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Thread: NY Times on declining US middle class standard of living

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    Banned Melonie's Avatar
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    Default NY Times on declining US middle class standard of living

    (snip)"Caught between rising aspirations and stagnant wages, Reich says, middle-class Americans have gone through a series of coping mechanisms. First, women joined the workforce, giving families a second income. Then husbands and wives put in longer shifts, creating a species of family called DINS — “double income, no sex.” Finally, families went into debt. In this sense, inequality helped to stoke the credit bubble.

    Now that the bubble has burst, these coping mechanisms are exhausted. Americans are not going to push their working hours up even more. Already, according to some estimates, they sleep an average of one or two fewer hours per night than did their parents in the 1960s; in 2007 they spent a whopping $23.9 billion on sleep aids, from white-noise machines to medications. Nor are Americans going to incur more debts; to the contrary, the credit bust has forced them to pay down their balances. And so, as Reich puts it, Americans will “face a necessity they have managed to avoid for decades: They have to make do with less.”

    The belt-tightening is not likely to be popular, and Reich goes so far as to suggest that it could trigger a political convulsion. People are very likely to resent material losses bitterly if these are not broadly and fairly shared. And in the wake of the financial crisis, fairness has gone by the wayside: "(snip)

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    God/dess Deogol's Avatar
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    Default Re: NY Times on declining US middle class standard of living

    I have joined the "simplicity" movement that is for sure. Plenty of other people finding their way there... not much money in there for dancers though...

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    Default Re: NY Times on declining US middle class standard of living

    Well I have definitely been economizing I quit getting acrylic nails. I bring my lunch. And I really cut down on going out to eat. I have not been shopping in ages but I am dying to go.Francinista

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    Banned Melonie's Avatar
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    Default Re: NY Times on declining US middle class standard of living

    Actually, the 'simplicity' movement now appears to have increasingly strong motivation. Not wanting to get overly political, but it now appears that no action will be taken to extend the GWB tax cuts or the Alternative Minimum Tax fix i.e. the AMT disallows common tax deductions ( like state / local tax payments ) with rising income. Additionally, it appears that many states are electing to try and balance their budgets via enacting higher state and local income taxes and property taxes. And of course the 'marriage tax penalty' will be returning as well.

    Putting this all together seems to be leading to a conclusion that once 2011 arrives a significant number of middle class Americans ( specifically, singles earning $75k+ per year in high tax rate states) will now face combined federal / state / local marginal tax rates that approach 50% on every additional dollar of 'ordinary income' earned from a self-employed 'business'. This in turn is creating a real question mark as to whether or not the 'marginal utility' of the additional income is still worth the 'marginal investment' of energy and expense necessary to produce that additional income. Some are deciding that it is not ... and are thus opting for a simplified lifestyle involving fewer total dollars.

    Consider a specific example of 'marginal utility' of producing additional income as it might apply to a 'professional' exotic dancer evaluating whether or not it is still 'worth the effort' to work a 5th night per week. For the sake of simplicity, let's assume that the dancer is capable of earning a gross income ( after tipouts ) of $400 a night ... which over 5 nights * 50 weeks = $100k a year. In actuality, there are also probably an average of $100 a night worth of peripheral expenses involved for every night she dances - from gas / wear and tear on her vehicle, to time saving but expensive conveniences ( like take-out / restaurant meals ), to the eventual need for stress relieving vacations / shopping sprees.

    Obviously, if that dancer decides to drop back to 4 nights a week her gross income would drop to = $80k per year. But if that dancer lives in a high tax rate state, of the $20k of additional gross income stemming from working a 5th night per week, she would only get to keep ~$10k of that amount - due to progressive tax brackets and a marginal combined tax rate approaching 50%. Additionally, by dropping back to 4 nights per week, the dancer could theoretically avoid $100 * 50 weeks = $5,000 worth of incremental expenses ( i.e. gas / wear and tear on car, convenience spending, stress relief spending etc. ). Thus in point of fact, the additional investment of time and energy to work a fifth night every week may only be adding $20k extra gross earnings - $10k in extra taxes - $5k in extra expenses = $5,000 in actual additional annual net after-tax income. From this viewpoint, working the fifth 8 hour shift per week 50 weeks per year to produce just $5,000 in actual additional net income after taxes and expenses equates to a $12.50 an hour ( after tax ) pay rate for the 5th night of dancing - but which comes in exchange for a 25% additional investment of overall time / effort / energy invested on the part of the dancer ( working 5 nights vs 4 nights ).

    Undoubtedly many dancers who realize this, i.e. understand the concept of the 'marginal utility' of additional gross income in a highly 'progressive' tax environment, will opt to quit working that 5th night !

    ~
    Last edited by Melonie; 09-27-2010 at 05:25 PM.

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