The collapse of the middle class?

[Independent]

Quote:

Originally Posted by Shawn Off topic, but girls/women comprised about 40% of college students from 1900 to 1970. This percentage dipped slightly after WWII, but this wasn't due to fewer women going to college. It was due to more men going to college under the GI Bill. Today, women comprise about 60% of college students. Women have been "equally" represented in college for at least 100 years. It would have been unusual if your folks sent their sons but not their daughters.

I would have guessed a lower ratio for the years my sisters started (1959 and 1962), but your 40% is pretty consistent with this table, which is the first thing I could find Googling. Total fall enrollment in degree-granting institutions, by attendance status, sex of student, and control of institution: Selected years, 1947 through 2007

I expect if I could find major I'd discover that women were heavily represented in teaching programs and that brought up the ratio. As it happens, both my sisters were teachers.

[Gumby]

Robert Reich weighs in on this topic

Robert Reich (The Truth About the American Economy)

[ziggy29]

Quote:

Originally Posted by Gumby Robert Reich weighs in on this topic Robert Reich (The Truth About the American Economy)

Some interesting points here. He really does nail some things, but there are holes that need to be plugged. And at least one of the holes in his thesis is, well, gaping.

But Reich fails to acknowledge that the "1947 to 1977" period he holds up as the "Great Prosperity" was not a sustainable phenomenon. To wit, here's one quote:

Quote:

During three decades from 1947 to 1977, the nation implemented what might be called a basic bargain with American workers. Employers paid them enough to buy what they produced. Mass production and mass consumption proved perfect complements. Almost everyone who wanted a job could find one with good wages, or at least wages that were trending upward.

Let's think back to 1947. OK, most of us here can't really remember 1947 that well if at all, but we can look at history. Global industry in 1947? No emerging markets had emerged yet. Pretty much all other major manufacturing powers were severely damaged in the war. In addition, these infrastructures had to be rebuilt. So who was in the enviable position of providing a lion's share of the world's manufactured goods, with very little competition, for many years until Europe was rebuilt, Japan because a manufacturing power and later other cheap-labor emerging markets emerged? AND who got the business of rebuilding the world in 1947?

For the most part, Reich picks a time period in which American industry was almost the "only game in town." Of course business will be strong then, of course labor will get a better deal when the factories had trouble hiring enough warm bodies to meet an entire world's demand (and well before "offshoring" manufacturing was remotely an option on a large scale). It was possible for business to meet that "basic bargain" in such an environment.

Let's also look at the products of 1947 versus, say, the 1980s through today. Increasingly, the goods are based in information and software. A piece of software isn't like an automobile. If demand for automobiles goes up tenfold, you have to hire almost 10x as many people to build them. If a single piece of software has sales rising tenfold, you don't need to hire 10x the programmers to "build" it -- once built, you may have to hire a few more sales and support folks (again, increasingly in 'cheap labor' economies) but not much else. So the goods produced today are unlikely to see labor demand scale with consumer demand.

Reich does make some good points, and there are things we can and should do to better defend the middle class from further erosion to globalization, both in terms of international trade laws and domestic labor laws. And those at the top of the economic food chain are, in many cases, better off than ever when the middle class clearly isn't. (Long term, history shows this to be a dangerous combination with respect to keeping the national order.) But to suggest that it's remotely possible to restore the "Great Prosperity" of the 1947-1977 period given the change in the world economy and massive global competition that didn't much exist shortly after WW2 is, well, fantasy land thinking. The global economic situation that existed for a while after WW2 is what helped fuel the ridiculously prosperous and unprecedented sweetheart deal for the American middle class, and I think Reich misses the boat in not acknowledging that much of that global demand for American goods in that period simply can not be replicated today by *any* government policy regardless of ideological leaning.

He also says this:

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But contrary to popular mythology, trade and technology have not reduced the overall number of American jobs.

IMO, a half truth. On an absolute level, there are more jobs than just about ever. However, in terms of jobs per job seeker, we *are* considerably reduced from the peak -- not to mention that the high demand for jobs and the relatively low employer demand for domestic labor has a downward push on real wages. Again, there are policies that can be pursued to soften this blow, but I think Reich is on the funny stuff if he really thinks the post-WW2 "perfect storm" for American industry and labor is remotely sustainable or repeatable. It's not the number of jobs that's important; it's the percentage of decent jobs per job seeker that matter most.

Having said all that, I do think public policy has increasingly sold out to large corporations, and often to the detriment of consumers, small businesses and middle/working class labor. And while it *may* have been true that "what's good for GM is good for America" 50 years ago, it's not so true any more. What's good for large corporations today is good for shareholders, executive bonuses and sometimes the cheap-labor countries where they are moving many of the jobs -- rarely U.S labor. Corporate prosperity "trickles down" to labor a lot more in tight job markets than in crappy ones like we have now. Indeed, I know quite a few corporate employees for several different companies which have posted record profits in the last couple of years, but haven't given out raises in 3-5 years.

[ziggy29]

One other comment on the Reich piece: He's repeating the old falsehood about "whacking school budgets" when a quick check of the U.S. Department of Education's "Digest of Education Statistics" would clearly show that we're spending something like three times as much per pupil, in constant dollars, as we were in 1970. That's an interesting "whacking." When will this myth get "busted" once and for all?

[Independent]

Quote:

Originally Posted by ziggy29 Some interesting points here. He really does nail some things, but there are holes that need to be plugged. And at least one of the holes in his thesis is, well, gaping. But Reich fails to acknowledge that the "1947 to 1977" period he holds up as the "Great Prosperity" was not a sustainable phenomenon. To wit, here's one quote: Let's think back to 1947. OK, most of us here can't really remember 1947 that well if at all, but we can look at history. Global industry in 1947? No emerging markets had emerged yet. Pretty much all other major manufacturing powers were severely damaged in the war. In addition, these infrastructures had to be rebuilt. So who was in the enviable position of providing a lion's share of the world's manufactured goods, with very little competition, for many years until Europe was rebuilt, Japan because a manufacturing power and later other cheap-labor emerging markets emerged? AND who got the business of rebuilding the world in 1947? For the most part, Reich picks a time period in which American industry was almost the "only game in town." .....

I've never been a big believer in this line of thinking. If US workers were building stuff that got used in other countries, then that created jobs in the US, but not consumption. US consumers didn't get to enjoy the things that US workers built.

It seems to me that unbalanced trade can't create both jobs and consumption. Balanced trade produces efficiencies, but it requires healthy trading partners.

During the 1950's, exports and imports both averaged 4-5% of US GDP. The net was very close to zero.

U.S. Department of Commerce. Bureau of Economic Analysis

Maybe you're saying that US workers didn't have to compete against foreign workers. I find that easier to believe, but I think it was largely a matter of transportation costs and infrastructure, and US consumers' preference for "made in USA". That tended to keep wages up.

I think there's some justification for the "social contract" or "enlightened self interest" theory. The US had meaningful communist and socialist movements in the 1930s, European countries in the 1950s had political parties with "socialist" in their names. It could be that the US elite felt it was better to share some of the wealth than to risk loosing more at the ballot box.

[ziggy29]

Quote:

Originally Posted by Independent During the 1950's, exports and imports both averaged 4-5% of US GDP. The net was very close to zero.

Then again, I'm just old enough to remember when "imported" often meant "high end, high priced niche luxury item that is made by foreign companies" often by workers getting at least as good a deal "there" as "here". These days it more often means "cheap crap produced U.S. corporations selling out American labor in search of the lowest bidder." Low cost was not nearly the cause of importing as it is today.

IMO, this matters because in the former case "imports" weren't being driven by U.S. corporations looking to exploit economic conditions that allowed them to help the U.S. middle class race to the bottom by sending jobs to another country.

[haha]

Quote:

Originally Posted by ziggy29 Then again, I'm just old enough to remember when "imported" often meant "high end, high priced niche luxury item that is made by foreign companies" often by workers getting at least as good a deal "there" as "here". These days it more often means "cheap crap produced U.S. corporations selling out American labor in search of the lowest bidder." Low cost was not nearly the cause of importing as it is today. IMO, this matters because in the former case "imports" weren't being driven by U.S. corporations looking to exploit economic conditions that allowed them to help the U.S. middle class race to the bottom by sending jobs to another country.

Doesn't globalization allow much greater scale to the ideas and prototypes produced by the upper tier of middle class knowledge workers?
I think there is no way around the fact that workers who can do something that is hard to accomplish remotely and is scalable, likely will see their position greatly improved vis a vis the baseline worker.
Nothing will stop the increasing spread of outcomes. Unions and government interference can slow it down, but companies will find a way around these obstacles. If not, the US will just lose competitiveness faster than we already are losing it.

Our only lasting chance would be to fundamentally alter education, medical care, resource allocation, taxation and many other things from the ground up. It is very hard for me to see a way that this happens.

Ha

[igsoy]

Quote:

Originally Posted by ziggy29 One other comment on the Reich piece: He's repeating the old falsehood about "whacking school budgets" when a quick check of the U.S. Department of Education's "Digest of Education Statistics" would clearly show that we're spending something like three times as much per pupil, in constant dollars, as we were in 1970. That's an interesting "whacking." When will this myth get "busted" once and for all?

I think one difference between school costs from 1970 and now is that in 1970 basically all special ed children were institutionalized or kept home. Now schools are required to service all such children, especially the severely disabled, until age 21. In my local elementary of 600 students the staff for dealing with this population includes: a school psychologist, a speech language therapist, an occupational therapist, and a physical therapist and skilled paraeducators(numerous aides). I believe that's around 10 staff members a 1970s school would not have had to employ. Then you'd need to multiply that by all the schools in the district and add the program admin on top of that.

There are also all the children who require English as a Second Language assistance and the staff for those programs.

So I don't know about triple the cost from the 70s but there are definitely several whole new cost centers that explain part of the increase.

[Surewhitey]

Ok, I have to comment on the $250k comments. We made $55k each in 2000...very middle class in Dallas, but we lived below our means and paid off our modest home ($145k) by 2004.

2006 rolls around and we made $175k (through hard work), but still lived like its 1999. We took an opportunity in Cali and bumped us to $250k. Here, this is middle class. You really should take into consideration of the region's COL and reduce or increase the #'s vs. just a broad stroke comment.

We save so we don't have to leech off the system / daughter. Just because we make it doesn't mean we live it or have the mindset. I would put the upper class out here at $500k-ish.

We save about $100k annually by risking / moving / new jobs for the reward. You shouldn't punish us for our risk taking & hard work.

[ziggy29]

Quote:

Originally Posted by igsoy So I don't know about triple the cost from the 70s but there are definitely several whole new cost centers that explain part of the increase.

Part of the increase, I'll buy that. But not this much:

Total and current expenditures per pupil in public elementary and secondary schools: Selected years, 1919-20 through 2007-08

Looking at column 9 (using constant 2008-09 dollars), it looks like we spent $4,269 in 1969-70 and $10,441 in 2007-08 -- more like 2.5x than tripled, but still a heck of a lot more per student than in 1970. And if you go back to 1960, it's $2,560 -- again, in constant dollars which means about a fourfold increase per student, inflation-adjusted.

Also look at column 10. These are *real*, inflation-adjusted changes in per-pupil expenditures from year to year. Since this has been tracked in 1970-71, in only four years did real per student spending fall (and never more than 1%). Just to reiterate, this is per student and in constant dollars so it's already normalized for inflation and population growth.

Now I'm certainly no opponent to school funding but I think we have to question the widespread assumption that the biggest problem our schools face is that we are "starving" them financially. The stats simply don't bear that out. There may be resource allocation issues -- money not getting where it's needed most -- but the whole pie is expanding much faster than inflation, and (especially in recent years) much faster than median wage growth. History simply doesn't support the common belief that schools are failing because we aren't spending enough for them.

Part of the problem is that it's simply not acceptable to be in opposition to (or even skeptical of) increased spending and school tax hikes lest you be accused of hating children and being against education. IMO there is way to much rubber-stamped voter acceptance of school bonds and school tax increases. Sometimes they make sense, I think, but if it's just "more money to improve outcomes" I hardly think the track record support that thesis.

If you look at government spending, it's greater than ever despite what Reich makes it sound like -- but a handful of programs are eating a larger and larger portion of government budgets, crowding the rest of the stuff out that Reich and others bemoan the decline of.

[Webzter]

I collapsed on the floor last night with a cold beer after 14 hours outside in overbearing heat and humidity.

[Andre1969]

I wonder if part of the increased cost for education is the school buildings themselves? I remember as a kid, I went to the only high school in the county that had central air conditioning. It was built in 1976. All the other, older high schools didn't have central air. When it got too hot, they'd dismiss school early and send everyone home. And, even though our school had air conditioning, they sent us home early anyway, so we didn't interfere with the bus schedule!

Nowadays, a lot of these schools they're building are bigger, fancier, more high-tech, and that has to cost a lot more money, both to build and maintain. And when I was in high school, there was one computer lab, which had a mainframe and a bunch of terminals which were black and white...well, okay, black and green! I'm sure they have computers and internet all over the school buildings these days.

I wonder if the fleet of school buses is "younger" these days as well? It's hard to tell, because back when I was a kid, they changed the styles a lot more often, where now, buses have looked about the same for a good 25 years or more. But even if the styles don't look that different, I'm sure they have a lot more high tech stuff and safety features in them than they did back in the old days. That probably helps boost the overall cost of education as well. Presuming that busing is factored in?

[Dudester]

Quote:

Originally Posted by SteveL Gosh, is there anyone on this board who doesn't think of themselves as middle class? The trouble with "collapse of the middle class" is that you can't really define who is included. Households with two incomes and $250k in HH income still think they are part of the MC. Gosh, how are they going to send Johnny to college, and still go skiing at Vail, maintain the yacht etc. etc. etc.

Perhaps the way to define middle class might be as follows:

Divide the population into (at least the following) 2 groups:

1) Those who depend on an income on a job-related income to survive. If they lose their job, they lose their income and fall into poverty.

2) Those who have sufficient assets to live off the dividends, interest, etc thrown off by these assets. In other words, they're rentiers. They might have a job also, but if they lose their job, no big deal.


The middle class are those in group 1, in other words, most people. Notice that this definition does not depend on how much income a wage/salary earner makes. The important point is that they are wage/salary earners not asset holders.

A peculiarity of this definition is that a successful early retiree is not middle class. I personally don't have a problem with this peculiarity of my definition.

[haha]

Quote:

Originally Posted by Dudester Perhaps the way to define middle class might be as follows: Divide the population into (at least the following) 2 groups: 1) Those who depend on an income on a job-related income to survive. If they lose their job, they lose their income and fall into poverty. 2) Those who have sufficient assets to live off the dividends, interest, etc thrown off by these assets. In other words, they're rentiers. They might have a job also, but if they lose their job, no big deal. The middle class are those in group 1, in other words, most people. Notice that this definition does not depend on how much income a wage/salary earner makes. The important point is that they are wage/salary earners not asset holders. A peculiarity of this definition is that a successful early retiree is not middle class. I personally don't have a problem with this peculiarity of my definition.

Just don't let the tax man hear you, please.

Ha

[Midpack]

- deleted -

[Gone4Good]

What we're seeing (and experiencing) is a several decade long shift in power away from labor and toward capital. And that is happening for many of the reasons mentioned above. But the assumption that this is absolutely necessary to maintain competitiveness is belied by record corporate profit margins that trend ever higher. Surely if competitiveness were an issue, companies would be using increases in worker productivity to cut prices. Instead it looks like it is all flowing to the bottom line.

[Hamlet]

Yes, although it is reaching a point where those people are really separate from the old-style middle class.

If you are college educated, in a good field (engineering, medicine, etc), and smarter than the average person, you are probably doing pretty well.

If you happen to be the absolute best at what you do, you may be doing insanely well. As in, buckets of money pouring down on you well.

The incomes in this country have become incredibly stratified, to the point that there really isn't a majority of the population making similiar money that you can call "middle class"

I make 3-4 times what my brothers make in income. My father probably makes 3 times what I do. However, I suspect that both my brothers and my father think of themselves as "middle class". They live in completely different worlds though. My father bought two large HD TV's for two rooms in his house that are connected and only about 10 feet apart. My brothers have trouble affording cars that run consistently.

What is a little crazy is that my father is still a tiny fish in this global world. There are people making 10 times his income that feel poor because they see people making 10 times their income.

Quote:

Originally Posted by haha Doesn't globalization allow much greater scale to the ideas and prototypes produced by the upper tier of middle class knowledge workers? I think there is no way around the fact that workers who can do something that is hard to accomplish remotely and is scalable, likely will see their position greatly improved vis a vis the baseline worker. Nothing will stop the increasing spread of outcomes. Unions and government interference can slow it down, but companies will find a way around these obstacles. If not, the US will just lose competitiveness faster than we already are losing it. Our only lasting chance would be to fundamentally alter education, medical care, resource allocation, taxation and many other things from the ground up. It is very hard for me to see a way that this happens. Ha

[Midpack]

Quote:

Originally Posted by Gone4Good What we're seeing (and experiencing) is a several decade long shift in power away from labor and toward capital. And that is happening for many of the reasons mentioned above. But the assumption that this is absolutely necessary to maintain competitiveness is belied by record corporate profit margins that trend ever higher. Surely if competitiveness were an issue, companies would be using increases in worker productivity to cut prices. Instead it looks like it is all flowing to the bottom line.

And yet these charts (no better/worse) would suggest different conclusions, ain't technology (the internet) grand. It's easier than ever to find "data" to support any conclusion. Showing a composite chart may not relate to what "middle class workers" are experiencing, as described in several earlier posts...

• Profits are just returning to previous "norms"
• What the financial sector (the rich folks) are doing seems to be very different than the non-financials (keeping prices the same?) - there's a big surprise

I can assure you the (large) non-financial industry I'm in looks a lot more like the non-financial line on the second chart. We're nowhere near improving margins and won't for decades if ever. What's going on in financials appears to be completely different...again, there's a surprise based on what's happened over the past decade.

And Robert Reich may be more politician/ideologue than economist these days...as pointed out by others, his piece fluffed over "globalization" a little too easily to be realistic IMO. To blame it on government policy ignores the big picture...

[GregLee]

Quote:

Originally Posted by Midpack And yet these charts would suggest slightly different conclusions, ain't technology (the internet) grand...

Different in what way? It still looks like a recent upward trend, to me.

[jdw_fire]

Quote:

Originally Posted by Dudester Perhaps the way to define middle class might be as follows: Divide the population into (at least the following) 2 groups: 1) Those who depend on an income on a job-related income to survive. If they lose their job, they lose their income and fall into poverty. 2) Those who have sufficient assets to live off the dividends, interest, etc thrown off by these assets. In other words, they're rentiers. They might have a job also, but if they lose their job, no big deal. The middle class are those in group 1, in other words, most people. Notice that this definition does not depend on how much income a wage/salary earner makes. The important point is that they are wage/salary earners not asset holders. A peculiarity of this definition is that a successful early retiree is not middle class. I personally don't have a problem with this peculiarity of my definition.

looks like people with no assets, retired on SS alone and arent working fall into group 2. hmmmm i think there is a big problem with your grouping.