The Disappearance of the Middle Class - Jacob Fisker

[Sarah in SC]

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.

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

 

[jacob]

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]

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]

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]

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]

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]

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]

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]

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.

 

[jacob]

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.

Yes, in retrospect I will agree. Engineering beats science.

 

[Nords]

... 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.

According to my first-semester-freshman civil engineer 101, a lot of those wannabe engineers get thoroughly discouraged by their (required) chemistry, physics, and math courses.

Her grades are solidly in the middle of the pack, but she's not discouraged by that. Not yet, anyway.

For many others, though, those pre-law and business classes are lookin' pretty spiffy...

 

[keegs]

It's also a relatively complicated subject.

For example, I have yet to see a standardized definition of "middle class". I suspect that the definition of it has expanded over time. What gets lost in the sauce is that it's very different comparing different bases of a definition than a static definition. Both may have their place, but they are different issues.

For another, the culture has changed. An example of which is that with the advent of more women in the workplace, we also saw an increase in the age of first marriage. So just for discussion purposes, whereas before there may have been one household of two people living on $45k, there now may be two households each of which are living on $45k.

Also, one thing that such statistics generally fail to incorporate (and this goes so far as GDP) are "improvements" in quality of life. What % of households had washer/dryers/cable or sat TV/cell phones/etc. over time? How has the size of the average home changed over time? How has the quality/features of automobiles changed over time? And so on. (This is part of my point about an expanded definition of 'middle class'.)

And maybe it's just me, but I often interpret two separate questions being asked as one: there is the question of 'how is the middle class doing?' and the question of 'how much income inequality is there?".

All good points Nick.

I think poverty is typically measured as income < 60% of the median. The median hh income today is about $49K and has remained somewhat flat for the past thirty or forty years.

I agree cheap imports and automation have driven down the cost of consumer goods as they have driven down the number of manufacturing jobs in the US. The US ranked number one in industrial exports forty years ago and today we rank number three behind China and Germany. Over that period we've gone from first in the number of adults with college degrees to twelfth. And from what I gather, in general, job, health care and old age (pension) security was somewhat less worrisome years ago than it is today.

Growing up Mom always had a washer and dryer and today receiving OTA digital broadcasting costs about the same as analogue TV did back then . Dad always bought used cars and Mom didn't drive.

Our household makeup has changed over the years but the majority of households today have two incomes, whereas forty years ago there was more likely only one. And including Mom and Dad we were eight back then, not at all an unusual number.

Income inequality has increased significantly. Check the Gini index to compare the US with others.

These developments are largely due to politically driven tax and macroeconomic policies. These are choices we've made as a nation.

 

[chinaco]

Middle class will be redefined. Middle class implies a category that is too broad.

The other part that is misleading is basing this measure on income... instead of income plus assets amassed. Some people can control their taxable income.

American middle class - Wikipedia, the free encyclopedia

Still there is an effort/reward factor in America. Most people who acquired success did it through effort.

The shrinking middle class is due to higher paying jobs shifting to lower wage countries.

Unlike the isolationist that think we should protect certain jobs... I believe in the theory of comparative advantage... assuming it is not gamed.

But, we should choose to retain certain activities for strategic purposes.

This theory is not perfect... but it makes sense. Again, as long as it is not gamed!

http://en.wikipedia.org/wiki/Comparative_advantage


IMO - if a basic widget can be created at a lower cost somewhere else, we all benefit.


However, it is painful when job restructuring occurs... especially if it happens to yours truly.

 

[keegs]

Middle class will be redefined. Middle class implies a category that is too broad.

The other part that is misleading is basing this measure on income... instead of income plus assets amassed. Some people can control their taxable income.

American middle class - Wikipedia, the free encyclopedia

Still there is an effort/reward factor in America. Most people who acquired success did it through effort.

The shrinking middle class is due to higher paying jobs shifting to lower wage countries.

Unlike the isolationist that think we should protect certain jobs... I believe in the theory of comparative advantage... assuming it is not gamed.

But, we should choose to retain certain activities for strategic purposes.

This theory is not perfect... but it makes sense. Again, as long as it is not gamed!

Comparative advantage - Wikipedia, the free encyclopedia


IMO - if a basic widget can be created at a lower cost somewhere else, we all benefit.


However, it is painful when job restructuring occurs... especially if it happens to yours truly.

We're certainly not going to be able to support our standard of living (the middle class) making tube socks and straw brooms but much like other countries (e.g. Germany), the US could develop an idustrial policy.
The absence of such a policy, that's to say handing our industrial base to our competitors, will continue to be a drag on the economy.

I'd add, the trade-off to more consumption (lots of cheap goods) is low savings.

 

[samclem]

. . . but much like other countries (e.g. Germany), the US could develop an idustrial policy.
The absence of such a policy, that's to say handing our industrial base to our compeitors, will continue to be a drag on the economy.

If, as is usually the case, "industrial policy" is newspeak for "government picking winners and losers and involving itself more in private enterprise" then I don't think you'll find many supporters for that position. If we're using "industrial policy" to mean "changing our laws (including tax code) to remove disadvantages presently experienced by US businesses in world competition" then I think most folks would support it.

 

[audreyh1]

According to my first-semester-freshman civil engineer 101, a lot of those wannabe engineers get thoroughly discouraged by their (required) chemistry, physics, and math courses.

Her grades are solidly in the middle of the pack, but she's not discouraged by that. Not yet, anyway.

For many others, though, those pre-law and business classes are lookin' pretty spiffy...

Yes - that's usually what causes engineering students to choose another path - the required math and hard science courses are pretty stringent, and they are required for good reason - you can't do engineering without that kind of background.

I wish there was a way to get American kids to like science and math, (I sure did), but for some reason it seems to be a bit of a national weakness. I guess the teachers can't teach it and the parents don't really care. Intellectual challenge just doesn't seem to be valued in this country, whereas athletic challenge is.

I have noted over my career, however, that the US still seems to be able to out-innovate most nations, in SPITE of such a severe lack of scientifically skilled students. So perhaps we just don't need that many scientifically skilled people per capita AND we are good at importing the skills we need and putting them to work in our innovative system. There are many, many areas in which the US still maintains the technology business lead. It takes way more than pure science and engineering know-how to turn ideas into a profitable business, and the US still seems to know well how to do the rest of it.

Audrey

 

[ziggy29]

I wish there was a way to get American kids to like science and math, (I sure did), but for some reason it seems to be a bit of a national weakness. I guess the teachers can't teach it and the parents don't really care. Intellectual challenge just doesn't seem to be valued in this country, whereas athletic challenge is.

Part of it is cultural, but part of it also is that teaching pays terribly for math and science graduates compared to private industry. Much of this is because public employment pay scales don't tend to "value" some degrees more than others to nearly the degree private industry does. As a result a social studies teacher (who might have few good paying opportunities outside of teaching) would get paid as much as a physics teacher for the same level of education and experience. That makes teaching a good deal relative to the private sector in the humanities and social sciences, but a terrible deal for math and science grads. So our ability to get the best folks teaching math and science is weakened.

 

[keegs]

If, as is usually the case, "industrial policy" is newspeak for "government picking winners and losers and involving itself more in private enterprise" then I don't think you'll find many supporters for that position. If we're using "industrial policy" to mean "changing our laws (including tax code) to remove disadvantages presently experienced by US businesses in world competition" then I think most folks would support it.

Sam.

Are you suggesting that special interest entitiies within our economy don't exercise influence on economic policy? For example, do you believe the fact that we pay double what our industrial competitors pay on a per-capita basis for healthcare isn't the result of a particular industry or industries influence over another?

How many small businesses aren't started because of the cost of healthcare.

Leveling the cost of healthcare is an industrial policy Sam.

 

[Nords]

I wish there was a way to get American kids to like science and math, (I sure did), but for some reason it seems to be a bit of a national weakness. I guess the teachers can't teach it and the parents don't really care. Intellectual challenge just doesn't seem to be valued in this country, whereas athletic challenge is.

Like it, hell, she worked her ass off at it.

She started Kumon at age 6 and managed to snorkel through the entire math curriculum (and most of the reading) before finishing her sophomore year. Kumon is a wonderful way to practice skills and to minimize test anxiety. We talked her into taking AP Probs & Stats in high school (sucker!) just to reduce the trauma she'll be experiencing when she runs across it again at college. High-school chemistry was a struggle but the teacher, a woman PhD, was inspirational. Our kid did OK at regular physics, went back for a helping of AP, got her doors blown off, got pissed off at the teacher's attitude toward her struggles, and managed to recover. Today that's all paying big dividends in the academic and morale departments-- she's been there before and she knows how to dig herself out.

We also spent a lot of time during those formative high-school years talking about what happens when the country's [-]hottest[/-] smartest kids all live on the same floor of your college dorm. I added in many hilarious good-ol'-days stories from my college months spent on [-]conduct[/-] academic probation. I'm sure she appreciates that now.

I think part of it is the kid's hard-wiring, and part of it is showing kids how to value an intellectual/athletic challenge. Double-Goal Coaching.

Perhaps it also helps if the parents have managed to take more college math courses than their kids, although we were pretty close to tapped out by the time she started doing differential equations. I'm glad she left when she did...

 

[samclem]

Leveling the cost of healthcare is an industrial policy Sam.

I see you're a fan of a very "inclusive" definition of industrial policy. I'm not.

How many small businesses aren't started because of the cost of healthcare.

Today no business (big or small) has any mandatory direct health care costs. None. That won't be the case soon. I guess this is an example of how government is going to "help".

 

[52andout]

I had no idea until recently that the US High School graduation rate is around 70%.
My district has an 81% rate and I live in a pretty nice area. If you search around the web you realize the US is behind so many countries in high school graduation rate. How in the world can you expect to make a middle class wage without even a high school education? I am not saying everyone can be a rocket scientist or brain surgeon but a basic high school diploma?

I was blown away when I realized this fact- MIL mentioned her nearby city was trying to raise it's grad rate to 50% so I started looking it up. It is true that some people get GED, some enter the military or end up getting some type of training, but yikes.

 

[keegs]

I see you're a fan of a very "inclusive" definition of industrial policy. I'm not.


Today no business (big or small) has any mandatory direct health care costs. None. That won't be the case soon. I guess this is an example of how government is going to "help".

So Somalia is your Shangri-La Sam?

 

[audreyh1]

Like it, hell, she worked her ass off at it.

She started Kumon at age 6 and managed to snorkel through the entire math curriculum (and most of the reading) before finishing her sophomore year. Kumon is a wonderful way to practice skills and to minimize test anxiety. We talked her into taking AP Probs & Stats in high school (sucker!) just to reduce the trauma she'll be experiencing when she runs across it again at college. High-school chemistry was a struggle but the teacher, a woman PhD, was inspirational. Our kid did OK at regular physics, went back for a helping of AP, got her doors blown off, got pissed off at the teacher's attitude toward her struggles, and managed to recover. Today that's all paying big dividends in the academic and morale departments-- she's been there before and she knows how to dig herself out.

We also spent a lot of time during those formative high-school years talking about what happens when the country's [-]hottest[/-] smartest kids all live on the same floor of your college dorm. I added in many hilarious good-ol'-days stories from my college months spent on [-]conduct[/-] academic probation. I'm sure she appreciates that now.

I think part of it is the kid's hard-wiring, and part of it is showing kids how to value an intellectual/athletic challenge. Double-Goal Coaching.

Perhaps it also helps if the parents have managed to take more college math courses than their kids, although we were pretty close to tapped out by the time she started doing differential equations. I'm glad she left when she did...

Well your household is clearly one of the exceptions Nords! As was mine. The households motivated to achieve academic excellence for their kids in this country is much lower than most others in my experience growing up overseas.

Audrey

 

[dex]

The households motivated to achieve academic excellence for their kids in this country is much lower than most others in my experience growing up overseas.
Audrey

That is the key. Children learn by example. If they see their 'rents watching TV all the time that is what they will do and do it well because they want to be accepted and be like their 'rents. If their 'rents read and take an active part in their education that is what they will want to succeed in and do.