Guess What's Destroying the Middle Class?

[WiseOne]

Ha, a different kind of "keeping up with the Joneses" competition is born....

I don't know about San Francisco, but the middle class is alive and well in New York City -  in upper Manhattan (above 125th street) or the outer boroughs, outside of the upscale Manhattan or Brooklyn neighborhoods.  Aren't there neighborhoods like this in San Fran or around it?  Oakland certainly has its middle-class neighborhoods if that counts.

If you're absolutely determined to live on Park Avenue or Central Park South on a middle class salary, then...yes I suppose you'd be highly dissatisfied that your wages haven't kept up :-)

[GT]

I would agree with easy credit. The days of setting down with the local bank loan officer and explaining your exact need for an item are long gone.

I also think folks in the 1950’s and 60’s were more content based on what they experience in the prior decades.

Having survived the great depression and WWII, my Grandparents were grateful to own a two bedroom one bath home in the 1950’s.  When they were able to afford a window A/C unit and a color TV with remote in the late 1960’s they thought they were really living large. But during this whole time of prosperity they never forgot the hardships of their youth. They lived below their means as a way of life. The window A/C unit was only run for a short time during the evenings right before bed or on Sunday’s right before the Sunday meal; Texas heat. All meals were homemade and going out to eat was a treat reserved for very special occasions. They managed to live, for them, a very comfortable life on the combined salaries of a “road worker”? and “cafeteria lady”?. Their true happiness came from taking care and pride in what they did own, and of course, their relationship with friends and family.  I miss them both!

[barrett]

Agree with GT. My mom and dad both lived through The Great Depression and both sacrificed a lot in WWII (my dad four years of service and my mom lost her first husband). After that to be able to live in a simple home on a half-acre lot in the suburbs with a company car, and to be able to do all this without a lot of debt, was a dream come true. They even managed a cheapish couple of weeks on The Outer Banks each summer. The neighborhood was crawling with kids but I don't remember absolutely having to have all the latest crap. We actually played outside and made some of our own toys. Such sacrifice! Most of the best stuff was free. Kick the can passed for entertainment. (Yes, dragoncar, we actually had a can!)

[moda0306]

How much can easy credit have to do with it if it's even hard for someone who AVOIDS credit to afford the basics on a manual labor job?

I mean credit is bad and all, but we can analyze this stuff totally independent of credit and see that people are paying more for the basics in real labor than they used to.  Or at least it seems that there is a bit of consensus that "Mr. 1965 laborer buying the basics" had it easier.  If this is the case, the credit problem is likely in addition to, rather than either the cause of the problems of the middle class, or proof that they're self-inflicted or something.

[WiseOne]

+1 to GT and Barrett. 

My dad used to tell us stories of the Great Depression, too.  It had a big influence on the parents of the Boomers, but the lessons it taught are passing into history now.

That's another HUGE difference between kids growing up in the 1970s vs today.  I remember playing softball in the street and using sewers as first and third base, hanging out in someone's driveway playing chess, playing on swingsets in various people's backyards, developing selective hearing when my mom yelled at us to go weed the garden, etc.  Summer vacations were mostly unscheduled as was after school time.  Of course, once we turned 16 we were expected to work:  babysitting or lawn mowing/snow shoveling during the year, and full time jobs during the summer. Now, kids are herded through an endless series of planned activities, summer camps, and summer travel - all of which is costly, plus they are doing these things instead of earning their college spending money.  They'll borrow that instead.  And, my parents now have to get expensive professional lawn care & snow removal services because the neighborhood kids don't do those things anymore.

Who decided that the pattern of life had to change like this???  And what are these kids learning except how to be more profligate consumers?

[Pointedstick]

How much can easy credit have to do with it if it's even hard for someone who AVOIDS credit to afford the basics on a manual labor job?

This is a great point, and I think the answer is that the easy availability of credit has had the effect of increasing people's effective purchasing power, which has driven up prices. Even if you don't use credit, you have to pay the prices that have been inflated by everyone else's use of credit.

How much can easy credit have to do with it if it's even hard for someone who AVOIDS credit to afford the basics on a manual labor job?

I mean credit is bad and all, but we can analyze this stuff totally independent of credit and see that people are paying more for the basics in real labor than they used to. Or at least it seems that there is a bit of consensus that "Mr. 1965 laborer buying the basics" had it easier. If this is the case, the credit problem is likely in addition to, rather than either the cause of the problems of the middle class, or proof that they're self-inflicted or something.

i think that is the point , it should be analyzed independently from credit, saying lets count at all the fancy versions of "basics" we have today, will skew the results of who is and isn't middle class if many or most of them are bought on credit and the 1960 guys basics are not..

[moda0306]

How much can easy credit have to do with it if it's even hard for someone who AVOIDS credit to afford the basics on a manual labor job?

This is a great point, and I think the answer is that the easy availability of credit has had the effect of increasing people's effective purchasing power, which has driven up prices. Even if you don't use credit, you have to pay the prices that have been inflated by everyone else's use of credit.

But everyone else's use of credit perhaps make rents higher, and healthcare?  Transportation?  Food?  Clothing?

And all that credit makes manual labor worth so much less?

I'm not saying it's not true at all, but it doesn't pass the smell test.  I think AI-esque engineering applications and globalization bringing 3rd world countries into the general labor pool has had a TON to do with it.  Now, perhaps THOSE are a result of credit, and therefore you may be right.

[Pointedstick]

But everyone else's use of credit perhaps make rents higher, but healthcare?

That would be insurance and other forms of 3rd party payment, as well as government mandates.

Transportation?

Car loans.

Food?

No, food is cheaper.

Clothing?

Ditto.

Don't forget about higher education, which is financed through a huge debt bubble.

[moda0306]

Is food of similar health really cheaper?  I pay a LOT more for beef that was raised like most cows were 50 years ago.

But I see your point, overall.

[Mountaineer]

Agree with GT. My mom and dad both lived through The Great Depression and both sacrificed a lot in WWII (my dad four years of service and my mom lost her first husband). After that to be able to live in a simple home on a half-acre lot in the suburbs with a company car, and to be able to do all this without a lot of debt, was a dream come true. They even managed a cheapish couple of weeks on The Outer Banks each summer. The neighborhood was crawling with kids but I don't remember absolutely having to have all the latest crap. We actually played outside and made some of our own toys. Such sacrifice! Most of the best stuff was free. Kick the can passed for entertainment. (Yes, dragoncar, we actually had a can!)

Similar to my situation, even down to the Outer Banks. 

... Mountaineer

[madbean]

Agree with GT. My mom and dad both lived through The Great Depression and both sacrificed a lot in WWII (my dad four years of service and my mom lost her first husband). After that to be able to live in a simple home on a half-acre lot in the suburbs with a company car, and to be able to do all this without a lot of debt, was a dream come true. They even managed a cheapish couple of weeks on The Outer Banks each summer. The neighborhood was crawling with kids but I don't remember absolutely having to have all the latest crap. We actually played outside and made some of our own toys. Such sacrifice! Most of the best stuff was free. Kick the can passed for entertainment. (Yes, dragoncar, we actually had a can!)

Similar to my situation, even down to the Outer Banks. 

... Mountaineer

A similar story here. My Dad was a WWII vet, and then a blue collar worker for the same company the rest of his life. Probably peak earnings of less than $25k. My mom stayed home and raised the kids. They managed to raise 4 kids in a 3 bedroom, one bath house that my Dad built himself with the help of a GI loan. Had a nice, long retirement travelling back and forth from Ohio to Florida until my Dad died last year.

I don't think this story could be replicated today (starting with all the hassle that would be involved with building his own house but I'll save that for another conversation). It seems nowadays that both spouses have to work if there is any chance at all to achieve the "American Dream". And then when both go to work, the taxman cometh. I don't think my Dad ever paid more than 4 or 5% in taxes in his peak earning years and that includes the payroll (social security) tax. Our top marginal rate in my peak earning years right now with both of us working stands at about 25% (without the SS and Medicaire taxes - so add another 8% to make it 33%). Nobody has mentioned this as a factor in the declining middle class but I think it is noteworthy.

[bedraggled]

Living in Manhattan;

1) get an old car, maintain it meticulously, pay no collision (suck up the 'bumper car' effect) and have the car insurance tab come in at just under $800/ year.  A new paint job every 5 years would be nice.

We have a 1991 Accord with 296,000 miles.  This 5 speed manual gets up to 40 MPG highway.  We keep it because we like the car.  We are grateful for the competent mechanic.  No car loan payments allow us to fund private school tuition.

You folks need to try the above some time.  It is never dull.

Oh, the new mechanic believes in valve adjustments.  Now the soon to be 25 year old car charges up hills!  Valve adjustments are wonderful!  The previous mechanic said valve adjustments were unnecessary.  Wrong!  And for $100, a reborn car.

But I digress.

Who can provide rules 2), 3), and 4) for living in Manhattan?

[madbean]

my GF and ex-wife both drink a 2L bottle of diet pepsi about every 3 days. I keep telling them how unhealthy it is, but neither will listen.

Off topic, but it turns out Pepsi is removing aspartame from Diet Pepsi and replacing it with sucralose and ace-k. Idk why they don't just use stevia?

http://www.usatoday.com/story/money/201 ... /26297755/

Well, if we're going to drift off topic there is this gem from the article....

But Jacobson says scientific studies have shown a link between aspartame and cancer. "Three top-quality studies have found that aspartame causes cancer in animals, so the less that people consume the better," he says.

One medical expert, however, disagrees. "Aspartame's safety in the quantities the general public consumes has been established as safe many, many times over," says Rebecca Blake, director of clinical nutrition at New York's Mount Sinai Beth Israel. "The research does not yet support a greater level of safety among the 'more natural' sweeteners."

So science has now proven that Aspartame causes cancer and only "One medical expert" disagrees?

What a misleading piece of junk.

[Pointedstick]

Living in Manhattan;

1) get an old car, maintain it meticulously, pay no collision (suck up the 'bumper car' effect) and have the car insurance tab come in at just under $800/ year.  A new paint job every 5 years would be nice.

We have a 1991 Accord with 296,000 miles.  This 5 speed manual gets up to 40 MPG highway.  We keep it because we like the car.  We are grateful for the competent mechanic.  No car loan payments allow us to fund private school tuition.

You're definitely preaching to the choir here in terms of good individual decisions that allow one to live well on not much. My car is similarly paid off and its insurance runs about $350/yr (gas about $300, re-registration $40). But we're talking about average people. Investing in the PP pretty much disqualifies you from membership in that category!

[bedraggled]

PS,

The choir?  Probably.  It is flabberghasting that others cannot figure this out.

The car is excellent and borders on being genuinely fun to drive, though an acquaintance explained that the short-stroke, high revving BMW engine is much more interesting.  Oh well.

People have told us that we have to live for today.  We are not depriving ourselves but these "advisors" have little as we all hurtle toward retirement.  I wonder what the middle class thinks?  Time to look back at the previous generation as has been suggested here.

Finally, you coming to NYC to meet with  us on May 9?  I think you  are expected at this point.  We'll save you a chair.

[Pointedstick]

Wish I could but I won't be able to travel on short notice like that until early retirement.

I'll have to wait for PP meet-up: Albuquerque edition. I already know of at least one other forum member who lives here! Or maybe Chicago or Dallas or San Jose or something. Lotsa people near to those places it seems.

[WiseOne]

Going back a few posts...really great point about easy credit driving up prices for people who don't partake.  That's most certainly happened with housing and college tuition.

Re the PP meetup...it would be great if people from out of town could drop in, but that's not expected :-)  on the other hand, anyone who happens to travel to NYC give a yell!

[Mountaineer]

Going back to the original post, the conclusion of the linked article seemed to focus on declining or stagnating wages with robots, globalization, and/or China being contributing factors.  Perhaps, as others have alluded to, there is another potential cause in play - tolerance and intolerance.  Consider the following quote and then think about what we see happening in our society:

“Unlimited tolerance must lead to the disappearance of tolerance. If we extend unlimited tolerance even to those who are intolerant, if we are not prepared to defend a tolerant society against the onslaught of the intolerant, then the tolerant will be destroyed, and tolerance with them.”? - Karl Popper, The Open Society and Its Enemies.

From my perspective, our society has been preaching tolerance (increasingly defined as afirmation or acceptance) for quite some time now in certain arenas more so than in the past (e.g. race, sexual preference, dress, religion, body art, entertainment with more X and less G, etc.).  Those in the upper class (e.g. politicians, business leaders, media moguls) pretty much do as they wish and are not impacted as much as the middle class.  Those in the lower class (e.g. the chronically unemployed, the lesser educated, many new immigrants)  are more interested in survival than tolerance, or are so fed up (fueled by endless TV hype) with their situation they rebel with most of the targets being the middle class; the upper class is too powerful to go after.  Thus, the middle class that has been trained/educated/indoctrinated to be "tolerant", is getting it from both sides from an ever increasing "intolerant" crowd that wants the middle to confrom to "their way" by penalty of threat (e.g. regulations on how one must behave), or shame (e.g. I feel bad if .....), or false accusations (e.g. Candidate X's speech: you know Candidate Y might be a racist because Y once studied the colonial history of South Carolina?).

Just a thought.

... Mountaineer

[madbean]

Immigration and the tax burden on the middle class. Am I the only one to think these might be contributing factors?

[Benko]

Immigration and the tax burden on the middle class. Am I the only one to think these might be contributing factors?

There was a very good and unfortunately deleted post on the immigration issue early in this thread (not mine).  There was an article looking at immigration vs income over the last 70 years in the news in the last week or so.  So no you are not the only one.

[Tyler]

People tend to focus on illegal immigration, but when it comes to middle class wages I think the bigger issue is legal H1-B visa abuse by large companies. They import cheap high-end tech labor as modern-day indentured servants. It's extremely widespread in California right now. Just google "h1-b abuse". 

[Mountaineer]

Average posts per day are down considerably in April.  Are we, the middle class, being destroyed? 

http://gyroscopicinvesting.com/forum/stats/

... Mountaineer

[Mountaineer]

Average posts per day are down considerably in April.  Are we, the middle class, being destroyed? 

http://gyroscopicinvesting.com/forum/stats/

... Mountaineer

Well, considering that Machine Ghost hasn't been around much for the last 3 weeks, the explanation seems simple.

ROFLMAO 

... Mountaineer

[Mountaineer]

Well, considering that Machine Ghost hasn't been around much for the last 3 weeks, the explanation seems simple.

ROFLMAO 

... Mountaineer

Glad you got a laugh out of it, but just to be clear: I wasn't dissing him, just noting that he is a prolific poster and he has been absent of late.

I completely understand.  I did not take your comment as being disrespectful ... just hilariously funny to me.  I don't know why, just one of those funny moments that was totally unexpected.  I'm just glad I was not drinking coffee ... or stronger ... when I read your post.  It was a rare moment!

... Mountaineer

[lordmetroid]

I simply haven't found the topics to be very interesting as of lately.