The New Gilded Age

[Kraken]

Robert Reich on Inequality for All

[noxiousdog]

Robert Reich on Inequality for All

All I got out of that was raise the minimum wage.

[Kraken]

And see his movie!

I'm intrigued that he believes, as I do, that we're on the brink of another progressive era. Looking forward to seeing him make his case.

[malchior]

And see his movie!

I'm intrigued that he believes, as I do, that we're on the brink of another progressive era. Looking forward to seeing him make his case.

I like his optimism but believe his faith and optimism are misplaced. Everything that went wrong for the robber barons the first time has been corrected in their favor.

I often do some quantitative/qualitative ranking at work - so it might make for an interesting thought experiment. I picked some progressive drivers from the last go round and ranked them on a scale of -3 to 3 with 3 being progressive.

Muckraking - Investigative journalism is dead. Deader than a door nail. Most major media is owned by big corporations and they've pretty much put a stop to it. The best writing we've seen about financial corruption is from Matt Taibbi at the Rolling Stone -- not exactly a major media outlet. And I'd even speculate most folks haven't heard of him. There is little awareness about how out of whack wealth concentration is to the general population. However there are some progressive outfits that do publish - even inside Corporate America (e.g. Huffington Post). Progressive Potential: -1

Democratic Institutions - A permanent (for at least the near future) majority for the Republicans in the House of Representative due to heavy gerrymandering inhibits progressive lawmaking. In the Senate the minority is willing to obstruct anything resembling progress. Progressive Democrats are few and marginalized. Progressive Potential: -3

Legal Institutions - The Supreme Court has swung both ways on progressive reforms. I see them as pretty neutral. A minority on both sides wants more influence but Roberts seems to want to guide the court neutrally. They do side with the Chamber of Commerce far more often than not so I'd say a little away from Progressive but in bite size pieces. Progressive Potential: 0

Labor Unions: Successfully have been demonized by the Right. They have shown steady decline for years and companies are better than ever at combating unionization. The major media often is used to expose their corruption. Also they often can't get out of their own way -- e.g. several teacher's unions fought for raises during the financial crisis alienating people who were being laid off left and right. Progressive Potential: -2

Political Activism - Tea Party and huge money being funneled to Tea Party by the new robber barons. Occupy Wall Street fizzled out. The tea party is demonstrating that activism works but funding for progressive initiatives is scant -- there is no seed on the ground much less grassroots. Progressive Potential: -2

Immigration -- The vast majority of immigrants have been poorer and hispanic. The right has done an extraordinary job of alienating them lately. Reform efforts has been designed to ramp them to citizenship over long periods of time to avoid affecting electoral balance of power. Progressive Potential: 2

Economic Policy - Fed policy towards achieving full employment has been almost completely on the supply side and has exacerbated the wealth divide. To be fair it is their only play. Unemployment numbers have slowly drifted done more due to changes in the labor pool versus quality jobs being produced. Most new jobs are low-skill, low-pay jobs. Congress has no interest in reforms that sustain a robust middle class. Progressive Potential: -2

So that is my *admittedly bleak* assessment. I don't share the same optimism as some about the people suddenly waking up and realizing how they are being screwed. This is by design. I hope I'm wrong because I think this course leads to instability eventually; even though we don't have a history of it (in modern times) which is a good omen.

[LordMortis]

Not knowing the movie I don't have the optimism because of employment. We make projects cost way too much money. How much do they say new refineries are going to cost? How much do they say R&D costs? How much do we insert investment structure and law into everything? How much to people of means expect to make? How little do we want to risk our own life and limb to "progress." The progressive era he speaks of talks about how many sacrificed human lives to build the monumental (but now crumbling) infrastructure we have now.

Rebuilding the 'Merica is exactly what we need and it's going to have to come out the pockets of the wealthy. He's got that right. The problem is who is going to do it? Right now the only people I see stepping up to the task are the Military.

[noxiousdog]

In all seriousness, in my opinion the arguments are misplaced.

First, you have to separate income and wealth. Wealth is simply saved and invested income. Wealth is absolutely important to civilizations and you have to encourage it at all costs. Wealth is infrastructure, jobs, technology, production, and resources. Anything that has value is wealth. Properly invested wealth will throw off income. The trick is getting it into as many hands as possible and used most efficiently.

But consider the following experiment:
48 people ages 18 to 65. Each year they have saved $1 and invested it at 7% (a decent long term real rate of return). They all have the same net income (income-expenses). Still, the bottom 20% will only have 1% of the net worth. and the top 20% with have 51%. And that's doesn't include rising wages, falling expenses (owned housing), or being lucky (or skillful) at investing. The nature of compounding assets is HUGELY powerful over time.

So any time you see an inequality argument, you have to remember the previous paragraph and it's implications. It means, that you can never accurately compare a 30 year old to a 50 year old. Even if the 50 year old never invested another dime, he's going to have 20 years of compounding assets. On the average, that's 4 times, in real terms, what the 30 year old has.

The root of the issue, then, is how do we get people to have disposable income and invest properly? That's the rub. Looking at Reich's charts, the answer appears to be the rich need to pay for everyone else's health care and education. I don't buy the housing argument as housing costs what people are willing to pay. It's a pure auction. The other two are constrained and monopoly-like. I'm not totally opposed to the idea, but there is still a big issue.

No matter how much we adjust people's incomes, unless they become efficient savers, they will always be at a severe disadvantage to those that are. Consider someone saving 6% of their income in something like a 401k and getting a 7% return. By year 12, they will have amassed more than 1 year of salary. By year 24, it's 3.5 times. By year 36 it's 9 times. That's the nature of assets, and society will be at a disadvantage when assets aren't used efficiently. You only have to look at something like Kiva to see its importance.

[Little Raven]

Wealth is absolutely important to civilizations and you have to encourage it at all costs.

Not at all costs. Wealth is extremely useful, but if it's almost entirely commanded by a tiny slice of the population, then it stops being a growth driver.

Wealth is infrastructure, jobs, technology, production, and resources.

Wealth CAN be those things. But increasingly, it isn't. We're not building substantial amounts of new infrastructure, or creating new jobs. We're sorta investing in new technology, and we're sorta investing in new production, but thanks to automation, those gains aren't broadly shared. Instead, we're generating billions and billions of investment dollars desperately seeking a return. But there's no demand, because people outside of the top 10% aren't seeing any pay raises, so there's not much to invest in. So we get a series of bubbles instead, as too many dollars chase too few investment opportunities.

The trick is getting it into as many hands as possible and used most efficiently.

On this we agree. But as a society, we don't even TRY to do this. Our Gini co-efficient gets worse and worse every year, and nobody seems inclined to do anything about it. We haven't even TALKED about it in a national election recently. The top 1% managed to capture something like 95% of the income gains since 2009, and we're CUTTING FOOD STAMPS. I'm no communist. Equality is neither possible nor a particularly laudible goal. But I can't help but feel we're heading full speed to crazy town here.

No matter how much we adjust people's incomes, unless they become efficient savers, they will always be at a severe disadvantage to those that are.

Sure. But I don't think anyone is saying we need a level playing field. There will always be winners and losers, and that's fine. But what we're creating now is an aristocracy, where winners and losers are largely determined at birth. I don't think that's where we want to go as a society.

[noxiousdog]

Not at all costs. Wealth is extremely useful, but if it's almost entirely commanded by a tiny slice of the population, then it stops being a growth driver.

Yes, at all costs. If we do not increase productivity, the human race is doomed. That's the course we have chosen. We need the energy. We need the food. We need all the toys and gadgets that make it work. Capital is so much a part of our life you don't even realize it any more. Shoes, cars, screwdrivers, electric lights, internet. All of that is capital and wealth.

Wealth CAN be those things. But increasingly, it isn't. We're not building substantial amounts of new infrastructure, or creating new jobs. We're sorta investing in new technology, and we're sorta investing in new production, but thanks to automation, those gains aren't broadly shared. Instead, we're generating billions and billions of investment dollars desperately seeking a return. But there's no demand, because people outside of the top 10% aren't seeing any pay raises, so there's not much to invest in. So we get a series of bubbles instead, as too many dollars chase too few investment opportunities.

That's what you think but it's just a sound bite. You really haven't addressed what I said. Every new drug that hits the market has a billion dollars behind it. Every new drilling rig is tens of millions. Want a house? That's wealth. Car? Wealth. Cell phone? Yep. That is too.

The cool thing about investment dollars is you can (typically) go look and see how much a return they are generating. You can cut through the media and the spin and go see. You don't have to rely on feeling.

On this we agree. But as a society, we don't even TRY to do this. Our Gini co-efficient gets worse and worse every year, and nobody seems inclined to do anything about it. We haven't even TALKED about it in a national election recently. The top 1% managed to capture something like 95% of the income gains since 2009, and we're CUTTING FOOD STAMPS. I'm no communist. Equality is neither possible nor a particularly laudible goal. But I can't help but feel we're heading full speed to crazy town here.

This is exactly what I'm talking about. What do you mean we don't try to get it in the hands of the people? IRAs? 401(k)? FHA loans? School loan forgiveness? Low capital gains taxes? The government begs people to invest in wealth.

Have you even bothered to track net worth by age?

Sure. But I don't think anyone is saying we need a level playing field. There will always be winners and losers, and that's fine. But what we're creating now is an aristocracy, where winners and losers are largely determined at birth. I don't think that's where we want to go as a society.

And you have zero evidence to back that up. (80% of millionaires are first generation). Regardless, the fix is still to invest in both skills and capital when you're young so it can play out over time. Concentrating on current income rather than future income is the wrong way to go about it.

[noxiousdog]

Sorry, another followup.

Even if I didn't disagree with what you wrote, this still has to be addressed:

But consider the following experiment:
48 people ages 18 to 65. Each year they have saved $1 and invested it at 7% (a decent long term real rate of return). They all have the same net income (income-expenses). Still, the bottom 20% will only have 1% of the wealth. and the top 20% with have 51%. And that doesn't include rising wages, falling expenses (owned housing), or being lucky (or skillful) at investing. The nature of compounding assets is HUGELY powerful over time.

[stessier]

Sorry, another followup.

Even if I didn't disagree with what you wrote, this still has to be addressed:

But consider the following experiment:
48 people ages 18 to 65. Each year they have saved $1 and invested it at 7% (a decent long term real rate of return). They all have the same net income (income-expenses). Still, the bottom 20% will only have 1% of the wealth. and the top 20% with have 51%. And that doesn't include rising wages, falling expenses (owned housing), or being lucky (or skillful) at investing. The nature of compounding assets is HUGELY powerful over time.

Yeah - projections suggest my parents will be near or part of the 1% when they retire at 70.5 (depending on what we use as 1% - somewhere in the range discussed above). Is that who we are going after?

Edit - hit submit too soon!

Projections say I will be there (assuming the range doesn't move much) when I hit 65. I can tell you I am no where near it now (in terms of yearly salary or net worth). 25 more years of compounding is going to take me from something like 40% to 1%. Grow, baby Grow!

[Pyperkub]

Sorry, not at all costs. My thought is that it is like the optimum price for monopoly power... once wealth becomes too concentrated, then monopoly power takes hold and you'll see the inefficiencies in maintaining and getting the most out of the monopoly vs sheer creation of wealth, much as you see a price vary from the intersection of supply and demand in a monopoly to one which is not market efficient but rather monopoly efficient.

[noxiousdog]

Sorry, not at all costs. My thought is that it is like the optimum price for monopoly power... once wealth becomes too concentrated, then monopoly power takes hold and you'll see the inefficiencies in maintaining and getting the most out of the monopoly vs sheer creation of wealth, much as you see a price vary from the intersection of supply and demand in a monopoly to one which is not market efficient but rather monopoly efficient.

You're reading into it. Who is advocating a monopoly? In fact, I'm advocating exactly the opposite. We need to be encouraging the acquisition of wealth for everyone one, especially at the low and young end. Taking away from the top does nothing if it's not invested at the bottom.

[Pyperkub]

Sorry, not at all costs. My thought is that it is like the optimum price for monopoly power... once wealth becomes too concentrated, then monopoly power takes hold and you'll see the inefficiencies in maintaining and getting the most out of the monopoly vs sheer creation of wealth, much as you see a price vary from the intersection of supply and demand in a monopoly to one which is not market efficient but rather monopoly efficient.

You're reading into it. Who is advocating a monopoly? In fact, I'm advocating exactly the opposite. We need to be encouraging the acquisition of wealth for everyone one, especially at the low and young end. Taking away from the top does nothing if it's not invested at the bottom.

The adage is that it takes money to make money, which ties into Maslow's hierarchy of needs quite well. What we run into is that the game gets rigged so that the wealth is sucked out of the bottom as they attempt to ensure their basic needs (inelastic demand), and cannot invest. Housing/Food/Health Care/etc. costs all get tweaked so that the wealth that the bottom has to spend on those needs (before investing it) gets funneled up, and the investment is made to continue that pattern by those with the money. Hence the desire to funnel the wealth of the top back to meet those needs without the additional siphoning effect (part of the monopoly price inefficiency analogy, though it merely illustrates the affect of many factors, and isn't quite the best analogy).

The end result is a company-town-esque economy.

[noxiousdog]

The adage is that it takes money to make money, which ties into Maslow's hierarchy of needs quite well. What we run into is that the game gets rigged so that the wealth is sucked out of the bottom as they attempt to ensure their basic needs (inelastic demand), and cannot invest. Housing/Food/Health Care/etc. costs all get tweaked so that the wealth that the bottom has to spend on those needs (before investing it) gets funneled up, and the investment is made to continue that pattern by those with the money. Hence the desire to funnel the wealth of the top back to meet those needs without the additional siphoning effect (part of the monopoly price inefficiency analogy, though it merely illustrates the affect of many factors, and isn't quite the best analogy).

The end result is a company-town-esque economy.

Except that's clearly not what is happening and there's tons of data indicating your theory is incorrect. Median net worth by age grows rapidly. Ergo, there is signficant movement through the income percentiles by age.

[Kraken]

The world's 85 richest individuals control as much wealth as 3.5 billion poor people.

Wow. Think about that for a moment.

The world’s richest 1 percent control nearly 50 percent of global wealth.
•In 24 out of 26 countries studied, the richest 1 percent has increased their share of national wealth since 1980.
•Only three in 10 people live in countries where economic inequality has not increased over the past three decades.
•In the U.S., 95 percent of post-financial crash wealth generated (i.e., since 2009) went into the bank accounts of the richest 1 percent.
•Nine in 10 people in the United States control less wealth in real terms than they did before the financial crash.

Quoting former U.S. Supreme Court Justice Louis Brandeis—“We may have democracy, or we may have wealth concentrated in the hands of the few, but we cannot have both”—the report argues that further concentration of wealth and power “presents a significant threat to inclusive political and economic systems.” The upshot could be “heightening social tensions and increasing the risk of societal breakdown.”

[Holman]

•In the U.S., 95 percent of post-financial crash wealth generated (i.e., since 2009) went into the bank accounts of the richest 1 percent.

This is the most alarming stat. That a miniscule global minority controls more wealth than all of the global poor has probably always been true, give or take a few percentage points. But for the United States to completely sell out the Middle Class abandons everything that once made the country great.

[Isgrimnur]

The Boomers will probably be the last generation that are able to leave their kids with anything like a legacy, which, of course, will have to be promptly liquidated to purchase the newest phone and get caught up on payday loans.

[Kraken]

That a miniscule global minority controls more wealth than all of the global poor has probably always been true, give or take a few percentage points.

You're probably right, but the idea that 85 = 3,500,000,000 still blows me away.

[Holman]

That a miniscule global minority controls more wealth than all of the global poor has probably always been true, give or take a few percentage points.

You're probably right, but the idea that 85 = 3,500,000,000 still blows me away.

Oh, definitely.

[Smoove_B]

The Boomers will probably be the last generation that are able to leave their kids with anything like a legacy,

I'm not even sure about that. I've seen a number of situations where the boomer parent has a relatively healthy life up through their 70s and then takes a turn for the worse. Those final few years are either spent in a continuing care or assisted living facility and when that move is made, any semblance of a "inheritance" is gone, taken by the organization as part of the transfer of care. Of course, in all cases it was poor financial planning that allowed it to happen in the first place (i.e. not moving money or account control long before illness), but in every case I've seen (anecdotal numbers) the transition from health and independence to assisted care turned on a dime.

On topic: I saw that report yesterday and I just can't get my mind around the numbers. I have to believe revolutions have been started over less. Though I guess when the "middle" has enough bread and circuses, don't notice.

[stessier]

The middle's situation is also better than it has ever been and continues to improve. It would be interesting to see what the percentage was like, say, every 100 years or so. As mentioned, I'm betting it hasn't changed much.

[LordMortis]

The Boomers will probably be the last generation that are able to leave their kids with anything like a legacy,

I'm not even sure about that. I've seen a number of situations where the boomer parent has a relatively healthy life up through their 70s and then takes a turn for the worse. Those final few years are either spent in a continuing care or assisted living facility and when that move is made, any semblance of a "inheritance" is gone, taken by the organization as part of the transfer of care. Of course, in all cases it was poor financial planning that allowed it to happen in the first place (i.e. not moving money or account control long before illness), but in every case I've seen (anecdotal numbers) the transition from health and independence to assisted care turned on a dime.

On topic: I saw that report yesterday and I just can't get my mind around the numbers. I have to believe revolutions have been started over less. Though I guess when the "middle" has enough bread and circuses, don't notice.

I don't want my parents' inheritance. I want them to live outlive me so I don't have wake up every morning feeling that void. Also, neither really got much of an inheritance from their "Greatest generation" parents. My dad's parents money all went away in probate. While there was as inheritance on my mom's said, my took on $300,000 in debt beyond the inheritance to keep grandpa's house in the family.

The middle's situation is also better than it has ever been and continues to improve. It would be interesting to see what the percentage was like, say, every 100 years or so. As mentioned, I'm betting it hasn't changed much.

I wonder about this. Aside from a cool phone and cheap electronics, what is so much better "for the middle" about 2015 than 1985? I don't know. I does seem the outlook looks worse for "the middle" in the coming years. I look kids in high school and I really fear for how the majority of them are going to find their way.

[stessier]

The middle's situation is also better than it has ever been and continues to improve. It would be interesting to see what the percentage was like, say, every 100 years or so. As mentioned, I'm betting it hasn't changed much.

I wonder about this. Aside from a cool phone and cheap electronics, what is so much better "for the middle" about 2015 than 1985? I don't know. I does seem the outlook looks worse for "the middle" in the coming years.

The 3.5 billion poorest are not all American's. Life expectancy is longer, more children make it to adulthood, fewer people go hungry, unintended pregnancies are down, health care is generally better. This is not to say there isn't a long way to go, but baby steps continue to be made.

I look kids in high school and I really fear for how the majority of them are going to find their way.

Has there ever been a generation who hasn't thought this?

[RunningMn9]

In the interest of keeping an open mind, I would like to see more detailed numbers than national ones.

I think the fear isn't that the middle class is poverty stricken, but rather that the middle class is under significantly more downward pressure than in the previous generation.

In other words, the effects you'd be looking for haven't really started yet because the middle class has been able to keep the party going by absorbing ever larger amounts of consumer debt.

At some point those bills must be paid, and when that happens, you will start to see the real impact on the middle class.

[Isgrimnur]

I suppose that I'm lucky in a way. Growing up in a military family, there was never an attachment to a family home.

The house I graduated HS from was only home for four years prior to that, and has been a rental home for the past 15+ years. My folks' home is in another city and has never been somewhere that I've lived, so even after a decade of visiting it, there's nothing special about it that would make me want to maintain it myself if it came down to it.

[LordMortis]

The 3.5 billion poorest are not all American's.

There are two different conversations happening. I hate to say this but other than not depleting the world's resources I can't worry about 3.5 billion people. If I let that weigh on my mind every day, I'd snap quick.

Life expectancy is longer, more children make it to adulthood, fewer people go hungry, unintended pregnancies are down, health care is generally better. This is not to say there isn't a long way to go, but baby steps continue to be made.

In the US since 1985? I would genuinely like to see stats on this.

I look kids in high school and I really fear for how the majority of them are going to find their way.

Has there ever been a generation who hasn't thought this?

I don't think so. I know my parents generation were paving the way for a better life for their children as their parents generation did for them. It doesn't feel our generation is doing that for our children.

I think the fear isn't that the middle class is poverty stricken, but rather that the middle class is under significantly more downward pressure than in the previous generation.

That is my concern. Looking around my real concern is that the hangover is really going to start with whatever generation is being born to kid the age of 15 is called. I don't have any figures to back this up, but looking around makes me curious as to what those facts are. To see if (hopefully) stess is right and I'm just feeling a paranoia and the 1% have it all under control (in a good way, well, quite frankly, for me and mine).

I suppose that I'm lucky in a way. Growing up in a military family, there was never an attachment to a family home.

It's not at emotional attachment to the home. It's the location and the size. It can host gatherings of 20-40 people at a central place, which is to say mom's siblings and their children during the holidays. If dad didn't buy the property then her family would drift apart. We would not count on holidays there and make other, smaller arrangements.

[Smoove_B]

In other words, the effects you'd be looking for haven't really started yet because the middle class has been able to keep the party going by absorbing ever larger amounts of consumer debt.

While that might be true, I also saw this article over the weekend regarding college grads ending up in dead-end jobs.

Since the dotcom bust, the share of underemployed college grads in what the Fed calls "good non-college jobs," which today pay at least $45,000 a year,* has declined from more than half to slightly over a third. Meanwhile, the share in "low-wage jobs," which today pay $25,000 a year or less, has risen to about 20 percent, from roughly 15 percent. Do little back-of-the- envelope math,** and you find that about 9 percent of all working college graduates are stuck in jobs that pay less than $25,000, or probably somewhere south of $12.50 an hour.

While I know there has been numerous reports suggesting a "college bubble" is about to burst, I think the latest information suggests it's already happened in the for-profit colleges but that traditional institutions are still booming. I don't know if it's a straight-line to consumer debt, but I do think we need to stop selling the idea that college is for everyone and it's a required experience. Skilled labor is imploding here in the US and when you factor in things like the the infrastructure report card, you have to wonder why we're not making a push for more plumbers, electricians and pipe-fitters.

[Isgrimnur]

Thanks for clarifying. Still not a thing for my family, same reason. Also, I only had one grandparent past about age 8, and all my aunts and uncles had long prior scattered to the four winds even without the military mandated moves.

[LordMortis]

Thanks for clarifying. Still not a thing for my family, same reason. Also, I only had one grandparent past about age 8, and all my aunts and uncles had long prior scattered to the four winds even without the military mandated moves.

Where you're "lucky" IMO is that you learned to have wings instead of roots. While having strong roots is fine and all, I really envy people whom aren't attached to a geography and can pick up an move "easily" both by means and by emotional attachment.

[Isgrimnur]

While it might have been easier, it is still by no means easy. Momentum is a heavy thing, especially when you have a need for things to be in place where you will land.

Post college, the option was there to pack everything and move towns, but with no financial resources, no job to which I was going, and no support network at that time, making that move was not within my power.

Only once I was able to arrange a job, the majority of my close friends were in the new area, and I was ready to clip those roots, even long after my parents had left, it wasn't easy.

[Kraken]

Business follows the money.

NEW YORK — In Manhattan, upscale clothing retailer Barneys will replace bankrupt discounter Loehmann’s, whose store closes in a few weeks. Across the country, Olive Garden and Red Lobster restaurants are struggling, while fine-dining chains like Capital Grille are thriving. And at General Electric, the increase in demand for high-end dishwashers and refrigerators dwarfs sales growth in mass-market models.

As politicians and pundits in Washington continue to spar over whether economic inequality is in fact deepening, in corporate America there really is no debate at all. The postrecession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away.

If there is any doubt, the speed at which companies are adapting to the new consumer landscape serves as very convincing evidence. Within top consulting firms and among Wall Street analysts, the shift is being described with a frankness more often associated with left-wing academics than business experts.

“Those consumers who have capital like real estate and stocks and are in the top 20 percent are feeling pretty good,” said John G. Maxwell, head of the global retail and consumer practice at PricewaterhouseCoopers.

In response to the upward shift in spending, big stores and restaurants are chasing richer customers with a wider offering of high-end goods and services, or focusing on rock-bottom prices to attract the expanding ranks of penny-pinching consumers.

“As a retailer or restaurant chain, if you’re not at the really high level or the low level, that’s a tough place to be,” Maxwell said. “You don’t want to be stuck in the middle.”

In 2012, the top 5 percent of earners were responsible for 38 percent of domestic consumption, up from 28 percent in 1995, the researchers found.

Even more striking, the current recovery has been driven almost entirely by the upper crust, according to Fazzari and Cynamon. Since 2009, the year the recession ended, inflation-adjusted spending by this top echelon has risen 17 percent, compared with just 1 percent among the bottom 95 percent.

More broadly, about 90 percent of the overall increase in inflation-adjusted consumption between 2009 and 2012 was generated by the top 20 percent of households in terms of income, according to the study, which was sponsored by the Institute for New Economic Thinking, a research group in New York.

Ain't no money in the middle class anymore.

[LawBeefaroni]

“As a retailer or restaurant chain, if you’re not at the really high level or the low level, that’s a tough place to be,” Maxwell said. “You don’t want to be stuck in the middle.”

Ain't no money in the middle class anymore.

Exact same trend in real-estate locally. Prices of top-end and low-end (forclosures) are growing at a much faster rate than everything else. Mostly because top end is what wealthy buy and forclosures are what they speculate on.

Mid-range prices are growing much slower. Mostly because potential first-time buyers are less able to buy, resulting in a domino effect as starter real-estate goes stagnant. Well, except those forclosures which speculators sell at a profit.

[Kraken]

Real estate has a whole other set of issues. The Milennials, who are supposed to be in their peak household-forming years, mostly aren't. Those who are want urban spaces, not the suburban McMansions that the boomers are vacating. So while those generational shifts are partly caused by the declining middle class, there's also a cultural shift going on. The hot construction trend here is micro apartments (650 sq ft) with no parking, because Milennials are single and don't drive.

[LordMortis]

Real estate has a whole other set of issues. The Milennials, who are supposed to be in their peak household-forming years, mostly aren't. Those who are want urban spaces, not the suburban McMansions that the boomers are vacating. So while those generational shifts are partly caused by the declining middle class, there's also a cultural shift going on. The hot construction trend here is micro apartments (650 sq ft) with no parking, because Milennials are single and don't drive.

It's weird that 650 sq ft is considered micro. I grew up in a family of 7 in a 750 sq foot home. I wish I never bought in to the idea that I needed a 3 bedroom home for resalability, especially knowing I'll never resell this house now. Though I'd never give up a garage. Speaking as lazy single person, parking in a closed garage is the single bestest part of home ownership. If I could do it all again, I'd get an even smaller lot than I have now, a better laid out 500 sq foot home with a full basement, and a larger attached garage.

[Kraken]

650 is the minimum size allowed under current zoning. Developers are pushing for relaxing that because youngsters are willing to live in as little as 450 sq ft if the price is right. Zoning also mandates a certain number of parking spaces per unit and the youngsters don't have cars so some of the new developments that are convenient to T stations want permission to go with zero parking. These two trends would change the character of the city if they catch on -- denser housing, but with more open space.

Problem is building a city for singles and mass-transit oriented housing when these same hipsters might someday decide to get married and have kids.

[malchior]

While that might be true, I also saw this article over the weekend regarding college grads ending up in dead-end jobs.

I have an anecdote for this. My wife is 5 years out of college with a degree in Chemistry. She has a decent job. In the sense it pays a median-ish salary. However, she has no retirement benefits, no health benefits, and hasn't gotten a raise in over 2 years. Consequently she has been job hunting for over a year now and has gone at least a dozen interviews. One question I always tell her to ask is how many other candidates are there. Every job she has pursued has a pool of applicants of at least 15-20 people. That is insanity. This is one of NJs biggest industries. On Monday she just lost out on another position to someone with a PhD. For a job that requires 3-5 years experience.

I am in business school right now in classes with people from these type of companies (think J&J, Revlon, L'Oreal, GSK, etc) and they are always talking about how much R&D is being shipped out of the country to China. It almost feels like an inverse peace dividend. We were afraid at one point to let the other side get an advantage - now we feel safe enough that we'll mortgage our future to others. I don't get how this ends well.

[LordMortis]

Problem is building a city for singles and mass-transit oriented housing when these same hipsters might someday decide to get married and have kids.

I guess I'm a hipster for life... Only I like having a car. That's a sort of independence and solitude I can't see giving up. Possibly because we've never had anything approaching reasonable mass transit.

That's only a problem when a future generation decides not to replace them with the same desires. The city should be happy at urban renewal. Suburban sprawl is the ally of urban decay.

[Kraken]

Problem is building a city for singles and mass-transit oriented housing when these same hipsters might someday decide to get married and have kids.

I guess I'm a hipster for life... Only I like having a car. That's a sort of independence and solitude I can't see giving up. Possibly because we've never had anything approaching reasonable mass transit.

Yeah, you live in the epicenter of the automobile. In Boston a car is a liability.

As a former Michigander and an old fart, I like my car and my garage, too (even though I only drive 2,500 miles a year). Core cities were not appealing places when I was young. That's changed in a big way. If I were 20-something now, urban living would look pretty attractive. I applaud the trend even if I can't participate in it.

We're living through a period of profound demographic and economic changes. We're never going back to the "normal" that existed before the Great Recession if a prosperous and growing middle class is history.

[Isgrimnur]

There's no such thing as "normal" when it comes to living arrangements. The living styles of the 20s do not match with the 50s do not match with the 80s do not match with this decade.

[Kraken]

There's no such thing as "normal" when it comes to living arrangements. The living styles of the 20s do not match with the 50s do not match with the 80s do not match with this decade.

I see that I switched lanes there without signaling. I was speaking of our persistent belief that economic "normality" is just around the corner. Forming families and buying houses is an important part of that, but far from the whole story. America's economy has been based since WW2 on the growth and prosperity of the middle class. We will never have that economy again while the middle class is stagnant or shrinking.

Maybe the affluent 20% will drag the rest of us along to a stable new normality. That's what trickle-down economics says, anyway. I hope so because we seem to be irrevocably on that path now.