The Disappearance of the Middle Class - Jacob Fisker

[MasterBlaster]

Unwise financial decisions aside...

The issue(s) that challenge the middle class are the relatively recent unaffordability of housing, medical care, higher education, and taxation. Paying for those things, or not being able to afford such, causes many to fall out of the middle class.

 

[FIREd]

The issue(s) that challenge the middle class are the relatively recent unaffordability of housing, medical care, higher education, and taxation. Paying for those things, or not being able to afford such, causes many to fall out of the middle class.

I agree with you. And I also think this is not happening only in America. My mom lives in Europe and she is losing ground every year. Her property taxes just went up 38% this year, reimbursements of her medical costs by the state have been reduced and her co-op fees have doubled over the past 5 years. She feels squeezed out of her own home. And it's not just her. The erosion of the middle class' purchasing power has become the number 1 topic of conversation when I go to Europe. Even the upper middle class is starting to feel the pinch.

 

[ziggy29]

Unwise financial decisions aside...

The issue(s) that challenge the middle class are the relatively recent unaffordability of housing, medical care, higher education, and taxation. Paying for those things, or not being able to afford such, causes many to fall out of the middle class.

In other words: For many people (if not most), incomes are failing to keep up with personal inflation rates. And as long as demand for the basics remains constant (or rising) and high unemployment allows employers to keep putting the squeeze on wages and benefits, it will continue.

 

[Alan]

http://www.early-retirement.org/for...le-class-jacob-fisker-52507-2.html#post986503

The Disappearance of the Middle Class

http://www.early-retirement.org/for...le-class-jacob-fisker-52507-2.html#post986503

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.

 

[Pete]

Even if you believe that society is divided into the "rich and clever" and the "poor and stupid", the continual wealth transfer to the "rich and clever" by exploiting the "poor and stupid" is not a viable strategy for long term economic stability, nor is it particularly moral.

I don't mind the clever becoming rich...it's just tough watching them pass it on to their not so clever relatives who sometimes wind up running things. Many big companies and the presidency are replete with examples.

 

[mh]

I don't mind the clever becoming rich...it's just tough watching them pass it on to their not so clever relatives who sometimes wind up running things. Many big companies and the presidency are replete with examples.

I'm not sure I can buy into the phenom of presidents "passing on" their
presidency to their children/wives/etc... I'm more inclined to think it's more
self inflicted group-think than super genius masterminding.

 

[LARS]

The middle class (or lack thereof) seems to be...

... the current hot topic. Another story on the topic in which the author points out that the vast majority of "middle class" really are not, given their lack of assets.

Dear "Middle Class" Americans: Most Of You Are Debt Serfs With Zero Assets

 

[Pete]

I'm not sure I can buy into the phenom of presidents "passing on" their
presidency to their children/wives/etc... I'm more inclined to think it's more
self inflicted group-think than super genius masterminding.

I didn't mean to imply there's any genius at all. More like dumb luck or dumb electorate. Could be money, perhaps being at the right place or in the right circles at the right time, or sometimes it just the last name. If I'm winning the monopoly game and my son gets to take my place when I leave, it's highly likely he will continue to win the game.

 

[MasterBlaster]

... the current hot topic. Another story on the topic in which the author points out that the vast majority of "middle class" really are not, given their lack of assets.

Dear "Middle Class" Americans: Most Of You Are Debt Serfs With Zero Assets

OK. They showed the issue of wealth concentration. But there was no workable solution presented to upgrade the lower rungs.

If the implied solution is to confiscate the higher rungs wealth then, in my opinion, that is the route to poverty for everyone.

 

[MichaelB]

The US has a large and thriving middle class IMHO. It is more described than well defined.

There is (are?) lots of data pointing to the concentration of wealth and declaring that upward mobility is at an end in the US. I haven’t seen any good analysis to support the lack of upward mobility and have the impression that it may not be well analyzed.

Wealth and income are clearly concentrated, but 1) the drivers that affect the lowest income earners may not be the same as those that enable the highest, and 2) I haven’t seen any good data that separates salary, non-risk investment income that is really compensation, and investment income resulting from risking capital. These need to be disaggregated to really understand them.

At the end of the day I suspect most US citizens are availed the options needed to be “middle class members”, mobility may be more difficult and require tough choices but is still there, and innovation will still find a greater the US to be the most receptive country in the world.

This is a subject that cries for more analysis and reasoning and less opinionating.

 

[LARS]

OK. They showed the issue of wealth concentration. But there was no workable solution presented to upgrade the lower rungs.

If the implied solution is to confiscate the higher rungs wealth then, in my opinion, that is the route to poverty for everyone.

I certainly hope that the solution is not to confiscate wealth (other than the usual progressive tax rates). We should, however, look to impact the results of wealth concentration at the margins through tax policies, but that will not be sufficient.

The reason no one has put forth a workable solution is because the problem is deeply structural at this point IMHO. The basic answer is to have an expanding economy that is generating sustainable, well paying jobs. I don’t see how this is remotely possible given the global arbitrage in wages, especially given the Chinese focus on pegging the yuan to the dollar to maintain their own employment levels.

 

[FIREd]

The reason no one has put forth a workable solution is because the problem is deeply structural at this point IMHO. The basic answer is to have an expanding economy that is generating sustainable, well paying jobs. I don’t see how this is remotely possible given the global arbitrage in wages, especially given the Chinese focus on pegging the yuan to the dollar to maintain their own employment levels.

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.

 

[REWahoo]

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.

Pogo was right...

 

[LARS]

I agree. But I would also like to note that Americans are shunning respectable and well paying careers in science for example.

Shunning would be good!

I'm afraid we aren't turning out sufficiently educated Americans to fill the scientific jobs you're referring to and so companies out of necessity are turning to foreign students.

 

[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.

 

[LARS]

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]

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]

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]

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]

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]

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.

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/app/shop/index.cfm?fuseaction=OpenShopDetail&aoid=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]

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]

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]

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 "f that isn't something to worry about, I don't know what is."?