The Future of the Middle Class

[GGT]

The truth is, this is a great time and place in which to be rich. The average Fortune 500 chief executive pocketed $10.5 million in 2008, the last year for which data are yet available. That's more than 300 times the average worker's pay. Back in the Dark Ages -- the 1940s through 1980 -- the ratio was typically about 40 times. From 1979 through 2007, says the CBO, the top 1% saw their average household income skyrocket from $346,000 to $1.3 million in constant, 2007 dollars. That's after taxes. Meanwhile the average middle-class family saw their income rise from $44,000 to $55,000.

http://finance.yahoo.com/family-home...ily-love_money

The article is mostly about high net worth individuals doing just fine, but those numbers for middle-class families are pathetic!

Puts the credit crisis and historically low rates of personal/retirement savings in perspective, though. I'll try to make a decent poll about it, but in case it stinks what's your opinion of the future? Doesn't have to be US, either.

[Dreadnaught]

I'd normally like to get angry about this, but it's not as if their pay is at the expense of other people's pay. Plus the definition of "middle class" is so ambiguous. Saying that the standard of living has barely changed for most Americans in the past 20 years is pretty obviously not true.

If we want everyone's incomes to go up more quickly, we need to have policies that support more economic growth and give people more chances for success.

[GGT]

I didn't mention "standard of living" on purpose. Obviously more of our poorer people have better quality of life than Zimbabwe or Haiti, and we have a large "middle income middle class".....

I see this more about the staggering income gap that keeps getting bigger. How long that can continue before we basically have a two-tier society, with a huge void in the middle?

[Dreadnaught]

It's not a zero sum game...

[agamemnus]

I see this more about the staggering income gap that keeps getting bigger. How long that can continue before we basically have a two-tier society, with a huge void in the middle?

Not long by the way things are going.

Here are two policies to reverse the trend you mention:
1) We make poor people drain less money on the economy by removing the incentives to have hundreds of babies.
2) We remove regulation (instead of adding to it, as we're doing now) so that it is simpler and easier to start and run a (small) business. (the engine of wealth) Large companies can afford tons of regulations; individuals and small business cannot. A modern market economy cannot function if large companies have a huge upper-hand that stalls innovation and efficient investment.

[Illusions]

Not long by the way things are going.

Here are two policies to reverse the trend you mention:
1) We make poor people drain less money on the economy by removing the incentives to have hundreds of babies.
2) We remove regulation (instead of adding to it, as we're doing now) so that it is simpler and easier to start and run a (small) business. (the engine of wealth) Large companies can afford tons of regulations; individuals and small business cannot. A modern market economy cannot function if large companies have a huge upper-hand that stalls innovation and efficient investment.

Can you provide data that shows the impact those two things actually have, and for number two, a list of or a link to a list of the regulations you're referring to?

[Lewkowski]

The average Fortune 500 chief executive pocketed $10.5 million in 2008, the last year for which data are yet available. That's more than 300 times the average worker's pay.

How many workers do the Fortune 500 companies employee? People don't understand that just because a CEO has more doesn't mean you have less. He might not decide to work for the company if he made less, you might have a boss that doesn't do as well and your company goes under... for example.

If the CEO makes 10 million and there are 10,000 workers then its only $1,000 if the CEO made nothing and everyone else got evenly divided the money. CEO pay is NOT an issue with workers getting less money.

As far as the future of the middle class - difficult to say. Its going to depend on what happens in the next few years politically.

[Ziggy Stardust]

They may be fortunate now, but chances are slim they'll go to heaven. So, there's a silver lining as well.

[EyeKhan]

http://finance.yahoo.com/family-home...ily-love_money

The article is mostly about high net worth individuals doing just fine, but those numbers for middle-class families are pathetic!

Puts the credit crisis and historically low rates of personal/retirement savings in perspective, though. I'll try to make a decent poll about it, but in case it stinks what's your opinion of the future? Doesn't have to be US, either.

A $55k annual income is not middle class in SE Michigan.

I'd normally like to get angry about this, but it's not as if their pay is at the expense of other people's pay.

Are you sure?

[agamemnus]

Can you provide data that shows the impact those two things actually have, and for number two, a list of or a link to a list of the regulations you're referring to?

Maybe someone else will...

[Hazir]

I have a bit of a problem understanding what 'middle class' means in the US. To me it seems that in the US definition people who would at most lower-middleclass and more likely lower class in other countries are included.

[Illusions]

Maybe someone else will...

It is on the person making a claim to back it up.

[LittleFuzzy]

I have a bit of a problem understanding what 'middle class' means in the US. To me it seems that in the US definition people who would at most lower-middleclass and more likely lower class in other countries are included.

Well, if you're lower-middle class then you're still middle class. As are the upper-middle class. Lewk might object, from one end of the spectrum, as might the more sensitive members of the board on the other side, but if the definition of middle is to have any meaning, both would merely be subgroups of the middle class.

[GGT]

I have a bit of a problem understanding what 'middle class' means in the US. To me it seems that in the US definition people who would at most lower-middleclass and more likely lower class in other countries are included.

Like I said, this doesn't have to be US middle-class.

No, it's not a zero sum game --- and this isn't a complaint about HNWIs or CEOs! Most everyone would like to become wealthier, or more comfortable. Most everyone would like to retire while they're still healthy enough to travel the world, or whatever.

But the gap between top-middle-bottom earners is astounding. People are deferring retirement, working longer to barely keep up with inflation and costs. Pensions are busted, new workers today won't have the "old pension plans" baby boomers relied on, trillions of dollars for small investors was wiped out....etc. All that affected the middle class more than anyone else.

<I suppose middle-class in my mind means not having to rely on government subsidies to afford shelter, food, transportation, child care, healthcare. The ability to save for retirement, plus having children (if desired), not living paycheck-to-paycheck or having to work until you drop dead on the job.>

[Loki]

I have a bit of a problem understanding what 'middle class' means in the US. To me it seems that in the US definition people who would at most lower-middleclass and more likely lower class in other countries are included.

From the way protectionists here throw the term around, it seems to include just about everyone who has a job, as long as they're not some kind of an executive.

[']['ear]

True enough Fuzzy.

My main concern about earning gap is two-fold. First, increases in total wealth should be reflected by benefits for all. Clearly some are benfiting FAR more than others, and some don't benefit at all.

Second, and perhaps more importantly, as the earning gap becomes larger, so does resentment. That feeds discontent, populist policies and political polarization (we see that now), and embracing pure redistributionist policies like strong socialism of even communism. I'm as opposed to those ideologies as I am to pure capitalism. Checks and balances.

But the real concern is that we undermine our own society. Because the true wealthy as a small fraction of the total, and if the total gets discontented enough, they'll tear down the whole thing and we all lose. Likewise, removing social support networks undermines our entire society. Keeping most members of society invested in the functioning of society should be a critical policy.

[']['ear]

From the way protectionists here throw the term around, it seems to include just about everyone who has a job, as long as they're not some kind of an executive.

And that kind of crap is totally unhelpful.

[Loki]

Here meaning the US...

And it's fully relevant considering that it shows the term "middle class" to be so ambiguous as to be totally lacking in meaning. It doesn't apply to any coherent group.

[GGT]

A $55k annual income is not middle class in SE Michigan.

It wouldn't be in Manhattan or San Francisco, either. But two combined incomes can usually make for a decent 'middle class' life.

That's one thing this recession has exposed: when one partner loses their job, for months on end, they can't maintain their lifestyle without eating up their savings, selling their home (at a loss?), maybe moving down a rung *being wrung out* into the working poor.

[']['ear]

Heck, I thought that what the recession revealed was a strong trend for just about everybody to encourage all citizens to live a "class above where they really are," if you get me. Very destructive for a lot of people. Heck, spending and borrowing is STILL being touted as a patriotic duty.

[EyeKhan]

Well, if you're lower-middle class then you're still middle class. As are the upper-middle class. Lewk might object, from one end of the spectrum, as might the more sensitive members of the board on the other side, but if the definition of middle is to have any meaning, both would merely be subgroups of the middle class.

The article calls the average middleclass family income $55k. How far down does lower go??? Yeah, I know this is an average for all Americans and is skewed because cost of living varies geographically, but still . . . .

It wouldn't be in Manhattan or San Francisco, either. But two combined incomes can usually make for a decent 'middle class' life.

This was family income. Assume average family of 4.2. That's not a lot to get by on, and it's an average so it includes a range that probably goes quite a bit lower.

[GGT]

Heck, I thought that what the recession revealed was a strong trend for just about everybody to encourage all citizens to live a "class above where they really are," if you get me. Very destructive for a lot of people. Heck, spending and borrowing is STILL being touted as a patriotic duty.

Hence, this thread.

Once austerity and paying down debt becomes the main goal of a large chunk of our consumer society (ie, the middle classes) the whole picture changes. No, I don't have studies or stats to prove this. But the large inventory of McMansions sitting vacant is one sign of shifting priorities. So are Staycations and crappy retail sales numbers. People aren't spending as much because credit is tight, and tons of our "growth" was living on credit cards and home equity loans.

We aren't likely to kiss our children and go shopping to get out of this one. Are we?

[agamemnus]

It is on the person making a claim to back it up.

I don't want to back it up. You can go and do the research yourself... the undisputed facts are that subsidizing non-productive activity while penalizing innovators with little capital is bad. The undisputed fact are that the US government has been throwing more and more regulations both in the Clinton years and now with the Obama administration "to prevent corporate sector abuse". The fact is that the US population is growing without a matching GDP growth; as GGT noted, the "median class" (not the middle class) is poorer than it was 40 years ago.

My contention is that Obama's regulations are hurting small businesses that don't have the manpower to .. never mind implement (and/or abuse and/or find a loophole, as big businesses always do), but even read through all these new laws.

My contention is that giving massive economic incentives for people to simply reproduce (as we discussed in my thread a few months ago) is bad for the economy. Why do you think Europe has huge negative population growth, even though it's "a serious problem", and European legislators are incredibly worried? They don't subsidize population growth because there is no constituency in Europe that can get them re-elected which also breeds massively.

The proof? It's in the pudding.

[GGT]

Then why don't they open the 0% Fed window directly to small business borrowers, instead of funneling it through the Big Banks (which aren't lending, but buying gov't debt Treasurys to make a profit instead)?

aggie, you always bring up reproduction. Wouldn't we want replacement population babies from middle-income middle-class families? How're we doin' there?

[Lewkowski]

Honestly there should be a definite definition of middle class. It should be 50% of the population, the lower 25% earners are poor the upper 25% earners are rich and the middle is the *GASP* the middle class. Adjust your income based on cost of living in the area you live in and then everyone can be fitted in a category without ambiguity.

[GGT]

You'd want 25% of a society considered "Poor"?

[Flixy]

You'd want 25% of a society considered "Poor"?

It would be the poorest 25% of the country, yes. Though poor maybe should be reserved for those under the poverty line, to avoid confusion.

[littlelolligagged]

You'd want 25% of a society considered "Poor"?

They already are poor, labeling them as such could at least maybe lead to them getting access to the services they need.

[GGT]

Then we're talking about how the poverty line is calculated. There's been talk of changing that, too. To reflect the working poor and those who need subsidies for child care, section 8 housing, food stamps, Medicaid, etc. Somehow I don't think Lewk wants 25% of the population qualifying for those things.

[LittleFuzzy]

You'd want 25% of a society considered "Poor"?

No, he wants the lowest quartile to be lower class. If you insist "poor" and "lower class" be synonymous than you probably don't want the lowest quartile to be your metric, considering "poor" and "poverty" go together much better, and poverty already has a usable metric.