- Personal Finance
Why Is It So Hard To Make Ends Meet These Days?
Why is it so hard to make ends meet these days when families and individuals try to balance their monthly budgets? There are a number of reasons why it is more difficult in the early 21st century than it was during past generations to get by financially each month. People are being squeezed on both the cost side and the earnings side of the monthly budget equation. On the cost side, many items have grown expensive more quickly than the overall inflation rate and additional services exist now that did not exist in the past, which many add to their monthly budgets. On the earnings side, the globalization of the world economy and other factors have caused middle class jobs to disappear and wages to stagnate in many professions.
Why Is It So Hard To Make Ends Meet?
The Factors That Make It Harder To Make Ends Meet These Days
The Golden Age After World War II
Many industrialized countries, from Europe to North America to Asia experienced golden age after World War II, which lasted until the late 1960s. While it may not have been easy for everyone to make their financial ends meet during this time period of healthy economic expansion, for most people, jobs were plentiful, pay rates were increasing, and the cost of living was increasing at a manageable pace. Making ends meet was possible for many middle class families, with or without a bread winner that possessed a college degree.
The 1970s was the critical decade for middle class families trying to make ends meet. During this decade, the golden age ended in many industrialized countries. By the 1970s, modern industrial societies were highly dependent upon petroleum products to maintain their standard of living. In 1973, Arab countries upset with industrialized country’s support for Israel instituted an oil embargo, which involved the withholding of oil supplies from the world market. This, in conjunction with the United States reaching peak oil production capacity in the early 1970s, caused crude oil prices to increase 400% in matter of months during late 1973 and early 1974. Oil prices surged again in 1979, as Iran fell into chaos and stopped supplying oil to the world market. This led to a stagnant economy and inflation during much of the 1970s; a condition known as stagflation, which is the worst of both worlds for anyone who is trying to make ends meet. Not only is the economy in poor condition and job opportunities lacking, but inflation is eating away at both buying power and savings. The situation was made worse for middle class families by “free trade” agreements that were enacted during the 1970s, which started the trend of shifting manufacturing jobs from industrialized countries to less expensive developing countries. Not only were job opportunities fleeing to other countries, but the ability of people to seek wage increases in the face of high inflation was limited or non-existent.
The 1980s and 1990s
The 1980s and 1990s saw economic booms in industrialized countries to one degree or another. While people trying to make their financial ends meet during these decades got a reprieve from inflation, as crude oil fell in price substantially from its 1980 high and inflation rates fell more in line with historical rates around 3%, the flight of jobs to developing countries continued unabated. That, and the decline of unionization during these decades, continued to keep a lid on middle class wages. The 1980s and 1990s were also a time when additional technology-driven cost pressures were placed on monthly budgets that did not exist in decades past, including: cable television, cellular/mobile phones, and Internet service.
The First Decade of the 21st Century
The first decade of the 21st Century was another critical juncture for middle class families trying to make their financial ends meet. 2000 was the year that China was admitted to the World Trade Organization (WTO), which opened the floodgates for manufacturing companies to leave industrialized countries to set up shop in China. This caused many blue collar jobs to disappear in industrialized countries, which continued the trend of holding middle class wages in check. The first decade of the 21st Century was not kind to white collar workers either, as new Internet, phone communication, and computer technologies made it possible to outsource white collar jobs to developing world countries as well (which has been dubbed “off-shoring”). During this decade, white collar jobs starting disappearing to far away places, along with the prospects for any decent wage increases to offset increasing budget demands from increasing energy prices, increasing housing prices, and the cost of modern technologies (cable TV, cell phones, Internet).
Median Annual Income In The U.S.
Why It Harder To Make Ends Meet These Days | Keeping It In Perspective
This critique focused on the core factors that have contributed to the struggle that middle class families and individuals in industrialized countries currently have with making ends meet. There certainly are other localized factors that have made it harder and continue to make it harder middle class families and individuals to make ends meet, from local tax rates to local economic changes, such as factory closings. The cost of health care was not included in this critique because health care has always been expensive in the United States, no matter what decade one is living in, and has always been a burden on the middle class. In other industrialized countries with socialized systems of medical care, health care costs have not been a major factor for the middle class.
It is fair to say that the rich and poor have not been affected in the same way as the middle class by the financial squeeze that has developed since the 1970s. There have never been more millionaires and billionaires in history than there are in the second decade of the 21st Century. Much of that wealth has been accumulated on the backs of the increasingly burdened middle class. While the middle class in industrialized countries has struggled with massive job losses to lower wage developing countries and all the negative impacts of those job losses, the wealthy have reaped tremendous financial rewards from the massive job relocations to developing countries. Products that are produced by low wage workers in developing countries are sold in relatively affluent industrialized countries for even higher profit margins than were possible before, and the rich who own the multinational corporations are benefiting from this new economic paradigm. As far as being poor; there has never been a good time to be poor. Nothing from nothing is still nothing. It could be argued that the poor make the middle class’ burden even worse because someone has to pay for the government programs that many of the poor live off of; and there may be some truth to that argument, but it is certainly not the deciding factor regarding why is it so hard to make ends meet these days. The government tax burden has always been a burden for the middle class.
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© 2013 John Coviello