Decline of the U.S. Middle Class?

Does anyone else here believe that the Decline of the U.S. middle class is underway?

To me; the global economy with its cheap labor and over abundant population in China, India etc. - Leads me to believe that the US Middle class will either be working for very reduced wages with no health care, no pensions or unemployed. This new class probably will not be able to own their homes either.

Of course the cheap labor and products will make the rich get even richer.

I'm not sure there is an answer, but I see the U.S. middle class as well as Europe's being lowered substantially over the coming decades as China and India's are raised.

This just seems to be in our future to me

[bow-tie]

That's a great question. Unfortunately for me, it leads to more questions.

- Can someone give me a definition of 'middle class'?

- Are we creating the wage downside to ourselves, with the hyper-leveraged lifestyles so many folks deem necessary?

With more areas of the world becoming more advanced, I don't see how we can escape some type of wage depression. Unless we can continue to innovate, and create value added work/careers that buoy wages here. Can that continue forever?

[Whakamole]

The problem is that that those countries are producing products but not really consuming them. They're trying for the "export-driven" economy that worked for Japan.

Someone, somewhere, has to consume those products. If you don't have a domestic market, it isn't going to be you.

Of course, the countries that are the recipients of all those cheap goods will eventually run out of money to buy them if everyone is laid off due to them not being able to compete. Not to mention political repurcussions, which eventually end in protectionism (or worse.)

I'm not terribly concerned because a system like that isn't sustainable. Without a US middle class to buy their products, the Chinese economy (and many other third-world economies) would collapse.

So there are a few possibilities:
1. Those countries become mass consumers as well ala Americans, or at least the Europeans;
2. They don't and the US/Europeans end up bringing back protectionist barriers to save their economies from ruin;
3. The developed world's middle class collapses, which also leads to the collapse of the developing country economies, which leads to global depression.

Nobody really "wins" with option number 3.

[MJ]

Regarding the decline of the middle class, I have a lot less money in my pocket today then I had last year.

Although I am still making very nice salary, it was slashed last year by over 30%. This year with no salary increase, I am losing an additional 4% due to higher passed along health insurance cost and inflation.

The additional money, I would have received, would have allowed me to ER comfortably at least 6 months sooner. I am planning to retire in about 8 months at the ripe young age of 57.

The good think about my salary reduction was that it started me to think seriously about ER.

MJ

[sewinglady26]

Being a boomer I think that in 10 years we may not have a middle class, rather a huge retired group and increased employment in the service areas. I don't know how to define what our class structure may be then. As earlier poster stated, if you send manufacturing jobs offshore our current manufacturing employees are unemployed and their consumption drops. Will we also see a decline in stock values when boomers start cashing in their assets?

[Bob_Smith]

Since I tend to be pessimistic by nature, I occasionally seek out folks with a different outlook, and one of my favorites is John Templeton. Take a look at this speech he gave in Canada in 1995. He examines the past and how far we have come, and he believes that the future is even brighter.

http://www.empireclubfoundation.com/...ID=1486&FT=yes

[Hyperborea]

The problem is that that those countries are producing products but not really consuming them.

Not true. *The consumption of consumer goods in China and India is growing explosively. *In China it's mostly taking place in the coastal cities but it is spreading. *I have worked on the design and development of consumer electronics for the Chinese market. *None of these would be made in the US.

What Chinese worker can afford to buy a product made in the US or Europe? *Not many so most of the goods sold in China are manufactured there or in other developing nations. *These may be from Japanese (or other 1st world country) owned factories but they are built in China. *If given the choice most Americans will buy the mostly equivalent $49 DVD player made in China versus some hypothetical because none exists $200+ American made DVD player. *Wal-Mart is contracting for more of the goods it sells to be made in China.

So there are a few possibilities:

Other possibilities are:

4) China and India use current sales of consumer products and services (more so for India) to leverage the growth of their market and continue to build their own home market. (like your #1) *This will mean more competition for raw materials such as oil and a global rise in prices.

5) The rise of the Indian and Chinese economies provides "replacement" at a distance for the boomers who will be retiring in the coming years. *The smaller remaining US working population will have to move into more advanced high tech fields. *Given the state of the US education system below the university level (and perhaps these days below the graduate level) this is hard to imagine.

6) The rise of the Indian and Chinese economies provides "replacement" at a distance for the boomers who will be retiring in the coming years. *The smaller remaining US working population will do whatever jobs are available and can't be exported. *The wealth of the boomers drains out to buy non-US made goods. *The US economy slides much like every other once world power's economy did - France, Spain, Rome, Portugal, Britain, etc. *Protectionism in the US may ensue but it just leads to increasing prices for goods that aren't made in the US and perhaps the smuggling of DVD players from Mexico.

[JonnyM]

The U.S. Middle Class has been in real decline since the 70's with respect to real buying power. It's been gradual, mostly unnoticeable, and we played into our own decline through changes in our culture.

For example, we don't as a group consider two-income families at all out of the ordinary, or even to be avoided. A generation or two ago, this was not normal, and would have been "talked about".

On paper I make tons more money than my parents did, yet I don't live a better lifestyle. They DID set a good example for how much better life is in retirement, and have inspired me to make the trip a decade sooner than they were able to. But by definition, those that participate on these boards are not typical americans (or cannuks)

The U.S. Middle Class has been in real decline since the 70's with respect to real buying power. *It's been gradual, mostly unnoticeable, and we played into our own decline through changes in our culture. *

I think you are right, and I now see it accelerating. We have used up all our slack, with the 2 income households.

Education has been touted as the tool to keep this from happening, but I see plenty of early 20 somethings moving back into their parents home. Our waitresses at the place where we eat Breakfast have Master's Degrees!

I would like to be proved wrong on this, but things have never looked bleaker(for the Average American) to me than they look at the present time.

This is not a political statement, as I believe that no matter who is President, it will not matter. I just believe that the rest of the World has caught up and they only make 1/10 of what we do.

..... those that participate on these boards are not typical americans (or cannuks)

I'm looking at this from a different perspective, maybe. My family of six used to live in a 400 sq ft 'apartment' in the 70's and counted ourselves blessed everyday due to the cheap rent. A/C was a small unit stuck in the one bedroom's window. Heating was a big generator in a corner of the living room. My siblings and I entered the workforce in the 80's and made out o.k. I would classify all of us as U.S. Middle Class. Our homes now range from a Mcmansion to a two story ranch in a nice neighborhood. Our parents upgraded to a 1500 sq ft house with a nice backyard on their own.

U.S. Middle Class historically included millions of immigrants whose living standards often improved with each new generation. So for us, U.S. Middle Class is a 'good thing' and referencing the quote above, I would say that we're typical U.S immigrants and by extension Americans. So as an immigrant and also a U.S. citizen, my perspectives are:
1) Global economy is a new paradigm that is evolving in order to factor in outsourcing, alternative energy sources, international politics. Depending on how these factors play themselves out, our relative living standards will adjust accordingly for better or worse...no one knows at this point.
2) In business, we favor the bottomline without the emotions associated with 'taking the jobs away from U.S.' whether this involves trade agreements or labor sourcing.
3) We're opened to various worldwide locations now and in the future so as to maintain or better our current living standards. Perhaps it is accurate to say that there is a populace who are committed to maintaining the 'Global Middle Class'.

So my point is that the decline of U.S. Middle Class maybe true only if you consider it in a narrow definition.

[Pennhaven]

The only way we can escape a continuing decline of the middle class in this country is by creating new industries to offset the migration of manufacturing and remote service jobs to lower wage countries. The big questions are what can those industries be? and can our population of displaced former factory workers adapt to fill the needs of these new industries?

What we have been seeing for a years is a change in the shape of the middle class "bell curve", with the lower income end of the middle class curve flattening as factory jobs are elminated and wages stagnate while the upper end of the curve has been expanding due to higher salaries for "creative class" workers in technology, finance, management, etc. So its not just a case of the middle class shrinking but also there is a much larger gap between lower middle class and upper middle class than was prevalent from the post WWII era into the 1980s.

I am very uncomfortable with this growing gap and the possiblilties for social unrest that may be implicit in it. Teddy Roosevelt was right when he said, "This country would not be a permanently good place for any of us to live in unless we make it a reasonably good place for all of us to live in."

Regarding the politics of the issue, while it may be true that neither party has any good answers to the problem, it seems clear to me that one party is failing to even acknowledge that the problem exists, and that their primary economic policies of lowering taxes for the upper classes and laissez faire business regulation are almost certainly insufficient to address the fundamental problem.

[markplus4]

Regarding the politics of the issue, while it may be true that neither party has any good answers to the problem, it seems clear to me that one party is failing to even acknowledge that the problem exists, and that their primary economic policies of lowering taxes for the upper classes and laissez faire business regulation are almost certainly insufficient to address the fundamental problem.

Let's take a look at what the "other" party has to offer & see if their policies will increase the size of the collective pot:
1) Excessive regulation without cost/benefit justification that raises the prices of everything we buy.
2) Egregious giveaways to public labor unions (ala California) that necessitate higher taxes.
3) Refusing to consider private competition alternatives to the teacher union controlled public "education" system. Shameful.
4) Continuing to bribe the American electorate with their own money via inefficient, costly government programs.
5) A belief that government should continue to confiscate a higher % of people's incomes. Show me one example of society that has taxed it's way to prosperity (just one).

I get a real kick out of people who want to turn the U.S. into a Euroland replica, despite the fact that they trail us in every conceivable economic statistic.

[charlie]

Welcome to the forum, mark. Although I share your
views, prepare for the onslaught. Many on this forum
will come with guns blazing.

Cheers,

Charlie

[Pennhaven]

...And I get a real kick out of people who believe everything Rush Limbaugh tells them.

[cute fuzzy bunny]

Cant we all just agree that both primary political parties suck and move on?

Ones full of lying liars that want to screw us, and the other is full of lying girlie men that want to screw us.

I expect that globalization will raise world wide living standards. But that doesn't neccessarily mean that there needs to be a decline in US living standards. Although competition for energy (oil) will put pressure on the US economy. (We've consumed significantly more energy per capita than anyone else. It's unlikely this disparity can continue.)

Most economists that I know of support 'free trade' and 'globalization'. A rising tide lifts all boats.

5) A belief that government should continue to confiscate a higher % of people's incomes. Show me one example of society that has taxed it's way to prosperity (just one).

I get a real kick out of people who want to turn the U.S. into a Euroland replica, despite the fact that they trail us in every conceivable economic statistic.

Taxes are a necessary to support the services that our people want. In many cases, these services are needed for a growing economy and prosperity. Taxes in the US have declined significantly since the 1970s.

How low do you think taxes should be? I don't think it makes any sense to even consider lower taxes without specifying how spending cuts will offset the difference. Compared to other developed countries, our taxes are low.

The world economic forum recently ranked Finland as #1 in global competitiveness. The US ranked #2. Finland has higher taxes and a public health care system. Sweden ranked #3.

What country has developed prosperity and competitiveness without support from a 'public sector'?

[unclemick]

Short version - if you don't have a government that taxes the crap out of you (and issues bonds) - you have neither freedom nor free markets - my short conclusion from reading Bernstein's Birth of Plenty. He gets a little more complicated - after all - it is a book.

[Michael]

People who get jobs in occupations protected by government granted monopolies (e.g., law, medicine) will see high standards of living since foreign competion is forbidden by law. *Those who have to compete with the international market will see lower standards of living.

[Martha]

Lawyers get plenty of competition from nonlawyers. They call themselves "consultants" and do what amounts to legal work with no legal training.

Martha