The Disappearance of the Middle Class - Jacob Fisker

[LARS]

Quote:

Originally Posted by GregLee I think it is odd to judge membership in the middle class by how many assets you own. Middle class concerns your place in society and, indeed, your wealth, but not in the sense how much your IRAs are worth, or whatever, but how well you can live. You can be deeply in debt, but if your credit cards still work so you can mostly buy what you want, and live pretty well, you can still be middle class, or even upper class. There's a confusion between means and ends here -- owning many assets may enable you to live well, and impress your neighbors, but it's not the assets that count in reckoning your class in society.

I think the author's point is that without assets, you are only one paycheck away from falling out of middle class.

[GregLee]

Quote:

Originally Posted by LARS I think the author's point is that without assets, you are only one paycheck away from falling out of middle class.

Okay. But because you're in danger of falling out of the middle class, that doesn't mean you're not in the middle class. In fact, it means you are. How could you fall out of something you're not in?

[LARS]

Quote:

Originally Posted by GregLee Okay. But because you're in danger of falling out of the middle class, that doesn't mean you're not in the middle class. In fact, it means you are. How could you fall out of something you're not in?

Actually he was most likely saying more: that being part of middle class America historically meant being part of the ownership society. The vast majority of middle class do not own anything today. Instead, they "rent" it from the banks through debt service.

[haha]

Quote:

Originally Posted by MichaelB This is a subject that cries for more analysis and reasoning and less opinionating.

Just trying to find the data, if there is any, would be way more trouble than it is worth for any of us, since we really have nothing to gain.

OTOH, if you were to shut down unfounded opinion, the guy who runs this board is going to see a huge drop in posting, and we would have to find a different place to amuse ourselves slinging bull.

Ha

[LARS]

While not totally on point, here is an interesting analysis of wealth distribution in the world. What jumps out at you when you review the tables is the amazing concentration of the world's wealth in effectively a handful of people (50% of whom are Americans). The underlying study was by Credit Suisse:

A Detailed Look At Global Wealth Distribution | zero hedge

[haha]

Quote:

Originally Posted by GregLee There's a confusion between means and ends here -- owning many assets may enable you to live well, and impress your neighbors, but it's not the assets that count in reckoning your class in society.

And you have the definitive poop on this? Some really smart, perfectly informed and omniscient people got together and decided, once and for all time, what determines one's "class in society"

I am quite glad to hear this. I would like to get my ranking, as the feedback I get from less exalted sources seems confusing. Bums offer to share their cigarette butts with me, but my broker and banker treat me sweetly. What gives here?

Ha

[MichaelB]

Quote:

Originally Posted by haha Just trying to find the data, if there is any, would be way more trouble than it is worth for any of us, since we really have nothing to gain. OTOH, if you were to shut down unfounded opinion, the guy who runs this board is going to see a huge drop in posting, and we would have to find a different place to amuse ourselves slinging bull. Ha

I see your point. Hard data takes all the fun out of pointless arguing.

Quote:

Originally Posted by LARS While not totally on point, here is an interesting analysis of wealth distribution in the world. What jumps out at you when you review the tables is the amazing concentration of the world's wealth in effectively a handful of people (50% of whom are Americans). The underlying study was by Credit Suisse: A Detailed Look At Global Wealth Distribution | zero hedge

A link directly to the study. That way we don’t need Tyler Durden’s opinion. https://emagazine.credit-suisse.com/...291481&lang=EN

Here we are arguing about income distribution in the US while almost all (>90%) all the income growth in the world for the last decade has gone elsewhere. Even “socialist” Europe has done better. If that isn't something to worry about, I don't know what is...
See figure 1, page 4.

[Nick59]

Quote:

Originally Posted by LARS While not totally on point, here is an interesting analysis of wealth distribution in the world. What jumps out at you when you review the tables is the amazing concentration of the world's wealth in effectively a handful of people (50% of whom are Americans). The underlying study was by Credit Suisse: A Detailed Look At Global Wealth Distribution | zero hedge

From the link:

"By now it should be common knowledge to everyone that in American society, the top wealthiest 1 percentile controls all the political power, holds half the wealth, and pays what is claimed to be the bulk of the taxes (despite mile wide tax loopholes and Swiss bank accounts). The rest of the population is merely filler, programmed to buy every latest self-cannibalizing iteration of the iPad/Pod while never again paying their mortgage and brainwashed to watch 2 hours of prime time TV commercials to keep it distracted from the fact that the last time America was a democracy was around the time the Wright brothers were arguing the pros and cons of frequent flier programs. So far so good."

Good grief.

[GregLee]

Quote:

Originally Posted by haha And you have the definitive poop on this? Some really smart, perfectly informed and omniscient people got together and decided, once and for all time, what determines one's "class in society"

Having reviewed some Wikipedia articles on class, I will qualify what I said, by associating class definitions according to control of assets as Marxist, since it is Marxists who classify us according to whether we control the means of production. But this is a little old fashioned.

I intended my remarks just as an observation about contemporary usage of terms. When do you say someone is in the middle class?

[Nick59]

Quote:

Originally Posted by MichaelB Here we are arguing about income distribution in the US while almost all (>90%) all the income growth in the world for the last decade has gone elsewhere. Even “socialist” Europe has done better. If that isn't something to worry about, I don't know what is... See figure 1, page 4.

The figure you refer to is wealth, not income -- is there something else you see to support the income claim you're making?

Regardless, it looks like US wealth increased about 25%, so while *wealth* may have been greater elsewhere, it's not like the US has been left behind.

Last, even if true, why do you feel that "[i]f that isn't something to worry about, I don't know what is."?

[Sarah in SC]

Quote:

Originally Posted by Alan This discusssion reminds of the changing views of working and middle classes in England in the 70's as traditional laboring jobs were becoming more 'technical' and better paid. http://www.youtube.com/watch?v=HLoVF7vcBtY

I just have to say that this is an awesome video, Alan! Thanks very much for the great perspective courtesy of Monty Python!

[jacob]

Quote:

Originally Posted by FD I agree. But I would also like to note that Americans are shunning respectable and well paying careers in science for example. DW's employer has to hire mostly foreign-born employees to fill vacant scientific positions. It's a sad day when, in a country of 300 millions with 10% unemployment, you have to fill some of your best paid positions with foreigners for lack of a qualified native workforce.

As a foreign/immigrant ex-scientist, who used to work in academia, I have some insider knowledge here.

From the perspective of an American, he can take his bachelor degree in science and go out and earn $40,000+ on average. Conversely, he can go to grad school and get a $20,000 stipend for the next 4 years while apprenticing with a PhD adviser. Following this, he can now earn $40,000 as a researcher---the same starting wage as an undergraduate, $35,000 if he works in biology. He can hope for some level of job security when he reaches his early/mid-40s although the chances of making it that far is 1 in 10. Being a professor has some stigma in the US, i.e. "those who can't do, teach."

From the perspective of a foreign scientist, it is pretty much expected that one does a stint in the US. The reason is that there are few positions in the home country. There is simply more research money in the US. Consequentially, staying at home and not going to the US is a really bad career move! Additionally, overseas being a college or university professor has more status than being a lawyer or a doctor. Many foreign researchers intend to go home once they've accumulated enough "experience points" to get a professorship in their home country. A few of us like it so much here that we stay.

From the perspective of an American student, he would have to love his field a lot for its own sake. Considering that the hard sciences (physics, mathematics, chemistry, engineering) are widely considered much harder (according to the ex-lawyers and ex-premeds in our ranks) with less job security, less pay, and less prestige compared than more remunerative and higher profile fields like finance, law, and medicine, it's no wonder that it's so hard to attract American students to the science and engineering. The incentives simply aren't there. And why should companies provide them when they can hire a foreign worker whose visa species than he can either put up and shut up or go home? If science and engineering was protected in the same way as medicine or law they would be paid very highly as well. For instance a foreign doctor or lawyer can not practice in the US without the proper certifications; this is much less of a barrier for programmers, scientists, or engineers.

Hence, it's okay for an American student to get a bachelor in science although there are certainly easier ways to make a good living. Getting a graduate degree in science is a very dumb move; this is why there are so many highly educated foreigners filling these positions.

[FIREd]

Quote:

Originally Posted by jacob As a foreign/immigrant ex-scientist, who used to work in academia, I have some insider knowledge here. From the perspective of an American, he can take his bachelor degree in science and go out and earn $40,000+ on average. Conversely, he can go to grad school and get a $20,000 stipend for the next 4 years while apprenticing with a PhD adviser. Following this, he can now earn $40,000 as a researcher---the same starting wage as an undergraduate, $35,000 if he works in biology. He can hope for some level of job security when he reaches his early/mid-40s although the chances of making it that far is 1 in 10. Being a professor has some stigma in the US, i.e. "those who can't do, teach."

I am a foreign/immigrant ex-scientist as well. Becoming a professor is only one option for someone with a post-graduate degree in sciences. DW and I worked for the private sector after graduation and our starting salaries were around $60K plus bonuses and stock options (it would have been higher if we didn't work for start-ups). Within 2 years, we were making $100K+ each. I am retired now, but DW makes several times more than that nowadays. The PhD scientists working for her all make around $150K a year plus bonuses and stock options in a low cost of living area. They have good benefits and good job stability as well. These "less prestigious" jobs have allowed us to accumulate a 7-figure net worth at the age of 36 despite the fact we started working at the ripe old age of 27. Doctors are probably just starting to repay their student debt at that age.

[Alan]

Quote:

Originally Posted by FD I am a foreign/immigrant ex-scientist as well. Becoming a professor is only one option for someone with a post-graduate degree in sciences. DW and I worked for the private sector after graduation and our starting salaries were around $60K plus bonuses and stock options (it would have been higher if we didn't work for start-ups). Within 2 years, we were making $100K+ each. I am retired now, but DW makes several times more than that nowadays. The PhD scientists working for her all make around $150K a year plus bonuses and stock options in a low cost of living area. They have good benefits and good job stability as well. These "less prestigious" jobs have allowed us to accumulate a 7-figure net worth at the age of 36 despite the fact we started working at the ripe old age of 27. Doctors are probably just starting to repay their student debt at that age.

I agree with this. The 2010 top salaries for graduates can be seen here and most are in science and engineering. (average starting salary for Petroleum Engineering graduates was >$86k )
News Headlines

In 2003 DD graduated from a 4 year BSc degree and started on $60k. Myself and DW have had similar success stories with our BSc degrees. It surprizes me how few students pursue the sciences these days.

[Independent]

Quote:

Originally Posted by jacob As a foreign/immigrant ex-scientist, who used to work in academia, I have some insider knowledge here. From the perspective of an American, he can take his bachelor degree in science and go out and earn $40,000+ on average. Conversely, he can go to grad school and get a $20,000 stipend for the next 4 years while apprenticing with a PhD adviser. Following this, he can now earn $40,000 as a researcher---the same starting wage as an undergraduate, $35,000 if he works in biology. He can hope for some level of job security when he reaches his early/mid-40s although the chances of making it that far is 1 in 10. Being a professor has some stigma in the US, i.e. "those who can't do, teach." From the perspective of a foreign scientist, it is pretty much expected that one does a stint in the US. The reason is that there are few positions in the home country. There is simply more research money in the US. Consequentially, staying at home and not going to the US is a really bad career move! Additionally, overseas being a college or university professor has more status than being a lawyer or a doctor. Many foreign researchers intend to go home once they've accumulated enough "experience points" to get a professorship in their home country. A few of us like it so much here that we stay. From the perspective of an American student, he would have to love his field a lot for its own sake. Considering that the hard sciences (physics, mathematics, chemistry, engineering) are widely considered much harder (according to the ex-lawyers and ex-premeds in our ranks) with less job security, less pay, and less prestige compared than more remunerative and higher profile fields like finance, law, and medicine, it's no wonder that it's so hard to attract American students to the science and engineering. The incentives simply aren't there. And why should companies provide them when they can hire a foreign worker whose visa species than he can either put up and shut up or go home? If science and engineering was protected in the same way as medicine or law they would be paid very highly as well. For instance a foreign doctor or lawyer can not practice in the US without the proper certifications; this is much less of a barrier for programmers, scientists, or engineers. Hence, it's okay for an American student to get a bachelor in science although there are certainly easier ways to make a good living. Getting a graduate degree in science is a very dumb move; this is why there are so many highly educated foreigners filling these positions.

Thanks for the post.

When I read "American companies can't find enough [science, engineering, IT, ...] professionals", I always think "There are plenty of them out there, just pay more and they'll find you!"

And, the corollary, if all US companies paid more, there would be more US citizen grads.

As long as we protect certain professionals, and pay $x million to a few very bright people in finance, we're going to see the talented students go in those directions.

[jacob]

Of course graduating into a hot field (like molecular biology, or five years ago: nanoscience) helps a lot on your personal bottom line. If you get a PhD in something with little industrial application, you'll get about the same pay as an bachelor degreed person, that is, if you actually get the job and aren't sent away because you're overqualified.

About a decade ago, anyone with a modicum of HTML skills could earn very large salaries. I had friends who took 6 month evening classes or dropped out of high school to take highly paid jobs as web designers. Of course today they aren't doing so hot. On a similar note, the reason petroleum and mining engineers are paid so highly is due to supply running out. As far as I remember, the average age of petroleum engineers is in the 50s and rising. Here the market is actually sending the right price signals.

Anecdotally, the people of my cohort/class who earn the most are those who do the least science. Those who left with less education and went into management and who've done very little science. Those who pursued the science and currently work on science are the ones making the least. The former are probably counted in terms of the average salary in terms of their science degree, but it wasn't the degree that got them the job---they would have been even more effective with an MBA.

[GregLee]

Quote:

Originally Posted by Independent And, the corollary, if all US companies paid more, there would be more US citizen grads.

I don't see how that follows. If they paid more, maybe they would just attract better non-US citizen grads. And, anyhow, why should they pay more at all? I guess I'm not following this.

[jacob]

Quote:

Originally Posted by GregLee I don't see how that follows. If they paid more, maybe they would just attract better non-US citizen grads. And, anyhow, why should they pay more at all? I guess I'm not following this.

They're already attracting the best non-US grads. They would attract more US grads, relatively speaking by increasing compensation. This would stem the disappearance of the US middle class.

What is currently happening is a globalization of the work force which is eating into all middle class vocations that aren't protected (see below), hence the disappearing middle class. It has already happened to manufacturing. It's happening to high-tech. Essentially, the middle class is equalizing on a global scale. Since the US has enjoyed an above-global compensation/standard of living in the 20th century, they see it as a decline. Developing countries see it as a rise of their middle class.

Law, finance, and medicine are protected vocations which is why it hasn't happened for them yet. Since they have no non-US competition, salaries are generally higher. It's essentially a trade-barrier/tariff in the service sector made possible because while there's free movement of goods, there's no free movement of people, nor rights to work anywhere.

It's all simple consequences of economics :-)

[audreyh1]

Quote:

Originally Posted by jacob As a foreign/immigrant ex-scientist, who used to work in academia, I have some insider knowledge here. From the perspective of an American, he can take his bachelor degree in science and go out and earn $40,000+ on average. Conversely, he can go to grad school and get a $20,000 stipend for the next 4 years while apprenticing with a PhD adviser. Following this, he can now earn $40,000 as a researcher---the same starting wage as an undergraduate, $35,000 if he works in biology. He can hope for some level of job security when he reaches his early/mid-40s although the chances of making it that far is 1 in 10. Being a professor has some stigma in the US, i.e. "those who can't do, teach." From the perspective of a foreign scientist, it is pretty much expected that one does a stint in the US. The reason is that there are few positions in the home country. There is simply more research money in the US. Consequentially, staying at home and not going to the US is a really bad career move! Additionally, overseas being a college or university professor has more status than being a lawyer or a doctor. Many foreign researchers intend to go home once they've accumulated enough "experience points" to get a professorship in their home country. A few of us like it so much here that we stay. From the perspective of an American student, he would have to love his field a lot for its own sake. Considering that the hard sciences (physics, mathematics, chemistry, engineering) are widely considered much harder (according to the ex-lawyers and ex-premeds in our ranks) with less job security, less pay, and less prestige compared than more remunerative and higher profile fields like finance, law, and medicine, it's no wonder that it's so hard to attract American students to the science and engineering. The incentives simply aren't there. And why should companies provide them when they can hire a foreign worker whose visa species than he can either put up and shut up or go home? If science and engineering was protected in the same way as medicine or law they would be paid very highly as well. For instance a foreign doctor or lawyer can not practice in the US without the proper certifications; this is much less of a barrier for programmers, scientists, or engineers. Hence, it's okay for an American student to get a bachelor in science although there are certainly easier ways to make a good living. Getting a graduate degree in science is a very dumb move; this is why there are so many highly educated foreigners filling these positions.

I don't think you can argue both science and engineering positions together. A pure science bachelor's degree may not have much financial incentive, but engineering bachelor's can start very well salary wise with much fewer years than doctor, lawyer, or MBA, yet the numbers of American students pursuing those careers are still not very high.

[samclem]

Quote:

Originally Posted by jacob Law, finance, and medicine are protected vocations which is why it hasn't happened for them yet.

Maybe not quite so much for medicine. Not much of the work can be sent overseas, but the workers can and do come to the US. I'd bet the share of non-AMCIT doctors and nurses is higher than for the US population as a whole. This, of course, depresses compensation in these fields while decreasing the cost of health care in the US.

I guess it is still "protected" because these workers need visas--but they are apparently getting a lot of them.