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The death of the middle class The death of the middle class
by Joseph Gatt
2019-03-19 09:16:14
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Rumor has it that globalization is stealing middle class jobs. That is not the analysis that I make of it. The middle class does not have a globalization problem, it has a spending problem. The middle class is expected to spend like the upper class used to spend a couple of decades back. Let me explain.

Wages have not gone up considerably for the middle class in the last 20 years. It used to be about 30,000 US dollars a year of disposable net income in Europe and North America, and still is.

middle001_400_01But, today, you have to pay a 150 or 200 dollar a month phone bill. That was upper class money twenty years ago. You have to pay up to 1,000 dollars in rent, sometimes more. That used to be upper class money. You have to pay 40 to 200 thousand dollars to get a university degree. Even the upper class did not spend that kind of money on education. Transportation money is the kind the upper class paid for, be it gas money, cars or public transportation. Leisure costs a lot more. Bills cost a lot more. Groceries cost a lot more. Fashion costs a lot more. And you have this new thing called travel. And this new thing called yoga lessons or piano lessons or krav maga lessons. Cigarettes and alcohol have gone way up, and so have night entertainment fees. And this new thing called clutter.

In sum, the middle class is spending way more, most of which are mandatory expenditures, than it used to spend. And the middle class is not making more money than it used to make.

In the past you had a 30 dollar phone bill, paid 400 in rent, 20 thousand for a university degree, cheap transportation, cheap leisure, cheap groceries, cheap fashion, little or no travel, leisure time meant dining with friends, cheap booze and cigarettes, cheap night clubs, and no one went around buying camping equipment, fishing equipment, or the entire collection of the Beverly Hillbillies action figures.

So how did we get to a point where the middle class lifestyle has become way more expensive than the middle class can afford? The first has to do with technology. The second has to do with higher demand. The third has to do with choice. Let me break these down for you.

Technology has come up with much higher quality products and much higher productivity for most products. But technology comes at a price. For better quality products, be it groceries, cars, fashion, houses or travel, you pay higher prices. You have the option to pay lower prices for low-tech products, but I'll get to that in a second.

Higher demand. Technology also means a lot more people are now in the middle class. The middle class has a higher demand for all kinds of products, be it housing, electronics, cars, food or what have you, which drives prices up as supply does not always meet the high demand.

Third is choice. We can choose to buy low tech products. We can opt out of college or choose very cheap, in some cases free colleges. We can choose cheap electronics, buy second hand housing equipment, move to a city with cheap housing, buy the cheap groceries, choose public transportation, but somehow the middle class is opting for the expensive kind of lifestyle.

I was at first going to title the article “the middle class commits suicide” because that's really what it is. But the truth is there are many ways to be part of the middle class, and if putting food on your plate was once a symbol of the middle class (when the working class had beans and rice for breakfast, lunch and dinner) what symbolizes the middle class today is a lifestyle even the middle class can't afford.  

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