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April 17, 2021

The collapse of the middle class

By Errol Muirhead, Sympatico / MSN Finance

According to Elizabeth Warren, renowned U.S. law lecturer and speaker, the collapse of the middle class in America is a systematic degradation of family values.  She argues that the risk factors of both parents in the workforce have led to the collapse of the middle class due to higher risks, lower rewards and a shrinking safety net.

In a generation, approximately 30 to 35 years, there are millions more mothers in the workforce today than in 1970. Warren argues that with more mothers in the workforce, families should be very wealthy; more secured, have more disposable income, able to take more vacations, have more savings, and so on.

However statistics have proven otherwise.  In 1970, with only one bread-winner, families had only 1.4 per cent in revolving debt (credit cards, lines of credit, etc) in relation to net income and 11 per cent in savings.  Fast forward to 2005, families with both mothers and fathers working had 15.6 per cent in revolving debt - and get this, -.8 per cent in savings. That’s negative savings.

Family income rose because mothers entered the workforce, but income for men fell by $800 in the same period.  But if the family was making more money, where did all the money go? Where were families spending the extra money?

According to Warren’s research and in inflation adjusted numbers, families are spending 32 per cent less on clothing, 18 per cent less on food, 52 per cent less on appliances and 24 per cent less on automobiles now than they did in 1970.  So where are families spending the extra money?

Mortgage payments have gone up by 76 per cent, health insurance has increased by 74 per cent, and car expenses went up 52 per cent as both parents are now working and need two cars versus one. Furthermore, child care went up by 100 per cent and taxes went up by 25 per cent. Listen to the lecture.

As a society, we’ve advanced by leaps and bounds, but have we really gained anything?



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