Middle Class Squeeze Continues

I’ve been discussed the declining middle class for some time now — see The Disconnect and Economic Classes for a more detailed chat on the subject.

I’ll have more on this later  in the week — but for now, I wanted to throw up some charts up.

I always snicker when I hear a politico scratch their head about why the opinion polls are so negative, despite "good growth and low unemployment."  Aside from the fact those stats are somewhat "gamed," we also know there are additional issues. Consider our modern bad habits — excess consumption, too much debt, too little security — of all types. 

Its no wonder much of the middle class is less than enthralled with the present environment:







New Study: Middle Class in Turmoil
Economic risks up sharply for most families since 2001 –
September 28, 2006
Christian E. Weller and Eli Staub

Middle Class in Turmoil PDF

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  1. wcw commented on Oct 29

    And of course, there is this picture of the relative share of aggregate income received my the middle 60% of households versus the top fifth (the bottom fifth is a rounding error; ah, poverty).

    There is a discontinuity in the series; look around it. It results from the census raising its cap on recorded incomes to $1m.

  2. Bill Conerly commented on Oct 29

    Here’s an interesting counterpoint from Seth Godin’s blog (http://sethgodin.typepad.com/seths_blog/2006/10/where_did_it_al.html)

    “According to a recent report, more than two-thirds of recent immigrants to the USA send money home regularly. The worst-paid, poorest people in the country manage to save enough to send some back to the old country. The US Ambassador from El Salvador says that the two million Salvadorians in the U.S. sent enough money home to account for 13 percent of the GDP of his country.”

    If some of the poorest people in our country can save enough to send money home, maybe what we have is not a public policy problem but a will-power problem.

  3. wcw commented on Oct 29

    The well-fed say look in the mirror
    If you want to know why we go bad
    Change your ways
    Look in your heart
    Look in your soul

    What the well-fed don’t say
    Look at the world if you want to know why we go bad
    Change the world
    Don’t look in your heart
    Don’t look in your soul

    McCarthy, “The Well-Fed Point of View”
    Banking, Violence and the Inner Life Today, 1990

  4. donna commented on Oct 29

    Bill, if you were living in a cardboard box in a canyon, you wouldn’t need to spend a lot of money either.

  5. dissent commented on Oct 29

    What conservatives don’t get is that the middle class struggles not just for itself, but to invest in the next generation and the future of the country by raising well-educated, healthy, well-fed children. The decline of the middle class means the decline of the country as a whole, now and in the future.

    With some exceptions, immigrants who send remittances home are not investing in the American future the way that native born Americans are.

  6. fearlessmanateehunter commented on Oct 29

    If you think that the “middle class” is going through some hard times, you should see how us in the “upper lower class” are struggling to keep up our appearances. I’ll tell ya, It’s not easy trying to look rich.


    The Fearless Manatee Hunter,
    Killer of the Gentle Sea Cow

  7. DavidB commented on Oct 29

    The GDP of El Salvador is 32 billion dollars. 13% of that is 4 billion. Divide that by 2 million people and you get a just over 2,000 per year or a whopping $173 per month. That is less than the monthly car payment for the average person.

    I should hope they can make and save enough in America to send that much money home!

    And keep in mind that they could probably buy a home or buy a business back home with monthly payments like that

  8. cButler commented on Oct 29

    With all due respect, something doesn’t jive here. The U.S. economy has just experienced several years of uninterrupted growth that, if I recall, has depended inordinately on the American consumer. Who is the American consumer? One would suppose that that would mostly be the middle class. No? I understand that the middle class would be concerned about the future given their high level of indebtedness, the high cost of health insurance and relatively slow rates of pay increases. But one seriously gets the feeling that the insecurity stems from not knowing whether or not they will be able to maintain their lifestyle, rather than whether hard times were around the corner – unless one defines hard times as not being able to buy the latest elctronic gizmo, car or whatever.

    But seriously folks, if you mortgage your wealth to buy s**t that’s what you end up with for patrimony. What’s the beef?

  9. j d ess commented on Oct 29

    donna: big yucks. oh, but wait. we happen to know a few immigrants who, omg, don’t live in cardboard boxes. one of them we met in the late 90s when she earned somewhere in the upper 30k range. she sent home a couple hundred a month to her parents in eastern europe. after that, which she considered a primary responsibility, she paid rent, lived a very social life and saved eventually about an entire year’s worth of salary. that savings went to a home to live. she carried no credit card debt. this in a major metro area where her salary aint’ that much. she had her priorities and they didn’t include leasing a new car, or buying a bigger tv or wardrobe with every season. the same can’t be said for many native borns we know.

  10. wcw commented on Oct 29

    More data for the innumerate.

    If you folks have a rational argument, make it. This “man in the mirror,” act-more-like-immigrants, Michael-Jackson theology-by-anecdote just isn’t getting through to me. I have a math degree. I like data and analysis.

    FD: my parents were immigrants

  11. V L commented on Oct 29

    I think we are looking at the major scandal (a possible congressional investigation?) before the election. Many economists have been questioning the accuracy of BEA data (possible data manipulation for political reasons?).

    “BEA urgently owes the public a rapid and clear response on how it estimated motor vehicle production, why its +26% growth estimate is at odds with the -12% estimate of the Federal Reserve Board”


  12. pjfny commented on Oct 29

    Nouriel Roubinis blog from today (29oct06) is explosive if true. Some investigation required, but he thinks the gov made a mistake or massaged the auto prod numbers to get to a 1.6% gdp report…without those “mistakes” the reprt would have been close to 0.9%.
    See his blog on right hand side of web site!

  13. wunsacon commented on Oct 29

    (a) More money goes to the upper class today than in the 70’s, as a percentage of total income.

    (b) Regardless of how well or poorly the economy is doing, there is always enough money for the hardest working, most parsimonious, luckiest serfs to act on their compassion for their malnourished families back home.

    (c) Point (b) was as true (maybe more true) in the 70’s — when the lower classes earned a bigger share of the income — than today. So, in a discussion starting with point (a), what does point (b) show? That (a) isn’t a big deal?

  14. John F. commented on Oct 29

    Since this blog’s value derives to a large extent from its skepticism, would it be too much to ask for charts that come from non-partisan sources?

  15. km4 commented on Oct 29

    Bushco, perpetual war, and the elite class

    What we have seen for the past 6 yrs is that the elite class is content to have perpetual war if their tax rates approach zero. They don’t care if the United States becomes a pariah, they don’t care about the huge budget and trade deficits that the Bush admin has created, they don’t care that the national debt won’t be paid off for generations and they don’t care about class warfare and the shrinking middle class in this country.

    They put an amoral, arrogant, ignorant, monkey in the White House because the elite financial, corporate, media class of the United States are making out better
    than ever before !

    I certainly hope enough ‘middle class’ Americans wake up and assess this ugly state of affairs that Bushco has put us in because we cannot afford to ‘stay the course’

  16. F commented on Oct 29

    wunsacon nails it.

    The fact that some of the middle class may share some of the responsibility for their plight is not relevant to the question of whether there are other important factors that can be fixed.

    wcw’s graphs clearly indicate that other important factors do exist, namely, rising income inequality.


  17. Mark commented on Oct 29

    F and other losers, is it the govt’s job to redistribute “wealth”? last time i checked, i didn’t work for a poor person, do you? maybe you should’ve studied a little harder when you were younger. too late now-

  18. whipsaw commented on Oct 29

    per Mark:
    “F and other losers, is it the govt’s job to redistribute “wealth”? last time i checked, i didn’t work for a poor person, do you? maybe you should’ve studied a little harder when you were younger. too late now-”

    There are plenty of “Marks” who post here, couple are intelligent, the others are Lizard Men.

    Giving you the benefit of the doubt, how could you possibly not understand that the past six years has been entirely devoted to redistribution of “wealth?” The corporate destruction of the middle class has been going on since 1980, but it only came to fruition once it could be combined with religion and war under Bush.

    As things now stand, Bush warrants no more respect than Franco did for many of the same reasons. My prediction is that over the next decade, most of the extreme right wing regimes (like our own) will not only fall by the way, they will become historical anathema to whomever is running things by then.

  19. F commented on Oct 29

    Ooooh. Ad hominems! I think I may faint. Perhaps the funnest part of the internets are ad hominem attacks against people that you know nothing about. Tends to make you look a little silly, or it would if you knew the situation on the ground.

    I can certainly understand, and even partially agree, that the primary purpose of government is not the active redistribution of wealth. But to argue that we, and by extension government, have no obligation to address social ills, whatever they may be, is a deeply antisocial point of view. And furthermore, when government works to actively propagate these social ills, as it has done recently, we all bear responsibility. This is not a partisan concept, but rather a moral one.

  20. Eclectic commented on Oct 30

    We recently debated the notion advanced by Mr. Greenspan that the housing boom had its roots in the collapse of the Berlin Wall… remember?

    I detailed my reasons for agreeing with him and traced my reasoning back, beyond Reagan and Berlin, to Nixon in China, but I won’t reproduce it here.

    I will say however that Greenspan’s conclusions about housing also trace adequately as reasons for the decline of the middle class in the United States and the industrialized West.

    They both derive from a struggle for some new economic growth engine needed to extend the middle class… not to contract it.

    It is because the currency that drives economic endeavors in the U.S. and the West is marginally departing for the Third World, a world that was hidden from the American middle class from the beginnings of the Industrial Revolution (the days of Adam Smith and the founding of the United States) until the first cracks appeared in Sino-Soviet communism.

    Had these two worlds grown together economically, there would be no disequilibrium between them today, but they were isolated politically, demographically, geographically and technologically.

    I’ll paraphrase Lincoln, who said: “The Great Powers of Europe [and Eurasia] could not by force take a drink from the Ohio in the course of a thousand years.”

    He was of course correct, however he could never have conceived of the invasion that might some day occur when your chest x-rays taken at your annual physical at, say… Paducah, Kentucky or other places along the Ohio, would be read for your doctor in minutes by a radiologist in Bangalore… for pennies on the dollar.

    What that means is that labor, which I have claimed is in all cases the core expression of money currency, is exchanged in Bangalore and not in Paducah. If labor flows away from the U.S., then its expression, currency, will follow.

    Where there is no exchange, there is no economy… Where there is no economy, socioeconomic classes are defined purely by residual wealth.

    Given sufficient time, so will wealth depart… until there is an equilibrium reached, or there is political unrest.

    Equilibrium is still years away, maybe a generation or more. Until it is reached, wealth will have to sweat the political unrest.

    Paraphrasing Lincoln once more:

    “If destruction shall be our lot, it must come by our own hands.”

  21. wunsacon commented on Oct 30


    What do today’s top 1% do so differently today to deserve a bigger slice of the pie than in the past 50 years? That’s the question.

    – Are they a race of supermen, who do more?
    – Do they pay themselves more for the same work?
    – Do they steal more?

    Or maybe the data comes from factors external to themselves:
    – Does globalization benefit them more than the average person?
    – Is technology replacing some lower-skilled white collar jobs, so that productivity goes up while SG&A stays flat, leading in turn to higher profits and exec compensation?

    If the data stems from these latter factors, I see no reason the benefits should fall so squarely in the wallets of the already-rich. The rich did not invent globalization. (They also don’t invent technology. They’re exploiting 5000 years of technology accumulation.) Society should share this wealth. That implies progressive taxation, unlike the regressive tax we have now where income from capital is taxed at about the same (or lower) rate as income from working.

    It’s these considerations that lead smart folks like Buffet and Gates to similar conclusions. The current distribution of wealth is not equitable.

    >> last time i checked, i didn’t work for a poor person, do you?

    Why is this person richer than my dad’s boss? Why does this person keep more of the company’s income than my dad’s boss did at his company? Those are the issues we’ve been talking about. You missed the point.

    As for your rhetorical question, you should ask yourself why in today’s mature capital markets we need rich people to employ us. Ironically, we do not.


  22. devline commented on Feb 26

    If the middle class can do this much in the U.S,this is an achievement.God bless them. they are doing more than the rich.

  23. mjoc commented on May 19

    The middle class is presently getting hammered by the skyrocketing cost of gasoline, thanks to the elite via Dubya. The electric car, or any alternative fuel designed vehicle, is anathema for the behemoth oil companies.

  24. Ian Random commented on Jun 13

    Gas costs too much, rather then wonder about increasing supply of oil and refining capacity. Let’s whine about greedy oil companies making 10% profits after years of 5% profits and lower. Just as the market price of oil is encouraging drilling in previously unprofitable wells, let’s pass an anti-goudging act to discourage that. We’d rather whine than think!!!

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