I am not sure how the lower middle class can expect to ever regain the value it once had. The need for blue collar workers is really going down with the coming of age of computers and moving jobs overseas. In theory I suppose this is the free market at work with the standard of living beginning to even out globally as more countries begin to receive more investments from US companies. That means money is moving overseas into the pockets of laborers instead of those in the US.

IMO part of this has to do with unions. On an engineering field trip to the Port of Norfolk, I was shocked to learn that the average dockworker makes 6 figures! Those seem like some exorbitant wages and I have also heard it is mostly a family job passed down through generations. Well guess what, as more and more automated ports come online, the port authority is not going to pay those huge salaries and eventually the dockworkers will be out of jobs for the most part.

Why pay more for something that can be done cheaper? That is the real issue here. I suppose tariffs can be considered to make it more uneconomical for companies to shift overseas but that means prices go up due to increased cost of importation and I dont know if companies would even consider moving manufacturing back with the many regulations placed on domestic plants. Its kind of shocking to tell the truth.

Perhaps I should load up on gold and silver, those seem like a solid investment...

 

The fact is the cost of living and standard of living is far less overseas. With the advances in technology over the last even 30 years, the free market is not confined to just a country or even a continent. I think there will be a period of time where developing countries will better their standing of living while the US standards may slide. If the scale tips too far in favor of other countries, that will slide back in favor of the US. Eventually, I think the free market will even out on a global scale, but that seems like a long way off with many bumps in that road.

What worries me about this economy is innovation. IMO, innovation is what drove the prosperity of the 20th century. I just dont know if that innovation will necessarily continue on the scale of the previous century.

 

Please enlighten me as to why the 20th century saw such an increase in the Standard of Living...

 

High taxes on the rich, which led to income redistribution, and a generally peaceful environment for labor relations with corporations and the government recognizing unions right to exist and collectively bargain(New Deal legislation). Companies in non-unionized sectors had to compete with unions by offering living wages and benefits. We also were the world's creditor not debitor. Even Republicans like Eisenhower supported this. That all started to change during Nixon's term, who broke up the Bretton Woods arrangement and got us off the gold standard. Jimmy Carter continued with deregulation. Reagan broke the unions, cut taxes on the rich massively, raised taxes on everyone else, ran up the debt to drown the government in order to defund social programs for the poor and middle class, and let corporations write legislation by allowing lobbyists to infiltrate Congress to pursuade the Democrats(especially Boweival Southern conservative Dems) into doing so. Bush sr. made sure the drug war broke up rights movements. Clinton signed welfare reform, NAFTA, the repeal of Glass-Stegal and ignored speculation bubbles in the housing and technology sectors. Bush Jr. tore up whatever was remaining of environmental and labor laws by placing corporate lawyers at government posts assigned to oversee industry, privatized government services, and reversed the surplus into a deficit to continue to defund the government by spending recklessly and by signing two massive tax cuts for the wealthy. Allowed inflation to rise while wages stagnated or declined, due to low paying service jobs replacing blue and white collar work. Let the oil companies create an energy bubble which raised the cost of living and the price of gas, cutting into any disposable income the middle and working classes had to spend to keep the consumer economy going. Bailed out Wall Street without doing anything for Main Street when the speculation bubbles burst. Obama(heavily funded by Wall Street) lets corporations write the stimulus and health care acts, ignoring economists suggestions for improving the economy for the short and long term. No actual jobs bills or New Deal like legislation to help workers during Great Recession. Further tax cuts for the wealthy. More bailouts for corporations but none for Main Street. Democrats, despite holding majority, tear up legislation that could help average workers and families in order to cater to conservative interests. Public gets angry, elect Republicans/Tea Party(funded by wealthy interests like the Koch Brothers) to kick out Democrats. Republicans then work to block any legislation to raise taxes on rich and cut subsidies in order improve deficit problem and block any legislation to help economy unless it caters to the rich and corporations. Waste time attacking the President while doing nothing for workers still suffering from bad economy. All Republican contenders for President all want to help big business and do nothing for workers as well. And it continues on and on.

We have no party that represents working people in this country any longer. That is why our standard of living has plummeted, in a nutshell.

 

Income disparity is a major factor, IMO. The elite "earn" much higher incomes now than before whereas the commoners income has slid down. However you like to label it, there is only so much wealth to go around, or in this case, money. But money is wealth and since it is finite, if we want more, we just print more. But that usually adds to the problem as the $ is devalued, prices rise, the elite gain more of the "new wealth" [printing of money]. Even tho we are off the gold standard, there is still only so much gold. There are way too many variables involved for any one person to get any kind of grip on it. But, I would expect the global economy, which is here to stay, to eventually level out evenly from country to country. I wouldn't be surpised if some day there is only one currency throughout the entire world.

 

Padre

how much of this do you think is from high energy prices?

 

this is just to 2007 and would be much wider today even. As the gap widens and widens, ie top earners making more, it allows less to be earned by others. As stated earlier, we can only print so much money. So, in the long haul, can capitalism even survive, as we know it. If it fails, then what?

 

What is clear to me is that the 'job creators' have never had it so good, and it's been several years, and the economy is still swirling the crapper. There is no trickle-down, there never will be.

 

If you look at the chart you'll see after Reagan's numerous tax reform bills and other "trickle down" measures are passed, the middle and bottom LOST income throughout the 80s. The beginning of the greatest transfer of wealth in history.

 

And hence the huge problems of today. The "99%" have less to spend each day.

 

I have no idea how these numbers were arrived at. They seem way out of line, as far as I am concerned. I know that is 1979, I earned a little over $13,000. In 2006, the year I retired, I earned $110,000. This income was certainly not in the top one percent of wage earners, but it exceeded the 281 % increase the top one percentage were said to have increased over this same time period. In fact everyone I know was earning at least two hundred percent more in 2007, compared to what they were earning in 1979.

 

Or one could say that the supply of money rises faster than the amount of goods produced

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The numbers are real and verifiable

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i don't know how they arrived at them either but the dollar has inflated around 281% during that time period. Question is tho, did you retire in the exact same job capacity in 2006 that you worked in 1979? The numbers indicate you likely didn't either by various promotions or even changing to a better job. I think perhaps this graph only shows the tendencies in comparing the different income levels and only illustrates the growing disparity.

 

Just because the numbers are said to be real and verifiable, doesn't make it true. Heck, according to the government figures, inflation over the last three years has been nearly zero. Of course if you had to purchase gas, food, health insurance, or any other type of insurance, you know that the government is lying about the real inflation rate.

As I stated earlier, everyone I know were making well over 200% more in 2007 then they were making in 1979. I am sure that a small percentage of individuals were earning a smaller percentage over this time period, but I think the vast majority of working Americans were well above the figures shown in this chart.

 

Yes, I did work in the same occupation all those years. I started out as a police officer in 1978, earning a little more then $12,000 a year. I did move up in the ranks over the course of my time in the department and when I retired as a Lieutenant in 2006, I was earning a base salary of $110,000 a year. I do know that police officers who started in 1979 and earned $13,000 a year at the time, were making a base salary of nearly $60,000 when I retired. Of course most of these officers made a great deal more because of the large number of overtime hours they worked each year.

I am sure that in many occupations, if you never get promoted and if you work in the same position for over 25 years, your salary increases will be limited to some degree. I just have to wonder why anyone would want to work in a job where your salary remains basically the same, from year to year. In today's job market, I can understand staying in a job where you are at least getting paid something every week. Yet, from 1978 to 2007, there were certainly opportunities for most individuals to find jobs which would have allowed them to make more money in a different occupation or perhaps the same occupation, but with a different company.

I changed careers four times in my twenties, in an attempt to earn more money each time. Once I found a career path which paid a decent wage and allowed for upward mobility, I decided to stick around until retirement. I realize that job opportunities are not as available today as they might have been in the late 1970's, but I still know many young men and women today who are doing quite well in the job market and the vast majority of these individuals are working in the private sector, not in law enforcement.

 

I live in South Florida, where we really don't have industry type jobs. The closest thing to an industry here is construction. Up until this latest recession, the pay of construction workers in South Florida had certainly risen well over 200% from 1979-2007. My response to the figures posted, were regarding salary increases over those years only. I certainly understand that since 2008 , unemployment has risen and salaries have not increased in most occupations over the last four years.

I think many people are stuck on salaries over the last four years and are not taking into account how much the average salaries did increase over the time period listed in the chart. I will admit that since I live in South Florida and we were not affected by industries closing their doors, as happened in many states, I honestly don't know many people in my personal life who didn't have very generous salary increases from 1979 to 2007. Of course this doesn't mean that a lot of individuals in other areas of the country saw these same type of salary increases. I apologize if my view of the salary structure in the United States appears myopic. I guess that is one of the disadvantages of living in an area which has never relied on industrial jobs to employ a large percentage of the town or cities population.

 

i know. part of what I do for a living is breaking through the gov't numbers to find out what's really going on. It depends on how they weigh things, but we cannot deny that the cost for housing has gone down during this period.

and actually, if you get away fro "income" and just look at real wages, there has been little gain over the past 30 years

as a fun exercise: the inflation calculator http://www.westegg.com/inflation/

if you plug your $12,000 for 1979 and find its equivalent for 2010, you get around $35K, which isn't far from what a typical worker makes in the earlier parts of their career these days.

you are an anomaly. if you weren't we wouldn't be having a SS and Medicare crisis or 30% of workers having less than $1,000 saved for retirement (or nearly half under $10,000). http://www.ebri.org/files/FS2_RCS11_Prepare_FINAL.pdf

 

Average household debt has more than doubled from 60% to 133% over the last 30 years. Gross household debt has moved from 100% of GDP in 1980 to 173% of GDP. People have been having less and less money for discretionary because we've been spending more and more money we don't have. And not just households, but corporations and government have also been riding the debt train the last 30 years. Eventually, no matter what the actual spark, the debt driven ecoonomy bubble was going to burst.

http://www.economist.com/node/12957769?story_id=12957769&fsrc=rss

And as you've pointed out before padre, with housing sold as the "savings" investment, money that could have been in discretionary income savings has been "invested" in bigger homes to the all time highest debt-income ratios and risk. A gamble reminiscent of that preceding great depression when you could buy stocks on credit and of course never worry about because the debt driven market bubble won't ever burst.

 

What happens when the "middle class" disappears?

 

How much was a gallon of gas then?

 

If debt increases, while standard of living decreases, then the problem is business is fleecing America. There simply is no other conclusion to come to.

 

Sometime around 1978-79 gas had >doubled from 45 cents to nearly a dollar. Shortly afterwards, they were setting the oumps at 1/2 the price per gallon and then double the amount as the pumps would only go up to 99.9 cents.

 

As the flow of income is going in only one direction, if you know what I mean.

 

I'm just so tired of this bull**** that is being spouted that people are just living beyond their means. They act like people were living in mansions and driving Bentleys. Its crap. Yes, people are living beyond their means but to attain a lower standard of living. Housing prices were too high. Gas is too high. Insurance is too high. That is the fault of industry and an industry run government.

 

Only the conclsusions you want to believe. Debt is decresing the standard of living.

Not mansions, but close considering how the household populations have dropped. Housing prices are high not just because of demand but because over 30 years homes have grown from 1500 sq feet to its high of 2250 sq feet high in 2007. The 3-1 income-mortage ratio from 30 years ago usually meant 10% of income going to housing...compared to the expanding and eventual all time high of 4.5-1 in 2007 and 15% of income going to housing purchase in 2007. Thats a huge accrued decrease in monies for disposable income standard of living for individuals and the economy over the last 30 years and not just the last 3 years from the recession the article is discussing.

 

Debt isn't separate from the cost of living. You guys are still pretending that credit is & was only used for luxuries. People were buying groceries with credit cards. People were paying for gas with credit cards. A lot of people had to do this because they simply didn't make enough money.

If 3 bedroom homes of 2250 sg feet are all that's being built, then that's all people are going to buy. And FTR, the older homes that were smaller were going for the same amount of money. Either way, during all of this, square footage is not a sufficient example of the standard of living, especially when we're talking about the difference of 700 sq ft.

All this is, quite frankly, is a weak attempt to pretend that during the lowest taxes "job creators" have had, the economy is the worst its been while the non wealthy have less money. But yeah, 700 sq feet.

 

The all time high for per capita disposable income peaked in spring of 2008. Credit card use and revolving credit have declined as people "didn't simply didn't make enough money" during and after the recession as opposed to before.

http://www.usatoday.com/money/perfi/credit/2010-08-25-credit-card-balances_N.htm
U.S. credit card debt drops to lowest level in 8 years
http://www.usatoday.com/money/perfi/credit/2010-09-10-credit10_ST_N.htm
Credit card use plunges as hard times drag on, debit use rises

Who's pretending now? Try to snarkily deflect this to the "yeah, 700 sq feet" all you want but doesn't change the fact the increasing amount of debt we have been taking on for the last 30 years is eroding away at standard of living. And not sure what lowest taxes is thrown in there too. You must have me confused with someone else as I've repeatedly stated we need to let all the Bush and Obama tax cuts expire.

 

Um, are you reading what you post?

So credit was being used at a ridiculous clip and only slowed when credit was taken away after the burst.

Debt hasn't increased just because. Debt has increased because we can't afford a normal standard of living without it. You make the claim that 700sq feet is the difference between living past your means or not and that is ridiculous. People could not afford modest housing. People could not afford gas. They used credit to buy that stuff, and had less money to buy other stuff. That is why the economy sucks. Businesses have been waaaaaaaaay more irresponsible than the consumer.

 

Pretty much sums it about 30 years of policies to get out of 70's stagflation and keep things humming along no matter what the consequences...and we're coming around full circle.

Although on the manufacturing level where so many jobs have left overseas during globalism and free trade, hope for a trend to gain momentom come full cicle of manufacturing jobs 'returning' home such as the Toyotas in Kentucky, KIAs in Georgia, or HondaJet and Volvo Trucks here in Greensboro.

 

Debt has declined simply because ppl were maxed out and could not take on any more debt. That along with paying down debt somewhat to gain a new line is why it decreased. I don't necessarily see that as a big improvement in many ppl's situations. It's just not getting any worse for them at the moment.