The Middle Class

We have heard, lately, that there is assault on the middle class.  The disparity that exists between the 1% and the 99%.  Tax the rich.  Redistribute income. Having lived these 78 years, I have heard this before. 

I grew up in a country that created an extraordinary social safety net back in 1936.  Social reforms that were not duplicated in other countries (except in some Scandinavian countries) for many years thereafter.  We had publically funded major medical insurance in the late ‘60s and universal first dollar medical insurance by the mid seventies.  Canada has good primary and secondary education and (by comparison to the US) cheap college education.  We have a redistribution program from “have” provinces to “have not” provinces. We are taxed, personally, a little higher than our neighbour to the south but, in my view, we get excellent value for tax dollar spent. 

So what happened?  Why do we have folks camped outside our business centers and stock exchanges chanting slogans?  One of the reasons (among many others) is a rising level of expectations. 

Life has gotten ‘way more complicated.  When my parents were married home ownership was not easy.  Most people scraped by and savings were hard to accumulate.  However, education was the hallmark of our family ethos.  It was my job to become educated and to lead a life that exceeded, financially and socially, that of my parents.  I was expected to pay for my higher education.  True that I graduated high school (when high school graduates were still able to get a decent job), college and grad school at a time when jobs were plentiful and salaries and wages allowed the worker to live a decent “middle class” life.  Our parent’s and my expectations were, in comparison to today’s workers, reasonably low.  Graduate, get married, buy a house and get “established”--all on a one-income family.  Vacations were summer affairs and the extravagance of summer camps for children were reasonably affordable. 

While there are many reasons why jobs are less available now than when I was college age including globalization, the wholesale reduction of manufacturing jobs, the gutting of the labour unions, etc., there has been a wholesale increase in the level of expectations of the average family. 

Housing.  We were content to have, for our first house purchase, a (by today’s standards) tiny house in a bland subdivision of tract housing.  We paid $17,000 that, in today’s dollars would be about $170,000.  We did it in order to “get into the market” and allow inflation to work for us.  We moved to a larger house (reasonable by today’s standards) that cost, land included, about $35,000 or about $350,000 in today’s dollars.  When I examine today’s housing market (aside from those who move into established neighbourhoods) I see starter houses that well exceed both in space and accouterments, what our second house had.  In many cases this has resulting in couples being “house poor” in that they can barely afford the house and cannot afford to furnish it.  A significant factor is that land prices has skyrocketed and services that were once built into the property tax system are now paid up front.  I am only making the point that the current ethos is to buy a first house that is much more ambitious house than what we owned.  Rising expectations. 

Food and Family.  In real terms food is cheaper today than it was when we were a young family.  Winter meant root vegetables and probably no more exotic fruit than oranges.  With cheap sea transport we started importing exotic fruits and vegetables during the winter months.  There were not 30 brands of morning cereals and adding sugar to Rice Krispys was unknown.  Kids played outside and ran off whatever calories they took on.  Junk food was limited to potato chips and ice cream.  Now dense calorie foods are debilitating a generation of kids who, when combined with a more sedentary life, become over weight or obese.  That said, rising levels of expectations ensnare us.  We have become convinced that mass produced foods are bad for us and pay astounding premiums for food that is “naturally” grown.  We pay exorbitant prices for store bought coffee and coffee that comes in little cups that cost about 50 cents each.  It is not unusual to spend $4 per day on specialty coffees and much more on snacks.  Eating or cooking at home has become too difficult.  What with take out pizzas or “assembled” meals (the supermarket has figured out that there is about a 15% margin for whole lettuce and a $65% margin for cut up and bagged lettuce) a larger part of our budgets are now consumed on eating food out or taking in.  Family expenses now include expensive pastimes for kids such as hockey and dance (which is now a competitive event) not to mention expensive electronic toys such as mobile telephones, iPads, and large HD TVs.  Since wages are relatively finite these expensive toys are financed, largely, by credit card purchases.  Hence, an unduly large amount of family income is spent on debt service.

Cars and Trucks.  The basic car has now been enhanced by so much electronic equipment (both operational and entertaining) that I suspect that the value of the actual vehicle has not exceeded inflation when a car cost about $1,700 to buy in 1956.  However, what people are willing to pay for (and seem to have the money for) is a collection of gadgets and playthings that would have defied the imagination of my parents and myself in the 1960s.  We now pay for off road vehicles that are for entertainment only.  We have figured out how to pay for these things through innovative financing such as leasing and 0 interest loans.  This consumes an inordinate portion of family income.

These are but a few instances of the impact that rising expectations have on the cost of living.  But when our middle class says that life has become unaffordable they should have a hard look on expenditures and what value for money these expenditures represent.  They might not be as badly off as they think.