Elizaberth Warren – The Coming Collapse of the Middle Class

This is a pretty long video. But it did give me a perspective on whats going on to the American Society today. A video that I would recommend to spend an hour of your time watching.

The lecture compares two families – Parents with 2 kids in the 1970s vs Parents with 2 kids in the 2000s.

In the 1970s, most families have only one working parent, but now most families have 2 working parents. Hence, household income increased from ~$40K to ~$65K (all numbers are inflation adjusted). Common sense would tell us that today’s family will be wealthier than the same family a generation ago – more savings, no debt. But, contrary to common sense, this is not the case. The average household in America today is actually spending more than they are earning. – no savings, loads of debt!

I was not surprised when I heard the above from her, as people today are consuming so much more on goods and services than a generation ago – Zara shirts, Levis Jeans, LV Bags, Nike shoes, Classy Restaurants, Organic Food, iPhone, Movies, Wii, etc. But what really shocked me is this:

We are now actually spending less (inflation adjusted money) in clothing, food & appliances compared to the 1970s. Below are some statistics provided in her presentation:

  • Clothing – 32% less
  • Food – 18% less
  • Appliances – 52% less
  • Car – 24% less

So where did all the extra income go?

  • Housing Mortgage – 76% more
  • Health Insurance – 74% more
  • Cars- 52% more
  • Taxes – 25% more

Elizaberth concludes that, the median family today is actually spending less on the “luxurious stuff” than a generation ago. And the Middle Class today is in debt today, largely due to spending more on the “necessity stuffs” like Home, Car, Health Insurance, etc.

So, with a weakened (or collapsing) Middle Class, what are the implications?

  • Less support from the Middle Class to the Low Class Earners
  • Possible shift from Big Bulk Middle Class America to a 2 Class society
  • Threatens the stability of American Society 

I would also like to add that, in todays 2 household income families, where both parents are working, parents spend less time with the family. And this could lead to social problems like Juvenile delinquency.

So, if you are a median income earner, would you rather live in the 1970s era or the 2000s era? 

And if we are politicians today, how do we fix this? 

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