|
I got dunked into a little hot water with some of our readers after I wrote a light hearted article about the disappearing middle class. Many of us grew up with middle class incomes and identities and many of us consider our membership in the middle class a birthright. Frankly, I was surprised with how touchy people get over the subject. I mean is it my fault that the middle class is shrinking? I shouldn’t have asked that question because, in all honesty, I must confess that I’m as guilty as the next guy of betraying my own class and making it shrink. It’s time for the middle class to admit that we all contributed to decimating the ranks of our tribe.
Let’s start with imports. Even in the midst of this great recession, we managed to import $50 billion more than we exported in June - that’s almost $2 billion a day. A billion in imports here and a billion there and soon you’re talking millions of jobs. Like the eight million jobs that disappeared over the last decade.
It’s not news that our manufacturing base is shrinking. America is still the world’s largest manufacturer and our industrial workers are among the most productive. The productivity of the twelve million workers we have deployed on assembly lines continues to improve and they still account for 18% of the globes industrial output. That’s the good news. The bad news is that only one out of ten Americans still works in manufacturing.
According to an associated press report, some 600,000 new jobs were created in 2010. But four out of five of them were in the service industry. Pedicures, manicures and “want fries with that sir?”
And it’s not just cheap Chinese labor that’s dismantling our manufacturing base. In June, Germany somehow managed to run an $18 billion dollar trade surplus versus our $50 billion dollar deficit. How did they do it? German workers save more, they tend to buy German stuff and when they buy almost anything, they pay high consumption ‘value added’ taxes. The average German works less hours, has longer vacations, watches his money, consumes less energy, eats less, drinks more beer and lives in smaller quarters. Incidentally, most of the beer is domestically produced and quite good.
The truth is the American middle class is consuming its way out of the middle class. Why do we even identify ourselves as ‘consumers?’ Why can’t we be more specific? “I’m a big red meat eater. I also do lattes and prefer white wines from Chile and German Beer.” “I’m a European car buyer and do a little dabbling in purchasing Japanese electronics.” “When I was younger, I was into fast German cars, now I’m a Swiss watch collector."
Middle class American consumers responded to two decades of wage stagnation by going on a spending spree financed by leveraging their home equity. And now they have to deal with the financial hangover in a job market where the official unemployment rate is 9.5% with the unofficial rate is more like 17% and it takes longer to land a job and the jobs available aren’t full time, don’t pay as well and aren’t as secure. And three years into the great recession, how have we altered our spending habits? by collectively running up another $50 billion in trade deficits in June.
Look at the media and the stock market, they light up with every uptick in consumer spending - like that’s the magic wand that will fire up the economy. It will fire up somebody’s economy, but it won’t be ours. Retailers might do a bit better but, with our taste for imports, the net result will be more jobs overseas - not over here.
Let’s sober up folks. Forget all the pep talk from Washington and Wall Street. For many middle class Americans, the next decade is going to be tough and adjusting to new economic realities starts with how you spend your money or, more accurately, how you save your money and learn to get by on less.
We’re not alarmists and we’re not subscribing to all that scare talk about America descending into third world status. That just ain’t going to happen. We’re still one of the most prosperous societies in human history and we’re likely to have a decent standard of living for a long time to come. If you want to break it down to raw numbers, the worst case scenario is where the average middle class family might have to adjust to a 20% drop in purchasing power. With a radical change in consumption habits and a little discipline, most of us should have no problem making the required adjustments because that’s what it will take to remain in the middle class. Our mission at LiveCheap.com is to offer up some common sense advice on how make the necessary adjustments while maintaining the same standard of living. It’s our little way of shoring up the disappearing middle class - saving one consumer at a time.
Read another great related article: 12 Ways to Determine if You're Still Middle Class?
More Articles:
Like this article? Share it on Facebook or more!
          |
