Enormous and Growing Inequality of Incomes: 12 Ways to Determine If You're Still Middle Class

12 Ways to Determine If You're Still Middle Class

August 11, 2010

LiveCheap.com - We get the occasional complaint from readers who think that our content is not pertinent for the ‘average’ American. In our defense, we don’t have a clue what average American means and if you know his or her name and address - please send it our way because we’d like to invite him over for an interview. It’s fair to assume however, that the average American is middle class.

That’s a very vague social and economic designation but it’s a label most Americans are comfortable with. We have millionaires that consider themselves Middle Class being waited on by minimum wage workers who also identify themselves as Middle Class. It’s all very confusing and the term has lost whatever meaning it was supposed to have. In the U.K. the vast majority of people that we consider Middle Class would be considered "Working Class". We're fantastic marketers in the U.S. hell bent on making everyone feel good.

Being middle class has always been a state of mind more than anything else. People are now middle class by a process of elimination. If you’re not poor or destitute and if you’re not rich, you’re supposedly middle class. So, we’ve come up with a way to determine if you’re still eligible for the middle class label. If you’re not something else, you’re Middle Class. Read these 12 points of elimination to see if you still qualify as "Middle Class".

1. You’re not middle class if you’re one of the 40 million Americans on food stamps. One out of five children lives below the poverty line. So, they’re not middle class either.
2. The 7.8 million millionaires in the United States are not middle class, although most of them still walk around wearing middle class hats. Even if all your wealth is tied up in your house in San Francisco, you always have the option of selling it, moving to a cheaper locale and retiring. Not Middle Class.
3. The ratio of the average top executive's paycheck to the average worker's paycheck is like 300 to one in large corporations. If you’re the executive, you’re not middle class. Even if you happen to screw up, you've got a golden parachute in place to ensure that you never have to enter the ranks of the Middle Class ever again.


4. The bottom 80 percent of American households hold less than 10% of the liquid financial assets. If you’re in the top 20%, don’t call yourself middle class, unless we can get the bottom to realize that they are Working Class. And if you’re part of the bottom 50 percent of income earners in the United States, you and 150 million Americans collectively own less than 1 percent of the nation’s wealth. So you’re not Middle Class either. You might think you are middle class based on your income, but you're not. That leaves the 30% in the middle and by all accounts, that figure is shrinking faster than a bullet train.
5. If you’re the average Federal worker, you're probably middle class because you earn 60% more than the average private sector employee and of course, you have some of the richest benefits that will ensure a nice retirement. Just remember it took thirteen trillion in deficit spending to keep you in the middle class and we can’t run 1.4 trillion annual deficits forever. Enjoy it while it lasts.
6. More than 40% of Americans who are employed are now working in low paying service jobs. Chances are if you’re in the service industry, you’re not middle class even if you do have a middle class car payment.

7. If you’re one of the 60% of Americans who live paycheck to paycheck, you might be living a Middle Class life style but maybe you really can’t afford it. Two out of five Americans don't contribute anything to retirement savings. They might be Middle Class now but they won’t be for long. You can’t live a Middle Class life style on just a social security check.


8. If the stats are to be believed, 43% of Americans have less than $10,000 saved up for retirement. That’s a price of an entry model car or a jazzed up refrigerator with a built in stereo. You’ll still retire on a social security check and you won’t be Middle Class even if you keep the refrigerator.
9. The 400 richest Americans have more wealth than 155 million Americans combined and top hedge fund managers make $900,000 an hour. They’ll never be Middle Class again and they won’t have to read this article to discover that factoid (unless they’re one of the Hunt brothers.)

10. One out of every four American workers have postponed their planned retirement age. You want to know why? Well, it’s likely because they want to retain their middle class amenities (or the debt they accumulated maintaining it) until they decide to throw in the towel just short of their 85^th birthday.

11. Last year, 1.4 million Americans filed for personal bankruptcy. A lot of them will never be Middle Class again.

12. If you're one of the millions of Americans that has seen wage stagnation for the last decade, you might have been Middle Class, but eventually you won't be. Unfortunately, you're not alone, if you look at a chart of labor costs over the last 10 years, it is rapidly approaching zero and trust me, the health care component is definitely positive meaning wages are increasingly negative.

The sad reality is that fewer and fewer ‘average’ Americans qualify as Middle Class. Even if they do qualify in terms of income, a vast majority don’t have the sense of security that used to come with a Middle Class paycheck because they can’t know for sure if they’ll have the same job for very long. When you break down the numbers and take into consideration the absence of job security and defined pension plans, it might be that only one in five workers really qualify as middle class.

The undeniable fact is that this generation of American workers will probably have a harder time maintaining a Middle Class standard of living and adjusting to that reality will require that they get more bang out of every dollar they earn. On that count, there is one positive indicator that says that an increasing number of Middle Class aspirants are ‘getting it.’ The savings rate is going up. . .If you really want to remain a member of the middle class, don’t depend on higher wages, watch your money and make the best of the wages you currently earn. Otherwise, you might not be Middle Class for much longer.

To the Federal Employee Debate. This just released on USA Today:

Federal workers have been awarded bigger average pay and benefit increases than private employees for nine years in a row. The compensation gap between federal and private workers has doubled in the past decade.

Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation, according to the Bureau of Economic Analysis. The data are the latest available.

The federal compensation advantage has grown from $30,415 in 2000 to $61,998 last year.

Read the full article.

The Culprit: Enormous and Growing Inequality of Incomes

September 17, 2010

Citizen John - This review is from: Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class (Hardcover)

In Winner-Take-All Politics, two political science professors explain what caused the Middle Class to become vulnerable. Understanding this phenomenon is the Holy Grail of contemporary economics in the U.S.

Some may feel this book is just as polarizing as the current state of politics and media in America. The decades-long decline in income taxes of wealthy individuals is cited in detail. Wage earners are usually subjected to the FICA taxes against all their ordinary income (all or almost their entire total income). But the top wealthy Americans may have only a small percentage (or none) of their income subjected to FICA taxes. Thus Warren Buffett announced that he pays a lower tax rate than his secretary. Buffett has cited income inequality for "poisoning democracy."

When you search the 'Net for Buffett quotes on inequality, you get a lot of results showing how controversial he became for stating the obvious. Drawing attention to the inequity of the tax regime won him powerful enemies. Those same people are not going to like the authors for writing Winner-Take-All. They say these political science people are condescending because they presume to tell people their political interests.

Many studies of poverty show how economic and political policies generally favor the rich throughout the world, some of which are cited in this book. Military spending and financial bailouts in particular favor the wealthy. Authors Jacob Hacker and Paul Pierson document a long U.S. policy trend favoring wealthy Americans. This trend resulted in diminished middle class access to quality healthcare and education, making it harder to keep up with the wealthy in relative terms. Further, once people have lost basic foundations of security, they are less willing and able to take on more risk in terms of investing or starting a business.

The rise of special interests has been at the expense of the middle class, according to the authors. Former President Carter talked about this and was ridiculed. Since then government has grown further from most of us. Even federal employees are not like most of us anymore. In its August 10, 2010 issue, USA Today discussed government salaries:

"At a time when workers' pay and benefits have stagnated, federal employees' average compensation has grown to more than double what private sector workers earn, a USA TODAY analysis finds."

An excellent documentary showing how difficult it is to address income inequality is One Percent, by Jamie Johnson of the Johnson & Johnson family. Collapse: How Societies Choose to Fail or Succeed, by Pulitzer Prize-winner Jared Diamond. Collapse: How Societies Choose to Fail or Succeed shows examples of what can happen when a society disregards a coming disaster until too late. I hope that Winner-Take-All will prompt people to demand more of elected officials and to arrest the growing income gap for the sake of our democracy.