A Hard Landing for the Middle Class

[Deleted]

The figures in this article about the continued upward movement of wealth are really depressing.  Thoughts?

www.washingtonpost.com/opinions/harold-meyerson-a-hard-landing-for-the-middle-class/2013/08/06/e8948e4c-fec4-11e2-bd97-676ec24f1f3f_story.html?hpid=z3

It’s August, and Americans by the millions are cramming themselves into coach-class seats as they embark on their summer vacations. Those able to learn from adversity might ponder this: Airline seating may be the best concrete expression of what’s happened to the economy in recent decades.

Airlines are sparing no expense these days to enlarge, upgrade and increase the price of their first-class and business-class seating. As the space and dollars devoted to the front of the planes increase, something else has to be diminished, and, as multitudes of travelers can attest, it’s the experience of flying coach. The joys of air travel — once common to all who flew — have been redistributed upward and are now reserved for the well-heeled few.

The new business-class seats that Lufthansa is installing convert to quasi-beds that are 6 feet 6 inches long and two feet wide, the New York Times’ Jad Mouawad reports. The price for working, eating, drinking and sleeping on this commodious couch, round-trip from Kennedy airport to Frankfurt and back, is a cool $5,000.

Lufthansa is hardly alone. Delta, United and American have all announced plans to upgrade their business-class seats for cross-country and transcontinental flights. Then there’s Emirates, which now sells first-class suites — complete with a shower — that go for a tidy $19,000 on the New York-Dubai route.

At the other end of the economic spectrum, low-cost airlines that re-create the thrill of traveling in steerage are thriving, too. The new business model, apparently, is to shrink the seats, charge extra for everything and offer nothing for free that might be construed as an amenity. That’s certainly the credo of Spirit Airlines, which charges its benumbed passengers a fee for their carry-on bags, $3 for water and $10 for printing out boarding passes and whose seats don’t recline. Spirit boasts one of the highest profit margins in the industry and plans to expand by 15 percent to 20 percent every year for the next eight years, according to the Los Angeles Times. It also ranks dead last in customer satisfaction — indeed, in last year’s Consumer Reports survey, it had one of the lowest overall customer satisfaction scores of any company in any industry that the magazine had ever surveyed.

But people fly Spirit Airlines because the fares are what they can afford.

The upgrading of business and the downgrading of coach present a fairly faithful mirror of what’s happening in the larger economy: the disappearance of the middle class. As University of California-Berkeley economist Emmanuel Saez has documented, between 2009 and 2011, the incomes of the wealthiest 1 percent of American families grew by 11.2 percent while those of the remaining 99 percent shrunk by 0.4 percent. Median household income has declined every year since 2008. Profits, meanwhile, have risen to their highest share of the nation’s economy since World War II, while wages have sunk to their lowest share. In an economy such as this, the growing markets are the rich and corporations, which have more money to spend on luxury travel, and the downwardly mobile everyone else, whose travel options are increasingly confined to discount outfits like Spirit and the increasingly hellacious coach sections of other airlines.

This week, one of the last airlines devoted to what we might call a middle-class travel experience succumbed to the increasing economic bipolarization of U.S. consumers. JetBlue, which has never had a first-class or business section but which afforded its coach customers more legroom than other airlines, announced that it would create a new first-class section on its cross-country flights with suites containing seats that fold down to full lie-flat beds.

In an unusually concrete way, JetBlue’s change of cabin configuration highlights what the changes to our broader economy have meant. Its ability to provide its customers with more spacious seats was the direct result of not having a first-class section. Airplanes, like stagnating economies, are finite, and if one class takes up more space or commands more resources, the other class gets less.

The U.S. economy has not stagnated over the past four decades, but so much of its wealth has been claimed by the very top that most Americans have experienced it as a zero-sum game in which they’ve lost ground. As tax rules favored the wealthy, as employees lost the power to bargain for their wages, as globalization reduced the incomes of millions of workers, the rich grew richer at everyone else’s expense. That’s the reality that today’s air travel illustrates, as the comfortable standard seat that once was the norm goes the way of the dwindling middle class.

[phunluvin82]

The bolded is definitely particularly depressing. I think increasing income inequality is the single greatest problem facing out nation...worse than the national deficit, or the student loan 'bubble', or anything else really...all big the problems both stem from, and are exacerbated by, income inequality and the slow disappearance of a 'middle' class.

Also, remind me never to fly Spirit.  That sounds absolutely miserable.

[jigsy]

I was going to start by saying I don't really care for the comparison to air travel...but then the more I thought about it, the more I guess it rings true. The reason coach blows is because people care more about a cheap ticket, and the reason First Class and Business are getting more and more luxurious is because airlines need those customers to fly with them to subsidize the people in the back.

I don't want to argue that upper class folks are subsidizing lower class people. I don't agree. However, I do think that corporations have shifted to paying the smallest amount possible to workers in order to boost profits. Increased profits often means bonuses to the management and rising stocks for share holders. So in a way, every dollar the rich person gets is at the expense of a poor person...keeping them poor.

But...I'm not an economist, so WTF do I know?

[Deleted]

Have you read Twilight of the Elites? It is interesting and related to this topic.

I don't really like the plane metaphor, for reasons discussed ad nauseam in the P&CE thread.  But that is kind of neither here now there -- the bolded is a real problem without an easy solution. I personally think a lot of good could be done by overhauling our tax laws so that the rich pay their fare share, but a lot of people would disagree and at any rate I don't see this actually happening any time soon.

What is going on in our peer countries middle class-wise? Is this a somewhat uniquely American problem?

[winnied]

Aug 7, 2013 14:43:47 GMT -5 v said:

Have you read Twilight of the Elites? It is interesting and related to this topic.

I don't really like the plane metaphor, for reasons discussed ad nauseam in the P&CE thread.  But that is kind of neither here now there -- the bolded is a real problem without an easy solution. I personally think a lot of good could be done by overhauling our tax laws so that the rich pay their fare share, but a lot of people would disagree and at any rate I don't see this actually happening any time soon.

What is going on in our peer countries middle class-wise? Is this a somewhat uniquely American problem?

Even just loophole issue in our tax system screws over the poor. Guess who knows those loopholes better than anyone else? The rich, of course. They can afford to have someone else comb over every detail and get them as much money as possible. How is a person juggling 2-3 jobs going to pay for or have time for that? 

I think the rich paying their "fair share" all depends on what "fair" means to different people. Some think there should be a flat tax. Others think you only need X amount to live well and all the rest should be heavily taxed/given to the people. 

[lys]

And next comes Obama's plan to reduce the number of mortgages bought by Fannie May and Freddie Mac (by 15% increments) and have the private market take over .  That means higher interest rates for mortgages and a 20% down payment requirement (since the lender is absorbing more risk - you pay more).  This will be challenging for many in the middle class who hope to purchase a home.

Complaining about the cost of travel for vacations is a 3rd world problem. 

[Deleted]

Aug 7, 2013 15:07:23 GMT -5 lys said:

And next comes Obama's plan to reduce the number of mortgages bought by Fannie May and Freddie Mac (by 15% increments) and have the private market take over .  That means higher interest rates for mortgages and a 20% down payment requirement (since the lender is absorbing more risk - you pay more).  This will be challenging for many in the middle class who hope to purchase a home.

For me, this raises the question of why it is so important to Americans to *own* the roof over their heads, but that's a discussion for another day.

[lys]

V - in addition to the personal reasons people want to own their home, home ownership is a huge driver of the economy (renovation, furnishing, etc), it is also a means of having limited housing costs in retirement (no mortgage).
There are positives and negatives to both renting and home ownership which depend on your location, lifestyle, goals and finances.

[Deleted]

I'm a renter and I have furniture!!!  

But yeah, I know there are plusses and minuses.  I just think it is a shame that so often we as Americans are pushed to think that owning is your home is all plus, plus, plus (and that renting is for failures) when it isn't right for everyone/in all circumstances