Article: "The Sharp, Sudden Decline of America's Middle Class"

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boltzmannsbrain
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Post by boltzmannsbrain »

http://www.rollingstone.com/culture/new ... s-20120622
Pretty frightening read. I live in a comfortable European country and can't quite comprehend how tough it must be to lose everything, and not be able to get back on track.
I would love to hear if the article is painting a truthful picture of the current financial state of USA. Any comments on the article?
(Tip: If you don't want to hit the "Next page"-button, click "Print". The layout is not as readable, but you get the whole article on one page.)


Christopherjart
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Post by Christopherjart »

It isn't surprising at all. Good jobs, very low savings rate and large houses with expensive mortgages. If one or both of a couple lose their jobs, they'll be homeless in just a few months. It would be nice if the McMansions were replaced with reasonably sized houses.
I remember when my mom sent me a photo of my brother and his wife in front of their new home in a suburb of Minneapolis, I thought wow that looks big. I probably will never see it in person, but i know it has four bedrooms. I really have no idea what a married couple without children need four bedrooms for, but I'm sure they'll find something to put in them.


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Ego
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Post by Ego »

adapt [əˈdæpt]: To adjust to different conditions, a new environment.
Conditions are changing faster than ever before and the pace of change continues to accelerate. Fast change demands adaptability and resilience.
The social worker in the story said, "When you come to me, you've hit rock bottom.... So now they're lost, they're humiliated, they're rejected, they're scared, and they're very ashamed. I'm worried about the psychological damage it does when you have a place and then, all of a sudden, you're in your car."
What "rock-bottom" means in California is very different from what it means for people from many other places in the world. She eats lunch at Whole Foods. She wears Patagonia clothes. She has a cell phone. She has a warm safe place to stay. Granted, relative to the average Californian or Northern European she is certainly poor, but rock-bottom? .... I'm not so sure. For most people in the world "rock-bottom" is far, far below.
For many, hitting rock bottom has been the best thing that ever happened to them. It forces flexibility, adaptation and resilience.


Dragline
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Post by Dragline »

It has happened to a lot of people, yet I don't think there is one "typical" story. It is sad -- they were really living beyond their means and did not appreciate it until it was too late. Now they have to re-think how they approach their lives.


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jennypenny
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Post by jennypenny »

A quote from the article...

"Most of the social-service systems in the United States function not to help people like Curtis and Concita Cates get back to where they were, to a point of productive stability, but simply to keep them from starving – or, more often, to merely reduce the chances that they will starve."
This_is_correct. This is how the system has always functioned. The chronically poor in the US have always lived with this system. It is not designed to get people "back to where there were" meaning middle class. If that were true it would be lifting people out of poverty and into the lower middle class.
Why is a system that most middle class americans found adequate just a few short years ago now under attack? Because now hardship is striking the middle class--people in minivans. It was ok for the poor to live this way, but it's not ok for people used to a middle class existence to live this way. That's the underlying message I get.
I realize my comments sound uncharitable, but I do feel badly for these people. It's just that if you work a food bank or soup kitchen regularly, it's hard to muster up anything but contempt for the kind of indignancy these people feel that they are suddenly poor and think the government should step in and reinstate them to the middle class. Pride can be the worst of sins.


jacob
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Post by jacob »

"Why is a system that most middle class Americans found adequate just a few short years ago now under attack?"
I think for the same reason that people are not currently "disproving" global warming based on observations of snow in their backyard. Now they're too busy dealing with wild fires and heatwaves. It's basically a short-sighted "it can never happen to me, so I'm not going to pay for it" attitude.
I think now people are going to pay for it. At least they'll remember for a couple of generations much like the Great Depression generation tends to be thrifty.
This can either be done the US way with people voluntarily increasing their savings so they have the liquidity to deal with sustained unemployment. In the cases above people have the assets (brand name clothing, car, ...) but they can't cover their current liabilities ($424 truck payment) because their income is gone. They're essentially defaulting because they were too leveraged and too dependent on a single income. Or it can be done the European way where the government does the saving (through taxation) and redistributes accordingly.
The problem with choosing a system is that some people are clearly capable of handling their own financial affairs and would benefit from being able to do so. Others are clearly not and would benefit from the government doing it for them. The problem is, like with health care and defense, that if nobody deals with it, it becomes a problem for all of us. So what to do ...


jacob
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Post by jacob »

So this article essentially describes a liquidity/lack of savings problem which can be fixed with more savings. (Or a government bailout for those with Washington connections.)
A bigger risk for the middle class is hyperinflation which would eradicate those savings. In such a case it doesn't matter how much money one has (unless that money is in controlling interests). If one can't get things by spending money anymore because nobody will take it, it comes down to skills with actual value [in such an economy] such as growing food, keeping warm, fixing transportation, ... and doing so without buying anything. Few have these skills noawadays.
I think this point is being sorely missed by most (dare I say) "middle-class" and "upper middle-class" oriented financial planners/sites/blogs/... I find it scary that so many recommend "saving more money" as the solution to ALL problems. They'll never know what hit them.


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jennypenny
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Post by jennypenny »

I agree with that last paragraph wholeheartedly. Skills can't be taken from you, or lost during hard times. I don't think it's unreasonable to try and acquire a core set of skills that would help you survive no matter your circumstances (mathematics, basic food production, first aid and herbal medicine, etc). Possession of those skills, and the right piece of land, are true freedom in my mind.


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Ego
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Post by Ego »

@Jacob "It's basically a short-sighted "it can never happen to me, so I'm not going to pay for it" attitude."
That's true for some. Not all. Many believe that allowing people to experience the consequence of their actions (or lack thereof) is the very thing that keeps them from making the same mistakes again, keeps others from making the mistakes the first time around, and causes positive, resilient change in both. While people may read the article and say, "There but for the grace of God go I," they are actually thinking, "What can I do to make sure that doesn't happen to me."


Dezdura
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Post by Dezdura »

I am in a similar situation. I lost everything when the economy tanked 2008-2009. I did not live in a car, but I lived in the basement of a friend with cancer who demanded rent, but would let me get away with it if I could not make it.
The worst thing is that HR departments who hire for major companies have no sympathy whatsoever, and as little as a 6 month gap in work can lead your resume to be thrown in the trash. If you have been unemployed for any length of time, it is very hard to get a job. This even goes for women who are caring for their young children at home instead of sending them off to daycare.
I do not know why it is. America has become a "work-state" where those with jobs have more rights than others. It is all about making money and tax paying. You must have permission from an employer not to work-- for instance to take a sabbatical or you risk never being hired again.
Due to American Right to Work laws it is easy to fire people for any cause just because a company wants to. There is no way to get a day in court. People are subject to the whims and tyranny of the HR department.
Yes, I have been living in this madness for 4 years now, and I thoroughly despise the situation. America has always had very little tolerance for people who do not move with the herd. For those who have discovered that there are "other" ways to live besides giving 40 years to various employers, it can be a nightmare getting a job should one be needed.
Jobs are not seen as an ends to a means any more, but some kind of --- what would be the word--- It seems like "prison" is close. A person must be tracked from institution to institution with no gaps where they are untraceable. To me, this is far unlike the American core values stated in the Declaration of Independence of "Life, Liberty, and the Pursuit of Happiness" which to me, means not working for some stuffed shirt.


plantingourpennies
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Post by plantingourpennies »

Hello Dezdura,
I was in a similar, though not as severe situation some years ago. Large companies would not look at me because of a voluntary work gap (tried to buy a small business, the deal fell through when the economy tanked).
After feeling frustrated and a little depressed, I started applying to jobs in sales, first at the retail level, and then later at a corporate and enterprise level.
White-collar sales positions have many of the "perks" of other white collar work; humane hours, bennies, cultural respect, along with higher than average income levels. HR departments do not seem to care if you are a little outside the norm, as long as your numbers are good!
A bit of unsolicited advice-apply to a sales position, view it as a challenging game, and see what happens. You are probably of above average intelligence, and if you hustle you may find yourself exceeding expectations.
Best,

Mr. PoP


Scott 2
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Post by Scott 2 »

IMO the people described in the article are lacking in the skills to plan ahead or adapt to their situation. A big factor is the economy continues to transition away from unskilled and low skill labor, meaning the people least well equipped to handle change are facing the most of it.
The first woman has been unemployed for 2 years, with access to a library and enough assets (a vehicle with stuff in it) to sell for at least a year of rent somewhere. That is enough time to figure out what skills the market is valuing, train yourself and get a job.
Running a nursery was probably fun, but growing flowers and supervising a few minimum wage part time employees is not exactly a high value skill set. WTF is she doing spending her time volunteering at a wildlife refuge if she has no place to live and can barely feed herself?
Keep in mind there is a bottom end for unemployment of 3-4%. Because businesses change over time, there was always be some percentage of people in transition. What that means is people are hired into jobs every day across the US. There may be more competition, but the work is out there.


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