The Increasing Pressure on the Middle Class

Tuesday, June 27, 2006 | 07:36 AM

In yesterday's RM column, I referenced a chart from the Sunday NYT (below).

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click for larger graphic

Wealth_distribution

Courtesy of the New York Times

 

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The key takeaway from this is the ongoing increasing pressure on the middle class; Dan Gross called this the cram down decade.

Since the theme of the column was "Ignore Statistical Oddities at Your Peril," here is one to mull over: How much of an economic aberration is a large middle class?

For most of history, there has been landed gentry and working knaves. The middle was relatively narrow slice -- larger in numbers than the wealthy, but obviously less numerous than the poor.

During the Roman Empire, the merchant class fully developed, including soldiers, traders, and all manner of craftsmen. The Middle Ages saw the rise of Guilds, as Coopers, Smiths, Innkeepers all rose above the indentured servants and free field hands. Perhaps some of our more knowledgable readers with a better grasp of histpory than I can address this in comments.

Following WWII, the United States saw an explosion in the number of people moving into the Middle Class. Those numbers may now be slowly reversing.

The funny thing to me is how your perspective can get easily skewed by your surroundings. To be in the top 1% of earners in the U.S., you need an annual wages/income of $237,000. Here in NYC, where there is an enormous concentration of wealth, you are (barely) upper middle income at that salary level -- certianly not wealthy. And on Wall Street, half the people I personally know earn at least that much -- and complain about it.    

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How this wealth distribution plays out may have significant repercussions on a variety of sectors -- especially the balance between luxury and discount goods.

It is definitely worth keeping an eye on this in the near future . . .

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Source:
Economic View: Income Inequality, and Its Cost
ANNA BERNASEK
NYTimes,  June 25, 2006
http://www.nytimes.com/2006/06/25/business/yourmoney/25view.html

Tuesday, June 27, 2006 | 07:36 AM | Permalink | Comments (46) | TrackBack (0)
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Comments

It will be interesting to see what sources of income the middle class generates to sustain itself.
Since outsourcing mainly hits the middle class from it's lower factory jobs to the software engineers, accounts and lawyers, I would think the next couple of decades will witness a middle class creating new sources of income.
More involvement in entrepreneurship (starting new software companies or selling coins on eBay) or other interesting blends of talent and capital.

Posted by: Louis | Jun 27, 2006 9:07:43 AM

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