Saturday, February 2, 2008

Is the Upper Middle Class Truly Better Off?

There's an interesting article in today's New York Times about Barack Obama's class warfare play. Sen. Obama wants to raise taxes on the "rich", defined as those in the top 10% of the income distribution, to pay for higher government spending. The article claims that higher taxes are justified because:

"high-income workers have received far larger pay increases than others over the past generation."

While gross incomes for the upper middle class may be higher than two or three decades ago, in many areas there has been a decline in actual purchasing power. When my dad graduated from business school back in the late '70's, his student loan debt was equivalent to 30% of his first year's salary. When my DH graduated in 2006, his debt was equivalent to nearly 100% of his first year's base salary. My parents were able to purchase a starter home in the Bay Area for roughly twice my dad's salary. That same house today costs more than five times my husband's salary. We are paying a much higher percentage of our income for healthcare, too.

My parents were able to send me to private school for K-3 on my dad's salary, and when they had a 3rd kid and decided that tuition was too expensive for all of us, they were able to afford to buy in a neighborhood with a good public school. Today, my DH and I cannot afford the private school tuition for even 1 kid, nor even to rent in a good school district.

The hours for upper middle class workers have lengthened, too. More than 31% of college-educated males now work 50+ hours/week compared with only 22% in 1980. I would say the norm in our area for white collar jobs is 60, and in certain industries (financial services, management consulting, law, IT, etc.) folks often work 80-100+. A study published in the Harvard Business Review found that 1.6 million Americans now work "extreme jobs" that require more than 60 hours/week. The study found that 52% of the nation's top income earners -- those in the top 6 percent of earners and often making six-figure salaries -- work more than 70 hours a week.

To be fair, some aspects of our lifestyle are better than my parents'. We have a nicer car, for one thing. Our economy car has anti-lock brakes, 2 airbags, air conditioning, automatic transmission, power windows & doors, power steering, cruise control, a CD player, etc. while my parents' economy car had none of those things. But we didn't really have the option of buying an equivalent car even if we had wanted to.

Don't get me wrong- we're among the lucky families in this country. We can afford health insurance, rent in a safe neighborhood, healthy food on our table, etc. We can also do it all on DH's salary, to allow me to be home raising our children. Too many moms these days don't have that option :-(

But I just would like to see Sen. Obama, former Sen. Edwards, and the rest just try living in the Bay Area on what they consider a "wealthy" income and see whether they still consider those families "rich"...

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