Episode-761- Downward Class Migration

Photo Credit to Purpleslog via Flickr

I have been predicting downward class migration in the coming years but the more research I do the more I realize that it is actively occurring and has been for the last 50 years.

In reality it is only the illusions created by easy consumer level debt that has hidden the drop in class level over the past few decades.

The coming downward class migration is more accurately a revealing of what has already occurred than something new.

Join me today as I discuss…

  • The inflation rate over the last 50 years
  • How a surplus of “educated” people has eroded the value of an education
  • Why almost all people with degrees used to be upper management and now are often receptionists
  • The real value of a general labor construction income in 1973
  • How debt has created an illusion of prosperity during an onslaught of poverty
  • How cities and counties are cutting costs today
  • 9 American cites that are on the fast track to bankruptcy
  • Harrisburg PA is bankrupt, how the state made it happen
  • The cold hard facts about what is coming
  • My challenge to you, do it on 70% for one month

Resources for Today’s Show

Remember to comment, chime in and tell us your thoughts, this podcast is one man’s opinion, not a lecture or sermon. Also please enter our listener appreciation contest and help spread the word about our show. Also remember you can call in your questions and comments to 866-65-THINK and you might hear yourself on the air.

37 Responses to Episode-761- Downward Class Migration

  1. Listening to the ‘cast right now and listened to the story about your father several times to get this right. I am just now hearing your forward calculation of the $125k _conservative_ estimate. To look at this a little bit differently, if you just look at $14.50/hr pay and compare that to today’s equivalent, you get over $74/hr. To get to that pay scale, you have to have a PhD in my line of work — OR — a lawyer who is on his first year out of law school. The only blue collar jobs I know of that even get close to that pay are for private contract haulers who own their own equipment and are working for Federal contract rates. For example, I know an owner/operator with a tri-axle dump truck making $100 an hour (in 2007), but he has to pay for all his own maintenance and fuel for the truck out of pocket. This is quite expensive with a truck payment to boot (he bought a new truck (Kentworth) about six years ago).

    • Modern Survival

      @Drew, shocking isn’t it? He said the lowest wage for such work was 9-10 bucks but if you worked your ass off you got more and regular work right away. I did mess up the annual stuff because thinking back he usually got “laid off” for like Jan and Feb if I remember right due to how bad the weather was. Of course you got unemployment for that and you got something you don’t hear about much more, called back in March when work picked back up.

      Many will blame illegal labor for this change but it isn’t just in road work it is everywhere. Also just read an article on a guy trying to hire local non migrant workers to pick corn, paid em 10 something an hour, most quit on the first lunch break, didn’t even collect the half days pay, just left and never came back, didn’t even tell him they were quitting. Sigh!

  2. I saw the list of 9 cities and was going to email you, but alas you beat me to it

  3. rich hutchins

    I just searched for downward class migration- & you come up first with this podcast!

  4. 30 years ago when I got married we were grossing a combined $18,000 and thought we were doing OK. That is just about transportation costs now.

    Sometimes you scare me Jack. I am looking for the worm hole out of here and not finding it.

  5. Ronnie in Iowa

    I sure wish I could get my daughter to listen to this but she is up for Loser Assclown of the Year Award. They’re going to lose their house. They are on their second bankruptcy. They eat out 7x a week, spend hundreds running the kids to sporting events, she has the fancy hair color and plastic fingernails. But they can’t make their house payment. Their gross income? $86,640. They have zero savings. But the kids have every war video game made. I went from making $30k yr and was reduced to SSDI, which is a horror. I took a $20k per year CUT. My only luxury item is the internet. Everything else went. That sad thing is I know what I need to do but am so financially strapped that I can’t. So Jack, got any plans for people at poverty level to prep?

    • If I may interject start prepping where you are at. Use what you have and be grateful for it. Your imagination life experience knowledge. Some times people think it takes a ton of money to prep and it most certainly can. However if you only rely on the money for prepping then you are missing one of the most valuable components true grit can do adaptive attitude. There are several posts on the forum that can help you out. to get you started. Take awareness walks. What do you see friends community water source edibles in the landscape evac routes pop cans you can turn in for change treasures that people throw out you could spit shine and sell at yard sale. Maybe you have skills or could get skills that you in turn could share with someone for something you need.

      I am sure it must be hard to see your daughter with means just squandering what you would put to good use. Ya know we all know people like that. It can be frustrating. But you know look at street/homeless people. Watch them see what and where they get stuff how they survive. You know to them you are the rich one. From their point of view you waste money on the internet oh what they would / could do with it. No not all of them are druggies. You can use trash bags for storing water that tid bit was on one of the interview shows with Steven Harris. Actually if you can figure out how to do things without cash you will be ahead of the game. So cheers to your creative can do adaptive attitude.

      • Ronnie in Iowa

        The neighborhood here is very unfriendly. Everyone keeps to themselves. I go to Good Will and multiple second hand stores and find wonderful treasures. Money is tight however. I live hand to mouth. I absorb Jack’s podcasts and find any prepping info I can get. Supplies cost money and I live in a broken down rusted out shit box with very little storage. It’s badly infested with black mold and there is no way to get rid of that stuff. Well, gasoline and a match but that’s not an option!! Some of us have to realize we’re not going to make it, ya know?
        My daughter and son in law are ADULTS who will have to crash and burn before they wake up.
        Thanks for an upbeat and inspirational pep talk!

        In Christ,
        Ronnie (Veronica)

    • What part of Iowa are you in Ronnie? My wife and I are preppers near Fort Madison.

  6. Thanks for yet another wakeup call kick in the butt!! I managed to squeeze another 3% out of the budget. So you have inspired and motivated us to save. We are now up to saving 53% of our take home pay. Compared to about 10% before we started listening to you.

    It is hard to keep it at that since there is so many things on the shopping list. Wood stove fencing fruit trees and so on. We just keep plugging away at it one step at a time. If it takes buying one tree a payday or one fence post thats what we have to do. Sometimes so badly I just want to say forget it where is the charge card or just take it out of ER fund.

    It has taken us a lot of hard work to build 6 month ER fund and pay off all debit but the house. I know that in a blink of an eye poof savings gone and visa maxed out. I know some things are an investment and will give us a monthly return. We could pay off that debit so quickly. BS if you can pay it off quickly then you can save cash to purchase it just as quick!!! Then you don’t have the debit when the next thing comes down the pike. Oh and it will.

    Over the last few shows I have noticed a change in your voice. Sense of urgency? importance? tired? just want people to hear the message? I just hope all is well with you. Thanks for the inspiration and the kick in the butt. You have reached this family we got the message loud and clear!

    Since Feb 2011 built 6 month ER fund
    also have about 6 months food or better for us and animals back up power and 3 back up water sources papers are almost in order BOL well haven’t found one yet but looking. Worst case crash at friends house in town and put livestock pigs alpacas dogs in their back yard until we are busted. I have read and learned so many things I am leaking info to everyone I see. I tell them about you and TSP. Paid off all debit but house put in 625 sq ft garden got pigs BOB er cash stashed couple of guns reload equipment scythe canning supplies dehydrator medical supplies. more to come. SEE WE HEAR YOU!!!!

  7. I don’t think theres a surplus of college degrees per se. But a surplus of humanities and social science degrees and especially “business/Finance” degrees. We need more engineers (all sorts), doctors, biologist, physicist, mathematicians, microbiologists, biotech, nanotech and etc. Not yet another MBA, Lawyer or english/philosophy majors working at starbucks.
    See people who learn engineering and etc, they can make new stuff. They create technology and machinery. They drive our economy and fields of knowledges and are necessary. They never have trouble looking for work, well until they’re in their late 50’s if they don’t keep up with new tech. But we don’t graduate enough of them, that’s why colleges are full of international students in our engineering, science and math programs. Theres not enough HS graduates that can handle high level math.

  8. The US is probably getting ready for a revolution. Back in the Cold War days, the CIA was asked to do a portrait of a country that might have a revolution. It decided that such a country would have three characteristics:
    A big gap between rich and poor.
    A middle class that was disappearing…or one that never existed in the first place.
    A lot of people with a grudge.
    The US fits each of these criteria. And then some others the spooks hadn’t thought about. The U6 broad measure of unemployment is going up…with 16.5% of the population without work. There are 6.2 million people who have been looking for a job for more than 6 months.
    (Bill Bonner The Daily Reckoning 10/12/11)

  9. Ronnie in Iowa

    I pray our organizations against domestic violence can gather together to fight the releasing of a significant other who is physically harming another. I would not be sitting here right now if it were not for my local shelter, the police and a very wonderful lawyer. I’d be pushing up daisies. I will send the link to this podcast to the ICADV and get them on the alert.

  10. Susan Cotrill aka Susie

    Hi Jack! Off topic here but this is something really great for you and the others here on TSP can look into and it’s so SIMPLE to do too! On how to make a refrigerator that uses NO ELECTRICITY at all. It was used by the ancient Sumerians to keep their food fresh and chilled even during the hottest times . It’s a rediscovered technology.

    It’s called a Zeer Pot also known as a Zeer Pot Fridge

    Here are some links about it:

    http://practicalaction.org/zeerpots

    http://www.theruralindependent.com/food-preservation/zeer-pot-2

    You can easily go to YouTube and type in Zeer Pot in the search engine and get a large selection of videos to watch about it.

    I hope this helps a lot of people out there.

  11. Freshwater shrimp

    I have 2 large ponds teaming with Yabbies http://www.nativefish.asn.au/yabby.html yabbies are native to South Africa and Australia. They are incredibly hardy (although require warm temperatures to spawn – I live in Victoria , Australia). They live on the plant life in the ponds. They produce very quickly and bury themselves and hibernate in drought. May be worth a try.

    Paul

  12. You made me feel so much better about our situation because we have spent the last five years saving every last cent and putting it to our mortgage. We currently save about half our money, actually put it to reduce our mortgage. As long as my husband is able to stay in work we will have the house paid off in two years. Not only that but we also have our next holiday paid for already. I know I could still keep the house even if my husband lost his job and had to go on government support. I run a frugal house, volunteer in the community and learn a martial art for self defence.
    I know what you mean about the reduction of income over time. My son-in-law is a photolithographer by trade. When he first got out of his apprenticeship he was paid more than a medical specialist. His income has only dropped over the years and now it is less than the average wage, while his productivity has probably tripled.

  13. LisaPainterGirl

    <<< accepted the challenge! (20% cut starting today)

  14. Jack: When you were reading the list of cities in trouble on today’s show you kept saying “debt”, but talking about it as if it was the “deficit” (annual shortfall vs total shortfall) Could you please clarify?

    Thanks, love the show
    John

    • Modern Survival

      @John,

      No I was giving new debt adding it to revenue which shows the deficit.

      City A

      Has revenues of 1 Million
      Takes on new debt of 2 Million

      Deficit is 2 million
      Money spent that year is 3 million

      In the above example the total spending is the new debt plus the total revenues. The deficit is the new debt necessary to accomplish the spending.

      The above would be exactly like a family with

      50K in income
      Takes on 100K in new debt each year

      In the first year

      Income – 50K
      Debt Increases by 100K
      Total spend 150K
      Deficit 100K (equals the debt, unless debt is used to purchase an offsetting investment, like stock margin, cities do not do this)

      Of course now interest works its magic on top of all this in time the interest becomes a major expense in the ongoing idiocy.

  15. Jack:
    Thanks for the clarification and prompt response.

  16. Nice article Jack. Looking forward to learning more from you and your resources in the future.

    IP-

  17. Ironically my wife and I had just decided to do exactly what you are suggesting for the month of October. However, even though we are cutting out all luxuries this month, we decided to join the Members Support Brigade. 2 years of free loading information and motivation that has improved our life is long enough.

  18. soccer grannie

    Go to Hank Jr’s site http://www.hankjr.com – he’s offering a free download of “Keep The Change” for a limited time.

  19. Jack, love the podcast and this show was great, but I think the numbers have to be wrong (not the message, just the numbers). Doing some research I find the average annual wage in 1973 was between 7500 and 9200, depending on where you look.
    Even at $14/hr, with no overtime, that means your dad was making between 3-4 times what the average American was making. That doesn’t seem right for someone who building a highway.
    Regardless of the absolute dollar amount, if someone was making 300 to 400% of the average (before adding in overtime) income, I would think they would be a near-elite level employee, with difficult to find skills.

    • Modern Survival

      @Mike yea road construction paid those numbers in the 70s, shocking as it may be finding enough men for the work was hard to do. A general labor on a day rate made about 9 an hour while he got felt out by the company. Starting wages for a full timer were 11-14 and as soon as you could run a bit of equipment and run a crew wages went up from there. It was dangerous hard and long work, with no benefits, no holiday pay, etc.

      I don’t care if it “doesn’t seem right”, it is the way that it was.

  20. What things look like now in southern europe:

    “Most young people here,” says Abrantes, “have to hold down two jobs to survive. As for the elderly – pensions were never very generous, and now they’re even less. The poorest are going to get poorer, the middle class will just be poor. We’re going to have to learn again, like in our past, just how little we can actually live on.”

    http://www.guardian.co.uk/world/series/europe-on-the-breadline

  21. Man, I hated listening to this show. The message was dead-on, and it sure opens our eyes about the political-economic situation of our localities.

    One thing I carried away was the need to get back to prepping AND to regain the mindset I had a couple of years ago. I’ve been a little lazy lately, and this really makes me realize that the seasons are changing (think Ant/Grasshopper story) and I really need to get back to the way of the Ant.

    Thanks, Jack, for the show. I hated hearing it, but sometimes truth hurts. Sometimes that “jab” is what it takes to get us back in the game. I’ll be sitting down with my wife this weekend to discuss our an “Ant Plan.”

  22. Hi Jack,

    Another Great podcast!, as usual. Although, I find little to disagree with you on,
    (meaning I agree with 99% Duh 🙂 I do have a few questions or am not really clear on some things you mentioned.
    Well, maybe just one question on the movie “the Secret of Oz” which I
    thought was superb. I also liked the Money Masters, although it felt like it was filmed in 1977 !!
    Being a former Gold Standard advocate, not really knowing why either. I do think they make a fairly good case in the film as to why this is not the best idea and perhaps a very bad idea.
    It’s still a fuzzy issue though, perhaps it is more simple than I realize.
    I live in North Dakota, and in the film they mention this briefly and not much is said as to “why” this Bank works.. just that we have a surplus and obviously
    not beholded the Great Behometh , the FED… but specifically what makes the Bank of North Dakota , or others like it unique and a possible solution to our economic crisis?
    Last point, When you mentioned that holders of Silver and Gold are not going to get rich, I can see your point there, in the long run “AFTER” the full collapse. But won’t many profit greatly in the meantime, especially those who have been buying for years and assuming they sell at the right time and convert that cash to something else of intrinsic, cash flowing value, couldn’t they in fact get rich in the process?

  23. Great sobering show. A thought: I don’t think it’s been mentioned for a while, but peak oil is out there looming, assuming it proves correct, also will be a huge reason for downward class migration. It would be cool to have Chris Martenson on again – it’s been a while – or maybe some other peak oiler (Heinberg perhaps?) to discuss the latest in that realm.

  24. You wanted to know if other people had talked about downward class migration – Ferfal was mentioning this in October 2008:

    Then we turned the page and saw the darned fourth pyramid. This one had arrows from the middle class dropping to the low, poor class.

    “What is this?” Some of us asked.

    The teacher looked at us. “This is us”

    http://ferfal.blogspot.com/2008/10/thoughts-on-urban-survival-2005.html

  25. Jack,
    I see your points, but in regards to my earlier post, I still don’t understand. I guess I’m confused, not by the 1970’s pay vs today’s pay, but the 1970’s pay related to the 1970’s cost of living.
    $1000/week is about $50K per year (2 weeks vacation), plus or minus. According to the American Journal of Public Health, the median physician income in 1973 was only $45K per year.
    Have we increased the amount we value our doctors (they now make significantly more than people who build roads), or, have we decreased the amount we value our labor pool? Or, why would they pay people in 1973 the same amount to build roads as they did to be doctors?

    • Modern Survival

      @Mike, all I can tell you is

      1. Called my dad on Saturday and verified the numbers. He did note that his annual income was lower than I stated due to winter layoffs, rain days etc but stated he did very well with his income.

      2. A median wage for a physician would be the average across all regions, skill levels, time in practice, etc. Let me also note when I was taken to the Dr. in the 70s an office visit was 25 dollars and the Doc would spend 20-30 minutes with you. Consider he was paying a staff, rent, insurance. I don’t think a GP made that much in the 70s. Just a thought.

    • “Have we increased the amount we value our doctors (they now make significantly more than people who build roads), or, have we decreased the amount we value our labor pool?”

      Your question assumes a free market. Here’s a lengthy, but good, answer to your question.

      http://mises.org/daily/3613

  26. I mentioned the 30% income drop challenge to some friends and most responded that they have fixed costs – mortgage, debt payments, child support, property taxes, etc. that exceed 70% of their income so there’s no way they could do it. Pretty telling, huh?

    • Modern Survival

      @metaforge that is sad and honestly in most cases it is also bullshit. What I mean by that is I promise you if you took most people to 70% of their incomes they would adapt swiftly, they are willing to do it only when they have to. Millions of Americans on unemployment are managing on less than 70% of their former incomes, it isn’t impossible it is uncomfortable.

  27. It’s just whether ‘managing’ involves mailing your keys (car or house) back to the bank for some folks, or defaulting on credit cards, I imagine, because their discretionary spending is truly already under 30%. Death by fixed costs.