Friday, December 6, 2013

The Fallacy Of the Excluded Middle (Class)

Google Image Search: Middle Class
I typed Middle Class into Google Image and the above was one of the top pictures. Let's see:
If you are reading this, the chances are you think you are middle class. Perhaps you have some economic background so you may intellectually know more about where you fall and what your percentile is (if #OWS accomplished one thing it was to put Social Class into math percentages). But even if you lay in bed at night worried about money or can regale me with statistics about the shrinking 'waist-line' of American society, the chances are?

On a day-to-day basis?

You feel pretty middle class. I know some for-real 1%-ers and I'm sure they feel "pretty middle class." No 1st-class air vacations to Fiji. No private cook. No Ferrari. I know a guy who owns a "super car" and manages his money wisely. If you stood in his living-room it'd look pretty archetypally middle class (the house was built in 1960--it could be from a 70's era sit-com).

Everyone thinks they're middle class in America, even people under the 20k/yr lower limit. The middle class is an attitude.
From the Congressional Report On The Middle Class. Middle is THIRD.
If the middle class is that middle-third (and there is no standard definition, the PEW range is 60k-85k based on where you live) then that picture up at the top? No way are all those guys middle class. Some of them have to be off the bottom (PEW) or way over the top (airline pilot, doctor).

But what about you?

What If The Illusion Is The Other-Way-Round?
We know that some people feel "middle class" who aren't--but what if instead of the airline pilot and the doctor making themselves feel better by telling themselves they're middle class when they're really upper middle? Or wealthy? What if they're the ones who are barely if at all making it to the historical "middle class?"

Zero Hedge posts an interesting set of criteria: Are you really middle class? They ignore the income issue as that's been talked to death. Here's their list:
  1. Meaningful healthcare insurance
  2. Significant equity (25%-50%) in a home or other real estate
  3. Income/expenses that enable the household to save at least 6% of its income
  4. Significant retirement funds: 401Ks, IRAs, etc.
  5. The ability to service all debt and expenses over the medium-term if one of the primary household wage-earners lose their job
  6. Reliable vehicles for each wage-earner
  7. If a household requires government assistance to maintain the family lifestyle, their Middle Class status is in doubt.
  8. A percentage of non-paper, non-real estate hard assets such as family heirlooms, precious metals, tools, etc. that can be transferred to the next generation, i.e. generational wealth.
  9. Ability to invest in offspring (education, extracurricular clubs/training, etc.).
  10. Leisure time devoted to the maintenance of physical/spiritual/mental fitness.
  11. Continual accumulation of human and social capital (new skills, networks of collaborators, markets for one's services, etc.)
  12. Family ownership of income-producing assets such as rental properties, bonds, etc.
The Omnivore would be stuck on #5, #8, and qualifies for #12 because of a property his spouse owns--but thinks that's kinda cheating. Can I count my timeshare?

But That's Not The Point, Really
You can look at graphs that suggest that the current state of the economy is slaughtering the middle class--that inequality is rising faster than ever--and that while we may not know the exact impacts of that ... it's bad. These are all things you can / should know.

The problem is that what we do about it is too painful to contemplate.

The solution to income inequality isn't a tax on the rich--or redistribution--or Quantum Easing--a jobs program--or even lowered taxes and the apocryphal rising tide (or trickle down). The problem--the reason this is happening--is that as I said above: no matter what the economists and quants say, you feel like you're middle class.

The problem is that while the world has changed the TV we watch hasn't. In it (a) everyone works (b) young people (generally) don't live with their parents (c) when we see college educated people they tend to be professional and employed (d) what the apartment of a stoner looks like--other than hygiene--is what the apartment of a middle class person looks like.

Sure, if you're looking at an image of the "super rich" you get a glorious sky-line view over Manhattan ... and you see art objects in glass cases ... but when you see Seinfeld you don't, unless you live in NYC, go "That apartment would cost like 30k/year."

The bottom-of-the-line Honda, the Honda Fit comes with an MP3 player jack. My 30k car from 2006 doesn't have that.

Poverty and wealth, in terms of what you have in your immediate life look almost identical. If you think a big-screen flat-screen TV is a luxury you've been under a rock for a decade.

This is why, ultimately, productivity can soar while wages stagnate: the societal markers for wealth have been outstripped by the lowered cost for "luxury goods." You can be bankrupt, drowning in debt (trust The Omnivore--both things are possible at once if you "do it right"), and still get a 32" TV from Walmart for next to nothing.

The point of the exercise is that your fore-brain can crunch some numbers and determine if you're "middle class" or not--but your emotional brain? It's stuck streaming Netflix through your Blu-Ray player to your 55" HD wall-mount TV.

The revolution won't be televised--because if it is, it won't be a revolution.

To actually change things we'd have to change the environment we live in so that the messages we get? They tell us the awful truth: a lot of us actually aren't middle class and maybe even that airline pilot and the doctor don't quite make it either. Anyone want to sign up for that?

* The gender gap should be its own post ...

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