40 years of faulty wiring

The Decline of the Middle Class

Statistically speaking between 1971 and 2005 people who lived in the burbs and earned what used to be considered a “middle-class salary” have declined radically.  In fact the lower class expanded significantly and the upper class increased in noticeable increments. Why is the middle class declining at such a rapid pace?  Underemployment, lack of a secure job, racial discrimination and reduced wages.  People are accepting jobs with lower starting salaries and few if any benefits just to stay employed. But one job is often not enough for a single working person to carry a mortgage and put food on the table. More and more people are working 2 jobs to maintain a lifestyle that is not as comfortable by comparison as their parents’ had during their peak work years.

In Toronto in 1970,  2/3 of the population was deemed middle class but by 2005 the middle class comprised only 1/3 of the city. It used to be that mom stayed home and raised the kids while dad went to work to pay the bills but no longer. Now the majority of households are the working class, where both parents need to work in order to finance the mortgage, pay expensive monthly child care fees, and put aside money for their childrens’ college tuition, making the old concept of middle class is more of a myth than a reality.  If you’re like most Canadians, you owe around $1.47 for every dollar of income that you earn. That means you’re paying an extraordinary amount of of interest and very little principal on your mortgage. It means that higher mortgage rates could push you over the edge. The old middle class mentality used to be that renting a home was just “throwing money away“. Now owning a home is risking bankruptcy with the unseen costs of home ownership and the possibility of rising mortgage rates.
Watch Federal Reserve is Laundering Money

Renting a one-bedroom apartment in a decent area of Toronto averages about $1200/month and often these rentals are inclusive of all utilities.  To maintain a rental of this amount a salary of at least $80,000 is necessary to maintain the rent and other living expenses. To buy a condomium in Toronto requires a significant down payment and at least $2000 for the monthly mortgage plus condo fees and utilities. That amounts to approximately $2000 a month. To rent an apartment keeps $800 in your pocket that is desperately needed for additional expenses. It is a fallacy that this is throwing money away. Watch Why People Don’t Buy Gold

That the upper class has increased seems like a good sign perhaps a sign that the middle class has moved into the upper class due to promotions at work and increased salaries. For some people this is true. However the upper class are more mobile than the middle class and it is also true that some rich folk migrate to Toronto from other parts of Canada or other parts of the world.

The rising development of condominiums in the city are a threat to industrialization, which means more job loss and more people on unemployment. The city caters to the needs of the privileged while ignoring the needs of the lower classes. And condos do not cater to families. Typical condos have 1 – 2 bedrooms and measure 600 square feet, hardly family friendly. David Foot, author of Boom, Bust and Echo states that there is no room for families to live in the downtown core since they are not designed for families with young children.

And of course many of us live well beyond our means. Keeping up with the Joneses, (watch The Joneses are broke and we’re next!)wanting luxuries that we cannot afford on our working salaries, taking vacations on credit that we don’t have the means to pay, all add up to the decline of the middle class. To be sure we want the same things for our children that our parents were able to provide us as children or we feel guilty, that we have somehow deprived them of experiences that our parents were able to afford. No one is crying poor to avoid providing for their children. But people don’t have the means to put their money where their mouth is the way they generally did forty and fifty years ago. It’s a sad reality that the middle class is slowly disappearing and worse, without people in this situation realizing it is happening to them. Watch Deflation not Inflation is Coming to America

A brief checklist to determine whether or not you are living beyond your means:

  1. Using credit to buy things you used to be able to buy with cash.
  2. Getting new loans or extensions to pay your debts.
  3. Paying only the minimum amount due on charge accounts.
  4. Receiving overdue notices from creditors.
  5. Using savings to pay bills that you used to pay from checking.
  6. Borrowing on life insurance with little chance of repayment.
  7. Depending on overtime pay to make ends meet each month.
  8. Using your checking account “overdraft” to pay regular bills.
  9. Juggling rent or mortgage money to pay other debts.
  10. Using credit card cash advances to pay living expenses.
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February 17, 2011 - Posted by | Career, Finance | , , , , , , , ,

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