What's holding back the middle class? Look in your closet.

[Jeff7]

Median household income, also adjusted for inflation, has fallen from $56,916 in 2000 to $54,417 today, according to Sentier Research. That’s a 4.4% decline in spending power.

Just look at what increases in productivity have gotten: More money shuffled away from the ones doing the work. I need to start building an altar to upper management and shareholders.

 

[Moonbeam]

I got tired of listening to assholes cry.

What happened to you?

We3ll lucky you. When you get in the mood to bitch about assholes crying, all I hear isn't an asshole, but a sniveling intolerant ignoramus for whom I have great sympathy.

 

[werepossum]

This article would make sense in one context but the unspoken implication is that everyone suffered equally or something since 2000. And that's simply not true. The income for the top 10% has soared way faster than for everyone else.

http://www.washingtonpost.com/blogs...-2000-and-2012-american-wages-grewnot-at-all/

http://www.nytimes.com/2014/04/23/u...ass-is-no-longer-the-worlds-richest.html?_r=0

About housing size: people are vastly more productive per person today than decades ago. Furthermore, there are more two-earner households now. That's something that the "houses are twice as big" people don't talk about. So are the bottom 80% supposed to be happy with living like it's 1945 while the top 20% get to have entire MANSIONS? Despite the bottom 80% working harder and with many more two-earner households?

Furthermore and even more importantly, I am sick of analysis that only takes income into consideration. WEALTH is a HUGE factor. Wealth is taxed at a lower rate oftentimes (capital gains) than income. Inherited wealth also makes inequality persist, yet we've actually made inheritance/estate taxes lower.

There's a very fundamental disconnect between right and left as to whether government's proper function is providing an environment in which one can prosper and provide a better life for one's children and grandchildren, or periodically reset everything so that no one gets any lasting advantage. I don't know how that can be reconciled since the split is no longer how to achieve a particular goal, but the goal itself. If one is generally on the left, no system that allows generational wealth accumulation will be acceptable. If one is generally on the right, no system that takes wealth one accumulates and redistributes it to others will be acceptable.

Median numbers would be far more meaningful here. Billionaires blowing millions are being blended with thousandaires blowing hundreds.

Excellent point. Even better would be by quintiles.

Tagged for later because I've got to run out and buy some lottery tickets.

lol +1

As far as looking in my closet, I refuse to accept that one or two coeds in bondage are responsible for holding back the middle class.

 

[ElFenix]

I got tired of listening to assholes cry.

so you decided to join in?

There's a very fundamental disconnect between right and left as to whether government's proper function is providing an environment in which one can prosper and provide a better life for one's children and grandchildren, or periodically reset everything so that no one gets any lasting advantage.

way to set up that strawman.

 

[BoberFett]

We3ll lucky you. When you get in the mood to bitch about assholes crying, all I hear isn't an asshole, but a sniveling intolerant ignoramus for whom I have great sympathy.

I'd feel sympathy for you, but I don't because you should know better. You despise the rich for their greed, but yet you want what they have. What would the Buddha tell you about greed?

 

[blastingcap]

There's a very fundamental disconnect between right and left as to whether government's proper function is providing an environment in which one can prosper and provide a better life for one's children and grandchildren, or periodically reset everything so that no one gets any lasting advantage. I don't know how that can be reconciled since the split is no longer how to achieve a particular goal, but the goal itself. If one is generally on the left, no system that allows generational wealth accumulation will be acceptable. If one is generally on the right, no system that takes wealth one accumulates and redistributes it to others will be acceptable.

No, it's not that the rich are simply passing on their wealth.

The rich are getting richer.

The rich are passing on EVEN MORE of their wealth than in the past.

Meanwhile despite a huge increase in productivity, the non-rich see compensation stagnate or even decline.

The inequality in the USA is approaching that of some developing countries. We're on par with countries like Turkmenistan and Morocco. We're actually slightly behind Russia depending on how you calculate things, and way behind countries like Cambodia and Sudan. http://en.wikipedia.org/wiki/List_of_countries_by_income_equality

http://www.washingtonpost.com/blogs...-2000-and-2012-american-wages-grewnot-at-all/

http://www.nytimes.com/2014/04/23/u...ass-is-no-longer-the-worlds-richest.html?_r=0

And that's just income. Look at wealth inequality which is even worse. http://en.wikipedia.org/wiki/List_of_countries_by_distribution_of_wealth

Is this sustainable? Of course not. In the past whenever things get too out of control, things are reined in or there is revolution or mass migration. But I think many ultrarich don't care because they think they can just move or something. To some extent they are right, but that's a pretty sorry attitude to have and furthermore as some expats have found out the hard way, people do things differently elsewhere. Bribes, crime, etc. Europe is on the downswing economically with social safety nets that are unsustainable, and if anything they may raise taxes even higher, so that's not a great alternative.

 

[nageov3t]

"In 1973, the average size of a new home provided about 550 square feet of living space per person. A new home today provides nearly 1,000 square feet for each inhabitant."

I think that a lot of that is due to divorces and broken families causing more people to live in seclusion or in smaller groups. Some of that is also due to bigger houses but I believe most of it is due to what I said before.

people are also marrying later in life and waiting until they're older to have kids, so presumably/hopefully, people today also have more money and better careers when they're starting their families.

at least in my social circle, the whole "tiny starter home and then upgrading to a big home a few years later" seems a lot less common that in my parents generation.

 

[werepossum]

people are also marrying later in life and waiting until they're older to have kids, so presumably/hopefully, people today also have more money and better careers when they're starting their families.

at least in my social circle, the whole "tiny starter home and then upgrading to a big home a few years later" seems a lot less common that in my parents generation.

Good points. My parents are in the first house they ever owned, more than forty years ago. As for us, once we no longer had a house payment, the idea of once again having a house payment just to have a nicer house is a non-starter.

 

[nickqt]

Listen, who cares that wages have stagnated for 30+ years, while benefits and pensions have been cancelled. It doesn't matter that in the same time American productivity has steadily increased.

We have to defend the wealthiest people shutting out the middle class. Because Freedom.

 

[Exterous]

Interesting that Yahoo chooses 2000 for its debt numbers. I guess the headline and article wouldn't be as interesting if you knew that Americans are decreasing their debt and delinquency levels:

Of course it would be even more of a decrease if student loans weren't up so much...

"In 1973, the average size of a new home provided about 550 square feet of living space per person. A new home today provides nearly 1,000 square feet for each inhabitant."

I think that a lot of that is due to divorces and broken families causing more people to live in seclusion or in smaller groups. Some of that is also due to bigger houses but I believe most of it is due to what I said before.

Actually the average SQ is up in general. To get the 1000 sq ft they divided by the average family size so that would already take into account divorces.

http://www.npr.org/templates/story/story.php?storyId=5525283

People now 'need' separate bedrooms for all the kids, 'need' 2.5 bathrooms and 'need' a finished basement

About housing size: people are vastly more productive per person today than decades ago. Furthermore, there are more two-earner households now. That's something that the "houses are twice as big" people don't talk about. So are the bottom 80% supposed to be happy with living like it's 1945 while the top 20% get to have entire MANSIONS? Despite the bottom 80% working harder and with many more two-earner households?

Its one thing to be able to afford a larger house. Its quite another to pay for a larger house at the expense of retirement savings and paying down your debt - which is what most Americans have chosen to do

 

[blastingcap]

Its one thing to be able to afford a larger house. Its quite another to pay for a larger house at the expense of retirement savings and paying down your debt - which is what most Americans have chosen to do

I don't know if I agree with your assessment--it's not like people are voluntarily giving up retirement savings to buy bigger houses; it's more complicated than that. Sure, there is some truth to how people arguably overspend fighting each other for the right to put their kids into a school district. But the cost of other things like food and clothing has gone down as a percentage of income. So what are people supposed to spend on if not stuff like good school districts? Apparently transportation (moving to the suburbs in White Flight), housing (a little bit), and health care (not directly but via employers). And "Other" whatever that means.

http://visualeconomics.creditloan.com/100-years-of-consumer-spending/

In 1950, food and housing together took up about 55 percent of peoples incomes, with 34 percent used for food and 21 percent for housing. About 12 percent of a consumers income was spent on apparel and 11 percent on transportation. Health care took up about 5 percent, entertainment required about 5 percent and reading remained at 1 percent of the income, the same as alcohol. Other expenses claimed the final 10 percent.
Fast Forward

From 2002 to 2003, food and housing together took up about 45 percent of incomes, with 13 percent on food and about 33 percent on housing. About 4 percent was spent on clothing and 22 percent on transportation. Health care took up about 6 percent, entertainment required about 5 percent And reading was about 2 percent. Alcohol was about 1 percent of a consumer’s income. Other expenses claimed the final 15 percent.

Anyway, I think people ought to learn about how WEALTH disparities work and not just income. There is an overemphasis on income but you need to look at wealth to get the full picture.

I provided links in my previous posts to how workers are more and more productive yet have seen their incomes stagnate unless they're in the upper percentiles of income.

And lastly, I also provided links so people can see how the USA ranks in terms of income and wealth inequality, just in case some people are under the VERY MISTAKEN belief that we're any better than a lot of developing countries. The USA is practically a banana republic in terms of income/wealth disparities right now. You know we have issues when we're behind countries like Russia and large swaths of Africa in terms of inequality.

 

[Moonbeam]

I'd feel sympathy for you, but I don't because you should know better. You despise the rich for their greed, but yet you want what they have. What would the Buddha tell you about greed?

Never mind what the Buddha would say. I gave you the word in post 21. You will find that it pretty much sums up the collapse of duality implied by the Diamond Sutra. Form is here emptiness, emptiness form. etc,

 

[Subyman]

Buddha would say share the wealth

 

[shira]

My father was fantastic at self abnegation. He wanted to be one of the richest men in the cemetery. He saved rubber bands and string, nuts and bolts and tools from the dark ages. I wish I knew where the brace and bit set went. The level I got from the garage still has an ancient price tag on it. If you want to save money have things that were bought long ago.

I have a Hewlett Packard 15C Advanced Scientific calculator, which I purchased new in 1983 and which still works perfectly. Even more astounding, it's on it's FOURTH set of batteries. Really. The tactile feel of keyboard of all of the "10C series" calculators was peerless.

Recently, Hewlett Packard offered the Hewlett Packard 15C "Limited Edition." I purchased one (for about $15 more than I paid for the original in 1983), and I was very dissapointed by the keyboard. Not only didn't it have the super-precise feel of the original, but it randomly repeats entries. Yes, the Limited Edition has a much faster processor, but it's very frustrating to use.

It's kind of amazing when you think of it that an electronic product made over 30 years ago remains the best of its kind, of all time.

 

[alcoholbob]

Just look at what increases in productivity have gotten: More money shuffled away from the ones doing the work. I need to start building an altar to upper management and shareholders.

Also the decline of 4.4% in spending power really only works if you have substituted U.S./Western manufactured goods for cheap crap that's manufactured in 3rd world countries. Electronic gizmos manufactured in the West/Japan has appreciated significantly in the last 10-15 years. Flagship electronic products that used to retail at $1000 have now moved to the $2000 price point. And many virtually unchanged A/V products have doubled in price in the last 10 years (if anything their internal components have gotten worse/cheaper...).

 

[Nograts]

This one time I was overseas making some decent tax free money, and two of the guys that worked for me were buying ~600-700$ a month on shoes. For hours each day they would browse the web looking at "nike's and jordan's' etc., etc,. Holy shit. I figured they spent ~25% of their income on shoes.

When I asked them what it was all about they said it was a hobby, that they collected them. Some they wore some they didn't. One guy liked to match his shoes to his outfit for the few hours he'd wear it. Which was mind boggling to me, I wear jeans and a hoodie 90% of my freetime. I have like 6 total "outfits", 2 of which I rare maybe once every 6 months.

Anyways, they were convinced that they were making good spending decisions. They were convinced that these shoes woul not lose value, PERIOD. In fact, in 30 years they would sell their collections. But I dunno, at that point it would be like crack. They couldn't give up their precious shoes. Blows my mind.

And don't even get my started on my sister, good lawd. How much freaking debt can you stomach and say "this is okay with me". Jesus. I've never owned a credit card. Period. The only loan I've ever had was a 6 month car loan (paid 90% cash upfront), and my home loan, which is ~25% of my income monthly. Some people man...

 

[blastingcap]

This one time I was overseas making some decent tax free money, and two of the guys that worked for me were buying ~600-700$ a month on shoes. For hours each day they would browse the web looking at "nike's and jordan's' etc., etc,. Holy shit. I figured they spent ~25% of their income on shoes.

When I asked them what it was all about they said it was a hobby, that they collected them. Some they wore some they didn't. One guy liked to match his shoes to his outfit for the few hours he'd wear it. Which was mind boggling to me, I wear jeans and a hoodie 90% of my freetime. I have like 6 total "outfits", 2 of which I rare maybe once every 6 months.

Anyways, they were convinced that they were making good spending decisions. They were convinced that these shoes woul not lose value, PERIOD. In fact, in 30 years they would sell their collections. But I dunno, at that point it would be like crack. They couldn't give up their precious shoes. Blows my mind.

And don't even get my started on my sister, good lawd. How much freaking debt can you stomach and say "this is okay with me". Jesus. I've never owned a credit card. Period. The only loan I've ever had was a 6 month car loan (paid 90% cash upfront), and my home loan, which is ~25% of my income monthly. Some people man...

Eh, if we're going to use anecdotes, my household (2 earner) spends ~8% of our gross monthly income on housing including all utilities and internet. And believe it or not there is a market for collectibles of all kinds. I am sad that I sold my old trading cards too soon, because they are worth so much more today.

There are definitely profligate people out there, but there are also heavy savers, which is why people like looking at medians. Also look at wealth, not just income. And productivity vs income shows a clear divergence starting around 1980 or so, after which the rich got richer and everyone else was left in the dust.

 

[Nograts]

Eh, if we're going to use anecdotes, my household (2 earner) spends ~8% of our gross monthly income on housing including all utilities and internet. And believe it or not there is a market for collectibles of all kinds. I am sad that I sold my old trading cards too soon, because they are worth so much more today.

There are definitely profligate people out there, but there are also heavy savers, which is why people like looking at medians. Also look at wealth, not just income. And productivity vs income shows a clear divergence starting around 1980 or so, after which the rich got richer and everyone else was left in the dust.

Right, and there are many variables and many different types of people out there, to each his own. My point was just that...I kind of found it disturbing that they spent their money this way. They were both single and had no kids so to each their own, but I just cringed when I thought about me doing that.

I save a LOT of money, or rather, invest it in my Roth and other stuff. Goal is to have $1Mil smackaroonies @ 55. Should be good. Once I get that and my pension, the income from that mil should set me up nicely. Splurge after that.

 

[blastingcap]

Right, and there are many variables and many different types of people out there, to each his own. My point was just that...I kind of found it disturbing that they spent their money this way. They were both single and had no kids so to each their own, but I just cringed when I thought about me doing that.

I save a LOT of money, or rather, invest it in my Roth and other stuff. Goal is to have $1Mil smackaroonies @ 55. Should be good. Once I get that and my pension, the income from that mil should set me up nicely. Splurge after that.

That's not a bad thing to do, but since we're talking anecdotes, back in my reckless younger days I thought I was investing but actually managed to day-trade my way into losses. I would have been better buying collectible Air Jordans or something, go figure.

More recently, I have personally had 3 coworkers die in the last 5 years. It's kind of unnerving when I think about it. One was in her 30s and died in a freak accident that also killed her youngest daughter. Another died from a coronary in his early 50s. Another died literally 2 years after he retired at ~62. A director that I didn't directly work with got cancer and last I heard was in chemotherapy. Outside of work, my father-in-law (ex-military, special investigator) died a few years after he was forced into retirement (coronary). My own father had a cancer scare last year. It turned out to be benign... but still...

Numerous studies have shown that experiences provide more happiness than "stuff," and after traveling more often and to farther places in recent years, and hiking 14ers and doing other stuff like that, I agree. You're lucky, being ex-mil you probably have some stories and travel just from that alone.

 

[CLite]

That's what I was about to say. The author is mixing up per capita spending (which is an average) with median income. This is a pretty elementary error.

What I see there is average consumption broadly increasing relative to GDP. That's to be expected. As you say, if median expenditures are going up like that while median incomes stagnate, then we're talking about an issue.

Exactly this, the author made a stupid error to try to push some personal opinion. To debate his hypothesis you'd have to use the consumer report from the labor department, this report has an equivalent way of reporting income and expenditure per consumer unit.

http://www.bls.gov/news.release/cesan.nr0.htm

 

[Blanky]

This is an incomplete, but still important point. There is, of course, far more going on than just the middle class buying more shit (i.e. see all above, the middle class is getting squeezed hard right now).

Most in this thread will fancy themselves above the rabble and thrifty, but I bet most of us can also appreciate how things have changed since we were kids. When I was a kid my parents made more than I ever will now, but I received way less at Christmas. Nowadays it's no big thing to buy a 10 year old an ipad and a game console at Christmas. Did you get that when you were 10 (or its technological equivalent)? Probably not.

That's what I was about to say. The author is mixing up per capita spending (which is an average) with median income. This is a pretty elementary error.

Really? Pathetic. And yes a massively important distinction given the huge discrepancies in incomes.

Why? Status: Buying something you don't need, with money you don't have, to impress people you don't like.

HAHA! Sometimes I have commented in jest I'm going to buy yet another new car just to annoy my neighbors next door.

I save a LOT of money, or rather, invest it in my Roth and other stuff. Goal is to have $1Mil smackaroonies @ 55. Should be good. Once I get that and my pension, the income from that mil should set me up nicely. Splurge after that.

This is a good dream, but it is probably just that. The kind of person with that financial discipline will never "splurge" because it's not in their nature. I look at warrent buffett and if I had his money I'd live in a mansion, drive sports cars, etc. Why doesn't he? It's just not in his nature.

You should do what you enjoy as long as it's not seriously injuring your future. As blastingcap says you could get cancer next year or die in a car crash. Odds say you won't, so you should save for the future, but nobody should ever be killing themselves to retire. It's really missing the forest for the trees.

 

[Newell Steamer]

In other words - live less with the lower salaries you are given. Say, isn't this counter to the trickle down economics the Right keeps screaming about? According to the Right, the middle class should have grown, but it hasn't.

So, I guess since we all realized there is no trickling down, we are now told to shut the fuck up and live with lower salaries.

Great - now start paying your fair share of taxes, since trickle down has done no such thing.

 

[Exterous]

I don't know if I agree with your assessment--it's not like people are voluntarily giving up retirement savings to buy bigger houses; it's more complicated than that. Sure, there is some truth to how people arguably overspend fighting each other for the right to put their kids into a school district. But the cost of other things like food and clothing has gone down as a percentage of income. So what are people supposed to spend on if not stuff like good school districts? Apparently transportation (moving to the suburbs in White Flight), housing (a little bit), and health care (not directly but via employers). And "Other" whatever that means.

Of course its more complicated than that and there are other factors in play but if you look at the rising mortgage debt (Technically its down from the last couple of years but still higher than even 2003) its obvious Americans are spending more on their housing. Your own link supports this with the housing expenditure rising from 20% to 33%. Granted they may not have put that money in retirement but that 60% increase in expenditure to get that larger house has to come out of their budget somewhere.

 

[blastingcap]

Of course its more complicated than that and there are other factors in play but if you look at the rising mortgage debt (Technically its down from the last couple of years but still higher than even 2003) its obvious Americans are spending more on their housing. Your own link supports this with the housing expenditure rising from 20% to 33%. Granted they may not have put that money in retirement but that 60% increase in expenditure to get that larger house has to come out of their budget somewhere.

If you look at what's driving home prices, housing price increased faster in good-school neighborhoods hence my mention of bidding wars by parents. But you know, it's not necessarily bad that people spend more on housing if it brings them enjoyment, considering the other things you could spend it on like drugs or something. And as long as housing doesn't crumble, you could sell the big house and downsize to a retirement community or small cottage in Arizona after you retire.

 

[Moonbeam]

I am completely rebuilding a house in Sacramento so I can have a place to be alone so I won't be disturbed when I do Diablo 3 timed Greater Rifts. I put in all new modern three pronged wiring and internet cable and everything else starting from zero. Then I will buy all new stuff for inside. I feel like a kid in a candy store. I'm also helping the economy.