Lazytown Classroom (11)

[chuft]

Had a busy and tiring day yesterday, I will try to read that NYT article tonight. But yeah I recall reading back in February

• US consumer spending drives ~70 percent of GDP but spending is increasingly concentrated among high-income households.
• The top 10 percent now account for half of all spending, up from 36 percent over the past 30 years.

Banana republic time. Corporations increasingly don't care about layoffs, poor consumer confidence etc because that stuff tends to come from the bottom 50% while fully half of all spending is just by the top 10%. And the top 10% are pretty immune to most things like AI job replacement, mortgage rates, inflation, layoffs and so forth. They are the ones still going to restaurants when the hoi polloi (a Greek phrase, not Yiddish as I always thought) cut back. Wealth inequality continues to worsen as it has since Reagan. The working class has been so propagandized against socialism and communism that the rich aren't worried anymore, since the fall of the USSR, that they might go far left economically with their voting or a revolution. So all their wealth is being taken away from them and we are becoming a two tier society.


The share of Americans who are in the middle class is smaller than it used to be. In 1971, 61% of Americans lived in middle-class households. By 2023, the share had fallen to 51%, according to a new Pew Research Center analysis of government data.

https://www.pewresearch.org/race-and...-middle-class/




While overall this looks mostly like there are fewer middle class and more wealthy, the problem is that the middle class that remains is poorer.

But the middle class has fallen behind on two key counts. The growth in income for the middle class since 1970 has not kept pace with the growth in income for the upper-income tier. And the share of total U.S. household income held by the middle class has plunged.


Note Pew's definition of "middle class" is not based on things like "do you own your own home" but on this:

In our analysis of the ACS data, “middle-income” Americans live in households with incomes that are two-thirds to double the national median, after incomes have been adjusted for household size and the cost of living in their area.

https://www.pewresearch.org/2024/05/...s-methodology/

This strange sliding scale is going to produce a particular result which may not match what people think of as a "middle-class lifestyle" because of how medians themselves are calculated.

[BRBFBI]

Great PEW article. I especially like this graph you linked:

That really says it all. Look how much more spending power the middle class had on the left side of the graph compared to today. They were leaps and bounds ahead of the appropriately niche market of upper-income households.

The PEW article would have you believe that, despite upper-income households seeing the largest gains, everyone is better off today:

Households in all income tiers had much higher incomes in 2022 than in 1970, after adjusting for inflation. But the gains for middle- and lower-income households were less than the gains for upper-income households.

But that's what I like so much about the NYT essay. It takes a middle-class family and shows how their experience at Disney is worse than it would have been 50 years ago. You essentially have to be a part of the ultra-wealthy to get the experience that was available to the middle class back then.

But yeah I recall reading back in February

• US consumer spending drives ~70 percent of GDP but spending is increasingly concentrated among high-income households.
• The top 10 percent now account for half of all spending, up from 36 percent over the past 30 years.

Good memory. I looked it up and found a slew of articles, indeed from February. According to Marketplace:

Obviously there’s always been a spending gap between rich and not as rich. But Brown said the chasm really started widening in 2023[...] That’s partly because richer households tend to own stocks and maybe the only thing rising faster than the price of eggs the past couple years has been NVIDIA shares.

Whereas the PEW graph above, which ends in 2022, shows the top 19% of households accounting for 48% of income, only three years later the top 10% account for 50% of spending. That is very disturbing indeed.

[chuft]

Read the article. It was good.

I work with some people who used to be huge Disney fans and would buy annual passes - I worked with some people in another city previously who did the same - and who loved the FastPass (free) system and the ride scheduling on their phones etc. They have stopped going completely since 2020.

As I have said privately before, I do not trust "median income adjusted for inflation" type stuff because the CPI has systemic problems in how it captures housing costs, health care costs etc.

Also to repeat myself from a long time ago, when I was young I was taught there were 5 economic classes. The ultra-poor living in total poverty (beggars and other homeless people, low end prostitutes, chronically unemployed or disabled living in fleabag hotels or rooming houses etc); working poor, who had jobs but few benefits and no job security and a low wage, typically waitresses, secretaries, farm workers, manual laborers, Walmart workers and so on; working class, who had decent trade or office or factory jobs and often owned their own homes, but often were also a few paychecks from disaster; middle class, who were either educated professionals (doctors, lawyers, architects, professors, bankers, stock brokers and bond traders etc.) or business owners (who often had significant net worth but worked very long hours in the family business) - the defining characteristic of all these people is having to work but not having a boss; and upper class whose primary attribute is not having to work at all yet maintaining an upper middle class or higher lifestyle.

Since then I have seen a relentless narrative in the US which only uses lower/middle/upper class, and even any talk of that is discouraged as "class warfare". "Lower class" is a term rarely mentioned if ever in casual conversation among workers in my experience, I think it is used primarily by statisticians, local government service providers, academics and the like. A gigantic number of people consider themselves to be middle class, when their circumstances, in my view, make them working class or working poor. But most people think they are middle class and thus must be doing alright and the system must be alright because at least they're not at the bottom, living in an abandoned building as a squatter.

I would be considered "middle class" today but in real terms I am much worse off than my working class parents, who did not go to college and had mediocre jobs. On the other hand my brothers, a surgeon and a bond trader, have a level of wealth and privilege that is hard to imagine (except of course I have seen it close up, so I don't have to imagine it). They had to work for what they have, so they were not rich, they were the essentials examples of what "middle class" used to mean. Educated professionals who worked hard and as a result, gathered significant wealth and could afford non-working wives.

And as I have mentioned before, one has to be careful anytime there are discussions of "high income" and the like. Income is a technical term and includes wages but does not include capital gains. People with income, work. In addition a lot of their wealth does not come from working and is not captured by statistics on income. If someone with a $1 million house has it appreciate to $2 million, and their stock portfolio grows from $500,000 to $1 million, those gains, whether actualized or deferred, are not captured by measurements of income. So the picture is actually worse than it appears. If you count capital gains, many of the "upper income households" have increased their wealth far more than their income alone would indicate. And there is another entire category, another invisible layer on those charts, of people wealthy enough not to work at all. I have known several such people; it is another world. The normal stresses of life are entirely absent from their consciousnesses. They too have grown much wealthier in recent years, but they do not show up on "income" charts at all, since they do not work.

[BRBFBI]

Thanks for reading, chuft.

Interesting about the five vs three class model. If I understand right, you're saying the consequence of the three class model is that people get a false sense of security from being told that they are "middle class" when under the higher fidelity of the five class model they would be considered "working class" or maybe even "working poor?"

Also good point (again) about capital gains/net worth not being captured in a discussion of income. On the surface it seems like such an obvious oversight, but upon further reflection I can see that statistics on income wouldn't be very useful if they measured net worth, which tends to fluctuate by huge amounts depending on the broader market conditions.

Wealth inequality is much more exaggerated when looking at net worth rather than income. The share of the pie held by the "bottom 90%" has shrunk by over 30% since the '80s.

[chuft]

Yes I am saying people by nature, our very nervous systems, are calibrated for comparison. If you stick your hand in cold water for a bit and then in room temp water it will feel warm. If you put your hand in hot water and then in room temp it will feel cold. The same with eyes and brightness etc. We detect differences rather than absolutes. People are always comparing themselves to others. If there are just three classes, and being rich is held to be an unusual privilege accorded to those born to it or the very few who create it themselves, then most people will be content to be middle class - they just want to avoid being lower class, although as I said that term is rarely if ever used in US public discourse. They may not be winning the game but they are not losing either, and they have been propagandized to believe those with money deserve it.

Even invective against the wealthy is typically expressed in attacks on "billionaires." You will rarely if ever hear attacks on people who make $200,000 to several million a year, or even those with net worths in excess of $50 million or more. Most Americans secretly think they or their children will break into that class and they feel uncomfortable with the thought they and everyone they know are quite likely to die the same class they were born. The only ones targeted for rhetoric (but never for taxes) are people worth a billion dollars or more.

The term "working class" has been removed from US discourse. If people thought they were working class they would vote differently and they would have a very different attitude towards all those wealthier than them. They would be below average, inferior, an intolerable state in a competitive culture. But middle class - well what more can you reasonably expect to be right?

It was not always this way. Look at this classic scene in Jaws between the rich dilettante Hooper and "working class hero" Quint. From the 1970s.

1:07 to 2:20

[BRBFBI]

Thank you for the interesting read. I was not aware of how the terminology has changed, or the implications of said change. I find it all fascinating.

[chuft]

This video is absurdly quiet but 0:42 to 1:02 it is made clear Hooper is rich and a dilettante.

[chuft]

I would not say it "has changed" so much as it "has been changed" by the power structure in place.

[BRBFBI]

I got that from your post. Yes, that's better phrasing.