Two national statistics in the last month underscore the nightmare of being a member of America's Middle Class. The cost of raising a child is up again to $235,000, while the income generated by those same families is "suffering its worst decade in modern history."
That was a quote from the Pew Research Center study released this week. The study shows that families with household incomes ranging from $39,000 to $118,000 have seen their incomes falling backward for the first time since the end of World War II.
At the same time The U.S. Department of Agriculture (USDA) said that the costs of raising a child in 2011 increased 3.5% from 2010. But those statistics only include child support to age 17. The USDA also considers middle-income parents as those with incomes ranging from $59,440 and $102,870, which is slightly lower than the Pew study.
Families in the Northeast ,especially those residing in urban localities, have the highest child-rearing expenses with housing commanding the highest share of expenses (30%). Costs also include transportation, child care, education, food, clothing, health care and other miscellaneous expenses.
In my opinion, those cost numbers are grossly understated. If you plan to send your kid to college, and you include the lost income if one spouse quits working to raise your child, then costs escalate substantially. In past columns, I have addressed both the rising costs of college education and the
These costs are escalating as 85% of middle class Americans say they are having the worst time in ten years making ends meet. Most of this demographic group, according to the Pew study, has been forced to cut spending last year as health care costs and college-tuitions have increased, as well as basic items like food and clothing.
Readers should not discount the middle class's dilemma as simply a rough patch that will clear up in a year or two, once the economy begins to grow again. The Pew study is simply more proof that the American Dream has turned into a middle class nightmare. Occupy Wall Street was right. The Middle class is shrinking.
In 1970 the share of U.S. income that went to the middle class was 62%, while wealthier Americans received just 29%. By 2010, the middle class received 45% of the nation's income, compared to 46% for upper-income Americans. The Census Bureau reported last year that although income fell 1.2% for the wealthiest Americans, it dropped 4 % for the bottom fifth of households. That trend is accelerating. We are rapidly becoming a third world nation in terms of income disparity.
It makes one question how believable the claim by conservatives that the remedy for this middle class dilemma and for the growing separation of wealth between the have and have-nots is by letting the "capitalistic system work." It sounds quite similar to the same "trickle down" economic policies that have created the circumstances we find ourselves in today.
Fool me once, shame on you; fool me twice, shame on me.
Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill's forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or e-mail him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill's insights.