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Two-Thirds of Americans Consider Themselves Middle Class – Most Are Dead Wrong
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Two-Thirds of Americans Consider Themselves Middle Class – Most Are Dead Wrong

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The middle class in America is steadily getting poorer. The mechanisms that supported its financial well-being no longer work.

On the eve of the bicentennial of the death of the founder of Marxism and author of the theory of surplus value Karl Marx, many are inexorably convinced of his rightness over the inexorable influence of the laws of economics on people's lives.

Of course, this is not his textbook thesis about the greatness of the proletariat and the dangers of entrepreneurship. Other, but also inexorable economic laws have led to reliably sad facts: In most developed economies, the size of the middle class is steadily declining. Most if not all sociologists have noted this fact, but no one has explained it yet.

For ideologists of the market economy of the 1950s and 1960s, the middle class seemed almost the basis of the capitalist way of life, such a “proletariat” in the Marx's enthusiastic sense of the free world. In the 1960s-1970s, the size of this "middle class" in the United States was approaching 2/3 of the working-age population (80 million of 130 million), and these people generally lived well, getting better from year to year. Apparently it was a coincidence, but the share of the “middle class” in the total income of the US population was also about 60%, and this figure tended to increase.

The current middle class can already boast at best 43% of income. And as for the rich, while they traditionally have no more than 5% of the population, their share of American income has increased from 20% to nearly 50%. Moreover, the middle class itself, whose numbers are trying to be calculated from formal income criteria of thousands of dollars a year, is rapidly becoming poorer — even in absolute figures of average income. From 2001 to 2015, for example, the decrease in income was 4%, that is, about $2,000 per year, with a significant increase in prices for all without exception. But the official figure of the lower limit of belonging to the middle class is about $45,000 annual income. This figure can be forgotten today.

"If in Washington you refer to a person who earns $100,000 a year, with the words: ‘Buddy, you are rich,’ you will definitely lead him into a rage,” notes Rick Edelman, a Fairfax Corporation financial consultant and author of the book Ordinary People, Unusual Capital. "In capital such income doesn't allow to pay for the education of children in College, or even to save for their own old age."

What has happened in these less than 50 years? Let's try to consider the situation comprehensively.

Americans don’t believe what is happening

The middle class has been steadily shrinking, but most Americans still believe that they are a part of it.  Perhaps this is due at least in part to the egalitarian values which have been pounded into our heads for most of our lives.  Very few Americans would have the gall to define themselves as "upper class", and I have never met anyone that would describe themselves as "lower class".  In place of "lower class", many politicians now like to use the much more politically correct term "working class", but a more apt description might be "the working poor".  Today, half of all American workers make less than $30,533 a year, and you certainly cannot support a middle class lifestyle for a family with children on that kind of income.

Our incomes have stagnated as the cost of living has soared, and the middle class has experienced steady erosion as a result.  But despite all that, 68% of all Americans still consider themselves to be "middle class"…

That’s according to new data from Northwestern Mutual’s 2018 Planning & Progress Study, which found that the 68% number is down 2% from last year. However, because of the fuzziness of the definition, far more Americans consider themselves middle-class than technically qualify based on income.

In reality, the middle class now makes up just over 50% of the total U.S. population, according to a recent report from Pew Research Center, which used 2016 data. That’s compared to 61% in 1971.

So according to that survey, somewhere around 18% of all Americans wrongly believe that they belong to the middle class.

Middle Class: Who are these people?

The concept of the middle class has been used for two and a half millennia — it was first used in about 420 BC by the ancient Greek playwright Euripides, who put into the mouth of Theseus, the hero of the “Begging” comedy, such words: "Only the middle class for the city support; it submits to the laws and power." In the next century, the idea was developed by the great philosopher Aristotle, who pointed out in his treatise 'Politics' that "the state, consisting of average people, will have the best state system".

The current sense of the term originated in 1913 when the UK Statistical Office designated the term “middle class” as segments of the population between the ruling class and the proletariat. This was a kind of response to orthodox Marxism, which divided humanity only into the proletariat and the bourgeoisie and forced to distinguish between them a variety of “layers” (for such a “two-color” vision of the world was clearly contrary to the observed reality). Since that time, Western sociology has regarded the middle class as the main pillar of the political and economic stability of the state — in full compliance with the precepts of Aristotle.

The system failed

In the 1970s, the system experienced a significant failure. Publicist, economist and politician Robert Reich, former Minister of Labor in the administration of his fellow Oxford student Bill Clinton went into great detail on this issue in his book Aftershock: The Next Economy and America's Future, which has been translated into several world languages.

The beginning of the failure of the middle class failed in the financial and social abyss dates back to 1977 according to Reich. On the one hand, the robbery of the American population by oil corporations began earlier, in 1974, and by 1977 was already in full swing, and Ronald Reagan reforms began later, which, strictly speaking, were not directed against the middle class.

Reagan reduced taxes for the richest from 70% to 35% and deprived the poor of benefits and food stamps. But even though during Clinton's presidency who, according to his Minister of Labor, really wanted the middle class to regain its former economic power, and having a budget surplus could somehow finance it — nothing has changed by and large. Therefore, the middle class had to solve their financial problems on their own.

At first, the situation led to wives going to work in all sorts of offices and shops in the 1970s, ceasing to be housewives. German economist Olaf Gersemann indicates in the book Cowboy Capitalism that in 1972 the bulk of the family incomes (on average) came from the husband's salary. "In the 1970s, families with two workers were rare. Today they are common, " he writes. The proportion of households where the woman works from 1982 to 2002 increased from 60% to 72%; by 2010, to 74%. In fact, if we take the income per worker in the family, the level of middle class wages (PPP) even from 1982 to 2002 fell by at least 15%.

In the 1990s, this reserve was exhausted and the heads of families already had to roll up their sleeves and work overtime, so the United States set a dubious record for the length of the working week. Even the workaholic Japanese work less: The American works 1,966 hours a year on average, the Japanese — 1,889 hours.

Then this source of additional money also ceased to solve the problem of lack of money, and in the course went mortgages and investments in real estate. The hope that this very real estate would eventually give such a "passive income" that life will improve, died last – in 2007-2008, when the financial crisis turned the owners of unoccupied real estate into potential bankrupts. The government of course saved the rich again, setting aside trillions of budget money (remind you of anything?), and the "middle class" was once again abandoned to its fate. Now the debt level of the average household belonging to the middle class has risen to $70,700, while in 1989, not the best year, it was $25,300.

How much do American families spend?

Two-Thirds of Americans Consider Themselves Middle Class – Most Are Dead Wrong

Apparently, it's time to take a closer look at how the "typical middle-class representatives" of the United States live today. Outstanding humanist and supporter of helping the poor, Barack Obama noted with satisfaction that the "average American family" received in the last years of his reign $56,500 of annual income, according to data from the U.S. Census Bureau. This data is even higher than some lower abstract figures, for example, several optimists consider the limit to be $40-46,000 annual income.

What can you afford for this money? Almost nothing, no matter how sad that is. Here is a detailed breakdown of the articles:

●      About 20% of family income earned sent into Federal and State Tax Treasury. That is $11,303, including benefits and write-offs.

●      Therefore, $45,213 or $3,676 per month remains in hand.

●      The monthly payment for a 30-year mortgage or rental home is $1,061 nationwide. As a result, almost a third of family income go for a roof over your head. After paying the bill for the apartment or house, the family has $2,615 left.

●      The second large-scale expenditure is payment of debts on credit cards, consumer loans or loans for education... The amount of monthly payments varies in studies of various financial institutions and is about $690. Thus, getting rid of once taken debts reduces the monthly family budget to $1,925.

●      The third column of expenses is medical insurance. For "two and a half" people, it costs from $673 to $1,500 per month. After solving problems with insurance, an ordinary family has $1,252.

●      From this amount, it's necessary to allocate money for the car, which since the 1980s is the main characteristic of the middle class. Insurance, repairs, gasoline, plus average loan payments not included in the previous columns are $196. That leaves $1,056.

●      Then, the average American family pays $193 for utilities, cable TV, Internet, and mobile communications.

●      It turns out that after solving problems with housing, transport, health insurance, and the Internet, only $863 is left per month.

●      That’s $28.70 per day for “two and a half” people (average number of middle American families) or $11.50 per person.

Now it's time to think about the other inevitable costs of the average American family: buying food, clothing, cleaning supplies, entertainment (movies, sports games, and restaurants), travel (at least once a year), gifts to friends and relatives, savings for emergencies and retirement, and most importantly — the cost of raising children. It seems the money simply disappears.

As a result, the middle class is less likely to marry, less likely to have children, and more likely to live in homes with people from several generations. And the worst thing is that more are often consciously moving into the poor class, which guarantees preferential medical care, food stamps, and many other benefits. The numbers and output are taken from here.

Of course, these calculations can be challenged in one direction or another. The same Robert Reich in his film gives a much larger figure on taxes, but medical insurance seems to be able to cost less. He said: "the middle American family would have earned $82,500 a year, despite the fact that the current mayor of Bill de Blasio considers income below $93,600 the lot of the 'poor.'”

Who will feed Americans?

It's time to ask a Marxist question: Why does American society treat its breadwinners with such indifference? What about the costs that the middle class supported the American economy-industry, agriculture, and services? Who will carry them now?

The answer is very simple: The whole world. If you look closely at the structure of US industry, in the context of globalization, its "flagships" are chemical, aerospace, and the electronic industries — it sells its products both at home and abroad. The same can be said about IT, agriculture and the food industry.

The exception is American cars, which are so losing in terms of price/quality to competitors from Europe and Asia that they really are intended primarily for the "domestic consumer". Alas, this industry is in such a deep depression that it cannot affect the income of its potential buyers, as did the overcharges at the Henry Ford factories in the 1920s.

If we take the famous iPhone, the share of American components in its selling price is about 5%, according to the Inequality for All documentary.

That is, the secured "lower middle class" is not a priority in the activities of the government and is not interested in the producers of goods. But there is also the service sector, which is at least ¾ of the US economy. As employees of the "middle class" are of little interest, wages are extremely low, and many jobs are automated.

And if in a supermarket or cafe the average paycheck of the "middle class" representative is hardly more than the happy recipient of food stamps or a bus driver — then in the service sector the situation is different.

Banks need a middle class

Perhaps this conclusion has already been made by someone else — the same Robert Reich for example. But it is the banks —-- as credit institutions — that benefit from the existence of the "middle class" in its current deplorable state. People who have enough salary do not need loans. The poor and the mendicant can take such loans — but they won’t. But the person who can give all their earnings as a loan percentage to the bank is the greatest value for the banker.

Yes, the poor guy was forcibly pulled out of his comfort zone — this doesn’t matter to the bank. And if you remember that the owners of real estate and insurance companies are also often banks, it becomes clear who primarily gets rich due to impoverishment, and in the future the extinction of the once prosperous and numerically growing middle class of the United States.

This is an objective, economic conclusion, but it's not the only one. It is possible that the current situation is accompanied by subjective reasons from the field of psychology. About 1% of the richest understand that without “specialists” — 15% of the "upper middle class" - just cannot do. But the representatives of the next social group — 33% of the lower middle class — do they need universities, comfortable cottage settlements, and restaurant tables?

Social boosts don't work anymore

Another trend in American society reflects the proverb "the General's Son will not become a Marshal: the Marshal has his own son." Since elite education is largely a guarantee of success in life, and slots in elite universities are limited, extra competitors are not particularly needed.

In his film, Robert Reich states a very regrettable fact for America: In the 1960s it was free to study at the University of Berkeley for those of lower income, but by the 1990s it had risen to a symbolic $700 a year. And under Obama, when the film Inequality For All was made, this figure rose to $16,000.

It is clear that people from the lower social group will think twice before taking a school loan. Especially in the United States — according to the Chronicle of Higher Education more than 317,000 people with a higher education, including more than 8,000 with a degree, earn a living as waiters. 5,000 Ph.D. holders work as doormen, 80,000 as bartenders, and 18,000 as parking guards. In General, 17 million Americans with a completed higher education, according to the US Department of labor statistics, work in specialties that require less than a bachelor’s.

Thus, globalization and scientific and technological progress have undermined the "society of equal opportunities," which the US has positioned itself as throughout its history.

This trend is already taking business into account: In the early 2000s, Procter and Gamble and Heinz, the most popular soap and ketchup brands, and the jewelry company Tiffany & Co. had predicted drops in demand — the latter for cheap rings, though the sale of expensive jewelry and accessories remained stable.

It's not so important how much money a year this "lower middle class" makes — what’s important is that there is still not enough for a diamond ring, even a cheap one.

The rich get richer, the poor get poorer

After a short break in the historical scale — from Roosevelt to Nixon — it seems the rule recorded in the Gospel of Matthew finally triumphed again: "For everyone who has will be given and multiplied, and the poor will be taken away." Or translated into simple language "The rich get richer and the poor get poorer.”

In short, today the US desperately needs a real cultural revolution. This means a return to the values and principles on which the life of the nation was previously based. If the US continues on the path it is on, the middle class is doomed to die.

Author: USA Really