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how the middle class became the under class

beethoven

Well-known member
http://money.cnn.com/2011/02/16/news/economy/middle_class/index.htm

How the middle class became the underclass

By Annalyn Censky, staff reporterFebruary 16, 2011: 4:30 PM ET


NEW YORK (CNNMoney) -- Are you better off than your parents?

Probably not if you're in the middle class.

Incomes for 90% of Americans have been stuck in neutral, and it's not just because of the Great Recession. Middle-class incomes have been stagnant for at least a generation, while the wealthiest tier has surged ahead at lighting speed.

In 1988, the income of an average American taxpayer was $33,400, adjusted for inflation. Fast forward 20 years, and not much had changed: The average income was still just $33,000 in 2008, according to IRS data.

Meanwhile, the richest 1% of Americans -- those making $380,000 or more -- have seen their incomes grow 33% over the last 20 years, leaving average Americans in the dust.

Experts point to some of the usual suspects -- like technology and globalization -- to explain the widening gap between the haves and have-nots.

But there's more to the story.
A real drag on the middle class

One major pull on the working man was the decline of unions and other labor protections, said Bill Rodgers, a former chief economist for the Labor Department, now a professor at Rutgers University.

Because of deals struck through collective bargaining, union workers have traditionally earned 15% to 20% more than their non-union counterparts, Rodgers said.

But union membership has declined rapidly over the past 30 years. In 1983, union workers made up about 20% of the workforce. In 2010, they represented less than 12%.

"The erosion of collective bargaining is a key factor to explain why low-wage workers and middle income workers have seen their wages not stay up with inflation," Rodgers said.

Without collective bargaining pushing up wages, especially for blue-collar work -- average incomes have stagnated.
0:00 /1:53How do you define middle class?

International competition is another factor. While globalization has lifted millions out of poverty in developing nations, it hasn't exactly been a win for middle class workers in the U.S.

Factory workers have seen many of their jobs shipped to other countries where labor is cheaper, putting more downward pressure on American wages.

"As we became more connected to China, that poses the question of whether our wages are being set in Beijing," Rodgers said.

Finding it harder to compete with cheaper manufacturing costs abroad, the U.S. has emerged as primarily a services-producing economy. That trend has created a cultural shift in the job skills American employers are looking for.

Whereas 50 years earlier, there were plenty of blue collar opportunities for workers who had only high school diploma, now employers seek "soft skills" that are typically honed in college, Rodgers said.
A boon for the rich

While average folks were losing ground in the economy, the wealthiest were capitalizing on some of those same factors, and driving an even bigger wedge between themselves and the rest of America.

For example, though globalization has been a drag on labor, it's been a major win for corporations who've used new global channels to reduce costs and boost profits. In addition, new markets around the world have created even greater demand for their products.

"With a global economy, people who have extraordinary skills... whether they be in financial services, technology, entertainment or media, have a bigger place to play and be rewarded from," said Alan Johnson, a Wall Street compensation consultant.

As a result, the disparity between the wages for college educated workers versus high school grads has widened significantly since the 1980s.

In 1980, workers with a high school diploma earned about 71% of what college-educated workers made. In 2010, that number fell to 55%.

Another driver of the rich: The stock market.

The S&P 500 has gained more than 1,300% since 1970. While that's helped the American economy grow, the benefits have been disproportionately reaped by the wealthy.

And public policy of the past few decades has only encouraged the trend.
0:00 /1:21Considering yourself 'rich'

The 1980s was a period of anti-regulation, presided over by President Reagan, who loosened rules governing banks and thrifts.

A major game changer came during the Clinton era, when barriers between commercial and investment banks, enacted during the post-Depression era, were removed.

In 2000, the Commodity Futures Modernization Act also weakened the government's oversight of complex securities, allowing financial innovations to take off, creating unprecedented amounts of wealth both for the overall economy, and for those directly involved in the financial sector.

Tax cuts enacted during the Bush administration and extended under Obama were also a major windfall for the nation's richest.

And as then-Federal Reserve chairman Alan Greenspan brought interest rates down to new lows during the decade, the housing market experienced explosive growth.

"We were all drinking the Kool-aid, Greenspan was tending bar, Bernanke and the academic establishment were supplying the liquor," Deutsche Bank managing director Ajay Kapur wrote in a research report in 2009.

But the story didn't end well. Eventually, it all came crashing down, resulting in the worst economic slump since the Great Depression.

With the unemployment rate still excessively high and the real estate market showing few signs of rebounding, the American middle class is still reeling from the effects of the Great Recession.

Meanwhile, as corporate profits come roaring back and the stock market charges ahead, the wealthiest people continue to eclipse their middle-class counterparts.

"I think it's a terrible dilemma, because what we're obviously heading toward is some kind of class warfare," Johnson said.
 

Mike

Well-known member
To say that wages have declined due to decreased "Unions", then turn right around and say that jobs have moved overseas where labor is cheaper is STUPID, STUPID, STUPID.

Think maybe the "Unions" might have pushed U.S. wages too far above the competition and now we can't compete?
 

TSR

Well-known member
This is one thing I agree with the president on-no tax breaks to any upstart company unless they keep everything here in America. Here I go again with a story about President Lincoln, fitting for president's day, I guess. During Lincoln's tenure his Sec of State came to him while they were building a lengthy railroad line. He told him he had found crossties for half the price in Europe. Lincoln said no thanks we'll just buy them here, that way the money stays here. :wink:
No wonder the Egyptian people are in revolt, at least a part of it is the economic outlook for the average Egyptian. You can't blame anyone for wanting to better themselves. Let's see, the upper class income has inncreased 400% while the blue collar worker's income has remained stagnant over the last~ 20 yrs here in the US

I guess I'm a C-Span addict, but the other day a Republican Congressman said his health insurance through the government cost him $1500 monthly for a family plan. I heard this myself as he was responding to a viewer's phone call. Could this be true?
 

hypocritexposer

Well-known member
TSR said:
This is one thing I agree with the president on-no tax breaks to any upstart company unless they keep everything here in America. Here I go again with a story about President Lincoln, fitting for president's day, I guess. During Lincoln's tenure his Sec of State came to him while they were building a lengthy railroad line. He told him he had found crossties for half the price in Europe. Lincoln said no thanks we'll just buy them here, that way the money stays here. :wink:
No wonder the Egyptian people are in revolt, at least a part of it is the economic outlook for the average Egyptian. You can't blame anyone for wanting to better themselves. Let's see, the upper class income has inncreased 400% while the blue collar worker's income has remained stagnant over the last~ 20 yrs here in the US

I guess I'm a C-Span addict, but the other day a Republican Congressman said his health insurance through the government cost him $1500 monthly for a family plan. I heard this myself as he was responding to a viewer's phone call. Could this be true?



there has been lots of talk about "tax breaks" on the forums the last few days, in regards to the Wisconsin protests.

Many people falsely claim that Scott Walker is giving tax breaks to big business.

What Gov. Walker's legislation does is to give out "tax incentives", I call them tax credits, which are totally different than tax breaks/reduction.

with tax credits you get the business/corp. to contribute to the economy first, by creating a job or building capital assets that are solid, like a factory. Then the tax credit is applied.

Works much better, but unfortunately some people that I have been discussing it with the last few days can not see the difference.
 

Steve

Well-known member
has anyone here ever looked at why and where the rich are making their money?

, hedge funds, stock market, I could list the dozen or so main areas where top earners get their top earnings from.. and CEO's and top execs fall in this group.. with out market earnings no one would pay them the outrageous salaries that are mostly in stock holdings,..

and where does the market get all this money, investors, well if that was wholly true it would have been a shorter poker game..

the market build wealth from sources like retirement funds, 401's IRAs, insurance investment ect..

this "wealth" is managed by the RICH, and is invested in a manner to keep the sucker on the hook.. if you lost everything every year, would you put another dime into your 401? , if you lost most your retirement account every year, would you bank on it for retirement, or find another savings source?

no but if you saw great gains for say 10, 20 years with little dips every 9 years, and then every 17 years or so there was a wiping out, heck you can still recover and stick away a bit more and make it up..

you have little if any control in how your retirement, 401, IRA pension plan is invested.. yet you keep sticking 10% or more away every year..
even with corporate matches few have really been able to keep up and maintain solid earnings.

yet who really gains.. by all reports it isn't the middle class.. (you know the ones who are putting in 10% or more every month)..

the market is like going to Vegas gambling, the house always wins..
 
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