What We Can’t Afford

I found this post at Personal Finance Cheatsheet quite distressing:

Though there is some debate over the exact income a middle class household brings in, we do have an idea of who the middle class are — most working class people. Today’s bourgeoisie is composed of laborers and skilled workers, white collar and blue collar workers, many of whom face financial challenges. Bill Maher reminded us a few months back that 50 years ago, the largest employer was General Motors, where workers earned an equivalent of $50 per hour (in today’s money). Today, the largest employer — Walmart — pays around $8 per hour.

The middle class has certainly changed. We’ve ranked a list of things the middle class can no longer really afford. We’re not talking about lavish luxuries, like private jets and yachts. The items on this list are a bit more basic, and some of them are even necessities. The ranking of this list is based on affordability and necessity. Therefore, items that are necessity ranked higher, as did items that a larger percentage of people have trouble paying for.

Here’s their list of things that middle income people can “no longer really afford”:

1. Vacations
2. New vehicles
3. Paying off debt
4. Emergency savings
5. Retirement savings
6. Medical care
7. Dental care

I can provide at least anecdotal evidence for the last item on the list. My dentist clients have been complaining since 2008 that they hadn’t seen anything like what’s happened to their businesses in their entire working lives. People are just not getting dental care. Since dental problems can be contributing factors to all sorts of other health problems, e.g. heart problems, that’s not prudent. It also provides a little support for a point I’ve made repeatedly here. People don’t distinguish between necessary healthcare and unnecessary healthcare. When they economize on healthcare, they may well choose wrong with serious implications down the road.

I have several observations. GM employees earn about what they did fifty years ago, maybe a bit more, and I suspect that the typical GM employee can afford all of the things on that list. There are just a lot fewer of them than there were 50 years ago.

There’s a big difference between a retail sales clerk and a GM hourly worker. Do we really think that sales clerks at Walmart should be able to afford middle class lifestyles?

Finally, I don’t recall that ordinary middle class people did all of the things in their list 50 years ago. 70 years ago my family which could reasonably have been considered middle class (although we lived in a working class neighborhood) didn’t. We always paid off debt, had a little emergency savings, and got medical and dental care. We had no retirement savings, didn’t take a vacation every year, and generally bought used cars. I think a little more research into how ordinary middle income people actually lived 50 years ago would be in order before making any generalizations.

All of that having been said, I don’t think the United States can be the sort of country we expect it to be if the typical job is retail sales clerk and we continue to import large numbers of workers from other countries who’d be happy to work for a less-than-middle-income wage. My preference would be a lot fewer retail sales clerks and a few more people working in the factories that make the gadgets that we use instead of having so many retail sales clerks. I seem to be in the minority in that view.