Wednesday, Nov 28, 2007
After paying the bills, middle-class pockets are emptier now than in the 1970s (in America)
MSNBC: Life is harder now, some experts say
Despite the long lines at Starbucks, consumers are actually spending much less of their income on discretionary items like clothing, entertainment and food than their parents did. In fact, after essentials like housing and health care, today’s middle class has only half as much spending money as their parents did in the early 1970s. Four in 10 Americans don't have even one month's worth of savings for use in case of an emergency. Household incomes have largely stagnated in recent years, even shrinking 2.8% from 2000 to 2006. Housing costs skyrocketed 32 percent in that time. Banks used to refuse mortgages if the monthly payment was above 25% of the buyer’s income. That limitation clearly is long gone. That means mortgages, more than lattes, are the source of middle-class anxiety.
3 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. drewster said...
The article is about America but the trends described sound familiar to the UK. It's a long article, here are the juicy bits:
Credit card-junkie culture is a myth:
"The average household has a credit card bill of about $9,300. That sounds like a lot, but a few consumers with very large debts skew the average. The median credit card balance is $2,200, a fairly manageable amount. Only 8.3% of households owe more than $9,000 on their credit cards. Meanwhile, one-quarter of all Americans don’t even have credit cards, and another 30% pay them off in full every month."
Discretionary items cost less....:
"Despite the designer brands they buy, the average family of four spends about 20 percent less on clothes today than in 1973. Thanks in part to the entry of inexpensive imported textiles from China, it's possible to buy a Friday night outfit for under $40. A fridge cost more than two week’s work for an average earner in 1971, but less than two day’s labour today."
....while essential items cost more:
"Rising housing costs have quietly broken a social contract with consumers that promised that a good job with a good income would guarantee a good place to live. While that may have been true in the 1970s, it is often not true today. People no longer feel certain they will be better off than their parents."
Busting the myth of the booming economy:
"Consumers are asking, ‘If the economy is doing so well why am I feeling so squeezed?’ Well, they feel squeezed because they are squeezed."
Growth in numbers of house-poor:
"Even more striking is the amount of income most families are paying to stay in their homes. The U.S. Census Bureau defines “house poor” as spending more than 30 percent of income on housing expenses (including mortgage or rent, home insurance, property taxes, and utilities). In 1999, 26.7 percent of U.S. households were considered house poor. By 2006, the number had jumped to 34.5 percent."
Working harder for less:
"The basics, according to Warren, now take up close to three-fourths of every family's spending power (it was about 50 percent in 1973), leaving precious little left over at the end of the month — and leaving many families with no cushion in case of a job loss or health crisis."
Overconsumption and excessive credit card spending persist as scapegoats:
“Frivolous spending is visible, and it’s easy to pass judgment on. There is a comforting notion that if you are not spending wildly you are safe. If you are deeply invested in the belief that 'if everyone solved their problems on their own then there’d be no systemic problem', it would be important to think that if anyone is in trouble financially it’s because they did something stupid.”
2. dohousescrashinthewoods said...
A few of us were discussing this last night and several people (most not serious housing bears) agreed that in the last couple of months people have just stopped spending. It's like something seized.
3. harold said...
Three cheers for the Federal Reserve System!
...what a scam.