The Shrinking Middle Class In America

At dinner one night this week with a friend here in Panama City, the subject of the American middle class came up–specifically, the decline of the American middle class. This isn’t a new topic, but my friend, Bruno, who is European, born and raised in Italy, but who has lived much of his adult life in Florida, is afraid that the United States is moving in the direction of Europe in this (among other) regards. And he doesn’t want to stick around to see how it all plays out.

Bruno has worked his whole career in the construction industry. When he started out, in the 1970s, in Florida, he paid finish carpenters working for him US$14.50 an hour. Today, Bruno explained, he pays a finnish carpenter in Florida US$18.50 an hour.

Bruno went on to put this into perspective. Back in the 1970s, he pointed out, that guy could have bought a home in a good “middle-class” neighborhood for about US$30,000. And he could have bought himself a new Ford Mustang for about US$1,900. So for only a little more than his annual gross income, he had a house and a car.

Today, Bruno estimates that a comparable house in a comparable neighborhood in the same part of Florida he’s thinking of would cost about US$400,000. And, today, a new Mustang goes for about US$25,000. Meaning that the carpenter of today needs to spend more than 10 times his annual gross income for a comfortable house and a decent set of wheels.

That’s the plight of the American middle class right now.

Of course, everything we buy hasn’t gone up 10 times in price since the 1970s. On the other hand, the average member of the American middle class requires many more things these days to qualify for that status. In this electronic age, he needs a computer, a cell phone, cable TV, a microwave, a dishwasher, an iPad, and on and on. Each of these “must-have’s” chips away at that poor carpenter’s middle-class income.

The American middle class has been hit on both sides. Put another way, his income simply isn’t keeping pace with his expenses. As a result, America’s middle class lives not only paycheck to paycheck, but also credit card limit increase to credit card limit increase. Even those making US$200,000 or more a year live paycheck to paycheck. While technically earning beyond “middle-class” levels, these folks, too, are struggling thanks to bad financial and lifestyle choices, just like the U.S. government.

Struggling, and looking for a way out.

The way out is: Offshore. It’s easy for those with portable jobs–consultants of all kinds from accountants to attorneys and PR guys. Thanks to the Internet, those with portable businesses can transition easily. But not everyone is as fortunate.

For those slogging it paycheck to paycheck in a job that requires their physical presence, the options are fewer.

No, that’s not it. It’s not that the options are fewer. It’s that the challenge is a bit greater. Because, if you have a job that requires you to show up day-to-day, the first step is to imagine another way to earn a living. That’s not easy, but I’ll tell you it’s easier than you may think and definitely easier than sticking around for what lies ahead for the middle class in America. For what lies ahead is not going to be pretty.

It comes down to starting your own business. And the options for that in today’s world are many.

The really good news is that whatever income you’re able to earn for yourself from whatever business you’re able to build for yourself wherever in the world you decide to build it will go much, much further many places overseas than it will in America today.

Lief Simon