Is the Middle Class Being Squeezed? 

by Optimistic Patriot

Are you part of the middle class “squeeze”? ABC News offers this article with two contrasting views on why the middle class feels so constricted when incomes are up and the stock market is doing well. Some experts blame the heavily indebted latte drinkers while others blame the healthcare costs and say the “social contract” with the working class has been broken.

But whatever side you favor, those claiming the social contract has been broken are skewing their data. For example, take a look at this comparison chart between families in the 70s and today

Generational shift
Comparing budgets for two typical, four-member families

  “Tom and Susan,” single-income family, mid-1970s (adjusted to 2004 dollars) “Kimberly and Justin,” dual-income family, 2004 Percentage change

 

Husband’s income $42,450 $41,670 -2 percent
Wife’s income $0 $32,100 +1,000 percent
Total family income $42,450 $73,770 +74 percent
Tax rate (% of income: local, state & federal) 24 percent 30 percent +25 percent
Taxes $10,300 $22,280 +116 percent
After-tax income $32,150 $51,490 +60 percent
Major fixed expenses
Home mortgage $5,820 $10,250 +76 percent
Day care (7-year-old) $0 $5,660 +1,000 percent
Preschool (3-year-old) $0 $6,920 +1,000 percent
Health insurance $1,130 $1,970 +74 percent
Automobile #1 (purchase, upkeep, insurance) $5,640 $4,275 -24 percent
Automobile #2 $0 $4,275 +1,000 percent
Total fixed expenses $12,590 $33,350 +165 percent

 

First, how can they assign $0 to childcare in the 1970s? Just because a typical 70s mother stayed at home doesn’t mean that care was free or had no value. To make a valid comparison, they either need to assign a value to the care or a value to the mother’s income potential. This error skews the data tremendously.

Second, I’d be really interested to know how the salary figures were calculated. According to the chart, the husband’s (not very inclusive of them to assume they’re married) income decreased. Did they say he was a factory worker in the ‘70s and a factory worker today? However, if union membership is any indication, fewer people work in blue collar factory jobs. Therefore, it would be interesting to know how those income figures were computed given the changing nature of the workforce over the last 30 years.

Until the social contract income redistributionists get their data straightened out, I’m still inclined to fault the latte drinking credit card junkies for the perceived middle class squeeze.

Archived in:

October 16, 2007 at 11:26 am | Trackback

← Baseball PlayoffsTsongas Widow Wins, but Pundits Wrong →

14 comments

1 Insurance » Is the Middle Class Being Squeezed? { 10.16.07 at 1:34 pm } 

[…] New England Republican wrote an interesting post today on Is the Middle Class Being Squeezed?Here’s a quick excerpt Are you part of the middle class “squeeze”? ABC News offers this article with two contrasting views on why the middle class feels so constricted … (3-year-old) $0 $6,920 +1,000 percent Health insurance $1,130 $1,970 +74 percent Automobile #1 (purchase, upkeep, insurance) $5,640 $4,275 -24 percent Automobile #2 $0 $4,275 +1,000 percent Total Posted in New England Republican ( 87 links from 49 sites) by NERepublican […]

2 Health Insurance » Is the Middle Class Being Squeezed? { 10.16.07 at 2:25 pm } 

[…] New England Republican wrote an interesting post today on Is the Middle Class Being Squeezed?Here’s a quick excerpt Are you part of the middle class “squeeze”? ABC News offers this article with two contrasting views on why the middle class feels so constricted … (3-year-old) $0 $6,920 +1,000 percent Health insurance $1,130 $1,970 +74 percent Automobile … “Tom and Susan,” single-income family, mid-1970s (adjusted to 2004 dollars) “Kimberly Posted in New England Republican ( 87 links from 49 sites) by NERepublican […]

3 Medical Insurance » Is the Middle Class Being Squeezed? { 10.16.07 at 3:43 pm } 

[…] Optimistic Patriot wrote an interesting post today on Is the Middle Class Being Squeezed?Here’s a quick excerptMajor fixed expenses. Home mortgage, $5820, $10250, +76 percent. Day care (7-year-old), $0, $5660, +1000 percent. Preschool (3-year-old), $0, $6920, +1000 percent. Health insurance, $1130, $1970, +74 percent … […]

4 CPT Kevin { 10.17.07 at 2:25 am } 

Your comment on the value of day care in the ’70s is misguided. This clearly is a CASH FLOW view of the family home. No more or less.

What this tells me (assuming the numbers are even close to being accurate) is that, for most families, the woman going to work has been a BAD financial decision. I am NOT arguing the politics of women working. I am merely saying that unless both parents can garnish large incomes, it almost always pays to keep on at home. My wife stayed home from the day our son was born for that reason. We did a “pro-forma” on the costs of day care, incovenience, expensive second car v. used piece of crap etc. etc. and quickly realized that it was a far better deal for one of us to stay at home.

I think people would be surprised at the low payback if they really ran the numbers.

5 Rhod { 10.17.07 at 4:35 am } 

No complaint with you, Pat…

The “social contract”, besides being an easy thought-avoiding concept for stupid journalists, has nothing specifically to do with economics. It’s the expression used to describe the ultimate consent of the governed; because “society” issues from the common will of people who agree that organized life is better than a life of anarchic isolation.

It’s also occasionally used to describe sanctioned government to group benefits, like welfare, or management-labor agreements, but no government other than collectivist systems does this. A minimum wage might also apply, but assured prosperity and ever-increasing material wealth is the great fraud of the last century and this one, so far. Expect more of this crap from the Donks.

6 The Cheshire Cat { 10.17.07 at 7:15 am } 

“…who agree that organized life is better than a life of anarchic isolation.”

I don’t! Let those who crave the “one size fits all” strait jacket find out how it is to make their way with no governmental help.

7 Optimistic Patriot { 10.17.07 at 12:13 pm } 

“Your comment on the value of day care in the ’70s is misguided. This clearly is a CASH FLOW view of the family home. No more or less.”

I understand what your saying, but a stay at home mother does effect cash flow. Additionally, as noted in the article, Americans eat out a lot more today, which probably also happens because nobody is at home making meals. Therefore, a stay at home parent does significantly affect family cash flow, but they made no adjustments to account for that in their 1970s comparison.

8 Rhod { 10.17.07 at 12:20 pm } 

Hey, Cheshire. Me too. I never signed that contract either.

9 The Cheshire Cat { 10.17.07 at 3:00 pm } 

OP, these families eat out more often because these swells can’t cook. Yeah, they’re all foodies; they will bore the beans out of you with tales of vintage Muscatel and the newest Mesopotamian meal like camel scrotum with dander.

Home cooking is pot pie with salmonella or Mrs. Paul’s Boston Harbor scrod in white enamel sauce.

10 Rhod { 10.17.07 at 3:59 pm } 

I always liked The Three Muscatels. Alexander Dumbass? Someone like that.

Anyway, the food channel this ain’t.

11 Vermont Woodchuck { 10.17.07 at 4:04 pm } 

You sir, will receive a kumquat in each nostril for that terrible pun. Opun up!

12 Rhod { 10.17.07 at 4:59 pm } 

Hmmm. Kumquats. Little devils have great skin but lousy guts. Kinda like Susan Sarandon.

13 Vermont Woodchuck { 10.17.07 at 5:27 pm } 

I wouldn’t know. I never packed Susan Sarandon up someone’s nostrils!

14 Rhod { 10.17.07 at 5:32 pm } 

My last two words on the subject. Henry Waxman.