Monday, October 17, 2011

Economic Structure

Currently America has a 4 tier economic structure:

1% (TW) Truly Wealthy (Yacht/Full time Servants Don't have to work, owns multiple homes)
9% (UMC) Upper Middle Class (speedboat/luxuries - many have a Graduate degree, always owns their home) 
50% (MC) Middle Class (two cars, graduated from college, - sometimes owns, sometimes rents )
40% (LC) Lower Class (one used car, at best - did not graduate college, usually rents)

There used to be a Lower Middle class (LMC) that consisted of clerical/blue collar workers, but that class has dissappeared.  They typically had the 2 year "Associate's Degree"  but not the four years B.A.  Computers and robots took a lot of those jobs and the pay dropped for the rest, making them clearly the lower class. Oh, a few managed to make the jump to Middle Class, but not many.  Now a days a n Associate's Degree won't help you that much.

At the same time, the Upper Middle Class has shifted upwards a bit.   They don't like to be called the "Upper Class" for several reasons.  Chief among them is that often the Upper Middle Class works sides by side with the Middle Class - in fact sometimes U.M.C. people work for a MC boss.

This is because children can turn an Upper Middle Class family into a Middle Class family.  If your boss has a family, he may not live as well as you do - particularly if his wife is a stay at home mom.  Children cost a lot of money and often the mother (and rarely the father), have their employment changed because of the child.  The second most common reason why an UMC becomes a MC family is disease.  A single sick person in a family (parent, worker, or child) can  cost huge amounts of both time and money.

This happens because the main difference between UMC and MC is that the UMC has luxuries.  The main difference between the MC and the LC is not luxuries, but steady employment, with benefits, and a bit of a safety net in the bank or home equity.

The same effects (child, sickness) can turn Middle Class into Lower Class, but this is a little bit bit rarer.    The movement is generally caused by someone stopping a lucrative job to help out and give personal, loving care to someone (child/ sick parent).  The Middle Class does not have the luxuries afford to do that - so the child/sick person often just has to make do with what they can afford because both mommy and daddy have to keep working to keep them out of the dreaded Lower Class. 

I don't think we will ever regain the Lower Middle Class.   Computers do what they did much very well.   In addition, the push to get more people with a full bachelor's degree is a wise thing.  If you are smart enough to graduate High School, you should get a full Bachelors Degree, not settle for an Associates Degree.

Being in the Lower Class is often the result of illness in a family without two strong, skilled workers.  Drug use is also a contributing factor.   To pull people out of the Lower Class we need better education and better free healthcare (Obamacare is a good start).  What we really need is a new education system.  And that won't happen without removing local control.

Now to discuss the big one.  The move, everyone dreams about.  Moving into truly wealthy is practically impossible.   Social mobility beyond the UMC is practically gone.  The top 1% likes their position and does what it takes to stay there.    It's no enough to be better than 99% of the population.  Bill Gates' children - who may be smart but not as smart as he was - fight to keep their position.

(Source for rest of article)

The telling problem is the drop in mobility.  In the 1940s and 1950's, the chances of changing social class were from a low of 5 to as high as 12%.    But since the 1990s, it has held solid at about 3.8%  That means less than 4% of the top 1% will ever stop being rich.   You just can't become wealthy (or lose your wealth) the way we used to.  Not unless you do something spectacular.  Everyone hears of lottery tickets wasting their wealth.

In truth if you have to be 1 in 2,500 to fight your way into the top 1 in 100 position.   As for the rich slowly descending into the Upper Class - that usually only happens to the arrogant ones that pissed off their parents.  Again, less than 1 out of 25 rich people somehow blow it and end up living in just a million dollar condo instead of a $10 million dollar mansion.

Part of the issue is that corporations got bigger and better.  We created national chains, so new businesses have to compete against huge businesses - that can sell at a loss in a small area.   It used to be that small business could relatively easing establish dominion over a 3-10 town area without fear of competition form a national chain.  You were only competing with other local businesses.  But now we have huge national chains.  This makes it much harder to turn your family business into a state wide corporation.

The internet helped out a bit - but try to compete with Google/Apple/Amazon/PayPal now.  We have new large corporations, not many medium ones competing with each other.  In the end, it was a one shot infusion of new blood to the upper classes, not a continuous engine.

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