Middle Class in Turmoil...

[rogerluli]

If getting the visa and adjusting to a cross-cultural relationship was not quite enough to fill your plate... perhaps the latest reality check on the squeezed middle class will help keep you awake at night... Most of us here are members of the great middle of America financially. And that middle is being squeezed as never before by rising expenses and stagnant earnings. Some of us are renters who have seen the price of home ownership climb out of sight. Many of us are homeowners and although we have enjoyed appreciation in our property, we have also found it necessary to tap into that equity in order to meet living expenses. More of us have to live without the safety net of health insurance in the richest country on the planet...and rising energy costs that we all must have seem a given for the forseeable future...For many Americans the thought of being able to look forward to a comfortable retirement in a paid for home is only a dream...

 

 

Middle Class in Turmoil

Economic risks up sharply for most families since 2001 -

 

September 28, 2006

 

 

America¡¯s middle class families are caught in an unprecedented crunch. Despite a growing economy, their incomes have remained stagnant or flat. And because prices for big ticket items such as housing and health care have gone through the roof, families are not able to put away a rainy day fund. Instead, middle class families have had to take on more debt to maintain their basic needs and, as a consequence, have been unable to save. Taken together, these trends have left families increasingly vulnerable to the impact of an economic emergency, such as unemployment or a medical emergency.

 

According to the report, more families are more vulnerable today to unexpected events such as a layoff or a medical emergency. A few stark indicators of the precarious financial position of America¡¯s middle class provide a much-needed reality check, highlighting why so many families feel economically insecure today. Over the past five years, the number of families with enough resources to weather a layoff or a medical emergency has declined dramatically, wiping out the gains in financial security that many families experienced in the 1990s. Specifically:

 

Families are increasingly unable to save for a rainy day. Five years into an economic recovery, average job growth is one-fifth that of previous business cycles and wages are flat when inflation is factored into the equation. At the same time, the cost of families¡¯ top five expenditures¡ª medical care, housing, food, household operations and cars¡ªhave risen more than twice as fast as the cost of the bottom five items. To maintain their day-to-day consumption, families took on a record amount of debt equivalent to 126.4 percent of disposable income in the first quarter of 2006.

 

Families capable of weathering this financial crunch are diminishing. Less than a third of families boast accumulated financial wealth equal to three months¡¯ income (counting all financial assets, including retirement savings accounts minus debt), a decline of 6.3 percentage points to 32.6 percent in 2004, the last year in which this data was available, from 38.9 percent in 2001. This trend is particularly pronounced among typical middle class families¡ªdual income couples between the ages of 36 and 54 who earn between $18,500 and $88,030 a year. Families in this middle 60 percent of income distribution who have three months¡¯ income stowed away in liquid financial wealth declined 10.5 percentage points over the same period: to 18.3 percent from 28.8 percent.

 

Declining wealth and savings pose significant risks to middle class families facing a spell of unemployment. The weakest job growth since the Great Depression means that people who lose their jobs today face a much harder time finding new employment. Long-term unemployment in this business cycle is on average the highest for any business cycle, with 17.6 weeks as the average period of unemployment. As a result, a spell of unemployment can be quite costly for families. Less than half of all families (48.3%) could weather a bout of unemployment in 2004¡ªthe last year data was available¡ªdown from 53.8 percent in 2001. Again, the trend is particularly pronounced for typical middle-income families, only 28.8 percent of which could sustain themselves through a spell of unemployment in 2004 compared to 39.2 percent in 2001.

 

A medical emergency is an even bigger risk for families¡¯ financial security. Ever rising health care costs consistently outpace overall inflation, leading more employers to shift more and more of those costs to their employees through higher premiums, co-pays and deductibles, or eliminating their health care coverage altogether. As a result, the cost of a typical medical emergency jumped to $3,313 in 2004, according to our analysis of the most recent figures, from $2,832 in 2001 (in 2004 dollars). That¡¯s less than $500 dollars over four years, yet families financially capable of weathering such an increase declined to 36 percent in 2004 compared to 43.7 percent in 2001. And once again, the decline is most pronounced among typical middle class families. Less than a quarter of these families (23.1 percent) could cope financially with a medical emergency in 2004, down from 35.2 percent in 2001, a decline of 12 .1 percentage points.

[ndjarrett]

Declining wealth and savings pose significant risks to middle class families facing a spell of unemployment.

 

 

No SHIT!

 

I just went through that spell for 3 months recently, and now have NO savings. If it happens again...the 401k would also disappear (damn near tapped it this time).

 

And, should we talk about the massive salary adjustment (reduction) I had to take just to land something else?

[dstarsboy]

Wow, I thought this was just in Phoenix, where the housing prices have doubled in the last 5 years, while incomes have stayed the same and have even declined a bit in some industries.

 

Bummer that it's happening all over America though.

[rogerluli]

Declining wealth and savings pose significant risks to middle class families facing a spell of unemployment.

 

 

No SHIT!

 

I just went through that spell for 3 months recently, and now have NO savings. If it happens again...the 401k would also disappear (damn near tapped it this time).

 

And, should we talk about the massive salary adjustment (reduction) I had to take just to land something else?

 

Sorry to hear that Neal... Hope everything works out okay...I used to be in manufacturing and went through all the layoff/recall bs for years...finally went back to school and got my gummint job which is bomb proof...I think...

[chilton747]

Times are certainly not as easy as they were before when a high school drop out could make 150% of the average American wage working in a union auto plant. They had it better than many college grads.

 

Of course household necessities like a new, luxury model car are a 'necessity'. Tickets to the all star game at $150 a pop are also considered necessary. And the RV; don't forget the boat. Is the grocery cart full of hot 'n pot in the microwave meals or is it filled with raw materials to make a good meal? Take a look at what's in the cart in front of you next time you're in the grocery store.

 

I'm not saying that it's easier to get by now than in earlier times, but the basic problem is the consumer. They have already spent their next 3 years salary and are paying 20% interest, to boot.

 

THIS is where we can learn valuable lessons from our SOs.

[tonado]

No more middle class.

[notrevorich]

No more middle class.

I think the middle class is still there and life is tougher now because we want more than our parents did .

I was raised on a Farm where we had chores to do every day and worked all day on Saturday and most of Sunday .

We lived in a 3 bedroom 2 bath house that did not have AC and used a wood stove to heat part of the house in the winter time . We also had only 1 car and I was lucky enough to get an old clucker to drive to school when I was 16 .

Now I have a boat 3cars and a big house -Am I happier than my parents were - Well no

but I am now just as they were considered "middle class "

My wife has made look at things differently - she is happy all the time and is NOT materialistic

She is making me curb some of my stupid materialistic needs which will probably allow me save more money

[rogerluli]

In the gummint unit over 1 stop from mine there was a recent job opening. It paid well and had all the usual govt perks and only really required a commercial driver's license and basic skills to start. There were 206 applicants for 1 job... and this is in quite a rich town... People are VERY concerned about the security of their jobs because they can see how close they are to the street...

[Cerberus]

In the gummint unit over 1 stop from mine there was a recent job opening. It paid well and had all the usual govt perks and only really required a commercial driver's license and basic skills to start. There were 206 applicants for 1 job... and this is in quite a rich town... People are VERY concerned about the security of their jobs because they can see how close they are to the street...

Roger,

 

My question is how long do we have, before the middle class is totally eliminated? Day to day living is becoming harder and harder for all of the middle-class that really make up the backbone of the US economy

 

Two classes:

 

The "haves": People with the majority of the money and no longer worry about the day-to-day needs or extravagant spending.

 

The "Have-Nots": Everyone else!

[rogerluli]

In the gummint unit over 1 stop from mine there was a recent job opening. It paid well and had all the usual govt perks and only really required a commercial driver's license and basic skills to start. There were 206 applicants for 1 job... and this is in quite a rich town... People are VERY concerned about the security of their jobs because they can see how close they are to the street...

Roger,

 

My question is how long do we have, before the middle class is totally eliminated? Day to day living is becoming harder and harder for all of the middle-class that really make up the backbone of the US economy

 

Two classes:

 

The "haves": People with the majority of the money and no longer worry about the day-to-day needs or extravagant spending.

 

The "Have-Nots": Everyone else!

 

a "Rising Tide" has not lifted most boats... , except for luxury liners...

[rogerluli]

Times are certainly not as easy as they were before when a high school drop out could make 150% of the average American wage working in a union auto plant. They had it better than many college grads.

 

Of course household necessities like a new, luxury model car are a 'necessity'. Tickets to the all star game at $150 a pop are also considered necessary. And the RV; don't forget the boat. Is the grocery cart full of hot 'n pot in the microwave meals or is it filled with raw materials to make a good meal? Take a look at what's in the cart in front of you next time you're in the grocery store.

 

I'm not saying that it's easier to get by now than in earlier times, but the basic problem is the consumer. They have already spent their next 3 years salary and are paying 20% interest, to boot.

 

In many cases you're right Don. There are a ton of people with 40 year mortgages, 100% home equity loans and 7 year auto loans... Of course they're staying up at night worrying about the next sneeze in the economy... But there still are many responsible people not living that way at all but just unable to find good-paying jobs. International competition has forced wage cuts in many industries in America but the US has NOT become a cheaper place in which to live, but a more expensive one...

[toolman]

i agree being a steelworker,,,do not even feel middleclass anymore,,,we will keep the faith,,

[DMikeS4321]

Times are certainly not as easy as they were before when a high school drop out could make 150% of the average American wage working in a union auto plant. They had it better than many college grads.

 

Of course household necessities like a new, luxury model car are a 'necessity'. Tickets to the all star game at $150 a pop are also considered necessary. And the RV; don't forget the boat. Is the grocery cart full of hot 'n pot in the microwave meals or is it filled with raw materials to make a good meal? Take a look at what's in the cart in front of you next time you're in the grocery store.

 

I'm not saying that it's easier to get by now than in earlier times, but the basic problem is the consumer. They have already spent their next 3 years salary and are paying 20% interest, to boot.

 

All good points. Many in this country are spoiled rotten. What about "health care"? When my sister was born, my Dad couldn't pay. The doctor told him "Pay what you can, when you can". Things worked out. I remember the doctor coming to my HOME to see me when I was sick. This was the late 1950's. Do we have better "health care" now? I don't think the intrusion of a bloated insurance bureaucracy has helped.

 

I was just reading last week that Toyota Japan pays about $200 per car manufactured for employee health care. In the U.S., it's $1500!!! How competitive is that? As for government jobs... sorry, there are far too many of them. Defending our country and safeguarding our rights from threats inside and outside the U.S. is just about all our government should be doing. WTF else is going on? What has the government done for me lately, other than spend the money I put into the "trust fund" they sponsored for my "benefit"?

 

Another case in point... sales tax in CA has sneaked up from 6.0% to 7.75% in most areas. This is an increase of darned near 30% in revenue for the Golden State. What do we have to show for it?? Same with gasoline and diesel fuel. As the price has tripled, sales tax revenue has tripled. What do we have to show for it??

 

Why is all this happening? It's called redistribution of wealth, and it benefits NO ONE outside the power elite. Very few people starved during the depression; do we really think people would starve now, if we cut back on the ridiculous over-expenditure of government funds?? I doubt it.

 

What is the Federal Budget now, $2.1 trillion? MORE?? That alone is over $7000 for every man, woman and child in the U.S. Add state and local to that figure, then ask yourself, are we getting enough for our money?? Personal financial stupidity aside, we are being killed by our own government(s).

 

Best Regards

 

P.S. For those who don't think we should be involved in fighting fundamentalist terrorists overseas, that only accounts for about 13% of the total FEDERAL budget.

Edited May 14, 2007 by DMikeS4321 (see edit history)

[SheLikesME?]

Geeze. My wife cannot understand my situation with my income. Also she doesn't understand the losses in divorce nor the effort I have to put into a job that is too much to handle and way too political making it worse. So I hang out here and make it worse B)

 

Well she doesn't care now if I sell off all and get the stress out of my life. Cash in the bank is as good as equity with her. good. I may not sell the primary house but it is nice to know she is not so stuck on staying in the house she didn't like in the first place.

 

I can't imagine making the money I make and yet there in black and white are the figures. I need to sell out and live small so I can save for bad health and retirement. Don I like to see your transition. I am learning. I thought I was trying before, but with this wife I am wasteful. All Americans are wasteful.

 

Roger your one lucky dude to get those condos in China. Good fortune. I still won't let mine sell her place. Of course if she does let it be for a trade for that beach house in Dalian she dreams of.

[rogerluli]

Doug I am definitely NOT one of the rich guys here... But I have a job that suits me very well. I have a sum total of ZERO stress with it and to me that is very valuable. I do not have a type A+ personality, more like a type Z... I do not understand people KILLING themselves to make more and more $$$$ to buy more and more STUFF...To me the phrase...HE WHO DIES WITH THE MOST TOYS WINS...makes no sense... I mean isn't he DEAD???