razz
5-1-17, 10:51am
I have been puzzled for years over the term "middle class". Trudeau used it as part of his campaign and got elected Prime Minister of Canada with very little experience. He campaigned about the middle class and little policy beyond legalizing pot, reforming the voting process and the Senate, our upper body of government. We are now legalizing the pot.
Balancing the budget etc., is not a high priority. :( Nuff said about that.
John Mauldin's latest free letter covers a lot of ground using US data when comparing the middle class around the world. www.MauldinEconomics.com. Some excellent charts in this letter.
Is this news to you or about what you thought is true? Can we or any politician protect the middle class?
Some key quotes below:
" The Great Middle
Now let’s consider some related data from Europe and the US, courtesy of Pew Research Center. In this case, we’ll look at the middle class.
First question: What’s “middle class?” Pew defines it as adults living in households with disposable incomes ranging from two-thirds to twice the national median disposable income. In the US, that means a 2010 after-tax income between $35,294 and $105,881...
Pew found that from 1991 through 2010, the percentage of adults living in middle-class households in the US shrank from 62% to 59%.
More significantly, perhaps, the US has the smallest percentage of middle class adults of any of the advanced economies Pew studied. Notably, during this period the middle class expanded in the UK, Ireland, France, and the Netherlands...
Measuring Relative Income
If the average person in this country feels as though they are going nowhere fast, there is a real reason for it. The next chart, from the St. Louis Federal Reserve FRED database, shows that median income in the US is actually down over the last 17 years and is only 3% higher now than it was 30 years ago. Those are inflation-adjusted numbers. But the reality is that, for the average person, inflation has been much higher than the average of 2% per year over that time, because the things that the average person actually buys, like housing and education and healthcare and all the other necessities of life, are rising at a much faster rate than 2%. So this chart reflects the fact that life has gotten much more difficult for average Americans. If people’s income hasn’t grown beyond what it was 30 years ago, they struggle just to make ends meet and to maintain the lifestyle they had. Can we say angst?
It looks like everybody’s income is rising, especially those in the top 20% and 5%. But if we inflation-adjust those numbers, the illusion of growth goes away. What we see is that there has been almost no movement for the bottom 60%, while the middle quintile has grown somewhat, and – this won’t surprise anyone – the top 20% and 5% have done very well.
But what about the 1%, I hear you asking? Investopedia conveniently gives us that answer:
To be certified as a one-percenter, you needed to bring home an adjusted gross income of $465,626 more for the 2014 tax year, according to data from the IRS. The Washington Center for Equitable Growth put the average household income for this group at $1,260,508 for 2014.
And of course, the lower middle in the 25–50th percentiles are very vulnerable to downward mobility. A New York Times report on the Pew study starts with one of their usual personal vignettes:
Mike McCabe’s neighbors in rural Gillespie, Ill., consider him lucky. After being out of work for a year, he landed a job in January making cardboard boxes at a nearby Georgia-Pacific plant for $19.60 an hour.
He would agree with them, were it not for the fact that his previous job in a steel mill near St. Louis paid $28 an hour. “I’ve had to rethink my whole life to make ends meet on what I’m now making,” Mr. McCabe said. “The middle class is struggling for sure, and almost anybody in my position will tell you that.”
That short passage actually says a lot about angst in America. Let’s unpack it.
Your neighbors will consider you lucky if you stay unemployed for a year and then find work for 30% less money than you made before. Maybe so, but you’ll still be hurting. The statistics suggest that people in situations like this probably had little savings and burned through whatever they had while unemployed. They may have gone deeply into debt to survive.
“I’ve had to rethink my whole life to make ends meet on what I’m now making.”
That’s haunting because I think we can all imagine ourselves in that spot, no matter where we are now. What if you had to (a) go a full year with no income and (b) return to work at only 70% of your former earnings? Would you have to adjust your lifestyle? I sure would. My dad taught me that you do what you have to do, but fear of having to do it is the source of much of our angst.
Balancing the budget etc., is not a high priority. :( Nuff said about that.
John Mauldin's latest free letter covers a lot of ground using US data when comparing the middle class around the world. www.MauldinEconomics.com. Some excellent charts in this letter.
Is this news to you or about what you thought is true? Can we or any politician protect the middle class?
Some key quotes below:
" The Great Middle
Now let’s consider some related data from Europe and the US, courtesy of Pew Research Center. In this case, we’ll look at the middle class.
First question: What’s “middle class?” Pew defines it as adults living in households with disposable incomes ranging from two-thirds to twice the national median disposable income. In the US, that means a 2010 after-tax income between $35,294 and $105,881...
Pew found that from 1991 through 2010, the percentage of adults living in middle-class households in the US shrank from 62% to 59%.
More significantly, perhaps, the US has the smallest percentage of middle class adults of any of the advanced economies Pew studied. Notably, during this period the middle class expanded in the UK, Ireland, France, and the Netherlands...
Measuring Relative Income
If the average person in this country feels as though they are going nowhere fast, there is a real reason for it. The next chart, from the St. Louis Federal Reserve FRED database, shows that median income in the US is actually down over the last 17 years and is only 3% higher now than it was 30 years ago. Those are inflation-adjusted numbers. But the reality is that, for the average person, inflation has been much higher than the average of 2% per year over that time, because the things that the average person actually buys, like housing and education and healthcare and all the other necessities of life, are rising at a much faster rate than 2%. So this chart reflects the fact that life has gotten much more difficult for average Americans. If people’s income hasn’t grown beyond what it was 30 years ago, they struggle just to make ends meet and to maintain the lifestyle they had. Can we say angst?
It looks like everybody’s income is rising, especially those in the top 20% and 5%. But if we inflation-adjust those numbers, the illusion of growth goes away. What we see is that there has been almost no movement for the bottom 60%, while the middle quintile has grown somewhat, and – this won’t surprise anyone – the top 20% and 5% have done very well.
But what about the 1%, I hear you asking? Investopedia conveniently gives us that answer:
To be certified as a one-percenter, you needed to bring home an adjusted gross income of $465,626 more for the 2014 tax year, according to data from the IRS. The Washington Center for Equitable Growth put the average household income for this group at $1,260,508 for 2014.
And of course, the lower middle in the 25–50th percentiles are very vulnerable to downward mobility. A New York Times report on the Pew study starts with one of their usual personal vignettes:
Mike McCabe’s neighbors in rural Gillespie, Ill., consider him lucky. After being out of work for a year, he landed a job in January making cardboard boxes at a nearby Georgia-Pacific plant for $19.60 an hour.
He would agree with them, were it not for the fact that his previous job in a steel mill near St. Louis paid $28 an hour. “I’ve had to rethink my whole life to make ends meet on what I’m now making,” Mr. McCabe said. “The middle class is struggling for sure, and almost anybody in my position will tell you that.”
That short passage actually says a lot about angst in America. Let’s unpack it.
Your neighbors will consider you lucky if you stay unemployed for a year and then find work for 30% less money than you made before. Maybe so, but you’ll still be hurting. The statistics suggest that people in situations like this probably had little savings and burned through whatever they had while unemployed. They may have gone deeply into debt to survive.
“I’ve had to rethink my whole life to make ends meet on what I’m now making.”
That’s haunting because I think we can all imagine ourselves in that spot, no matter where we are now. What if you had to (a) go a full year with no income and (b) return to work at only 70% of your former earnings? Would you have to adjust your lifestyle? I sure would. My dad taught me that you do what you have to do, but fear of having to do it is the source of much of our angst.