The Haves and Have Nots: Government is the Last Great Source of Middle Class

It is becoming very, very difficult to live a middle class lifestyle if you do not work for the government. More than 40 percent of Americans who actually are employed are now working in service jobs in the private sector, which are often very low paying. So the tables have turned: the private sector now works to service the public sector, the last great source of middle class.

How the U.S. Feels About the Wealth Gap

February 8, 2010

American Public Radio - Most everybody has lost economic ground the past few years, but some people are still wealthy while others are getting by on less. Monthly contributor Dan Ariely talks with Kai Ryssdal about wealth distribution.

TEXT OF INTERVIEW

Kai Ryssdal: Most everybody has lost economic ground over the past two years or so. But before the recession and the financial crisis and the wealth destruction that they brought, people in the upper reaches of society were proportionately way better off than most of the rest of the country. While over the past decade or two everybody else has been figuring out how to get by with less. Dan Ariely polled more than 10,000 people -- including, via our Web site, some of you -- to discover how we feel about the ever-increasing U.S. wealth gap. Dan, it's good to talk to you again.

DAN ARIELY: Same here, as always.

Ryssdal: So it is the haves and the have nots, a little wealth distribution that you've been looking at.

ARIELY: Yes, and the first thing I should tell you is that you don't have many people listening to you.

Ryssdal: To this show?

ARIELY: Yeah, only about 600 people filled out the survey.

Ryssdal: All right. So it's actually 601 because you gotta count my mom.

ARIELY: OK, so aside from the fact that not many people are listening or at least not many people filled the survey, here is the question that we're interested in. The philosopher Rawls proposed a long time ago that a fair society is a society that if you knew everything about it, you'd be willing to join it in a random place in the distribution. You would be willing to toss the dice and put you in one bin of wealth, for example. So we posed people two questions, we said: What do you think the wealth distribution in the U.S. is? And what do you think is the ideal wealth distribution?

Ryssdal: So in other words, what do you think in the United States now, who has most of the money and then what ought it be, right?

ARIELY: That's right. And what happened is that first of all, people dramatically underestimate the wealth inequality in the U.S.

Ryssdal: Underestimate. So the fact of the matter is fewer people have more of the money.

ARIELY: That's right. So if you look at the whole world in terms of wealth distribution -- before the recession, I don't have data about after the recession -- but before the recession we're basically between the Western world and South America. We were the most skewed distribution of the Western world in terms of the haves and the have nots. But now the more interesting question is what do people think it should be. And what we found was that actually there's a huge agreement between people in terms of what it should be. And this happened to both your listeners and the general sample population. You would take, for example, Republicans and Democrats, and you would think that they would vary dramatically, and they don't, I mean they differ but they don't differ so much. So you take Republicans and they basically agree with Democrats, and you take people with low income versus high income, and they basically agree.

Ryssdal: Can you quantify what we have right now? I mean, what percentage of people have what percent of the wealth?

ARIELY: Right now the top 20 percent of the people have about 85 percent of the wealth. People think that they only own 68 percent of the wealth, so people underestimate the inequity, but if you ask them what's kind of an ideal world in the Rawls kind of sense that you would actually want to participate in, they say 33 percent. So they say in an ideal world, we want the top 20 percent to own more than 20 percent, we want them to be wealthier, but we want them to own about 33 percent of the wealth.

Ryssdal: That's so interesting. They still want the rich to be rich, but just not as rich?

ARIELY: Yeah, you know, actually, rich to be rich is a perfectly reasonable idea, right? I mean, people that have money can create jobs, they can create factories, so there is benefit in non-equal distributions of wealth, the question is what is the ideal?

Ryssdal: I'm stuck on the idea that there is a segment of society out there that thinks that inequality is the way it ought to be.

ARIELY: Yeah, you know, everybody thinks inequality is the way to be. The main lesson for me from this whole study is that when we look at the political arena, we kind of have this huge polarization, and yet when we ask people a question that is not tainted by saying Republicans or Democrats -- it's just formed and here are the numbers, and what kind of society do you want to live in -- the answers come out quite close. And for me that's kind of the optimistic outcome of all -- of this -- is, in fact, as a society, I think we're much more similar to each other than the political arena plays out how it looks like.

Ryssdal: You learn something new everyday. Dan Ariely teaches behavioral economics at Duke University. Dan, thanks a lot.

ARIELY: My pleasure.

Is the U.S. Government the Last Great Source of Middle Class American Jobs?

August 10, 2010

End of the American Dream - Once upon a time, private industry was the engine of the great American economic machine. From coast to coast, expanding industries spawned massive cities filled with optimistic Americans who were able to achieve middle class lifestyles on the good jobs that American companies were providing for them.

The largest middle class in the history of the world had been created and it seemed possible for just about everyone to live the American Dream. But today all of that has changed. The private sector is being dominated by gigantic global corporations that have shown absolutely no hesitation to ship jobs overseas. Millions upon millions of good jobs have been sent to China, India and the third world and they are never coming back.

Pay and benefits for middle class Americans working in private industry have been slowly eroding and are now at dangerously low levels. Meanwhile, working as a "government servant" has never been more rewarding. Today, the average government worker makes far more than the average worker in the private sector does.

How much more?

Well, according to a new study from the Heritage Foundation, U.S. government workers earn 30 to 40 percent more money than their private sector counterparts on average.

So, in essence, the "servants" make substantially more money than the taxpayers who employ them.

Isn't the system great?

In fact, according to the study, if you add in retirement and health care benefits, the average federal employee now earns nearly twice as much as the average private sector employee.

Ouch.

Just check out this excerpt from the study....

"Including non-cash benefits adds to this disparity. The average private-sector employer pays $9,882 per employee in annual benefits, while the federal government pays an average of $32,115 per employee."

Yes, it is very good to be a U.S. government employee in 2010.

Meanwhile, the private sector continues to bleed jobs. The U.S. economy lost 131,000 more jobs during the month of July. Needless to say, the vast majority of those job losses came from private industry.

The truth is that it is becoming very, very difficult to live a middle class lifestyle if you do not work for the government.

A reader of this column named Tim recently shared the difficult experiences he has been going through as an employee in the private sector....

Been with my current company over 12 years. Last pay raise I got was six years ago. The last two years we’ve had our salaries actually reduced. 401K matching, vacation time, company stock purchase plans, actual pay, all gone or reduced. Me and buddies figure it to be about ~14% overall reduction. At my level I was averaging a 10% annual bonus (which are now a vague memory).

All in all, I am NOW working longer hours, at a much less satisfying job (it actually sucks), for about 20-25% less than I was making just 3 years ago.

My company was once a very highly respected company for the way it treated employees and the loyalty that created. We were long term focused, made great products. But now? ha! Upper management pushes harder and harder so they get their *quarterly* bonuses. Below VP level, people, and I mean a LOT of people are now pushing 55-60+ hour weeks for fear of losing their jobs.

With all this said – I still consider myself LUCKY. Even with the ~20% pay reduction, I still make very good money. But one thing has drastically changed. I no longer circulate my money. It all goes into savings. Every spare penny. And while this is good for me, we all understand it is at the expense of the local economy.

The saddest thing is to see my kids now graduating from college (two in the last four years!). They are entering a dismal job market with no hope of “true” recovery in the foreseeable future.

Of course the U.S. government cannot keep paying their workers above market wages forever.

But for now, if you need a good job and can stand to do it, working for the U.S. government pays really, really well.

Might as well jump on the gravy train for as long as it lasts.

So is this a good system?

Of course not.

The true wealth of a nation is produced by the private sector. But unfortunately, the private sector is providing fewer and fewer good jobs in the United States.

The truth is that the U.S. government has become the last great source of middle class American jobs. This will not be able to last indefinitely, but for now those seeking the safety and security of a job ("just over broke") should be looking to the government because the chances of getting a great job in the private sector are getting slimmer by the day.

Why Can't We All Work for the Feds?

wiseGEEK - Socialism and communism are ideological doctrines that have many similarities as well as many differences. It is difficult to discern the true differences between socialism and communism, as various societies have tried different types of both systems in myriad forms, and many ideologues with different agendas have defined both systems in biased terms. Some general points distinguishing the two concepts, however, can still be identified.

One point that is frequently raised to distinguish socialism from communism is that socialism generally refers to an economic system, while communism generally refers to both an economic and a political system. As an economic system, socialism seeks to manage the economy through deliberate and collective social control. Communism, however, seeks to manage both the economy and the society by ensuring that property is owned collectively, and that control over the distribution of property is centralized in order to achieve both classlessness and statelessness. Both socialism and communism are similar in that they seek to prevent the ill effects that are sometimes produced by capitalism.

Both socialism and communism are based on the principle that the goods and services produced in an economy should be owned publicly, and controlled and planned by a centralized organization. Socialism asserts that the distribution should take place according to the amount of individuals' production efforts, however, while communism asserts that that goods and services should be distributed among the populace according to individuals' needs.

Another difference between socialism and communism is that communists assert that both capitalism and private ownership of the means of production must be done away with as soon as possible in order to make sure a classless society, the communist ideal, is formed. Socialists, however, see capitalism as a possible part of the ideal state and believe that socialism can exist in a capitalist society. In fact, one of the ideas of socialism is that everyone within the society will benefit from capitalism as much as possible as long as the capitalism is controlled somehow by a centralized planning system.

Another difference between socialism and communism is centered on who controls the structure of economy. Where socialism generally aims to have as many people as possible influence how the economy works, communism seeks to limit that number to a smaller group.