The Struggling Middle Class

It is a strange world we live in today.  There are people in third-world countries who have cell phones and internet access, yet they struggle just to put food on the table.  It is even becoming bizarre in America, where we have gadgets that were unimaginable just a few years ago, yet the cost of our basic needs are going up.

It makes it quite hard to judge our standard of living.  Compare a middle class family living in the year 2012 with the average middle class family in the 1950's.  We have so many luxuries today that would have seemed impossible then.  We aren't flying around on spaceships like the Jetsons yet, but we have instant communication throughout the world.  We have wireless phones.  We have microwave ovens.  We have giant televisions with hundreds of channels.  A middle class family in the 50's would have been lucky to have one television set.  And there was certainly no remote control.

Of course, the list could go on for pages.  There is no question that we have luxuries today that we take for granted.  If we went back in time and had to live in the 50's (or even the 90's), we would quickly realize how much we have.

On the other hand, life was easier in the 1950's in a certain sense.  Most people are familiar with the television show Leave it to Beaver, which took place in the 50's.  While life may not have been as great and simple as portrayed in the show, it was still somewhat accurate in describing a middle class American family in the 50's.

The wife/ mom could afford to stay home.  It was not necessary for both parents to work.  While marginal income taxes were higher, taxes overall were lower.  And government spending was a fraction of what it is today.  While many taxes are hidden today (including the inflation tax), it basically takes the woman to go to work just to pay for the tax bill of the household.

In the 50's, medical care was very affordable.  A hospital stay for a couple of nights would not bankrupt you.  A visit to the doctor, or perhaps more accurately, a visit from the doctor, did not set people back much.

While there was no Walmart back then, things were still relatively inexpensive, particularly for basic needs.  The man could go to work and support his family and the basic needs would be taken care of, which included housing, clothing, food, medical care, a car, and other incidentals.

Perhaps we are more spoiled today and we expect more cars, more television sets, cable, etc.  But shouldn't we expect those things?  After more than 50 years, we should expect that our standard of living would be much greater.  But now the typical middle class family has to send both parents to work if they want to enjoy the modern day luxuries.

A lot of people today do not understand why they are struggling.  While unemployment is high, let's just focus on people who have kept their jobs.  Even these people seem to be struggling, but it is not surprising if you think about it.  Salaries have remained stagnant.  In real terms, salaries have actually gone down in the last few years.  Most people I know are not getting much in the way of raises, unless they get a big promotion.  Some people aren't even getting a cost-of-living increase.

There are some companies giving out 1 or 2 percent raises.  But then they are also raising insurance premiums so much that the premiums alone are offsetting the salary increase.  So many people are not seeing an increase in their paycheck, even in nominal terms.  Meanwhile, even if price inflation is only 2% per year, that is a big hit, especially when it compounds over a few years time.  In less than 5 years time, you would have taken the equivalent of a 10% pay cut.  But it is all so subtle, most people don't even know what is hitting them.  That is why the government loves monetary inflation so much.  The populace doesn't fully blame the government for the decrease in their standard of living.

This whole thing comes down to government spending and regulation.  Every dollar that the government spends is a dollar that is not being spent by someone who earned it.  The federal government alone is spending almost $4 trillion per year now.  It is about 25% of our income (and this doesn't include state and local spending).  It is a giant misallocation of resources.

There is no question that, despite iPads and HD TV, middle class families in America are struggling.  Food, clothing, furniture, medical care, and other basic needs are going up in price, while most incomes are lagging behind.  Until there is a significant cutback in the size and scope of government, particularly at the federal level, then American families will continue to struggle with their basic needs.