans for all
-Credit card debt
-Zero savings
-Having too many children


Short-sighted planing/budgeting and greed at all levels is to blame here.

What's interesting about this sort of problem (materialism) is that you can blame it on the individual, but it's culture that is the largest influence of peoples' behavior here. A capitalist service economy must create demand for products in order to thrive. Things have to be sold, even if people don't need them, because otherwise people aren't making money which leads to stagnation. This is why we have pervasive advertising, aggressive loans, and planned obsolescence - because products must be sold in order to keep the wheel turning. Demand has to be created. And of course, Americans are no longer making most products, rather they are mostly consuming them.

So there has been a culture of manufactured demand for a while now, which leads to the sorts of things you listed in your post. You can chalk it up to "people are stupid," but I think it's more complicated than that

The transfer of wealth to the high upper class is only somewhat related to this though, in my unprofessional opinion

 

[Texashiker]

-Having too many children

The more kids you have, the more government benefits you can get.

 

[theeedude]

Good:
1. Middle class on the ropes
2. Cheaper labor costs
3. Profit

 

[Blackjack200]

And let's not forget that America's middle class in many cases has itself to blame...

-Buying a McMansion on meager income
-Buying a car (SUV?) for each household member
-Buying luxury cars on meager income
-Paying for more bling?
-Putting stuff over important things like education and health care
-Cable TV/Internet/Data Smartphone plans for all
-Credit card debt
-Zero savings
-Having too many children


Short-sighted planing/budgeting and greed at all levels is to blame here.

So you look at a consumer driven economy, and blame its decline on people consuming too much?

What would happen if people stopped buying houses, cars, "Cable TV/Internet/Data Smartphone plans"?

 

[rudder]

If I were in charge of education reform, a dual-track system would be one of my policies. One track prepares a student for a trade/service and the other track prepares a student for University.

Like masons? No, companies hire lots of cheal illegals to do the work of a fewer number of veteran, skilled masons. You can get more done with 20 people than say 4 or 5. There used to be mason apprentices in this country.

University engineering graduate? Cheaper to hire someone on an H2B visa and dangle a green card in their face so they work for slave wages and won't complain.

[dmcowen674]blah blah Bush and Cos fault. [/dmcowen674]

but the democrats are just as culpable because they can retain power with those voting blocks.