What Killed The Middle Class?

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

If the four structural trends highlighted below don't reverse, the middle class is heading for extinction.

Everyone knows the middle class is fading fast. I've covered this issue in depth for years, for example: Honey, I Shrunk the Middle Class: Perhaps 1/3 of Households Qualify (December 28, 2015) and What Does It Take To Be Middle Class? (December 5, 2013)

This raises an obvious question: what killed the middle class? While many commentators try to identify one killer cause (for example, the U.S. going off the gold standard in 1971), the die-off of the middle class is more akin to the die-off in honey bees, which is the result of the interaction of multiple causes (factors that increase the toxic load dumped on bees and other pollinators by modern agriculture).

Longtime collaborator Gordon T. Long and I discuss the decline of the middle class and other key topics in a new 29-minute video How did that work out for you?

So where do we begin this detective story? With the engine of all real prosperity, productivity. This chart reveals that wages stopped rising with productivity around 1980.

Here's another look at the same phenomenon:

Productivity has been slipping since around 2003: Alan Greenspan:"Productivity is Dead”

Cause #1: declining productivity, which means the pie of real wealth is no longer expanding.

Exhibit #2: middle class wage earners have not received any of the gains. Wages as a percentage of GDP have been falling for decades, with occasional blips up in tech/housing bubbles:

Inflation-adjusted household income has dropped back to levels first reached in the 1980s:

More recently, wages have actually declined, regardless of educational attainment:

Income gains have all flowed to the top 10%, with most of the gains being concentrated in the top 5% and top 1%:

If the middle class didn't receive any of the gains, who did? Corporate profits have soared to unprecedented levels:

Cause #2: all the gains in the economy have flowed to corporations and the top 10% of financiers, managers and technocrats.

But wait a minute--hasn't the rising stock market enriched the middle class? Short answer: no. Middle class household wealth has absolutely cratered since the top of the housing bubble in 2007, and hasn't recovered.

Why? Middle class wealth is based not in stocks but in the family home. The middle class does not own enough financial assets to have participated in the latest stock market bubble, while the majority did not recover the wealth lost in the housing bubble bust. This is the cost of allowing the financial sector to financialize housing and mortgages in the 2000s.

Cause #3: the middle class doesn't own the "right" assets to benefit from systemic financialization and financial speculation.

How about rising costs? The federal agencies tasked with measuring inflation assure us inflation is near-zero. But these measures underweight big-ticket costs like healthcare and higher education, where costs have exploded higher, greatly increasing the burden on the middle class:

Cause #4: soaring costs of big-ticket expenses such as higher education and healthcare. Saving $10 on cheap jeans imported from Asia does not make up for 135% jumps in tuition and college fees, and $100 decline in the cost of a laptop computer does not make up for healthcare insurance and out-of-pocket expenses in the tens of thousands of dollars per household.

Correspondent Kevin K. submitted this article and accompanying note: Colleges with the biggest tuition hikes (my ala mater University of Hawaii-Manoa clocked in with an increase of 137% since 2004.)

"It looks like the article linked above didn't do much research since:
University of California Davis
2004 in-state tuition $5,684
2015 in state tuition $13,951
Percentage increase 145.44 percent"

There is no way middle class households with declining real incomes can pay soaring costs imposed by state-enforced cartels and gain ground financially. If the four structural trends highlighted above don't reverse, the middle class is heading for extinction, the victim of financialization, the glorification of financial speculation via central bank-central state policies, the decline of productivity and rising costs imposed by state-enforced cartels.

Gordon T. Long and I discuss the decline of the middle class and other key topics:

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dimwitted economist's picture

I think it started in August 71' when Nixon did that thing..

Nutsack's picture

I'll take racist Homosexual Muslim Knigger Obama for $1000, Alex....

Nutsack's picture
Nutsack (not verified) Nutsack Mar 24, 2016 9:13 AM

-1....so Obama isn't a  racist?

 

What about refusing to prosecute the racist knigger Black Panther who threatened white voters on election day with a billy club while blocking their way to Vote? ???

 

HINT: that makes him a KNIGGER and a RACIST!

Stainless Steel Rat's picture
Stainless Steel Rat (not verified) Nutsack Mar 24, 2016 9:14 AM

Someone wrote ‘Trump 2016? on Emory’s campus in chalk. Some students said they no longer feel safe. The students were so traumatized that they stormed the offices of Emory President James Wagner, demanding answers and feelings-protection. Some Emory students are so fragile, and terrified of innocuous political speech they dislike, that they immediately sought comfort from campus authority figures. These figures, of course, were more than willing to coddle them. 

Dg4884's picture

What a bunch of pussies.  Wait till they have cook their own freaking meals, pay their own freaking rent...  I would love to chronicle these idiots over the next 10 years to see if they survive.  Like watching Wild Kingdom LOL

Chupacabra-322's picture

Generation WMP

Weak Minded Pussies.

JRobby's picture

To get the middle class "back" will require fighting and a re-distribution of wealth. Most people don't like the "sound" of that and can't "stomach it". Because that is in fact, violent revolution. What our previous country, before the corporate take over, was born from.

To do it non-violently will take a long well planned and well executed strategy that will require discipline and self sacrifice because the change will be slow to come. Do it for your children and grand children.

 

A Nanny Moose's picture

Our previous country was born from the desire to separate from oppresive government that A) tried to steal guns, and B) enabled mercantilism.

All that bloody revolution resulted in exactly what we have today. It was all good until the Statist took over and started trying to control shit.

Silky Johnson's picture

The middle class is killing itself. Fat, stupid, brainwashed and increasingly lazy, the causes are undeniable.

HenryHall's picture

>>> I think it started in August 71' when Nixon did that thing..

 

Without doing that the USA would have been unable to continue in a war in Vietnam that it could not otherwise afford to pay for. De Gaulle knew as much and said so. When he withdrew France's money as gold that in large measure precipitated the crisis.

Mr. Bones's picture

If you can't afford a Ferrari don't buy one, if you can't afford a mcmansion don't buy one, if you can't afford a war don't let the fucking French drop one in your lap.

Reichstag Fire Dept.'s picture

If you like your war, you can keep your war...

Tall Tom's picture

 

 

 

Are you willing to pay for it?

Isy's picture
Isy (not verified) Tall Tom Mar 24, 2016 2:15 PM

Trump Got It Right Again.

However the mainstream media isn't saying a word about it!

http://goo.gl/tQmCvF

Tall Tom's picture

THIS HAS NOTHING TO DO WITH THE DECLINE  OF THE MIDDLE CLASS.

 

If you want to bring this up on a thread about Trump then it would be on topic.

 

But it is off topic and you introduced it to DISTRACT FROM THE TOPIC AT HAND.

 

That is a TROLLING TACTIC.

 

The Middle Class is in decline because of WARMONGERS.

 

I have brought this point out and your Government does not want it widely known.

 

TOO FUCKING BAD.

 

The Warmongers can go straight to Hell....including Hillarity...including theDonald...including Ted Cruz.

 

And Bernie can go to Hell because he wants to steal from everyone to finance his communism.

 

So fuck you.

Baa baa's picture

Definitely onboard with that, keep telling it.

JRobby's picture

Wow Tom!

This is Fight Club!

Tall Tom's picture

 

 

 

Only the Low Voltage cannot see that abandoning the Gold Standard led to the decline in the Middle Class.

 

Yet even that is COINCIDENTAL....and not the root cause.

 

Of course the abandonment of the Gold Standard allowed the Nation to prosecute unwarranted wars throught the past 45 years financed by Currency creation....er...debauchment

 

Many dimwitted are too quick to blame this on Obama, Bush, Clinton, Bush the Elder, Reagan, and Carter...and refuse to recognize the core of the problem.

 

The debauchment of a Currency always leads to economic and social decline as we are now reaping the wrath of the wrath we have sown in prosecuting unwarranted warfare for the past seven decades.

 

Before the abandonment of the Gold Standard our Gold Reserves were depleted to where we were forced to abandon the Gold Standard in order to continue our abhorrent unwarranted warfare.

 

That is the reason that the Gold Standard was abandoned in the first place.

 

We were able to use our vast economic power and savings to prosecute the Wars previous to the abandonment of the Gold Standard on August 15,1971, and even during that period we still experienced a growth of the Middle Class and growth in their savings and their incomes 

 

But the abandonment of the Gold Standard was just the harbinger that Middle Class USA would experience a decline in the Standard of Living as our vast savings and capital had been depleted.

 

The crux of the issue is warfare. Wars are extremely expensive.

 

Your standard of living is scattered acrosss on many battlefieds across the Globe, far too numerous to list.

 

Everytime I watched a Tomahawk launch from a Warship, at a cost of $1 Million each, I remarked to others watching with me, "And there goes someone's retirement up in smoke." They laughed at my statement.

 

They are not laughing now, are they?

 

Are you laughing?

ATM's picture

War is only a part of it. The abioity to have the world's reserve currency and print it from nothing was the big draw. 

It means that the demand for dollars is insatiable as long as the $ retains reserve status. We print money and live like kings compared to the value of what we really produce. What we are best at producing is simply fiat currency that the rest of the world has chucked itot he garbage yet. But they will.

This inflated value given to a dollar due to reserve status means that US manufactured products, priced in dollars, are uncompetitive witht he rest of the world. US manufacturing labor is uncompetitive. How ever the US con borrow for nothing and spend those valuable dollars on goods and services fromt he rest of the world and live a lifestyle far beyond our means.

For now. Such imbalances cannot and will not last forever. Eventually manufacturing and those jobs will flow back to the US but not until the $ has been replaced on the world stage as the resrve currency.  That transition is going to be a hell storm as countries around the globe wake up and wonder WTF we did to them by reneggin on our obligations to provide the full faith and credit if the US government.

They aren't going to be happy and we aren't going to have any money.

BLOTTO's picture

What killed the middle class?

.

.

Our wants and needs of the 'flesh', combined with their brainwashing?

Tall Tom's picture

The [abliity] to have the world's reserve currency and print it from nothing was the big draw.

 

 

But as we were producing Goods and Services from the postwar period from the late 1940s well into the 1970s the World Reserve Currency status did not markedly contribute to the depletion of Gold Reserves.

 

Other Nations at the time were rebuilding from the destruction of World War II and were not producing or exporting all that much consumer goods. However we used the Gold to pay for War Materials, or more accurately the raw materials to produce weapons.

 

In fact we were the World's Largest CREDITOR Nation until 1982. Foreign Nations were in debt to the USA.

 

So I must disagree.

 

Yes in the past few decades we have used those trade Deficits as well as Currency Debauchment in order to continue to prosecute unwarranted warfare to this very day. Yes our World Reserve Currency status has excerbated this problem in the past few decades which allowed us to extend our Empire building addiction.

 

But that is NOT in addition to the root cause. It is an exacerbating factor.

 

Baa baa's picture

Once again, thank TPTB and crony capitalism. They (The hoodwinked) are going to want that money back and may well be willing to attempt to take it back. Yep, a dearth of wealth and happiness is in our future.

Baa baa's picture

I despise corporate wars and those that want more. Most of the under 30 crowd do not know what the gold standard represented. At least most of the ones I speak with about macro economics.

Tall Tom's picture

Without doing that the USA would have been unable to continue in a war in Vietnam that it could not otherwise afford to pay for.

 

Very close.

 

But it is more than that.

JRobby's picture

"Fat, stupid, brainwashed and increasingly lazy, the causes are undeniable."

They want it ALL delivered to them while they sit in their TV chairs. They certainly do not want to get their hands dirty to maintain their comfort level. Oh, No, that is for "others" to take care of.

The down voters no doubt. At least those that can not yet handle the truth.

Tall Tom's picture

 

 

 

 

The elite does not want a lean, healthy, intelligent, and motivated population. They are much more likely to revolt.

 

They do not want a Middle Class. They want a SERVANT Class.

 

These people were not educated but indoctrinated from birth and early childhood. They do not know any better.

 

It is by DESIGN.

 

So if that is not the reason then what is?

 

So you blame the victim and choose not to engage your brain? That is really shallow.

 

Perhaps it is you who cannot handle the truth.

xythras's picture
xythras (not verified) Tall Tom Mar 24, 2016 3:48 PM

That's why they banned steroids, raw milk, bashed cholesterol (raw milk=Vit D + cholesterol => Testosterone) they push vegetarianism and other phaggy soymilk crap on the market.

Because pussies can't fight back.

JRobby's picture

Try Rhodiola and Boron supplements with some Red Bull. You might feel like beating the shit out of some people.

Baa baa's picture

Yes! Even residents of the ivory towers must evolve or they will be evolved right out of existence. The rich best fire the nanny and get with teaching the junior league candidates some survival skills. I guarantee they are going to need them. I believe no amount of money will spare the pain of impending reality.

nailGun's picture

yes, there has always been and always will be a huge number of lazy dipshits. i doubt that level has changed much over the years and that's not really what we're talking about here. regardless of your socio-economic position, does it make sense to ask someone to continue to work harder and harder to maintain the same level of living?

Miffed Microbiologist's picture

What I'm seeing from a healthcare prospective is the increase in obesity made quite a spike after 2008. Especially in men. I think this goes beyond fat and laziness which are just observable states. Men thrive living a purposeful life and their livelihoods have been destroyed. The service industry is predominantly female.

People today seem just to be numbing themselves with food, trinkets and entertainment. They have just given up and cannot see the way out or are convinced there is no point to try to find one. If you challenge them, what you will see is they are afraid at the core of everything. A dangerous state to be in because one is so easily manipulated. I think I have more pity than anger.

Miffed

Baa baa's picture

I'm curious about Silky, Serf, JR, Tom and you, Miffed. Where do you see yourselves in this mix. Surely, not fat, stupid, lazy, etc. From what high point are you enabled to judge a segment of society that until recently was busy contributing hordes of money to fund government sponsored God knows what until they just simply became tapped out. Only an asshole accuses honest, hard-working people for the crises we are facing.

The more I think about it, the more disingenuous your posts seem. Judging another accurately is very difficult and takes real skill, knowledge and experience with the process. Based upon what I have read, you people do not meet the criteria.

Watch it turn out each of you are a district judges or some similar shit.

 

overmedicatedundersexed's picture

it is simple see my prior post:  CRIME..

not like a gun in the ribs dark alley mugging..but close

they did not take your wallet ..the came for your job

they did not steal your vote...they just imported millions of foriegn labor who then vote

they did not take your wealth out the broken window..they debased your money

they did not comply with the constituion but changed the money system to create fiat out of thin air 1913.  prior counterfeiting was a death penalty.

they did not keep you from justice- they bought the courts and lawyers.

they did not stop the police - they just now keep them under their control.

they let you invest in markets they control with fiat by a bank which can never be audited..

they use wars to stimulate the economy and get a lot of  us killed..murder by deception of true intent of say bush or johnson.

The crime is so large few can see it ..but it is all just as mundane thuggery done with computers - complex legal systems and laws of 3000 pages-

at the Top they are like al capone, no al was a better person.

now as can be expected of crime- no value was created by the crimesm only taken and now poverty is headed our way.

 

 

Implied Violins's picture

Congrats on doing to others what you accuse others of doing.

Tall Tom's picture

The middle class is killing itself. Fat, stupid, brainwashed and increasingly lazy, the causes are undeniable.

 

Why are they "Fat, stupid, brainwashed and increasingly lazy"? Can that be by design? 

 

Yeah. Shift the blame onto the victim...In that way you do not have to look in the mirror and investigate.

NEOSERF's picture

Nothing kills innovation and ingenuity like a big $35K safety net...free health, free food, free transportation, subsidized housing and as many kids as you can have gets you a bigger check.

Tall Tom's picture

 

 

 

Drugs or Alcohol, combined with TeeVee does the trick.

 

Even the Minimum Wage earning WORKERS are indoctrinated to accept that their lot in life is to serve.

 

Welfare may not help but it is not a root cause.

 

They are INDOCTRINATED, DRUGGED, INTOXICATED, INEBRIATED, MEDICATED...and DUMBED DOWN as THEY ARE EASIER TO MANAGE

True Blue's picture

The beauty is that it kills it from both sides of the bell curve; it kills it in the recipient and in the person who is taxed to pay for it.

Miles Ahead's picture

Great.  Death to the "middle" class.  They never stood for much anyway, not in the 50's, 60's... and not now.  Just the next pay raise and the house on the cul-de sac.  They don't even protest war anymore - never did really.  Especially since Lockheed, GE, et al made them "middle" in the first place.

When you raise people's wealth without truly raising their educational level you get baboons like Nutsack whom for every issue there is one thought - kniggers.  And happy is he that he can come onto a thoughtful forum nightly and spew his ignorance with impunity and with green arrows from like-minded apes.

That, and sucking on guys hairy nut-sacks once the dreariness of hours on the forum has kicked in.

JRobby's picture

Clearly a closet case Miles. Good call!

Miles Ahead's picture

I guess in the end we need to be grateful that he didn't use a photo of his asshole as his avatar. I probably shouldn't give him any ideas. Although it would be appropriate.

A got-damn pair of balls.  Yeah, that proves his manhood.  I'm convinced.

Baa baa's picture

Something about your post rings hollow but it may be I misunderstand. When you rail about education, do you mean at the secondary school, university level or do you refer to ongoing education as a part of a career?

While education does allow for a more circumspect approach to living, character dictates what choices a person makes along the way. Character is molded by family, society and some genetics. Education today is the domain of government. These distinctions are fuzzy at best but a solution does not rest on education alone. Have a child and then abdicate from the role and duties of parenting, odds are, you wind up with a monster. It begins at home, period.

swmnguy's picture

I don't think he was being specific about education.  He was talking about elevated levels of thinking, discourse, perception; all of which tend to imply a higher level of education, from whatever source.  The reverse of this, low levels of education, tend to be expressed in cliches, racism, crass rudeness, etc.  Obviously we all know exceptions to the rule but that's the typical assumption people infer from behavior.

snr-moment's picture

Will never happen with the leftist\statists in control of all "education"

jus_lite_reading's picture

@jrobby- "re-distribution of wealth" Are you serious? That is exactly what has been happening the past 30 years. Everytime there is a new and great "social" system set up to help the poor folks, the middle class pays for it. Tax increase always hit the middle class the hardest because the poor pay no tax, the rich don't feel a thing if they end up paying an extra $3 million in taxes but the middle class feels the pinch when their health insurance goes from $300 per month with zero deductible to $742 per month with a $5000 deductible under Oshitcare.

What the middle class needs are JOBS. Manufacturing jobs, technology jobs. Trump is 100% right about that. America is being sold down the river by greed. IF we were to magically redistribute the wealth from the rich to the poor and middle class would that stop the bleeding that continues?

We need a strong currency.

We need to mind our own damn business in global politics.

We need to take care of our own people.

We need to enforce current immigration laws.

We need to stop being pushed around and sold down the river. And..

The Tree of Liberty is very thirsty...

 

JRobby's picture

You are missing the point I propose. 

Hint: it is not changing laws, tax and spend policy or negotiations of any kind.

jus_lite_reading's picture

What is your point then? Mine is that the middle class is burned out and don't have many options left. Just because the bank account has a few extra zeros in it doesn't mean you have MORE WEALTH than you did 40-50 years ago. It just means everything got more expensive and now requires the mother to work and send their children to daycare to pay for that mortgage they can no longer afford. It's out of control. All this consumerism is leading everyone to indentured slavery. Go back 40-50 years and I bet your grandparents owned their home by the age of 30 and that was all on grandpa's income and one job not two or three. So are we richer? Access to better techonology does not make someone richer. It's complicated and requires many metrics to answer, for which I can't even say anymore cause my head is spinning. It could be that new bottle of Maracame tequila. Idk.

Baa baa's picture

You blame consumerism? What folly. It is not consumption that created this mess, as has been pointed out on ZH innumerable times, It is the crony capitalism. Corporate influence under the protection of corporate personage has made the government unaccountable to its citizens. The primary process locks out all but the chosen few. We have a broken, corrupt government. That is the problem, the rest are symptoms. But then, I do not suffer from impulse shopping, so this assessment may come with some bias.