How’s the Middle Class Doing?

Professor James Hanley has a great post from a few weeks back comparing the middle class circa 1950s vs. the middle class of today.  It has touched off a quite a debate at the League of Ordinary Gentlemen after Jason Kusnicki picked up on it a few days ago. Here’s part of what Hanley said in that January 5 post:

it seems to me that part of the problem is that as the country becomes wealthier, it doesn’t seem to become easier to live a middle class life. And it seems to me that this is because the material standard of living that defines the middle class today is higher than that which defined the middle class in past generations. For example, in the 1950s, a middle class lifestyle meant a window air conditioner and some fans to move the air around; today it means central air conditioning. Back then a single car family was middle class; today most middle class families are two car families. A single television set was sufficient to be middle class back then; today–even though televisions are much cheaper–most middle class families have multiple televisions, many pay extra for a television that’s much larger than what their (grand)parents had, and most pay extra–sometimes a lot extra–for cable or satellite (i.e., once upon a time three free channels was middle class; now 100 pay channels is middle class). They didn’t pay for microwaves and computers (and internet access) in the 1950s, while we do now. We also eat out a lot more today than they did back then. One of the biggest changes is the size of American homes. In the 1950s, the average home size was just under 1,000 square feet; today it’s over 2,300 square feet. As importantly, a house back then most often had a single bathroom; now homes regularly have 2 1/2 baths or more.

All this extra material wealth is a good sign, from a strictly economic point of view,* because this means our middle class can afford more than our grandparents’ middle class. Our middle class has a higher standard of living, is better off, than our grandparents middle class. But as commenter E.C. Gach’s question, “Will we (human race) ever have competed enough in the rat races to have a future where our children can have their needs met while only working part time at the “low end” job?”

Like I said, it’s created a lot of debate. As of today, there are 353 comments. This is what E.D. Kain, once a heterodox conservative and now newly-minted progressive, had this to say:

Jason,

I’m well aware that leisure items and material goods are in many ways more fun and more advanced than in the past. But this says absolutely nothing about retirement security or healthcare – two far, far more important issues. Furthermore, it doesn’t speak to the preferred changes libertarians and many conservatives would like to make which would, on sum, make retirement security even less reliable. And frankly, if left to just libertarian and conservative ideas on healthcare – without the pressure liberals place on the issue – I don’t think you’d ever see anything like healthcare security for the poor and working classes. Just look at the efforts to cut people off the Medicaid rolls across the country.

Furthermore, while this does a fine job at explaining how things have improved in society (and I don’t think most people are arguing that we should return to the 1950’s or the 1800’s – the idea of progress is well-rooted in the collective psyche) it says nothing at all about how things should have improved. Would we trade our high-tech middle-class existence for the low-tech middle-class existence of the 1950’s – maybe some die-hard nostalgiaits would, but most people would not, even if they believed that there was a crisis in the middle class. Asking to pick the present over the past and then using that as an example of how things must have improved is pretty paper-thin as far as arguments go. Nor does it say why things have gotten materially better. Perhaps some of these much-loathed government programs are to blame; and perhaps, too, the liberalization of markets and the lowering of tax rates have helped as well. Perhaps it is a very mixed bag with no simple explanation, just as the gains made across the board don’t tell the whole story either. But I suspect that the usefulness of libertarian economics has reached its peak. Civil liberty issues are the next frontier for libertarians who want to improve the lives of Americans – not attempts to privatize public libraries or fight for more tax cuts.

Anyways, this argument also says nothing about how things will be in the future if we maintain the current course. I don’t trust that the nation as a whole will be very good with its 401k investments, or that the investment bankers who just thrashed the economy will be very wise stewards of our money. Pointing out that the middle class can afford more leisure and better toys than it used to, and that we live in more material comfort, ignores the chaos in the system, the rapidly shifting industries, the rough and tumble ride that middle class workers face, and how very important things like health insurance are for people who have none, or who lose it when they lose their jobs.

The argument that is going on about the middle class could be summed up in another comment:

Being middle class isn’t just the ability to buy stuff… it’s security: knowing that if you get sick you’ll get health care, when you retire you will be comfortable; etc.

One of the main defenses of the globalization of labor is that this decreases the cost of consumer goods. Well, we have that now.
Maybe it’s time to focus on the other side of the equation… finding ways to drive up the costs of labor so that the middle class can have both cheap TVs and a decent retirement.

The debate boils down to what the middle class can do: are they able to buy certain consumer items or are they able to afford retirement and health care.

Since, I tend to lean to the right, I tend to resonate with Hanley’s argument.  But I don’t know if some the anxieties that the middle class feels is just due to higher living standards.

What do you all think?

6 thoughts on “How’s the Middle Class Doing?

  1. Bruce R. Gilson

    I, of course, am probably atypical in that I am retired. So I can’t speak for the current workers who worry about whether they’ll have Social Security when they do; I’m getting mine. In some ways, I’m not so well off — I am living in a room in semeone else’s house rather than my own apartment. But I have enough to pay for food, and the Government is paying for most of my medical expenses. I can’t complain, but I wonder: if the money I’ve put into Social Security over a lifetime had been inversted, would I have been better off? I really can’t tell!

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  2. James Hanley

    Being middle class isn’t just the ability to buy stuff… it’s security: knowing that if you get sick you’ll get health care, when you retire you will be comfortable; etc.

    This assumes that middle class has every actually meant that, which is very debatable. Did everyone defined as middle class in the 1950s (the reference point I used in my original post) have that kind of security? The assumption seems to be that they did, but I’m not sure. Retirement programs in some ways seem more secure to me now, because we still have Social Security, but we also have 401k plans and Roth IRAs in addition. And as we’ve seen with the collapse of many defined benefit pension plans when firms went under, the apparent security of retirement for many people back then may have been more imaginary than real.

    As for E.D. Kain’s arguments…

    Would we trade our high-tech middle-class existence for the low-tech middle-class existence of the 1950’s – maybe some die-hard nostalgiaits would, but most people would not,

    In the guise of arguing with me, he actually restated a crucial point of my post. Things aren’t easier for the middle class now not because we’re poorer but because our expectations are so much higher. Our discussion would have been more constructive, perhaps, if he had realized that he actually agreed with me on this point.

    Asking to pick the present over the past and then using that as an example of how things must have improved is pretty paper-thin as far as arguments go.

    Actually, when responding to the argument that the middle class is worse off now than it was before, it’s not paper thin at all. Humans choose those things they believe to be better, so this is actually a good test of the thesis I’m rebutting, that things have gotten worse. If most people would, after considering what they would be gaining vs. what they would be losing, choose the ’50s, then I’m wrong.

    Nor does it say why things have gotten materially better.

    Of course, because that wasn’t my point. Had E.D. meant this as riffing off my point to go in a new direction, it would be a worthwhile thing. But phrased in the context of a rebuttal, it’s merely a strawman. My original post was only meant to point out that the middle class is materially better off now than half a century ago, not to explore why that was the case. It was only a blog post after all, not a full manuscript for a research article.

    As to the final question here, about middle class anxieties, I personally suspect (opinion here, not a factual claim) that it is the inevitable nature of the middle class to be anxious, because the middle is a position of striving. The very very wealthy have their problems, to be sure, but economic anxiety ain’t it. And the very poor sometimes don’t seem to have economic anxiety precisely because they lack any expectation of being able to achieve more, so they focus on the non-material good things of life (that’s not to romanticize poverty, though). The middle class is able to have, and told they should be able to have, yet they aren’t able to have everything they want. That’s true for material goods, and it’s also true of the concept of “economic security.” Nobody will ever have economic security when they depend on having a job to pay the bills, yet we condition ourselves in the middle class to believe that middle class means security. But that’s a goal that can only be achieved by becoming fabulously wealthy, by becoming independent of work. In short, our aspirations don’t match the world’s reality.

    We could, however, achieve something close to a sense of economic security if we ratcheted down our expectations. I’ve known a few people who’ve done that, but it would take a widespread change in our collective social values for that to become the standard middle class choice. And whether that would be a good thing or not is beyond my ability to say.

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  3. Dennis Sanders Post author

    You make some very good points, James. I remember when I was growing up in Michigan during the 70s and 80s most of the people who worked around me were autoworkers, including my parents. It wasn’t uncommon to see a lot of these folks buying boats or snowmobiles and Caddys. My parents didn’t really engage the buying of things, but did use their earnings to put me through school ( I went to private school, mostly Catholic schools from K-12). Most of the folks who worked in the plants made really good money, probably more than what others were making. When those jobs started to go away, living standards plummetted. People who were used to a generous health package (and GM had a sweet deal, let me tell you), and money to buy a lot of stuff weren’t able to do that anymore.

    Is that fair? I don’t know. But I wonder if we get ourselves in trouble in getting accustomed to one way of living and when the situtation changes, we have a hard time adjusting to the new reality. Maybe all that talk about living below your means makes some sense.

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  4. James Hanley

    Is that fair? I don’t know.

    I would hesitate to try to answer that directly, but if I may be troublesome, let me pose a related question.

    The ability of GM to pay so well and give such nice benefits was based on minimal competition in the auto market, enforced by high tariffs on imports. Was it fair to deny consumers a choice of less expensive cars?

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    1. Dennis Sanders Post author

      Well, that’s is one reason that the unions and GM were able to pay so well- Japan, Korea and Europe were basically burning hulks after WWII and that allowed the US to become dominant. By the 70s, both Europe and Japan had rebuilt themselves and were able to challenge the US dominance which then led to economies like Michigan ending up where they are now.

      The fairness question was part rhetorical and part I-really-don’t-know-the-answer. If you are an autoworker that got laid off and now work for less wages, it doesn’t seem fair. I’m not saying it isn’t fair, but that’s the appearance that people might have.

      On the other side of that fairness question, the consumer does have more choice than ever before and it should (the jury still out on this) force the domestic automakers to compete on price and quality.

      It’s all interesting to me in part because it’s somewhat personal to me as well. I totally understand that things change and that industries and their workers have to learn to change, but I also understand the pain involved in that change.

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  5. DonC

    If I may remind you all, the huge change that has happened since the 1950’s is not that we have bigger houses or whiz-bang electronics. It has happened because in the 1950’s, an overwhelming number of households had only one bread winner. Today, that usually happens when there is only one adult in the house … and those homes aren’t doing so well. The better comparison is between 1980 and today. Even with two bread winners, middle class incomes have been flat. The middle class, as a group, has been in slow decline. The ranks of the poor are swelling. The ranks of the wealthy have have grown a little. What’s really disturbing is percentage of the wealth held by the top 1%. This has changed immensely over the past 30 years.

    Where is this pointing us?

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