The Decline of the Middle Class

I recently read a description of capitalism as an overloaded horse drawn carriage on an extremely muddy road with water filled ditches on both sides.  Inside the carriage, drinking tea and munching biscuits were the monied 1%-the upper class.  Scrambling to keep a foothold hanging on for dear life on the outside of the carriage and kicking at the hands reaching up from the muddy track were the middle class.  And climbing over each other, balancing on the heads and shoulders of the poor devils sinking into the morass and reaching up trying to pull themselves onto the carriage were the lower class.

It was written over 100 years ago and was an anti-capitalist treatise.

Over the weekend I read another piece.  It was on the potential demise of the American dream, which is predicated on a healthy middle class sitting comfortably on the carriage and a lower class that is not sinking in the bog but rather walking along a proper road.   If they can't get on the first carriage, they are confident that another will come along.

The median income for a family in the United States is $49,000.  That means there are as many people earning more than that, as there are earning less than that.  And that is for a family which in more cases than not requires two incomes  to support a family at the mean and above.

Blah blah blah I'm sure many are thinking.  Tell us something new.  Don't be so left-wing.

Well, the truth is this is a massive problem.  Not just for the USA- but very seriously for the USA.

This is a nation built on consumer spending.  It was also somewhat built on a cradle-to-grave mentality which provided security and a slow but steady income growth-as a single-earner family.

Times have changed.  The two earners that it requires to earn the mean or above are working primarily to stay in place.  They do not have job security and they do not have a steadily increasing income.

Global competition has torn that model up and replaced it essentially with "just-in-time" employment, at sharply reduced wages. 

And those below the median are most likely to be single-parent (mother) families-and they represent 50% of the nation's families.

So we have a large swathe of society living on a form of subsistence income i.e. they have little if any discretionary income which means they DON'T BUY anything other then essential goods and services.

That's not a consumer-driven economy.  That's an economy surviving on providing essentials. 

As I read reports of steady enonomic growth in the US and that things are getting better and that there are more people being employed I am struck by the fact that incomes are not rising....

This is not good.