NPR/Pew Research - Most Americans No Longer Are Middle Class

[Spungo]

Dude I remember growing up on 20k a year and my dad worked minimum wage and paid off a mortgage on minimum wage. But back then bills were not crazy.

That doesn't really mean anything. Prices are controlled by supply and demand. If everyone makes $10/h, the price of housing drops until $10/h is enough to afford one. If everyone makes $100/h, it doesn't automatically mean everyone gets a house. Since the market is dynamic, prices will rise until $100/h is the wage needed to buy a house. This is why housing in poor areas costs less than housing in rich areas. If you really wanted to, you could buy a house in Detroit for $10,000. The monthly payments would be almost nothing. You could get a really good paying job in San Francisco, but everyone else has a good paying job too, so you'll need maybe $2,000,000 for something resembling a middle class home.

There really isn't a simple solution to the problem of affordability. It's just the way economics works. If we say the down payment needs to be 20%, the price of housing will crash until 20% is something people can afford. If we say the down payment needs to be 0%, every asshole with a pulse can buy a home, so the price of houses explodes. Interest rates are another factor. If the interest rate is 20%, the price of housing needs to crash until people can afford 20% loans. If the interest rate on a mortgage was 0%, housing prices would explode because people would be able to borrow huge amounts of money while maintaining the same monthly payments.

In cities with affordability problems, the only thing that would work is restrictions on who can buy property. It the people buying properties are rich Chinese businessmen, the interest rate and down payment requirements have no effect on real estate prices.

 

[piasabird]

Ross Perot called it that Great Sucking Sound of all our jobs leaving the country.

This is the true result of Free Trade.

 

[dullard]

Ross Perot called it that Great Sucking Sound of all our jobs leaving the country.

This is the true result of Free Trade.

Why was this graph linear with no change at all after NAFTA?

Why are there tens of millions of more jobs after NAFTA if free trade results in a giant suck of jobs from the country?

 

[woolfe9998]

The data presented by Pew suggests increased income polarity. It does not suggest an overall drop in average income. I find it odd that the article laments a shrinking of the "middle class" when in reality more of this is people moving from middle to upper than from middle to lower. For example, according to Pew's data, since 1981, what they call middle class has declined by 8.7%, while what they call lower class has increased by 2.8%, but upper class has increased by 5.9%. Doesn't seem quite as alarming when in fact over 2/3's of those moving out of the middle class are moving upward rather than downward.

Also, I question the assumption that $120,000+ is "upper class." That term needs clarification. $120,000/year is NOT wealthy. It is upper middle class at most, what others in the past have referred to as part of "middle class." So where they choose to put the upper and lower boundaries will affect our perception of what is happening with the middle class. Put the upper boundary higher or the lower boundary lower and the "middle class" suddenly hasn't shrunk so much. The reality is these boundaries are arbitrary decisions of Pew.

 

[dullard]

Also, I question the assumption that $120,000+ is "upper class." That term needs clarification. $120,000/year is NOT wealthy. It is upper middle class at most, what others in the past have referred to as part of "middle class." So where they choose to put the upper and lower boundaries will affect our perception of what is happening with the middle class. Put the upper boundary higher or the lower boundary lower and the "middle class" suddenly hasn't shrunk so much. The reality is these boundaries are arbitrary decisions of Pew.

Yes, it is arbitrary. But it is also a fairly common definition. Note: Pew actually breaks it out by state, not nationwide: http://www.businessinsider.com/middle-class-in-every-us-state-2015-4

But I ask you, why wouldn't making double the median family in one of the wealthiest places on Earth be considered upper class?

 

[woolfe9998]

Yes, it is arbitrary. But it is also a fairly common definition. Note: Pew actually breaks it out by state, not nationwide: http://www.businessinsider.com/middle-class-in-every-us-state-2015-4

But I ask you, why wouldn't making double the median family in one of the wealthiest places on Earth be considered upper class?

Your question is obviously subjective. It depends on what "upper class" means to you. To me, it means wealthy. $120,000 is not even close to what at least I would consider wealthy. What Pew has done is eliminate the idea of "upper middle" and fold it into "upper." That was an arbitrary decision, but it certainly tends to support the "shrinking middle class" hypothesis quite nicely. And as to your "one of the wealthiest places on Earth," that only underscores how relative these artificial categories truly are. In Liberia, I'm sure the standard of living of someone just above our "poverty line" seems quite wealthy.

Anyway, my main point is not about these artificial categories, but the fact that more have moved up than down, yet the data is pitched as negative. It sounds like being "middle class" in America is a thing in and of itself to be preserved, meaning it is somehow preferable to being lower OR higher. Doesn't make a lot of sense to me but YMMV.

 

[Blackjack200]

Your question is obviously subjective. It depends on what "upper class" means to you.

When I look at stories like this, the most important metric to me is how people are doing vs. social expectations. My impression is that Americans are fairly similar in terms of real income to their 1971 counterparts, but social expectations are absolutely off the charts.

That sort of explains why you see more debt, more depression, more suicides, increased median age for getting married etc. etc.

A dude can make $15-$20 an hour, pay rent on a ratty apartment, feed himself, and even have a few bucks left over. But most women will look at that and go "LOL no." And I don't mean to blame them, that's just the society we live in, it's where the expectations are.

Guys do it too. We had a thread about passports on this very board a few weeks ago, and people were acting like if you don't travel internationally, you're an uncultured bumpkin. Seriously?

People see themselves falling behind in a million different ways. All we see on Twitter and Facebook are people on vacation, eating at expensive restaurants, etc. etc. They've become social proving humblebrag platforms. I have one friend that checks in every time he's at an airport, and uploads pictures of his 1st class seat & in flight meal.

Wherever the zero-point or median is, I think it's obvious that income and wealth stratification has gotten very bad, and it's been socially corrosive for quite some time. I don't know if tax policy is the best way to address it, but it seems like the most natural place to start.

 

[woolfe9998]

When I look at stories like this, the most important metric to me is how people are doing vs. social expectations. My impression is that Americans are fairly similar in terms of real income to their 1971 counterparts, but social expectations are absolutely off the charts.

That sort of explains why you see more debt, more depression, more suicides, increased median age for getting married etc. etc.

A dude can make $15-$20 an hour, pay rent on a ratty apartment, feed himself, and even have a few bucks left over. But most women will look at that and go "LOL no." And I don't mean to blame them, that's just the society we live in, it's where the expectations are.

Guys do it too. We had a thread about passports on this very board a few weeks ago, and people were acting like if you don't travel internationally, you're an uncultured bumpkin. Seriously?

People see themselves falling behind in a million different ways. All we see on Twitter and Facebook are people on vacation, eating at expensive restaurants, etc. etc. They've become social proving humblebrag platforms. I have one friend that checks in every time he's at an airport, and uploads pictures of his 1st class seat & in flight meal.

Great point. Expectations are controlling the perception of how well we are doing as much or more than economic realities. Expectations continue to increase on a sliding relative scale. If 200 years from now technology has improved our standard of living to the point where an average person lives like a millionaire does now, these future "millionaires" will likely still envy the future billionaires.

But that issue is cultural. We are conditioned to always want more than what we have. We can't really address that problem without censoring commercial speech (i.e. advertising) and popular culture, which are responsible for creating these constantly upward shifting expectations. Beyond that, I have no idea what could ever bring people's expectations down to reality.

Wherever the zero-point or median is, I think it's obvious that income and wealth stratification has gotten very bad, and it's been socially corrosive for quite some time. I don't know if tax policy is the best way to address it, but it seems like the most natural place to start.

IMO "income inequality" per se isn't really the issue. Elimination of poverty is. Income inequality only matters within the framework of our discussion above, the fact that people always envy those further up the scale.

Tax policy can address elimination or reduction of poverty. There may be other ways as well. It may also reduce income inequality but that IMO is secondary.

I'll close with a favorite quote:

Man, I see in fight club the strongest and smartest men who've ever lived. I see all this potential, and I see squandering. God damn it, an entire generation pumping gas, waiting tables; slaves with white collars. Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don't need. We're the middle children of history, man. No purpose or place. We have no Great War. No Great Depression. Our Great War's a spiritual war... our Great Depression is our lives. We've all been raised on television to believe that one day we'd all be millionaires, and movie gods, and rock stars. But we won't. And we're slowly learning that fact. And we're very, very pissed off.

- Tyler Durden

 

[dullard]

Your question is obviously subjective. It depends on what "upper class" means to you. To me, it means wealthy. $120,000 is not even close to what at least I would consider wealthy. What Pew has done is eliminate the idea of "upper middle" and fold it into "upper." That was an arbitrary decision, but it certainly tends to support the "shrinking middle class" conclusion.

Anyway, my main point is not about these artificial categories, but the fact that more have moved up than down, yet the data is pitched as negative. It sounds like being "middle class" in America is a thing in and of itself to be preserved, meaning it is somehow preferable to being lower OR higher. Doesn't make a lot of sense to me but YMMV.

I think the concept of wealth and income shouldn't be confused. Wealth is an accumulation, while income is ephemeral. A family making $120k could very well be millionaires or may be on their way there. Another family making $120k could be barely scraping by. I personally think societal information should be included. For example, do you ever have financial trouble putting enough food on the table? If so, then you aren't middle class. You could put something like that on the other side too (I don't have great examples now, but maybe something like: do you have to stop and think if you can afford a splurge? Are you worried that you can afford to retire? Etc.)

Moving up is great. You are correct that middle class doesn't need to be preserved. The bigger problem here is that there is greater inequality. Some inequality is great and is needed to encourage hard work. But too much inequality is very terrible. I long for the good old days of serfs and peasants with lords, what great times those were!

 

[theeedude]

Americans voted since 1980 to no longer be in the middle class.

 

[hal2kilo]

Americans voted since 1980 to no longer be in the middle class.

Was that when Walmart started to go national big time? I know, the beginning of being pissed on, er, trickled on.

 

[Blackjack200]

He's referring to the election of Reagan. It does stand out as a turning point to me as well.

 

[hal2kilo]

He's referring to the election of Reagan. It does stand out as a turning point to me as well.

I know, I was just throwing that out there. I despise Walmart as the beginning of the big out sourcing that began the race to the bottom.

 

[dullard]

Americans voted since 1980 to no longer be in the middle class.

I would say that is true. But, the problem happened throughout the 1970s. The voting had no impact on it.

 

[Blackjack200]

I would say that is true. But, the problem happened throughout the 1970s. The voting had no impact on it.

You can't say that just because something has had a regular progression, certain things haven't impacted it. Like, maybe that progression would have been interrupted for a little while if someone else had been elected.

 

[dullard]

You can't say that just because something has had a regular progression, certain things haven't impacted it. Like, maybe that progression would have been interrupted for a little while if someone else had been elected.

True, but my thought is (since there have been a half dozen presidents, from both sides of the aisle and none had any noticeable impact) that we are giving our presidents and congress too much weight. There are greater effects than just politics at play. The politicians may influence things, but no one has actually signed into law anything yet that made enough change to be noticeable on this data set.

 

[shady28]

How quickly we forget inconvenient truths -

Post


This chart shows the impact of immigration on the bottom 90% of filers.

It also shows the decline in real wages over the last 15 years has been severe - around 20%.

The real inflection point - where the middle class began to decline in real wage terms - is around 1973-1975. You can draw a vertical line from that inflection point to the inflection point where we started seeing mass immigration into the US.

 

[Bart*Simpson]

An almost perfectly linear drop over the last 44 years, I blame Obama and Bush.

Because the epic badness of both Bush and Obama is so bad that it created a temporal anomaly that enabled their evil to create poverty decades before either of them was ever elected to political office.

Bastards.

 

[Blackjack200]

True, but my thought is (since there have been a half dozen presidents, from both sides of the aisle and none had any noticeable impact) that we are giving our presidents and congress too much weight. There are greater effects than just politics at play. The politicians may influence things, but no one has actually signed into law anything yet that made enough change to be noticeable on this data set.

I agree. I do think policy is important, but some of these trends seem more structural. Like, as technology allows outsourcing, more jobs will go overseas no matter what the trade/tax/immigration policies are. As technology allows automation, jobs will be lost no matter what the trade/tax/immigration policies are.

 

[shady28]

I agree. I do think policy is important, but some of these trends seem more structural. Like, as technology allows outsourcing, more jobs will go overseas no matter what the trade/tax/immigration policies are. As technology allows automation, jobs will be lost no matter what the trade/tax/immigration policies are.

You've got it backwards.

Automation is, and always has been, the cure. You don't really think that current automation compares to say, the cotton gin, the internal combusion engine, tractors, trains/railroads, radio / telegraph, do you?

But instead of focusing on automating and making US workers much more efficient - as we did in the past - corporate execs and their political lackeys have focused on offshoring to take advantage of lower wages. That's what they chose to use the technology for.

 

[alcoholbob]

How quickly we forget inconvenient truths -

Post


This chart shows the impact of immigration on the bottom 90% of filers.

It also shows the decline in real wages over the last 15 years has been severe - around 20%.

The real inflection point - where the middle class began to decline in real wage terms - is around 1973-1975. You can draw a vertical line from that inflection point to the inflection point where we started seeing mass immigration into the US.

Simply a matter of supply and demand. We already know from the Miami study when 100,000 Cubans showed up in Miami in 1980, within 2 years wages for men with only a high school education and below were cratering in the Miami area, and didnt recover for nearly a decade. When America takes 2,000,000 immigrants a year, has 500,000 teenagers turning 18 a month, and only creates 100k-200k jobs monthly, you are going to have systemically depressed wages.

Since immigration is considered a "human right" for some in the left, and the likelihood of immigration reform (restricting immigration) is unlikely any time soon (in fact both republicans and democrats are looking to expand immigration, not decrease it), I'm suspecting in 20-30 years you are going to see a significant split between Canadian and American median net worth and income due to the differences in immigration policy between the two countries, and you are going to start hearing about Canadians wanting to build a wall on the American border.

 

[Brian Stirling]

The difference is in what the sides propose to do about it. Recognizing an insufficiency of jobs & pay, the Left seeks to redefine the social contract to extend more of the benefits of our society to people who once got what they needed from working. Clearly, our own financial elite has no incentive to create jobs & to pay well enough to match that anymore.

The message needs to be clear- Jobs or taxes. If we have to settle for less, so do they. They may not need to hire Americans as they once did but Americans still need to feed the kids & pay the bills.

Leadership has responsibilities & consequences that our economic leadership needs to owe up to. Where we are today is the result of their leadership.

The idea that the wealthy, having pushed to kill manufacturing in the USA so they can take a larger percent of the process, would turn around and give it all back via some form a handout is ... naive in the extreme!


Brian

 

[trenchfoot]

Taxes are stealing now?

And some folks conveniently forget/ignore the fact that when the middle class was doing well the very rich was paying +50% tax rates and still prospered nicely. Bringing back previous tax rates and policies that promoted and sustained a healthy middle class and getting rid of loopholes that the very wealthy acquired for themselves through corruption is now considered theft? lol

Prosperity for all is now a fairy tale that the present day working class can hardly believe it ever existed. AND a bunch of them work tirelessly to keep their own wage earning brethren and themselves from bringing back those golden years.

Still can't figure that one out.

 

[fskimospy]

How quickly we forget inconvenient truths -

Post


This chart shows the impact of immigration on the bottom 90% of filers.

It also shows the decline in real wages over the last 15 years has been severe - around 20%.

The real inflection point - where the middle class began to decline in real wage terms - is around 1973-1975. You can draw a vertical line from that inflection point to the inflection point where we started seeing mass immigration into the US.

And yet if you look at real COMPENSATION over that time period, you know, the amount that companies are actually paying in total costs to acquire and retain talent, that relationship basically disappears. FRED doesn't have data on foreign born going back that far but you can put my line on top of your graph easily enough in your head.

Does that make you reconsider? This is why friends don't let friends read the Daily Caller, by the way. It is not a reputable organization.

 

[shady28]

And yet if you look at real COMPENSATION over that time period, you know, the amount that companies are actually paying in total costs to acquire and retain talent, that relationship basically disappears. FRED doesn't have data on foreign born going back that far but you can put my line on top of your graph easily enough in your head.

Does that make you reconsider? This is why friends don't let friends read the Daily Caller, by the way. It is not a reputable organization.

No it does not, because my chart showed the lower 90% while you are looking at a view that includes the top 10%.

So when you include the top 10% or so, as you did, everything looks fine. Although I would point out that your chart has a change in the slope - an inflection point - as well, at about the same time (what happened in 1973 would be a good question).

Exclude the top 10% and you see why people are pissed, as my chart shows.

That is a simple concept that even you should be able to grasp.