By Charles Hugh Smith
The net result is America’s working class is up against the wall, maxed out.
Let’s start by defining the working class in a meaningful way rather than by tossing around meaningless income metrics which implicitly suggest that exceeding some semi-arbitrary income bracket will magically lift a working class household into the middle class.
In the real world, in terms of class status it doesn’t matter whether the household income is $30,000 or $130,000; what matters is 1) ownership of assets that have bubbled higher in the Everything Bubble which then provide a buffer of wealth that can be tapped when misfortune strikes, and 2) a cost of living that is consistently and significantly lower than net income, enabling regular savings.
In other words, a household earning $130,000 that owns negligible assets / wealth buffers and consumes every dollar of income just to service its debts and pay all the other bills is working class, while the household earning $30,000 that owns meaningful assets and frugally gets by on $20,000 a year is middle class. The household that earns $130,000 (generally considered a middle class income) but has a net worth is $2 million, no debt and an annual cost of living of $90,000 is upper middle class.
Income by itself misses what’s truly important: wealth buffers and a lifestyle that leaves surplus income to be consistently saved and invested.
While we focus on the alarming leap in the cost of living over the past three years, we lose focus on the larger issue: America’s working class has been squeezed for decades by the relentless decline in the purchasing power of wages. I explained how to calculate this in We Feel Poorer Because We Are Poorer: Here’s Proof (December 4, 2023).
The devastating decline in the purchasing power of wages since 1975 is beyond dispute. As I noted in the above post: “The status quo cheerleaders in the Ministry of Truth ignore the $5,000 annual cost increases in essentials while trumpeting the $100 decline in occasional discretionary purchases. Your rent costs you 100 more hours of work, but you save $100 on airfare, so it all evens out. Um, no.”
This chart reveals that the decades of hyper-globalization-hyper-financialization transferred trillions of dollars from wage earners to owners of capital. I explained this in Labor Rising: Will Class Identity Finally Matter Again? (May 1, 2024).
Read More: Squeezed for Decades, America’s Working Class Is Finally Up Against the Wall