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Re: How to Escape the Middle Class Squeeze
How to Escape the Middle Class Squeeze
by Rick Newman / US News
Most Americans don't need to be told this, but the middle class is struggling.
In case any skeptics remain, new data confirm the downward mobility of the typical family. The Census Bureau's annual report on income and poverty shows that median household income in 2010 was $49,445, after adjusting for inflation, a 6.4 percent drop in purchasing power since 2007. The typical family's take-home pay is now at 1996 levels. Those figures don't include the value of employer-provided health insurance, which has made up an increasing share of total compensation in recent years. Still, the number of Americans without health insurance rose to nearly 50 million in 2010, the highest number on record. And the percentage of Americans living in poverty rose to 15.1 percent, the worst level since 1993. All of those numbers would be worse if not for billions of dollars in temporary tax breaks and government aid for the unemployed.
So if you feel like you're falling behind, you're not imagining things--and you've got plenty of company. The fading fortunes of the middle class are probably the top factor fueling vast dissatisfaction with government and a pervasive sense of national decline. But this gloomy trend isn't irreversible, and it's worth noting that real income levels in 1983--at the tail end of another rough downturn--were at the same levels as they were in 1969, 14 years earlier. What came next were the Reagan-era tax reforms and two decades of steady improvement in household income.
It's also important to remember that nobody is captive to national trends. Every individual has the ability to improve his or her own fortune, no matter how the rest of American society is doing. Some people are waiting for Washington policymakers to fix the problem, but if you'd rather take matters into your own hands, here are seven ways to get ahead, even in an unforgiving economy:
Make sure you have the right skills. A mismatch between the skills employers need and the skills Americans have is perhaps the biggest problem in the U.S. labor force. There are roughly 2 million unemployed construction workers, for instance, and lesser-skilled assembly-line jobs disappear daily. But many employers can't find enough good salespeople or customer-service reps, and there's a shortage of plumbers, electricians, and welders in some places. A lot of people figure they're better off waiting for jobs in their field to return instead of learning something new. But this is a deadly, outdated mentality in an economy that's changing with record speed.
Many lost jobs will never come back, and workers who can't acquire the new skills that are in demand are the ones who are truly doomed. The top 10 job trends tracked by job site Indeed.com, for example, all involve social media and other forms of technology that didn't exist 10 years ago. It's not always easy figuring out what employers want in your field or region of the country. But if you aggressively ask around, network with informed people, join the right interest groups, and do detailed research, you'll have a lot more focus than somebody who does a few Google searches each day. Even a little familiarity with hot skills like data mining, Web programming, or certain areas of technical manufacturing will enhance your appeal as a candidate for a raise, promotion, or open job.
Get the right education (or make sure your kids do). Too many college grads get degrees in soft disciplines like arts, literature, and social sciences, while there's a shortage of math, science, and engineering grads. A college degree is as important as ever, with consulting firm McKinsey predicting that by 2020, there will be a shortage of 1.5 million college graduates in the United States. But all diplomas aren't created equally, and if you're not learning stuff that employers are willing to pay for, then you may not be getting the best return on your education investment. Good technical schools and community colleges are also a valid alternative to college for many teenagers, especially if they teach marketable skills and offer internships at local businesses. Mid-career people should also be ready to go back to school or get whatever training or instruction is necessary keep up with technology or get an edge over other workers.
Reduce your dependence on government. Anybody who relies on government subsidies of any kind is living on borrowed time. Deep cost cutting at every level of government seems inevitable, and that will affect welfare, Social Security, and Medicare recipients, homeowners claiming a mortgage-interest deduction, municipal workers relying on government pensions, and many others. Anybody whose livelihood is dependent on "discretionary" federal spending--such as funds devoted to arts, parks, highway construction, community development, and dozens of other nice-to-have things--should make backup plans, because this is the type of spending that seems most likely to get whacked over the next few years.
Get used to starting over. Oldthink: You'll have a stable career in a single field: Newthink: You might have three or four careers over the course of your working life, as you respond to rapid changes in the workplace and the global economy. Getting fired or laid off can often seem like a setback from which you'll never recover. But there's ample evidence that one key determinant of success is how well you respond to tough challenges. Determination and resilience can even be more valuable than a high IQ or a fancy degree. Steve Jobs was famously fired from the computer company he founded, spending more than a decade in exile before he returned to Apple and transformed it into the world's most accomplished technology company. His most important lessons came from failing and starting over. Most people aren't as brilliant as Jobs, but they can still benefit from the vital learning that hardship often produces.
Get more involved in your kids' schooling. One upsetting but inevitable trend is a decline in school budgets in many communities, even affluent ones. Education budgets are often tied to property tax receipts--which have fallen along with home values--and state and federal aid, which is drying up in many localities. At many schools, cutbacks mean fewer teachers and counselors and less money for sports, activities, and enrichment programs. Parents should fight to make sure education funds in their communities are spent on teachers and kids, not on buildings and administrators, but they should also get as involved as possible in their kids' schooling: Talk regularly with teachers to monitor progress. Oversee homework. Make sure your kids are in the best possible programs, instead of relying on counselors to do it. Yeah, it's a burden for working parents who are tired at the end of the night. But we've also gotten used to the dubious idea that learning is something to be completely outsourced to the education establishment. Meanwhile, research shows that kids whose education transcends school and continues in the home perform better.
Save more and buy less. Many Americans are trying to live more frugally--but our commitment is wobbly. The savings rate, for instance, is now 5.2 percent, which is better than the near-zero levels of a few years ago, but probably not high enough. Saving 10 percent of your income is a good target, and more can't hurt. Americans have also been paying down record levels of debt, but still owe far more than historical averages. Paying off debt and building savings is crucial, because doing so provides a cushion during rough times that many people lack. That provides the kind of flexibility that's sometimes needed to try something new--which might have better long-term prospects but require a temporary cut in pay--or even move to an area where job prospects seem better. Too much debt and lack of financial flexibility, by contrast, can promptly land you in quicksand when trouble hits.
Reduce your own living standards. The net effect of falling incomes for many people is a lower standard of living, which can be characterized in many ways: More work, more stress, less money, less free time, less stuff, and falling satisfaction. But a lower standard of living doesn't need to be disastrous, and many people make the mistake of clinging to every gizmo, convenience, and club membership they've ever enjoyed, as if entitled to such things in perpetuity. Better to get rid of unneeded appurtenances on your own, while you have some choice about how to spend your money.
A lot of people have found that simpler living is a luxury in itself, especially if it eases the anxiety that comes with paying dozens of bills each month or being in debt. A lot of things that technically represent a "lower standard of living"--an older car, a smaller house, fewer restaurant meals--don't really change our lifestyles all that much. Forcing yourself to adjust to minor changes before it's absolutely necessary enhances self-sufficiency and makes cutbacks easier to swallow when there's no choice. But if you do it on your own, you might just avoid the squeeze altogether.
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