The Shrinking Middle Class in America

[Boris Godunov]

$2/meal is a little too low I think.

I'd rather use actual data:

http://www.nytimes.com/2008/11/04/health/nutrition/04well.html/?_r=1

the average American eats $7 worth of food per day.

That's a lot closer to my guess than yours.

Even with $2/meal/person, however, you're still at $2080/month or $24960/year.

The problem with all your numbers is that they appear to be guesses, and perhaps like the food guess are not very accurate. You then extrapolate them out into bigger numbers, compounding the potential error.

Take your rent estimate--that seems unreasonably high too. In my area, which again is above the norm, you can get a decent 2-bedroom apartment for $900/month. I bet the national average for a 2-bedroom apartment in an average part of an average town is noticeably lower. Try $600 a month and see how that effects things.

Why look for more accurate estimates of cost?

[Al B. Sure!]

what the ****?

Skim through the thread. He has been consistently denying it.

To be fair, I think the CPI has issues, as well, as I discussed throughout this thread. For example, I think by ignoring housing and fuel costs, it is systematically understating inflation because those are areas that have been highly inflationary since 1970.

I suspect that real wages have stagnated as is borne out by the CPI. Total compensation (income plus benefits) has increased, however, but there is also rising disparity between the 95th percentile of wage earners and both the 50th and 10th percentiles so inequality has increased.

Also, productivity has outpaced compensation since the 1990's, largely due to the introduction of computers and automation which have greatly increased productivity per man hour. Before the 1990's, compensation increased in step with productivity. Basically, workers are not being compensated for the rise in productivity as they were in the past. Of course, this is just because of technology, not anything inherent in any economic policy.

The average standard of living has improved but only because households now average two wage earners and credit card debt exceeds average disposable income.

There. That's a brief summary of my position. Like I said way earlier, it's all a mixed bag. Not a clear-cut win or loss either way. My explanations, rationale, and evidence can be found throughout the thread.

I just hope all the guys like MrFun or Kidicious actually learn something. Really, MrFun, don't read some liberal gobblygook. Honestly, if anything with regards to economics is very straight-forward and one-sided, it's probably wrong. Economies are very complicated beasts.

[Al B. Sure!]

Boris, you're forgetting that the 1970's median family owned a home. A 2-bedroom apartment for 5 people is a considerable downgrade. We're talking 3 kids sharing one bedroom here.

And most people back then and still today live on either the East or West Coast. I'm seeing much higher than $1000/month for 2-bedrooms in any East Coast city (Philly, Baltimore, DC, etc.). I think $1000/month is reasonable for 2-bedrooms.

However, even if you can get a 2-bedroom cheaper in some communities, that doesn't change the fact that I downgraded the living conditions from the median 1970 to begin with. Perhaps we should compare it to a 3-bedroom apartment or 3-bedroom house? Would that cost $1000/month? Looks like 3-bedrooms in Detriot go for $1100/month but it's Detroit

So the housing costs remain the same.

I already downgraded the food costs and the utilities I know are accurate because I verified them.

You're still left with $400/month to spend on everything else besides housing, utilities, and food. That's a pittance for 5 people. Transportation, clothing, and money spent on (humble) fun activities, and you're done.

You're nitpicking but my general point remains very much true. A family earning $30K today will be worse off, by any measure, than a family earning $7K in 1970. Women work and households use credit cards as a response so that the average household now makes more than $30K (real median household income is $50K) along with having considerable debt.

[RGBVideo]

But which would you prefer: earning $6,670/year in 1970 or $30,513 in 2004? If the answer is "2004 **** yeah", then you've got pretty clear evidence that CPI is not accurately measuring the change in the real value of wages.

hahaha you'd prefer earning more dollars even if it'd buy you less goods? congrats, you're an idiot if so.

what the flying ****. what is your argument here? that you'd prefer to have $10 which would be able to buy 50 pounds of bread rather than $1 which would be able to buy 100 pounds of bread, since you can also use that $10 to buying a cell phone which wouldn't be available in 1970? i honestly can not understand what are you trying to achieve by discrediting CPI here. sure, it's not the perfect index in keeping track of consumer good prices wrt inflation, but it's by far the best available.

[Jaguar]

The food estimate of $12/day/person is the absolute most ridiculous assumption, and it leads me to wonder whether AS has ever shopped for groceries in his life. (Actual groceries, not prepackaged stuff.)

I have actually shopped for groceries recently, and happen to have a receipt right here. Keep in mind that I'm shopping for 1-2 people. (Girlfriend lives with me on weekends, but not weekdays.) If I were shopping for a full family, I could buy in greater bulk.

Let's see how well I do in constructing a diet for myself, using just the receipt I have right in front of me. I see that I got a half-dozen eggs at 9 cents apiece. An egg has 90 calories, so I'm getting 10 calories per cent, or 1000 calories per dollar, in my purchasing of eggs. I'm going to say I'll eat a healthy 250 calories worth of eggs per day, for twenty-five cents. I also bought a 2 lb bag of brown rice. Rice is a healthy, staple food for most people worldwide. Looking at the nutritional facts, I see that it is 3500 calories. I got it for a dollar and thirty-seven cents. That's 2600 calories per dollar. I'll have 800 calories of rice a day, for thirty-one cents. I got a 1 lb bag of black beans for 1.12. That's about 1100 calories per dollar. I also got a loaf of whole wheat bread, at 1.42. That's about 1200 calories per dollar. I'll spend fifty cents on bread, and twenty-five cents on black beans, and that gets me 875 more calories. Fresh fruit is probably the most expensive healthy food you need, but I bought a watermelon, so life is good. The watermelon is only 300 calories per dollar. So I'll eat 150 calories of that per day for fifty cents.

I'm slightly beyond the recommended "average" 2000 calorie diet, with 2075 calories. If we add up the costs of all of my items, I have spent one dollar and eighty-one cents on my diet for the day. And I would venture to say that the diet I've laid out is considerably healthier than that of 95% of Americans today, or 99.9% of people throughout human history.

I could literally work a minimum wage job for two hours per week, and have enough food for myself to live on. It would be tight, but I could do it.

tldr: Al B. Sure has no idea what food costs.

[Al B. Sure!]

Jaguar:

I already downgraded the estimate to $2/meal. It still leaves us with $400/month for every other purchase besides housing, utilities, and food. For 5 people, that is not much money.

You edited it to $1.80/day, I see. That's too low. I'm sorry. If you want to eat rice and beans for your whole life, be my guest. I'm sure the 1970 median American household ate better than that.

[Al B. Sure!]

And Boris was nice enough to cite the NY Times article that stated that the average American spends $7/day on food. That's $2.33/meal.

[Jaguar]

Jaguar:

I already downgraded the estimate to $2/meal. It still leaves us with $400/month for every other purchase besides housing, utilities, and food. For 5 people, that is not much money.

You edited it to $1.80/day, I see. That's too low. I'm sorry. If you want to eat rice and beans for your whole life, be my guest. I'm sure the 1970 median American household ate better than that.

Sorry, it was a typo. That's a dollar eighty-one for a 2075 calorie daily diet.

If you want, we can swap in some meat and veggies. No way in hell is it bringing my costs of dining anywhere near to 6.00 a day.

If you give me a quarter-pound of beef, that's about a dollar and ten cents. Take away the eggs (protein, similar calorie count) and you've still got me living on 2.50 a day.

I'm pretty happy to spend more, and I do, but it's certainly possible to live in the 2 dollar/day range.

[Jaguar]

And Boris was nice enough to cite the NY Times article that stated that the average American spends $7/day on food. That's $2.33/meal.

That's because, contrary to your absurd beliefs, the average American has plenty of money to spend on food. Doesn't mean they need to, though.

[Al B. Sure!]

Consider:

Image is huge... go here: http://www.visualeconomics.com/how-t...heir-paycheck/

Here's a breakdown:

The average consumer has a budget that is split into a large number of monthly and yearly spending. The average consumer spends $49,638 a year on a range of necessary and desired expenditures. These expenditures come out of an annual household income of $63,091 per year on average, before taxes. The average consumer owns 1.9 vehicles, and 67 percent of them are homeowners. Households average 2.5 people and 1.3 earners reside in each.

The largest expenditure of the average household is housing. This takes up an average 34.1 percent of the yearly budget of households. This is an average of $16,920 spent on housing. This amount includes $10,023 spent on shelter, $3,477 spent on public services and utilities, $984 spent on household operations, $639 spent on housekeeping supplies and 3.6 Percent spent on household furnishings and equipment.

The second largest expenditure for the average consumer is transportation. The cost of vehicles purchased is an average of $3,244 per year, making it 6.5 percent of the average budget. The cost of oil and gas for vehicles costs the average consumer $2,384 per year, for an average of 4.8 percent of the total yearly budget. Combines, the cost of vehicles and their maintenance costs consumers an average of $8,758 per year. This is a total of 17.6 percent of the yearly budget.

Another large expenditure is healthcare. The average consumer spends $2,853 on healthcare each year. Another physical necessity, food, costs consumers an average of $6,133 per year. An average of $3,465 of that is spent on food that is consumed at home, and $2,668 of it is spent on food consumed away from home. Combines, the money spent on food is 12.4 percent of the entire yearly household budget.

Insurance and pensions are important financial considerations and they cost the average consumer $5,336 per year. This is a total of 10.8 percent of the annual budget. $5,027 f this, 10.1 percent of the yearly budget, is spent on social security and pension contributions. In addition, the average consumer pays an average of $309 each year, making up 0.6 of the annual budget.

Other expenditures include a yearly average of $945 spent on education, making up 1.9 percent of the annual budget. Consumers pay an average of 3.8 percent of their annual income, $1,881, on clothing and related services. Personal care items add up to $588 per year for a total of 1.2 percent of the annual budget.

Entertainment costs $2,698 yearly, making up 5.4 percent of the average consumer’s income. Purchasing reading materials makes up 0.2 percent of the average income, or $118 per year. The average consumer spends $1,821 per year on cash contributions. This makes up 3.7 percent of the consumer’s annual income.

Alcoholic drinks cost an average of $457 per year, or 0.9 percent of the budget. Tobacco and related tobacco supplies cost an average of $323 of the average consumer’s budget, for a total of 0.7 percent of the yearly income. Miscellaneous expenses make up the remaining1.6 percent of the budget with $808 per year.

Now, this is a household with $50K to spend so we need to deduct $20K to be equivalent to the 1970 $7K (let's ignore the differences between 2004 and 2009 for now).

As you can see, this household is only 2.5 people. That needs to be doubled because average households were 4-5 people in 1970.

Now, using that spending breakdown as a guide, where and how would you deduct that $20K that the $30K household wouldn't have from the $50K household, keeping in mind that instead of supporting 2.5 people, you're supporting 4.5 people.

[Jon Miller]

As far as food goes, I had a friend who managed to get down to 6$ per day, he ate extraordinarily cheaply. Friends who I considered more reasonable ate at 9$ per day or so.

None of these people ate out, and the one who was at 6$ only bought the cheapest food. He was trying to live as cheap as possible because he wasn't getting paid consistently (his university sucked).

I had some indian friends who were maybe lower, but they didn't even buy onions...

I spend too much on food and I spend closer to 20$ per day.

Your number of <2$ is just ridiculous.

JM

[Jaguar]

Don't worry, I have a 1920x1200 monitor, image is just fine.

As you can see, this household is only 2.5 people. That needs to be doubled because average households were 4-5 people in 1970

Um, demonstrably false?

http://www.msnbc.msn.com/id/14942047/

In 1967, when the U.S. counted 200 million citizens, households hovered at just over three residents each.

I study demographics, geography, and economic history almost obsessively. I can smell made-up stats a mile away.

Now, using that spending breakdown as a guide, where and how would you deduct that $20K that the $30K household wouldn't have from the $50K household, keeping in mind that instead of supporting 2.5 people, you're supporting 4.5 people.

Why should a household earning 30,000 a year try to live like one earning 50,000 a year? Most American families pay way more than they need to on food, clothes, etc. That doesn't mean you have to, just to keep up with the Joneses.

Obviously, if a 30,000-a-year family tries to live like a 50,000-a-year one, it will come up exactly 20,000 dollars short.

[Al B. Sure!]

That's because, contrary to your absurd beliefs, the average American has plenty of money to spend on food. Doesn't mean they need to, though.

Well of course they don't need to! You just showed that if you want to have the eating habits of your average Somali, you can do it for $2/day; Hell, they live on like 80 cents/day!

The point is that Kuci indicated that $30K today is worth more than $7K in 1970 (these are equivalent according to the CPI). People in 1970 didn't eat like paupers so you can't set up a scenario where you eat like a pauper today and claim you don't need money!

If the median household of 4-5 people in 1970 had a reasonable quality of life at $7K in 1970 with one wage earner, why is it that today, to have a reasonable quality of life with 3 people per household requires two wage earners and considerable credit card debt?

My point is that $30K today is less than or equal to but not more than (in the life it can buy a household) $7K in 1970.

[Jaguar]

As far as food goes, I had a friend who managed to get down to 6$ per day, he ate extraordinarily cheaply. Friends who I considered more reasonable ate at 9$ per day or so.

None of these people ate out, and the one who was at 6$ only bought the cheapest food. He was trying to live as cheap as possible because he wasn't getting paid consistently (his university sucked).

I had some indian friends who were maybe lower, but they didn't even buy onions...

I spend too much on food and I spend closer to 20$ per day.

Your number of <2$ is just ridiculous.

JM

It's ridiculous only because nobody in the US actually needs to do it, not because it's impossible, or even difficult. I can take a photo of the receipt, and the various groceries, on my webcam if you would like.

Obviously, my receipt contains other items I neglected to mention, like a blueberry pie, microwave pizzas, and other such awesomenesses, that aren't nearly as cost-effective. I do not advocate living on 2 dollars a day for food. I'm just saying I could do it reasonably healthily.

[Al B. Sure!]

Don't worry, I have a 1920x1200 monitor, image is just fine.

As you can see, this household is only 2.5 people. That needs to be doubled because average households were 4-5 people in 1970

Um, demonstrably false?

http://www.msnbc.msn.com/id/14942047/

In 1967, when the U.S. counted 200 million citizens, households hovered at just over three residents each.

I study demographics, geography, and economic history almost obsessively. I can smell made-up stats a mile away.

Now, using that spending breakdown as a guide, where and how would you deduct that $20K that the $30K household wouldn't have from the $50K household, keeping in mind that instead of supporting 2.5 people, you're supporting 4.5 people.

Why should a household earning 30,000 a year try to live like one earning 50,000 a year? Most American families pay way more than they need to on food, clothes, etc. That doesn't mean you have to, just to keep up with the Joneses.

Obviously, if a 30,000-a-year family tries to live like a 50,000-a-year one, it will come up exactly 20,000 dollars short.

Fine, I guess I did exaggerate the household number. I posted this earlier:



HOWEVER, I checked out gapminder.org and it says that for the US in 1960, the average woman had 3.59 children. Check it out yourself (children per woman):

https://www.bit.ly/a4SStr

Presumably, the average woman would be married so that's 5.5 people per household in 1960.

There appears to be some inconsistency with these statistics. Maybe there were a lot of bachelors driving down the household average?

Now you say if a 30K a year family tries to live like a 50K a year one, it will come up exactly 20K short... well duh!

Kuci doesn't seem to think so, however. The point was that the 30K a year family represented the median wage earner in 1970 in today's dollars. You see?