This is one reason that inflation (at least at smallish levels) is good for the economy. Lowering wages, even for low-performance workers, is difficult, legally and psychologically. But inflation lets employers cut real wages by default; small nominal hikes can be given to satisfactory workers just to keep up. Good workers can still be rewarded with wage hikes above the inflation rate.
That’s incomprehensible and ridiculous. Things like healthcare, housing, food, and college tuition aren’t free and their cost relative to income determines how much, if any, discretionary income is left for those tech toys and other forms of recreation.
And it doesn’t take a lot of analysis to show that the cost of most of those things has been rising much faster than income. Just looking at the cost of housing, cars, and college tuition, for instance, in 1950 those average costs were about 2.2, 0.45, and 0.18 of the average family income, respectively; today they are 3.7, 0.61, and 0.79. That doesn’t include other sectors like health care whose costs have been rising even faster. The housing multiple is also partly masked by the housing meltdown and stagnation in many US markets – where the markets have been robust, as I mentioned, the cost of a house has soared tenfold relative to income, from about 2.2 to more like 20 times the average income. And many middle class workers are also working harder and longer for those dollars.
Honestly, your economic values seem unrelated to the real-world cost of living; they sound like they’re coming from someone living in their parents’ basement whose major expense is their iPhone and their Xbox.
Seems to me, even if the definitions are arbitrary, you should be able to get interesting information out of it if you are consistent.
For example, if you define the middle class as between 42 000 and 125 000$, inflation adjusted, and a the number falling below that is growing, thats bad. If it is falling, good. Exactly what constitutes the middle class may be a different discussion.
The pic you are linking to does not make it weather it is personal median income or household. I suspect that latter from comparison with other sources.
But if it is household income, the growth in two-income households over that 35-year period will be a massive confounding factor.
Playing devil’s advocate. Lord knows he needs one.
Wouldn’t people that earn more money be motivated by benefiting society as a whole. If everyone’s income rises so that the gap is maintained, society overall benefits.
Wouldn’t you rather live in a neighborhood where everyone’s yard looked nice as opposed to one where your yard looked great but your neighbor’s yard was overgrown and couch on the front porch, just because they couldn’t afford a lawn service like you?
This sounds great in a Utopian Disney-Like Universe, but in reality human nature is to look out for oneself. Humans can be extremely benevolent but this has its limits.
Sorry I’ve got no cite - because I can’t remember where I found it - but an article I happened into recently said that yes, the American middle class was indeed shrinking, but that it was shrinking at the top - that is, the upper class in America is expanding.
[QUOTE=Grim Render]
Seems to me, even if the definitions are arbitrary, you should be able to get interesting information out of it if you are consistent.
For example, if you define the middle class as between 42 000 and 125 000$, inflation adjusted, and a the number falling below that is growing, thats bad. If it is falling, good. Exactly what constitutes the middle class may be a different discussion.
[/QUOTE]
That would be between $6,851.72 and $20,392.03 in 1970 dollars. I don’t know what percentage of US households fell below the $6,800 mark in 1970, but the median income then was only $7,466 ($45,765.43)…which today is $51,017 ($8,222.72). My family certainly fell WAY below $8,222.72/year in 1970 (or even the at the time median at $6,800.00), but I don’t know what the percentage of families below that was then (I just picked 1970 out of the air btw…you could do all of the above with any set of years). We still considered ourselves ‘middle class’, though lower middle I guess (when we thought about it at all, which I can’t say I did much in 1970, being only 10).
I mentioned this in another thread, but I’d like to know what people think.
Can we all agree that ideally, a country’s economy should help all its citizens? That is to say, in an utterly ideal economy, if the country gained X% in wealth, that every citizen’s wealth, on average, would increase by the same amount? Not that every single person gets a raise, but that the lowest 20% of income earners would go up as much as the highest 20%.
And that, if almost all the wealth being created is going to a small sliver of the populace that’s indicative of a flawed system? Am I off base with that?
I know Shodan has no problem with the rich becoming super-rich, but if they’re the only ones reaping the rewards of a rising economy, that strikes me as something to be fixed, not brushed off and ignored. The fact that wealth is floating to the top, while the middle withers seems like a big deal to me.
I’m no economist, nor do I pretend to be one. My gut feeling on this is that it SOUNDS great, but when you look at countries that actually try or tried to do it (without having some high value natural resource like oil), generally their economies are sluggish and unemployment rates or debt to GDP ratio or some other thing is off. The US, on the other hand, for all it’s problems, seems to have a pretty dynamic economy…when we aren’t in a bubble recession.
My own take is that trying to arbitrarily fix salaries to some percentage of overall GDP would make us extremely uncompetitive, as I guess I don’t see the value of US labor as warranting those levels of compensation compared to other labor markets throughout the world…I mean, why would anyone, including Americans pay a premium for goods and services just because they are built by or operated by Americans? I can see SOME premium, but not to that level…which means that companies who adopted those policies would quickly go out of business. At least, that’s why my non-economist trained gut feeling would be.
I suppose you COULD do something like a basic living stipend, to set a base level for everyone, and do that through direct taxes…but I’m not sure that would have the desired effect either, and not sure that it’s been a stunning success in other countries that tried to do this based on an economy not tied to something like large quantities of oil. I have this discussion with my dad and his friends who decry the fact that US manufacturing (jobs) have dried up in the US, and what we need (according to them) is to bring those jobs back (somehow…usually they are quite vague on how, but basically by fiat magic is my take). That SOUNDS great, but I don’t see us going back to the semi-skilled mass work force of the golden age of the 50’s and 60’s with high salaries and high benefits because we can’t compete in those markets with the near monopoly we used to have. To me, perhaps, a better investment would be to figure out how to make our labor a value add…sort of like the Germans. Maybe offer more training, or more money for cutting edge start ups or…something vague. I wish I knew the answer, as I agree, it’s an issue and is going to increasingly become one as automation really takes off in the US.
Personally, I’d rather have a system that if I work 20% harder I earn 20% more. If my buddy is happy punching a clock in the cubical next to mine while I’m putting in 60 hours a week I should make 50% more assuming my extra 20 hours accomplish more and aren’t just for show. So if we start the same I’d expect to make 50% more then him by the end of the year and I would expect the gulf to increase over the years.
On an economy wide basis I would expect a teacher who is teaching the same 30 students that the previous generation’s teacher taught to make the same amount of money (of course teachers have a lot of extra curricular stuff now but that’s a different conversation). While engineers and financial people are doing new and more complex things should be making more money and I’d expect the gulf to increase over time. At the top end of the spectrum If someone is investing at 7% and the economy is growing at 3% I would expect them to vastly outpace society as a whole and for the gulf to grow over time.
So assuming the system worked perfectly some people would hold their position while everyone else would outpace them by increasing amounts over time. So we’re fairly close to ideal.
For all the bitching about the middle class shrinking, it’s not shrinking quite how everyone thinks.
If you look at their graph, the middle class has primarily shrunk due to nearly twice as many people moving into the upper class (7%) instead of dropping into the lower class (4%)
This isn’t as bad as if that 11% change was solely due to people dropping out of the middle class instead of rising out of it.
That’s all in the OP, btw. The link I put in there actually shows an 8% move from middle to upper class, but regardless it’s clear more people have moved up than down…but, it’s also clear that the lower class has expanded by 4%, at least based on that arbitrary measure for a family of 3.
I think fundamentally “middle class” is a state of mind as well as a state of being and not just an easily quantifiable income amount. The essence of the middle class state lifestyle is characterized by financial comfort and dignity first and foremost. Secondly, I think the proper middle class has enough time and energy left over after the working day to enjoy quality time with family as well as the ability to have a hobby. It is entirely possible for the income figures to look and yet the lifestyle can be completely different.
I liken it to a heavyweight champion. Say, for instance there was a heavyweight fighter and to maintain his or her heavyweight status, they had to defend their tile once every year. Imagine, if you will, that the requirement changed to every nine months, and the fighter kept winning. The fighter is working a little harder, but it’s not a big deal. Then, lets say, the fighter had to defend the title every 3 months, then every month. If the fighter still wins every match, their is no change in his or her status; however, as you can imagine, having to fight a heavyweight fight every month is a much different lifestyle than having to fight only once a year.
The problem is that we do have a standard of living in this country that if not provided by employers, are supplemented by the public. I for one think that the idea of a profitable company producing poverty is abhorrent. A Walmart in Wisconsin a few years ago had supplied their 90-some emoloyees only half of their total income. The rest of their income, ie: various welfare programs, was provided to them by the public. Walmart is one of the biggest lobbyists for welfare programs. And as a consumer you pay for those low prices one way or another. A company that produces poverty like that should not be allowed to exist. The argument that those jobs are low skill and therfore should be impoverishing is weak. With higher wages would come more responsibility and dedication from employees and that would still apply. As most probably know, those low wage jobs have plenty of room for improvement and much higher expectations. They should not be positions designed for high turnover for the sake of cost cutting.
Do the same type of jobs exist in 2015 as did in 1920?
Googling, it appears that, although Joseph Stiglitz is frequently mentioned in SDMB threads on income inequality, nobody has mentioned his relatively recent book
The Price of Income Inequality: How Today’s Divided Society Endangers our Future.
I recommend that book to everyone who wants to expand their understanding of income inequality and related issues. (Though for some, he’ll just be preaching to the converted, while some will be too repelled to even open the book.) The book covers much more than just inequality; it gives a variety of insights into relationships between economics and society. Although I purchased the book, I see that a pdf version can be found in an on-line archive. I won’t post a link to a likely copyright-violation, but it will give a way to do copy-paste excerpts. I might do that in another thread if there seems to be sufficient interest.
I think this may be too simplistic. Times change; economic conditions change. It’s good to reward innovators. In present-day America, however, people often get wealthy not for helping other Americans, but for hurting them. One example is the the recent mortgage credit crisis where bankers got huge bonuses for outright frauds, and banks that should have learned a lesson were instead bailed out with huge sums of taxpayer money.
This is true, but another all important metric left out was the proportion of the income going to the upper class. Upper class income is raising much faster than middle and lower. That’s a problem. Upper class are not the ones working the restaurants or cleaning the offices. If they are getting a raise because business is booming, why aren’t they passing some of that wealth to their employees?
Also, it seems to be that it would be bad for people to only be lower or upper class. Sure, right now more middle class are moving to upper, but for the extremes to be housing the majority seems to be a poor set up.
If you read a variety of forums and comments sections wherever wages are discussed, a not-insubstantial portion of Americans are against almost ANYTHING that will increase wages for the American worker. To answer your question directly, they’re not passing on any of the wealth to their employees because of union busting and their right wing propaganda that has made the American worker hate himself.
Anyone interest in actual data about consumer spending in the U.S. can find them at BLS: http://www.bls.gov/opub/uscs/
Categories include food, alcohol, housing, apparel, healthcare, entertainment, education, tobacco, charity.
There are 3rd-party summaries that IMO do a better job representing the data graphically, but I don’t have those on hand.
Note that the linked report only goes through 2003.
Data on trends in tuition, fees, R&B can be found here: Trends in Higher Education – College Board Research
I don’t have a good link for increased availability of no-loan financial aid at some of the country’s more famous schools. I’m not sure if that’s relevant though.