This video is only for "middle class" visitors

Don't skip over this blog entry quickly just because it's tagged "economics." This is one (pardon the phrase) "kick-ass" lecture. Elizabeth Warren is a professor who teaches bankruptcy law at Harvard Law School; she has written several books for the general public re financial planning. In this talk she compares current American families with corresponding families from one generation ago (the 1970s).

The lecture begins with the observation that one generation ago, the American family was a one-income family (average $32,000 inflation-adjusted income) now $73,000 (also inflation adjusted, as are all numbers in talk) in early 2000s. So "income" way up - but this has occurred because of the addition of second earner in family.

She then shifts from looking at income to looking at expenses, and shows that credit card debt is now huge and savings are "negative" as opposed to 10% of income for their parents. Americans have spent all of that increased income - and more.

Where has the money gone? Americans are spending 32% less on clothes now than in the 1970s. 18% less on food, including eating out. Cost of owning a car is down 24% because cars are kept longer and repair costs are lower. Paying mortgage is 76% more - despite lower mortgage rates. Median house went from 5.8 rooms to 6.1 rooms. Housing is not being built as "starter homes." Health insurance costs (employer-sponsored) is up 74% (inflation-adjusted). Average family has changed from 1-car to 2-car. Child care was not an expense prior to the two-worker family.

By the time current family has paid their five basic expenses, they have less money than their parents. The average family now has to have two incomes, and are at huge risk if either one of the two jobs is lost.

In 1970 success as a member of the "middle class" required 12 years of education. In 2002 the public perception is that college diploma is required. And in 1970 pre-school was not "normal" - children just played with friends and neighbors. Both college and pre-school are paid for by the family, not the public. Not surprisingly the big rise in bankruptcies has occurred among families with children.

In 1971 a mother who gave birth to a baby came home after 5 days in hospital. Now insurance allows only 24 hours. Hospital efficiency has improved by sending patients home earlier to have the family provide nursing care. Any significant illness in the family (child or grandmother for example) has economic consequences because one family member has to miss work.

Her concluding concern is that this country is experiencing the "death of the middle class." As things are going now, the rich will become richer, the poor poorer, and the "middle class" will disappear. We will go from having a "bell-shaped curve" of income and class to a 2-class system - with all the dangers and uncertainties that implies.

For music videos I often recommend clicking and listening while scrolling down the blog. This lecture will probably deserve greater attention.

The introduction of the speaker and explanation of this history of the lecture series is boring, so let the video load for a moment and then move the slider forward to the 4 min 30 second mark and start watching there, where the lecture itself starts..

I don't know to what extent the data presented here are applicable outside the United States, but I expect some TYWKIWDBI visitors from Canada and Australia will find the principles discussed fully relevant to their lives.

Original link HERE.