Why is the middle class not gaining ground?

While there is a somewhat ambiguous definition of “middle class,” there is wide-spread understanding that the middle class is not growing or progressing in income. That means a lower standard of living than may have been anticipated. Some of the decline in middle class numbers is because some people have moved up and some down.

I have two questions; was the standard of living ever real and two, are we seeing fundamental changes in the world that are affecting Americans more than anything we may do at home? Consider the following from Wikipedia:

In February 2009, The Economist announced that over half the world’s population now belongs to the middle class, as a result of rapid growth in emerging countries. It characterized the middle class as having a reasonable amount of discretionary income, so that they do not live from hand to mouth as the poor do, and defined it as beginning at the point where people have roughly a third of their income left for discretionary spending after paying for basic food and shelter. This allows people to buy consumer goods, improve their health care, and provide for their children’s education. Most of the emerging middle class consists of people who are middle-class by the standards of the developing world but not the rich one, since their money incomes do not match developed country levels, but the percentage of it which is discretionary does. By this definition, the number of middle-class people in Asia exceeded that in the West sometime around 2007 or 2008.[19]

The Economist’s article pointed out that in many emerging countries the middle class has not grown incrementally, but explosively. The rapid growth results from the fact that the majority of the people fall into the middle of a right-skewed bell-shaped curve, and when the peak of the population curve crosses the threshold into the middle class, the number of people in the middle class grows enormously. In addition, when the curve crosses the threshold, economic forces cause the bulge to become taller as incomes at that level grow faster than incomes in other ranges. The point at which the poor start entering the middle class by the millions is the time when poor countries get the maximum benefit from cheap labour through international trade, before they price themselves out of world markets for cheap goods. It is also a period of rapid urbanization, when subsistence farmers abandon marginal farms to work in factories, resulting in a several-fold increase in their economic productivity before their wages catch up to international levels. That stage was reached in China some time between 1990 and 2005, when the middle class grew from 15% to 62% of the population, and is just being reached in India now.

The Economist predicted that surge across the poverty line should continue for a couple of decades and the global middle class will grow enormously between now and 2030.

If these predictions and assessments are correct, it appears that the US middle class is in a period of adjustment caused not by internal forces, but a changing world economy. Those who have set their lifestyle based on two incomes or worse on borrowing may be in for a long period of adjustment. Those who have ignored the cries for better education and skilled training may forever be locked into a downward cycle as the rest of the world catches up to the United States … at the expense of some Americans.

The claims that the middle class is suffering because of a decline in unions is a false excuse it seems to me. There is only so much that a union can extract from a company trying to compete on the world scene. There is only so much a company can charge for its products and services to support higher wages when it must compete with international organizations.

So where does this leave us? Can the government entitlement program its way to sustaining the middle class? Will dependency on government programs lead to more mediocrity and less initiative and drive? Can we successfully bring back solid middle class manufacturing jobs to the US? Will Americans support the resulting products or continue to look for the lowest price in foreign goods? Do we need a fundamental restructure in our expected standard of living more realistic with global society? If not, what do we have to do to keep ahead of the rest of the world? We cannot wish this to happen, nor can we, in my opinion, expect government to mandate change of this kind.

Perhaps it’s time to look in the mirror and reconsider how we do a lot of things.

One comment

  1. A common apologist’s rant that might hold water without any reference or other examples to compare.

    However the nature of the government and how much it can be held to be the honest agent of all of society figures greatly. As a result the government must be the agent that keeps all other leadership from corporations to unions (and they almost all have universal unionization) along the same path as honest agency.

    Add to that such empowerment of the entire population as free education for as far as your mind can go, a welfare system that provides a platform for growth and does not crush or punish and even low cost loans that supports housing or small business, and reaps returns to Society that far exceeds the investment.Toss in timely defense of its people and industries from internal or foreign depredation, and the common wealth of the society expands enormously. Not least because the activity of each individual produces the maximum value to BOTH the society at large as well as themselves, and real wealth in the form of stuff and leisure become commonplace. That is the real definition of a Socialized Society.

    Some of Northern Europe, Iceland, the Pacific Rim countries of South Korea, Japan, Australia, and New Zealand,; all have various takes on this model and some are better than others but everyone of them have come from behind the US to beat us at the game we used to know well but have gone the other way.

    Like

Leave a Reply