Tuesday, August 3, 2010

U.S. Middle Class Shrinks

In an attempt to create positive perceptions, President Obama is proclaiming that "we're turning it around."

But using data from such sources as the U.S. Bureau of Labor Statistics, Business Insider reports 22 statistics that indicate that the decline and fall of the American Empire is accelerating, with the middle class being the canary in the coal mine:
  • 61 percent of Americans now "always or usually" live paycheck to paycheck. That's up from 43 percent in 2007 and 49% in 2008.
  • More than 40 percent of employed Americans now work in service jobs, which are often very low paying.
  • The average time to find a job has risen to 35.2 weeks.
  • For the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Dept of Agriculture projects it to rise to 43 million in 2011.
  • 21 percent of all U.S. children now live below the poverty line, the highest rate in 20 years.
  • 43 percent of Americans now have less than $10,000 saved for retirement.
  • 24 percent of American workers now say they have postponed their planned retirement age.
  • The average federal worker now earns 20 to 60 percent more (different studies report different findings) than the average private sector worker. That is the most recent evidence of my assertion that now, because the federal government doesn't balance its budget and can--for the short-term at least--keep printing money, the federal government and federal contractors are, for all but star employees, the best source of employment.
As shocking and dispiriting as those statistics are, I was shaken even more when I read that when the Tacoma, Washington Utilities District posted a job opening for a single $17.76/hour meter reader job, 1,600 people applied.

These statistics provide yet more evidence that America is in a long-term jobless non-recovery.


Jacked Up said...

I regret not planning a career in the public sector because it's secure and a great path to wealth. However, I just don't see how we can be taxed much further so maybe we will see a reduction in public salaries and benefits.

Elsa said...

Your points are well taken and well documented. I only wish you had not chosen to open with a negative statement about President Obama. For one thing, his office is only one of the 3 branches of our government, and for another he has only been in office a year and a half, whereas the shrinking middle class problem has been with us since the Reagan years.

The real problems are (a) lack of regulation of big business, especially the financial sector, and (b) reduced tax rates for wealthy individuals. I believe that if Congress would wake up and put these two things back on track, workers in the U.S. middle class would be headed for a much more pleasant future.

Dave said...

Let's stop blaming the economy for all of our woes. 50 years ago, most middle class families owned one car, one television, and lived in a 1,500 square foot house. Today's middle class lifestyle demands a 3,000 square foot house, three cars, and a television in every room. Why are we so reckless with our finances? I think a value system overhaul is in order.

Excerpt: December 6, 2008 blogpost

2. Encourage a thrift-based, much less materialistic society, in which you don't buy what you can't comfortably afford. A home is the only item that one should borrow for.

When I came of age, I wanted a car and bought only what I could comfortably pay for in cash: a $300 ten-year-old Ford Falcon with a manual choke. (And I loved it more than if I had bought a brand new car and had to endure the constant pressure of car payments


This should be the goal. A thrift-based society would help us weather another economic downturn. It helps when you have money in the bank. The American people must also realize that material goods alone do not provide happiness and spiritual fulfillment.

ALP said...

I live just south of Tacoma, and have been searching for a job in that market for about 14 months, to no avail.

So my reaction is - what, ONLY 1600 applicants for the meter reading job?

Luckily, my partner went back to work after a year of unemployment. Lately, I've been joking to him that I hope he gets used to me being a kept woman, as the economy seems to have discarded workers in my age group.

Fred said...

Steve Sailer best described the disasterous Bush strategy, which Obama has continued: "Invade the world, invite the world, in hock to the world". We spend hundreds of billions of dollars fighting primitives in caves, we have been inviting tens of millions of the poorest, least-educated immigrants in the world to our country to drive down our wages and strain our social services, and we have been putting the cost of everything on our national credit card.

President Obama has been accelerating all of this. U.S. casualties in Afghanistan in July were greater than in the first two years of the war under Bush. Obama will have increased the federal debt more in his first two years than Bush did in eight. And Obama sued Arizona to prevent that state from enforcing the federal government's own laws against illegal immigration.

The disaster builds.

Anonymous said...

First off, there is clearly a role for government, but it feels like things have really gotten out of hand. Government spending accounted for about $6.5tr ($3.5 fed, $1.3 state, $1.7 local) in 2009. That's about 45% of our $14.5tr economy, and comparable to many European countries, but without many of the social benefits. Government spending is often quite useful, but it is usually not very productive. There is no feedback mechanism to cull unsuccessful ventures, and outdated laws are not regularly revisited.

Still, Americans live much better than the vast majority of people in the world. This was because much of the world hasn't even started to industrialize until about the 80's, and those that imploded during WW2 have caught up. We are now living in a far more competitive world with many countries that take industrialization very seriously.

Americans are exceptionally productive (especially since most of the lower priced work is done elsewhere with globalization, so by definition more higher priced work is what gets counted), but the American worker is no longer so productive as to justify the wage disparity. Capital intensive industries are the ones that can off-shore more easily, as most of the work is done with machines. These are the types of jobs that sustained much of middle-class America in the past. Further, we have been dishonest with ourselves by thinking that a 'post-industrial' economy can support a broad employment base. Not everyone can be a manager of our capital investments abroad (or doctors, investment bankers, lawyers, or other higher earning service jobs). Industry also develops around hubs in practice, and know-how remains there, so managers must also be there. Once lost, an primacy in industry is difficult to win back.

We have maintained growth beyond our productive means by first adding more people to the workforce with women during the 70's and 80's. Then great increases in private debt during the 90's and 00's. Now, we will do so with greater government debt going forward. Not surprisingly, the marginal productivity of additional debt is approaching a point where it may just cover the cost of funding (so amortization becomes unrealistic).

As some have suggested, living more modestly is probably the most important thing we can do collectively. With that thrift, we should re-establishing our industrial base, rather than using it for financial speculation or export it away through consumption. Also, some things that keep society together are most efficiently 'produced' at home with a family (not at institutions or corporations), like morality and responsibility. Further, the Dollar standard that supplies the world with liquidity requires trade deficits, so this must be addressed (with currency/commodity baskets, for instance), even if it does mean greater inflation (we've been exporting inflation and importing unemployment for a while - total employment % is more probative than U3). A currency collapse, however, will force a resolution on us and make life doubly difficult for everyone. Prices will increase while our export sector is too small to offset that loss with higher employment.

These structural adjustments entail a real drop in the standard of living in the short-term. No politician will risk this until there is a crisis. Unfortunately, Argentina was a wonderfully rich economy in the early 20th century until prices for its primary goods (agriculture) fell and it lost the means to competitively reinvest in its capital stock during the 20's.

We must always be mindful that there are others in the world who are willing to do things as well for a lot less. Their government and society are also designed primarily with growth in mind; most other issues will be trumped. The middle class (and employment) in America will thus likely not improve for some time to come.

Marty Nemko said...

Thank you for the fine post, most recent Anonymous. Yes, we must learn to replace materialism with humanity as our primary currency--perhaps leading to a better society than our current one.


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