The Incredible Shrinking Incomes of Young Americans

[MadImmortalMan]

Real wages certainly appear to be lower and the cost of living is higher.  In addition the amount of income disparity is growing to levels not seen for a very long time.  I doubt that merely telling people who have no disposable income to save more is the solution.

Right. Enabling them to do so might help though. Raising minimum wages, shifting tax burdens from incomes to consumption, some things to put investing more in the hands of poor people, stopping the crazy price inflation of real estate ..somehow. Stuff like that.

[Jacob]

Real wages certainly appear to be lower and the cost of living is higher.  In addition the amount of income disparity is growing to levels not seen for a very long time.  I doubt that merely telling people who have no disposable income to save more is the solution.

Right. Enabling them to do so might help though. Raising minimum wages, shifting tax burdens from incomes to consumption, some things to put investing more in the hands of poor people, stopping the crazy price inflation of real estate ..somehow. Stuff like that.

I don't disagree with you, but I think the bits you just outlined are the solution rather than "people saving more money", though maybe they're two sides of the same coin.

[Richard Hakluyt]

Real wages certainly appear to be lower and the cost of living is higher.  In addition the amount of income disparity is growing to levels not seen for a very long time.  I doubt that merely telling people who have no disposable income to save more is the solution.

Right. Enabling them to do so might help though. Raising minimum wages, shifting tax burdens from incomes to consumption, some things to put investing more in the hands of poor people, stopping the crazy price inflation of real estate ..somehow. Stuff like that.

I don't disagree with you, but I think the bits you just outlined are the solution rather than "people saving more money", though maybe they're two sides of the same coin.

The "people saving more money" is a route for some people to ensure that their family stays above the line. I am often surprised how many well-paid people spend the lot on consumerist tat, having some capital behind one's family is only getting more important with each passing year.

[Tamas]

More seriously - it is really hard to complain when the source of the problem isn't well understood, even by professional economists.

I've been saying for years now that the West is moving to a system where the non-rich are divvied up into "haves" and "have nots", and the middle ground between 'em is getting relentlessly squeezed.

What there is to be done about it is less obvious.

Is this so - I really cannot judge myself - or our definition of "have nots" in the Western World have improved to such a level of existence that would have put you in the "haves" a few decades earlier?

[Malthus]

Real wages certainly appear to be lower and the cost of living is higher.  In addition the amount of income disparity is growing to levels not seen for a very long time.  I doubt that merely telling people who have no disposable income to save more is the solution.

Right. Enabling them to do so might help though. Raising minimum wages, shifting tax burdens from incomes to consumption, some things to put investing more in the hands of poor people, stopping the crazy price inflation of real estate ..somehow. Stuff like that.

I don't disagree with you, but I think the bits you just outlined are the solution rather than "people saving more money", though maybe they're two sides of the same coin.

The "people saving more money" is a route for some people to ensure that their family stays above the line. I am often surprised how many well-paid people spend the lot on consumerist tat, having some capital behind one's family is only getting more important with each passing year.

I gotta agree with this, in part - it doesn't matter how much you make, if you spend more than you make. Particularly on stuff you don't actually need - like a shiny new car. 

The problem, though, is that it is hard to apply that logic to people who don't make enough to even buy what they *do* need.

There is a bit of inflation in expectations of what is "needed", as well - depending on where you live, you often don't "need" a car (for example), but many working people think you do. I lived without a car for a coupla years, it was perfectly doable in an urban setting. 

[Iormlund]

It also depends on what kind of job it is. In my city, for example, it's hard to work as an engineer without a car. You need access to factories, infrastructures, warehouses and offices outside the city limits and employers will rarely give you a decent salary, much less a company car.

[Malthus]

More seriously - it is really hard to complain when the source of the problem isn't well understood, even by professional economists.

I've been saying for years now that the West is moving to a system where the non-rich are divvied up into "haves" and "have nots", and the middle ground between 'em is getting relentlessly squeezed.

What there is to be done about it is less obvious.

Is this so - I really cannot judge myself - or our definition of "have nots" in the Western World have improved to such a level of existence that would have put you in the "haves" a few decades earlier?

I'm thinking not in terms of the material goods they may have, but of their overall level of things like bargaining power and job security.

The characteristics of the "haves" are that, broadly speaking, they have experience and skills that give them the ability to either command significant concessions from employers, or go out on their own with some chances of success; they are 'in demand'. Such people are often offered bonuses and other performance incentives to keep them happy. Losing a job, while inconvenient, isn't a disaster for these people - they are likely to be snapped up by someone else soon enough, and they know it.

The characteristics of the "have nots" is that, again broadly speaking, they find themselves at the mercy of employers. They cannot command concessions. They are easily replaced. They are not 'in demand'. Such people are often offered short-term contracts that lack perquisites and rights offered to long-term employees. Losing a job is bad, because they have to go back to endlessly looking for more low-paid work, in competition with thousands of others. Prospects of career advancement are poor or non-existent.

The characteristics of a middle way between these two are a salaried employment with significant job security, possibly even steady career advancement (maybe even gradual acquiring of 'have' status) and contractual rights and benefits. This is the "way" that is shrinking, while the other two are growing.

It used to be that education alone could catapult you into at least the "middle way", and maybe into the "haves". That is increasingly not true.

[Malthus]

It also depends on what kind of job it is. In my city, for example, it's hard to work as an engineer without a car. You need access to factories, infrastructures, warehouses and offices outside the city limits and employers will rarely give you a decent salary, much less a company car.

Absolutely, it may be a requirement for your job. But for many people, like me, work is basically static. I don't actually 'need' a car to get to it (in fact, because it is right downtown, given this city's truly horrible traffic, driving to work is ... difficult). Having a car is a great convenience - for shopping, travel to the countryside, visiting relatives and friends, etc. - but it is not really "necessary".

[crazy canuck]

Real wages certainly appear to be lower and the cost of living is higher.  In addition the amount of income disparity is growing to levels not seen for a very long time.  I doubt that merely telling people who have no disposable income to save more is the solution.

Right. Enabling them to do so might help though. Raising minimum wages, shifting tax burdens from incomes to consumption, some things to put investing more in the hands of poor people, stopping the crazy price inflation of real estate ..somehow. Stuff like that.

I don't disagree with you, but I think the bits you just outlined are the solution rather than "people saving more money", though maybe they're two sides of the same coin.

The "people saving more money" is a route for some people to ensure that their family stays above the line. I am often surprised how many well-paid people spend the lot on consumerist tat, having some capital behind one's family is only getting more important with each passing year.

I agree but given the growing income disparity I don't think we should worry too much about the people that do make relatively large amounts of money and spend it foolishly. 

[mongers]

Real wages certainly appear to be lower and the cost of living is higher.  In addition the amount of income disparity is growing to levels not seen for a very long time.  I doubt that merely telling people who have no disposable income to save more is the solution.

Right. Enabling them to do so might help though. Raising minimum wages, shifting tax burdens from incomes to consumption, some things to put investing more in the hands of poor people, stopping the crazy price inflation of real estate ..somehow. Stuff like that.

I don't disagree with you, but I think the bits you just outlined are the solution rather than "people saving more money", though maybe they're two sides of the same coin.

The "people saving more money" is a route for some people to ensure that their family stays above the line. I am often surprised how many well-paid people spend the lot on consumerist tat, having some capital behind one's family is only getting more important with each passing year.

I agree but given the growing income disparity I don't think we should worry too much about the people that do make relatively large amounts of money and spend it foolishly.

Indeed CC, my own concern if for people who're not just struggling to make end meet, but who can't survive and have to rely on food banks, which pretty much every UK town, no matter if wealthy, now seems to have. 

Our health service has started collecting statistics on people turning up at their doctors or hospitals with complaints, whose underlying cause is malnutrition.   

[Richard Hakluyt]

In the UK though, mongers, it is probably more informative to find out what someone's housing situation is than their income. The rents are terribly high. It is why you find poverty even in the wealthier areas, there are parts of the country where the median wage is essentially a poverty wage if you are paying market rents.

[Tamas]

More seriously - it is really hard to complain when the source of the problem isn't well understood, even by professional economists.

I've been saying for years now that the West is moving to a system where the non-rich are divvied up into "haves" and "have nots", and the middle ground between 'em is getting relentlessly squeezed.

What there is to be done about it is less obvious.

Is this so - I really cannot judge myself - or our definition of "have nots" in the Western World have improved to such a level of existence that would have put you in the "haves" a few decades earlier?

I'm thinking not in terms of the material goods they may have, but of their overall level of things like bargaining power and job security.

The characteristics of the "haves" are that, broadly speaking, they have experience and skills that give them the ability to either command significant concessions from employers, or go out on their own with some chances of success; they are 'in demand'. Such people are often offered bonuses and other performance incentives to keep them happy. Losing a job, while inconvenient, isn't a disaster for these people - they are likely to be snapped up by someone else soon enough, and they know it.

The characteristics of the "have nots" is that, again broadly speaking, they find themselves at the mercy of employers. They cannot command concessions. They are easily replaced. They are not 'in demand'. Such people are often offered short-term contracts that lack perquisites and rights offered to long-term employees. Losing a job is bad, because they have to go back to endlessly looking for more low-paid work, in competition with thousands of others. Prospects of career advancement are poor or non-existent.

The characteristics of a middle way between these two are a salaried employment with significant job security, possibly even steady career advancement (maybe even gradual acquiring of 'have' status) and contractual rights and benefits. This is the "way" that is shrinking, while the other two are growing.

It used to be that education alone could catapult you into at least the "middle way", and maybe into the "haves". That is increasingly not true.

I see. Makes sense! As I said I can't really judge because by the time capitalism came to Hungary, the situation immediately was as you described, I think

[Hamilcar]

More seriously - it is really hard to complain when the source of the problem isn't well understood, even by professional economists.

I've been saying for years now that the West is moving to a system where the non-rich are divvied up into "haves" and "have nots", and the middle ground between 'em is getting relentlessly squeezed.

What there is to be done about it is less obvious.

I think Piketty gives a fairly plausible diagnosis.

[Martinus]

More seriously - it is really hard to complain when the source of the problem isn't well understood, even by professional economists.

I've been saying for years now that the West is moving to a system where the non-rich are divvied up into "haves" and "have nots", and the middle ground between 'em is getting relentlessly squeezed.

What there is to be done about it is less obvious.

I think Piketty gives a fairly plausible diagnosis.

On a related note, it is also mind-boggling to me how the default "common sense" taxation of income has become so counter-intuitive in Western democracies.

If you look at it from the public interest perspective, you probably want to encourage and reward people who get rich through their own work; then people who get rich through the use of their own capital; and in the last order only people who get rich because someone dies and leaves them with inheritance, right?

Yet, our tax systems are completely the opposite of that: you usually pay a progressive tax on the income coming from your own hard work; a usually reduced (often flat) tax on the income coming from your capital, such as dividend or, say, letting of a flat; and then usually no tax on what you inherit from your parents. This is fucked up.

[Hamilcar]

Ah, but the current elite like the system, that's why it won't change.