Are we getting poorer or richer ?  

Posted by Big Gav in ,

I suspect the answer is might be richer (just) for Australians but poorer for our friends in the northern hemisphere (unless they work for Goldman Sachs, aka the Vampire Squid of course). The New York Times has a review of Richard Wolff's book "Capitalism Hits the Fan" which looks at Americans' changing economic fortunes (a trend which will continue as China and India continue to industrialise and resource limits become more apparent) - The State of Families, Class and Culture.

Over the last 40 years, we have witnessed a profound shift in the American family, one that bears the deep footprints of a disappearing economic sector and a transformed culture. The shift has hit blue-collar families especially hard. These days, the best gauge of social class is years in school. In 1970, a female high school dropout had a 17 percent chance of becoming a single mother (versus 2 percent for a woman with a bachelor’s degree). By 2007, her chances had jumped to a whopping 49 percent (versus 7 percent for the B.A. holder). Nearly all new mothers with graduate training, but only half of high school dropout mothers, are married.

Why is this happening? As the economist Richard Wolff tells the story in his book “Capitalism Hits the Fan,” for a century before 1970 most American companies paid wages that slowly rose decade by decade, so that a male worker could feel better off than his dad and trust that his son would be better off than he was. But by the 1970s, the deal was off; corporate profits continued to rise while workers’ real wages stagnated. Scrambling to make up for this fact, fathers worked longer hours. Mothers got jobs — and this in a society without paid child care or parental leave. Families went into debt. The blue-collar family became the shock absorber of the broken deal. On top of this, Americans of every class found themselves less and less secure about their jobs, pensions and health insurance. For as Jacob S. Hacker, the Yale political scientist and Democratic adviser, argues in “The Great Risk Shift,” over the last 30 years, companies and government have offloaded risk onto the shoulders of individuals.


The problem that I have with these sort of declarations that working Americans are going downhill is that authors generally don't give a comprehensive look at what is happening.

Let's go back to pre-1970s when "daddy" work for the income and "mommy" stayed home and took care of the household.

I grew up in one of those households, a decade or two earlier, but similar.

My father was a successful business owner (by community standards). We lived in a modest sized house, a "starter house" by today's standards.

We always drove used cars and never owned more than one car (until I bought my first). Our cars were never air conditioned, didn't have power windows, air bags, etc. Plain vanilla.

We had one TV, no boat, no jet skies, no RV, no computers, nothing like what fills todays garages.

We seldom bought new clothes. Christmas, Easter, and school created shopping trips and purchases were moderate. We never cruised the mall and made impulse purchases.

Clothes were worn until they were worn out. There were no thrift shops full of barely worn things as there now are.

We grew a lot of our own food and rarely ate out in a restaurant. We never did the fast food 'drive through'.

We didn't have cable bills, cell phone bills, ISP bills, gym fees, and all those other outlays that many people have today.

I just don't think many of these authors do a real apples:apples analysis.

OK - but since the 1980's how much of this new found affluence has been built on a base of rising debt and failing to save for retirement etc (as companies or the state stop or reduce funding health, education, pensions etc).

Have our "real" lifetime incomes increased over that period, or have we just dragged forward a whole lot of consumption in the dash for short term growth ?

(however I agree things have changed since the 1950's - the early seventies may not be a great example as there was a rather large recession / stagnation on during that decade)

I can't answer the "wealth via debt" question objectively. I've thought through the people whom I know enough about to know their finances and none of them are debt ridden.

Some have mortgages and some have car payments. (As do I. The finance rate was low and that make more sense than taking money out of the market to buy outright.)

I took a quick look on the web. Seems like the average US household credit card is $8,500. Up some as people struggle to get through the recession. But over half US households have no credit card debt.

Perhaps people owe on their big ticket toys like RVs and boats....

If anything, I suspect people (outside of this recession period) are saving more for retirement than they used to. Many people used to have pensions to take care of them. Many pensions have now disappeared and even those who have them are worried, and I suspect saving.

The big new debt seems to be people coming out of school. The average debt level for graduating students is about $20k. That's definitely new.

But, overall, it seems to me that today's dollar buys a lot more when you look at features and quality in "now and then" similar items.

When I look at how really poor people lived now and then, now is significantly better (except for neighborhood violence/crime).

Of course, it's a little hard to get a handle on it all as we are at the bottom of the worst economic collapse in almost a century and just starting to claw our way back out.

I still question that life is significantly worse in the US than it was 20 years ago.

Would you agree that working hours have increased, the participation rate for women has increased, and that average debt (in real terms) has increased ?

Would you agree that the safety nets (both corporate and government) have been reduced or removed ?

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