Death of the middle class

Posted on March 31st, 2010 by admin

Being referred to as “middle class” when pre-boomers were kids indicated that a family had more than the necessities of life. In the boom times after WWII, more and more people qualified for this title. To be middle class meant having a house, a car, a TV set and probably being able to take some sort of summer vacation. Life was good.

Image by National Library NZ on The Commons via Flickr

Over the past 50 years, things changed. Inflation is part of the problem, but there’s more to it than that. Instead of single-income families being the norm, dual-income families became the norm. At first, people believed that with two earning money, it would be easier to save for the future, but young married couples needed two cars, more clothes, ate out often, took expensive trips and generally spent more than they planned.

After the first baby came along, household expenses increased. And the more kids there were and the older they got the more it cost. Day care started early so mom could continue working, which allowed the family to continue to live well as the cost of running the household swelled. The growth of credit cards helped delay paying for some of the purchases until later.

The actual money needed to be considered a middle class family increased, yet those making less wanted to live a step or two above their means. After all, this was the American dream and it was their right. Unfortunately, no one put the breaks on out-of-control spending. The government was throwing money at all kinds of things. People were willing to extend credit for all kinds of purchases from electronic gear, to cars, to time-shares, to houses. Nothing down. Low monthly payments. Get what you want now rather than waiting and saving.

Finally, reality set in. America hit the wall. The nation’s financial institutions suddenly were in trouble. Businesses followed. Layoffs started. Housing tanked. The car market required a government takeover (or at least that’s what they claim). Few people or businesses can get credit. And, while there is a recovery underway, it is a jobless recovery in a highly-competitive worldwide economy.

So those who aspired to be middle class may slide further down on the scale than they had been, even if they are fortunate to have kept their jobs. Those without jobs are forced to be on the government dole. Without retraining, many of them will not earn what they once did and remain in need of some kind of welfare support.

Many of those who are middle class live from paycheck to paycheck, in total fear of losing their jobs or of a catastrophe wiping out what little savings they may have. So these folks are not spending except for necessities, much like their parents did 50 years earlier. Back then, however, the economy was on the rise. Today the outlook is not as encouraging. So, maybe, pre-boomers have to step forward and remind folks about the responsible way to run a family budget; otherwise, there will no longer be a great American middle class.