The middle class fantasy is the dream that you can live a very prosperous life by following the rules and living according to societies expectations.
The dream has taken different shapes in the past century, however it generally follows the same set of patterns and rules.
The dream involves:
• Working hard in school
• Getting a ‘respectable’ job
• Taking out a mortgage
• Getting married in your mid-twenties
• Having two children
• Climbing up the corporate ladder
• Earning an income to sustain a four person family
• Living a reasonably affluent lifestyle
The middle class lifestyle is in effect a social contract that says:
If you follow the rules, you will have a prosperous life.
The Dangerous Part
The dangerous part about the middle class dream is not just that slowly becoming of reach, its that the expectations placed upon the young, aspiring middle classes have not changed.
The majority of young workers today have no hope of being able:
• Afford a house within their lifetimes
• Have a job that increases in pay over time
• Afford two children while maintaining an affluent lifestyle
The geo-political changes and uncertainties emerging within the world suggest that the world of work and the fabric of working life is set to change dramatically in the next few years.
In this article, we will see why.
Middle Class Wage Growth
The middle class wage growth is one of the reasons for stagnation. The performance of wage growth for middle income workers has barely grown over the past few years and looks like it will not change for the foreseeable future.
If you had started work in a mid-ranking management position in 1980 and you did not get a promotion, your wages would only be 6% high today.
If we include inflation, your wages would actually be far lower.
If we include inflation our calculations we find that the average middle class family has actually been loosing money over the past forty years.
In the graph below, we see how the performance of middle class wages has barely moved in the past few years. It has stayed the same.
Middle Class Wage GrowthWage growth is closely attached to the ideal of the “American Dream” – the idea that you become more prosperous as you work harder. This graph shows instead that the earnings of middle class Americans are stagnating and have been the same for nearly forty years.
The lack of any real wage growth may not be a tombstone in and of itself, however if we pair that with the steady increase in housing prices, we have a serious issue.
In the graph, we see that the income in an average OECD country has grown excluding inflation, while the price of housing as risen hugely.
This phenomenon means that the middle class have struggled to deal with the disparity between housing prices and income for the last twenty years.
The meteoric rises in price may have stopped in 2013, yet it continued to grow from 2013 onward (although this graph stops in 2013)
The larger the gap between housing prices and wage growth, the more difficult life becomes for the middle classes.
You might think poor wage growth and housing prices make the middle class dream less attainable – at least there are still jobs!
Well actually, the jobs are at risk as well. This is probably the most serious issue and for some reason, the issue policy makers are not making a priority.
Since the 1980s, manufacturing plants have been introducing robots onto their assembly lines to make their operations more efficient. Robots are cheaper than human labour and probably more efficient.
Over time, these robots have been taking the place of Americans and causing regular factory workers to be laid off. Its been happening slowly, yet its effects are no less devastating.
CNN reported in 2015 that 5 million American jobs have been lost in manufacturing since 2000!
That is a little over 2% of the entire American population!
If you think you exempt from this – you are wrong. A recent report from PWC suggests 33% of jobs in the UK will be taken by automation in ten years. In American, the figures will be close to 40%.
Grim reading to say the least.
And this is not a problem for wealth countries either. A well-known think-tank recently published material that 85% of jobs in developing countries will be replaced completely.
To ignore this, would be succumbing to the middle class fantasy
This article is melodramatic. I find it hard to believe all these factors are going to come together in a perfect storm.
While I am not an expert in economics by any stretch, common sense tells me that the future will be challenging, but not dystopian.
What I think is important though is that the ‘middle class’ dream is reshaped and remoulded and that society’s attitude changes towards the middle classes.
• The idea of living at home with parents should be made acceptable and not used as an instrument of shame.
• The idea of unemployment should similarly made more acceptable, as it is likely people are going to face unemployment at some stage.
• The ‘cult of house ownership’ should also be gotten rid of (if policy makers cannot find a more reasonable solution which does not involve confiscation of land!)
Society’s expectations will have to shift down a peg, otherwise you are going to have an entire generation of millennials competing for a lifestyle that no longer exists.