Talking back: The middle-class squeeze
Wow. Quite a response to to Monday's post. Two big (opposing) themes in the hundreds of comments:

--People should stop whining. If middle class people feel pressured, it is only because they have unrealistic expectations about what they ought to be to afford. "Two people don't have to work [to maintain a middle class lifestyle]," says Jeff from Cary, NC. "They choose to to support all of the things middle class families didn't have years ago. Two cars, three, four or five TVs, microwaves, dishwashers, surround sound, air travel (once only for the rich)." Many people used themselves as examples, pointing out that they'd been able to do quite well thanks to good savings habits that most of their neighbors seem to lack.

--Simply comparing household incomes from 30 years ago to those today misses a lot of the story. In countless other ways--added work hours, the strain of raising kids when both parents work, the decline in benefits and job security--middle-class life has become more stressful and demanding. Says Trudy from Daly City, CA.: "Most people aren't going bankrupt because of $3 lattes. They're going bankrupt because the job market is much more fluid and unpredictable, and because home prices/mortgages are much higher, and the need to educate their children in the best way possible is more important than it's ever been."

Regular readers of this blog (Mom, Dad, Uncle Paul...) may know that I lean toward the second view. (This wasn't obvious to everyone who read the last post. Some thought I was endorsing David Brooks' cheery take, rather than rebutting it. I blame my clumsy, bait-and-switch headline.) It's right to point out that the typical American is richer now than he or she was 25 or 30 years ago. But let's also acknowledge that in many middle-class people have legitimate reason to fear that they could fall into financial trouble despite their best efforts. Unlike Brooks, I don't think it's vulgar class warfare to talk about this.

But enough about what I think. I'd like to keep up the conversation about what you think. So I have some questions for the folks who've already posted so far, and of course anyone else who wants to chime in:

--For those in the "stop whining" camp: You're right that people seem to be awash in consumer goodies. But that's partly because a lot of products that used to be luxuries (microwaves, second and third TVs, sound systems) have gotten to be insanely cheap. Meanwhile, many more important things, such as health care and quality education, just keep getting more costly. Do you think that's a problem? Or do you think more middle-income families could deal with education and health costs if they just bought fewer gadgets and baubles from China?

--For those of you who think the middle-class is in trouble: What would you actually do to fix this? You can't have opportunity without risk, and I don't think most people would want to emulate Europe, where job security (for those who already have jobs) and relatively high unemployment rates seem to go hand in hand. Are there other choices?
Posted by Pat Regnier 11:30 AM 19 Comments comment | Add a Comment

While the "New Rules" may be true, I don't find them particularly comforting.
Posted By Preston Carrier, Stillwater, Oklahoma : 5:24 PM  

Many college professors worry about the probability that as we push to graduate more students from college we are going to (and have already) pass out worthless pieces of paper to people without skills. We need skills, not diplomas. Diplomas can be bought, skills can't.
Posted By Russ Huebel Kingsville, Tx. : 10:30 PM  

Our education system is horrible at teaching financial knowledge. I sometimes wonder if corporate America (obviously in bed with the oligarchy - see previous posts) is purposely discouraging it because the second we know better, we won't keep spending madly. Conspiracy theories aside, the first thing we need to fix is to thoroughly educate people on how to handle finances AND, every bit as important, we must teach people how to enhance their opportunities in a Capitalist market system. People need to learn to be capitalists; most people don't really know, so they end up working for the capitalists.

We must use our democracy to push cities to stop catering to the Wal-Marts, Home Depots, and Starbucks of the world and encourage internal entreprenuerialism. This will both enhance city vitality and allow more "average citizens" to engage in capitalism.

Most people don't know how to be capitalists in a capitalist market system. Capitalists are doing fine these days; everyone else is on a downward spiral.
Posted By Brandon W, Ann Arbor, MI : 11:54 AM  

Pat, I agree that the costs of many of today's luxuries - multiple TVs, gadgets have become ridiculously inexpensive. In addition to the purchase price being low, they usually work for years and years with little maintenance. The black and white 19" TV we could buy for $350 in 1970 generally led to burned out tubes after a year or so. This was followed by a trip to the drugstore with a bag full of tubes to test on the TV tube tester -or a housecall by the TV repairman, an occupation that no longer exists today in numbers. Also, while autos were cheaper even in today's dollars, their lives were short. I remember a '68 cougar I had that was literally rusting away and falling apart by 1974 with 85k miles. I look at my 6 year old Honda with 110k miles on it now as about half way through its life. Repairs are rare. Tires, which cost as much in 1970 as they do now, if I recall, were good for 12k - 16k miles, about one fourth of today's tire life.
What I find we pay for now, in addition to the spiraling health care and education costs, is a high cost to communicate. Cable, cell phone, high speed internet - add up to a major monthly budget item that didn't exist for most in 1970.
What I do find different, and I don't think any amount of frugal living can fix, is the inability of a family to be supported by a single modest income. When I grew up as a baby boomer, I had friends whose fathers were career shoe store salesmen, bank tellers, factory shop workers, and TV Repair men. While not living extravagently, they were able to have a house, car, TV and kids (typically many more than today)and live a typical middle class lifestyle. Today, if this were the only family income, I expect that at least the shoe salesman and bank teller family of 4 would be well below the poverty rate. And, I'm pretty sure the bank president is living a much more extravagant lifestyle than the typical bank president of the 50s and 60s.
Posted By Pete, Aurora, Illinois : 2:12 PM  

Several trends have conspired to create the paradox of a middle class living lives that would be considered quite luxurious based on what us boomers grew up around in our own (middle class) homes....you know, the multiple cars, TVs', VCRs/DVDs, camcorders, interstate travels, cable/satellite dish, you name it! Yes, individually, each `want' item is fairly inexpensive but collectively, the media has created this urge to "have it all & have it your way"....plus, "0% financing" or "No Payments till next century, blah, blah, blah..."

In the enviroment today, those who `survive' are the ones better able to control their wants....not necessarily `frugal' like a monk, but avoid wanting the latest gigantica Plasma TVs', the latest iPods and those alluring cruise to the Bahamas, UNLESS you have saved up the money beforehand!

Another mega-trend `conspiracy' is the deregulation of interest rates paid on deposits! No more artificially low interest rates to borrowers (while shorting the savers). As another commenter said, today's environment is perfect for those who understand capitalism and are able to control their `wants' while building up capital!
Posted By Sean, Houston, TX : 9:03 PM  

To the gentleman who made the comment about the educational system not teaching enough financial things to kids today..... What happened to the parents?? Most children learn first and foremost from their parents. I am a young adult who is pretty knowledgable about finances. I work at a bank and am majoring in finance at college. I learned the most about finances from my parents. Although it seems that most parents have to work outside the home now, that doesn't rid them of their responsibilities of teacher to their children.
Posted By Christina Norris, Athens, GA : 10:31 AM  

Christina, I agree that parents should be responsible, but most are in no more knowledgeable about financial issues than their children. It's great that your parents knew something - though I hope you understand what being a capitalist in a capitalist market system really means - but they and you are in a distinct minority these days. It is unfortunate. We cheer on capitalism as the best, "free-est" way to run a market. But it's only beneficial to those who are trained to be capitalists. Americans have been brainwashed for at least the past 80 years to think they are capitalists but they are not; they've only learned to be the employees of the capitalists.

Some things to remember in a "Free-Market" capitalist economy:
1. Real capitalists control capital; everyone else are their labourers.
2. Labour is a suppy. As an employee, your pay is the price.
3. "Free-Market" Capitalism pushes prices down.
Posted By Brandon W, Ann Arbor, MI : 3:09 PM  

Yes consumer goods are insanely cheap. But they still cost money. And many times they lead to other expenses.

For example, the HDTV leads you to upgrade your cable. The new PC requires broadband. Cellphone gadgets need more expensive plans.

It is these monthly expenses that quickly add up. If you got all the cable and internet bells and whistles, along with a medium cost cellphone plan, you're looking at $250 a month! That's not insignificant.

My family does a few things that allow us to be megasavers. We don't have cable. We have a cheap DSL plan. We do the Sam's club/ AT&T card longdistance. And we have ONE Tracfone for the entire family.

Combine this with a Starbuck's-less lifestyle, and the fact that we don't buy a new luxury car every two years, and we're doing fine on one income in expensive Chicagoland.

This lifestyle is not that hard. We're just not self-indulgent pigs like most people seem to me to be.

My goal it to be retired by 50 and living somewhere really low cost, just managing my investments and living a stress-free lifestyle. I don't need my kids to go to some expensive Ivy league school. State schools were good enough for me, they're good enough for them.

As for health, well, my wife has a heart condition and takes medication for it everyday. Other than that, I suppose we are rather healthy. But bad health is only a fraction of the causes of most peoples money woes.
Posted By Buzzcut, Bartless, Illinois : 3:54 PM  

I went to many social place, the problem is the quality of life, not just measured in money or income.
Nowadays, most of people hate their jobs. i can see why, b/c teh management here try to run a company like Chinese and Indian. What a joke, the high tech people from China and India go as far as U.S. only to find out they pretty much work for a third world style U.S. company.
Posted By marvin, Fairfax, VA : 3:17 PM  

I think that we need a new health care system. There is a reason why middle and lower class pay more for health care. We are the "working class", often exposed to more dangerous chemicals while at work. We can't afford the high priced "organic" foods, which have been proven to be healthier. They not only do they have more vitamins, but they don't contain pesticides. So, instead we have to purchase food that has been processed and been inserted with cheaper materials. Take milk for example, there has been a lot of talk going around about the hormone given to cows to produce more milk, which is a whole other discussion, but he facts remain clear. A gallon of milk that has the hormone in it can be purchased for $1.99, while it cost double that at $3.99 for milk without the hormone. Just with these two things alone cause a snowball effect and we end up paying more for healthcare in the long run.
Posted By Hank, Seattle , WA : 5:46 PM  

Generally, I fall into the "stop whining" camp; nonetheless, I do think that housing & healthcare are outrageously expensive today, making it very difficult for middle-class families to stay afloat. Buying a house in a good school district and staying within reasonable lending ratios is nearly impossible in my neck of the woods. On top of that, healthcare costs for our family are rising at a rate that far out-paces the annual COLA raise. Fewer dinners out, a less expensive car, and a smaller house may make a difference for my husband and I, as we fall in the top 10% income bracket, but I doubt it will really help those who make closer to the average. The numbers are just too big.
Posted By Karen, Denver, CO : 11:14 PM  

The biggest threat to middle class life where I live on Long Island are the property taxes. For a basic house on 60x100 property taxes are running about $8,000 a yr and going up rapidly every year. How can young middle class families pay that?
Posted By Loretta Novellino Oceanside, N.Y. : 10:56 AM  

i got one for you. if the middle class is so well off why can"t i aford my kid;s education ,my house ,my medical insurance, my retirement,yes you right the class are doing well. were do you get your informaiton!!! try drivering around a middle class neighbor and see how well they live.
Posted By mario cranston rhode island : 12:00 PM  

How about getting rid of all those "recurring" charges? The must have $60 a month cell phone, the $100 a month digital tv service w/broadband, the $325 a month new car lease payments. Oh well, put it on plastic.
Posted By Don Hudson Parma, Ohio : 12:01 PM  

The middle class is indeed squeezed. But in many cases the squeeze is by choice. The sheer bounty of gadgets that you don't really need, items for mass consumption that were previously only for the wealthy (more than 1 television, central air conditioning, in-ground pools, vacation homes, Cadillacs)are now "indespensible" items for living. And yes, some things have changed for the worse as well (stagnant wages, killer home prices, unaffordable medical insurance, fixed pensions under fire)but people can still manage to get by, leading a respectable lifestyle in the same way a shoe salesman, bank teller, cloth cutter or shipping clerk did a generation or so ago. I can guarantee you that a considerable number(not all) of those under the squeeze have leveraged themselves to the teeth by using HELOCs as a credit card, keeping and maintaining 2-3 cars or suv's, multiple tv's, multiple computers, multiple vacations and whatever. In those cases, the squeeze can be mitigated by adjusting spending habits and not trying to outdo the Joneses. I'd like to hear from the folks that are really in a bind to give a real perspective on what the real squeeze is about, not those whining in their McMansions.
Posted By PS, Ridgewood,NJ : 12:18 PM  

in my area, it seems as if 28% of the working aged adults are "disabled". they get checks every month. most of them live the same lifestyle as a middle income middleclass family with 2 incomes. then when their kids get ready for college. they are given pell grants that pay most of the tuition, so not only are you working while they play. your giving up your future savings to educate your children, while theirs are educated free. this society is so completely out of whack, citizens with value, honor, and integrity are severly punished. liars, laggards, and thieves are never caught, and never repay what they have collected.

then there is the sue game. if your a decent working middle class person. you must insure yourself, your children, your home. and all your actions, because you own something. if you have nothing, then you cannot be sued. so basically if you have anything you have a great big target drawn on you.
Posted By red teal, gastonia nc : 1:22 PM  

I think a lot of people are being mislead about how much "value" is added by getting a college degree. What does that degree cost when you add up tuition, room, board, books, etc, plus the lost wages that you would have had if you had just gotten a full time job? Say $250,000 or so for a 4 year degree? What would that sum grow to if you had just dumped it into the stock market and gotten an average 12% or so on it for the rest of your life?

How much extra would you make in income with a college degree and how long would it take to overcome the expense of the degree? For most people who don't wind up in Law, Medicine, or investment banking, they will never live long enough to recoup the cost. For people people with the top earning jobs, they'll recoup the cost in a few years but most people will not get the top jobs.
Posted By Paul, Seattle : 5:33 PM  

People talk about the middle class being squeezed and the war on the middle class. While I agree that their is a war on the middle and that they are being squeezed, you have to ask yourself who is really declaring war on the middle class: it's the middle class itself.

People today are ashamed sometimes of being middle class. Like they are failures and they are passing these feelings on to their children. Middle class people do not want middle class jobs (factory workers, plumbers, carpenters, etc.), they do not shop at middle class stores, they do not want to live in middle class neighborhoods, and they do not want their children to attend middle class colleges.

Middle class people would rather shop at Wal-Mart for items that no one can see and then go to Nordstrom for the items people can see. Thus trying to portray themselves as "rich/better" people. You walk into any school in America and say you bought your clothes at Sears (a traditional middle class store) and people would probably think you are a loser.

Tell a fellow parent that your son/daughter is not going to college, but instead going to apprentice as a plumber and I am sure you would get a look like, "Wow. I guess you and your kid are losers and cannot do any better." I am even willing to bet some parents would be embarrassed/ashamed to say their kids are doing something like that. Yet, I know plumbers who make more than many college educated business professionals and they do not have to worry about having their job outsourced to China/India.

As long as people believe that status is the most important thing there is and are willing to pay any price to display a certain status, the middle class will continue to disappear. Once upon a time it was enough to go to college, now it has to the right college. Once upon a time it was enough to raise a family in a 2-bedroom house. They were happy and proud it was their home. Now we have to have one-bedroom per kid, spare bedroom, office, full basement, etc.

Until the middle class can regain the lost sense of pride and contentment that they once had, the middle class will continue to disappear and have challenges. If we want to stop the war on the middle class then teach our young ones that status is not everything and status can even be very fleeting. That working hard is not a sin. And that while it is good and even beneficial to strive for more, that everything has a cost and sometimes the cost can be more than anyone ever dreamed.
Posted By Mark, Libertyville, IL : 2:08 PM  

I think that poeple are spending money and not investing, and that health care is getting expensive
Posted By Carolina,El Cajon,California : 4:26 PM  

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.