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The Middle-Class Squeeze; Falling Wealth, Rising Costs
Topic Started: Oct 27 2011, 10:01 PM (865 Views)
tomdrobin
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It's no secret that many middle-class families are in a financial bind, caught between rising costs and falling incomes. But according to recent reports by the Department of Agriculture and the Congressional Budget Office, the middle-class squeeze is not a recent development, and isn't likely to disappear anytime soon.

On Tuesday, the CBO released an analysis of America's distribution of wealth over the last three decades. Their findings were shocking: Among the top 1% of households, income grew by an amazing 275% over the last 30 years. In the same period, the middle 60% of households saw their incomes increase by less than 40%.

But rising pay only tells half the story: As the rich have gotten richer, they have also gobbled up a bigger portion of the overall income pie. In 1979, half of all income went to the top 20% of households. By 2007, the top 20% was pulling in 60% of all income, while everyone else lost ground.

The Other Side of the Squeeze

While the middle class' slice of the income pie has gotten thinner, the price of real-life pie has shot up. According to the Department of Agriculture, food prices have increased by 4.7% since September 2010 and are on track to go up by another 4.5% over the next year. For certain products, the rise has been even sharper: Eggs and oils, for example, have gone up by more than 11%, while dairy products and beef have increased by more than 10%.

When prices go up, it's common to blame businesses and investors, but the recent cost inflation has been marked by a stagnation -- or even a drop -- in profits. Nicole Wolfgang, director of finance and product development at financial information company Sageworks notes that the impact on grocery stores has been negative: "Our data shows that grocery stores over the past twelve months have seen a slight decline in profits: They've gone down by 0.85%."

Similarly, Wolfgang points out, profits at full-service restaurants and food wholesalers have remained largely stable. The FDA notes, in fact, that the 1.3% rise in restaurant prices is the lowest annual increase in more than 50 years.

Competing for Food ... and Jobs

Ultimately, the fall in middle-class wealth and the rise in food prices may share a root cause: globalization. One effect of offshoring has been a drop in domestic wages, as American workers have increasingly found themselves competing with labor in cheaper overseas markets. As Don Peck recently noted in The Atlantic, this process has accelerated: "The recession, meanwhile, has restrained wage growth and enabled faster restructuring and offshoring, leaving many corporations with lower production costs and higher profits -- and their executives with higher pay." Thus, as business leaders have paid workers less, they've been able to pay themselves more.

On the other end of the spectrum, as overseas workers have made more money, they have spent more of it on food, driving up prices, a point that the Department of Agriculture acknowledged, noting that "cost pressures on wholesale and retail food prices due to ... strengthening global food demand, have pushed inflation projections upward for 2011." In other words, food prices -- and, in all likelihood, income inequality -- are going to keep growing for the foreseeable future.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.


http://www.dailyfinance.com/2011/10/27/the-middle-class-squeeze-falling-wealth-rising-costs/

I agree the rising income inequality is due to globalization and offshoring.

I can't understand why those who have fared so well under the changes need to have big tax breaks. It just exacerbates the problem.



Edited by tomdrobin, Oct 27 2011, 10:02 PM.
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Thumper
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Greedy bas****s. That's why. Of course I have class envy.
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colo_crawdad
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With that kind of after tax increase in incomes, if you are to believe the right about those people creating jobs in our economy, we should be at 100% employment. But apparently experience shows that right wing mantra to be wrong.
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tomdrobin
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I don't have class envy, nor begrudge success, but rewarding policies like offshoring to increase profits with tax breaks while the worker gets screwed is unjustified.

And, what about the right wing resentment of entitlements like food stamps and unemployment compensation. Seems like class warfare to me goes both ways.
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Jim Miller
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How does the worker get screwed? Is he forced to work for someone that he doesn't want to?
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Sea Dog
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Jim Miller
Oct 27 2011, 10:24 PM
How does the worker get screwed? Is he forced to work for someone that he doesn't want to?
No, Jim,
He is forced to pay into his pension!

doglaugh
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Chris
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As Kennedy put it, all ships rise with the tide.

The rich get richer because they risk more and lose and fall or win and rise. But they take everyone with them. It was pointed out on some TV show last night, forget which, that of those who were on the bottom of the wealth pyramid a decade ago only, iirc, 18% remain there and the rest have risen up.

Focusing on inequality and crying unfair as the emotional basis for jumping to the conclusion state intervention is needed, will only tend to level everything. For all ships fall when the tide goes out as well.
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Jim Miller
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Sea Dog
Oct 27 2011, 10:32 PM
Jim Miller
Oct 27 2011, 10:24 PM
How does the worker get screwed? Is he forced to work for someone that he doesn't want to?
No, Jim,
He is forced to pay into his pension!

doglaugh
I chose to pay into mine.
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colo_crawdad
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But, Jim, didn't you say it was
"stolen" from you?
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Pat
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Man their is a lot of anger and envy from the lefties on this board. Rather than look at the positive, you choose focusing on the "poor me" class warfare spiel. Let's look at this realistically for a change. Over the same time period the world caught up with the United States. Companies compete worldwide and wages are a major expense. Did you really think that wages for a coal miner, auto worker, widget maker, or auto mechanic would continue to reflect unrealistically in the market place? The middle class you speak of is the traditional blue collar, high school educated worker. And he is the guy competing to build widgets with a guy in Korea. It was only in the post WWII time frame, when America ruled world commerce, that blue collar workers thrived on unrealistic wage and benefit rates. Prior generations when America was on a more level footing in the world, earned about the same as a counterpart elsewhere.

Turning to the top wage earners, the reason they earn what they do is that their ideas and creativity result in more production somewhere in the chain. You are in reality, paid what you are worth in the economy. If you own or are in charge of a large company, your wages reflect the value you bring to the operations.

Crying or moping around about who gets more of the pie is silly and immature. If you want a bigger share of the pie, then go get it. Why are you bemoaning the income level of people who are not willing to climb out of their situation? And if you take the money away fro producers and redistribute it, the producers will find a way to circumvent your efforts. They won't sit still like the lower wage earners do. They will take the initiative.
Edited by Pat, Oct 28 2011, 12:37 AM.
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