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Why the Shrinking Middle Class Negatively Impacts ALL of Us. What We Can Do to Turn it Around.

Why the Shrinking Middle Class Negatively Impacts ALL of Us.

There is no universal definition of middle class.  Some say that in today's world, the US middle class from Lower middle to upper middle, ranges from $35,000 to $100,000 in household income.  Studies show that the percentage of US households that fit in the middle class has decreased significantly from the year 2000 with a small percentage moving up and the majority moving below the federal poverty level.  Many say the cause is a decline in wages and rising healthcare, tuition and child care costs.b2ap3_thumbnail_MiddleClass_6.png
 am not an economist and I don't pretend to understand all of the factors involved or even the data available to support what is happening.  I approach this discussion as a logical realist.  I believe that we all can agree that we feel the impacts and to some degree we have adopted a perspective that the rich are getting richer and the poor are getting poorer.  To me it is very logical that the rich would get richer because they have progressed in their skill level to create wealth.  Additionally, it makes sense that the poor would be getting poorer because of a decline in wages and rising costs.  In the case of the poor, something is lacking in order for them to progress in life and business but it is not a result of the rich getting richer and therefor the rich are not to blame. That doesn't mean the rich don't have some responsibility to contribute to the solution.  If this continues we all lose.  There will be tremendous pressure on services to serve the poor and the rich will lose their consumers.  

Lets talk about the rich 

In order for the rich to make money, what has to happen?  Someone has to spend money.  A product gets produced, supply and demand kicks in, commerce takes place and a profit or loss is realized.  The entrepreneur produces a product and the consumer willingly buys it.  It seems simple enough to me.  I think sometimes our opinion is that because they have so much that there isnt enough for anyone else.  In reality, anyone can make the climb to the middle, upper middle or even into wealth but it isnt easy and we have been spoiled to think that it should be.  However, just because the rich have the right to create wealth, it doesnt mean they can avoid social responsibility and doing their part to see to it that the whole progresses positively.  In our Executive Orientation we talk about how.

Let's talk about the poor

There is no doubt that in a country full of opportunity it still is not easy to escape the federal poverty level and be in the middle or upper middle class.  As an employee in the workforce, wages for most professions are down.  As an entrepreneur, there is a brutal gauntlet to overcome the failure rate.  Things are tough and it is not easy.  Nevertheless, there is no white wizard that is going to ride in and save the day for any individual American and I often think that sometimes we feel that should happen because it just isnt fair if it doesn't.  

As an entrepreneur, here are some of the things that I have personally experienced in my own life as well as the lives of others that make the climb up seem impossible even though it is not.

  • Lack of Knowledge-We may want to change our staus in life but lack the knowledge to do so.
  • Lack of Capital-We have gathered knowledge, have a great idea and no money to execute.  
  • Administration and operations-running all of the functions of a business is a very difficult task for one person starting out.
  • Client acquisition-the number one challenge facing business today.
  • Solid Strategy-knowing how and what to do when
  • Team-Finding and hiring the right people and being an effective leader to get the results the company and the individuals both want and need.
  • Much more-Too much to list

What We Can do to Turn it Around  

If the problem is declining wages and rising costs then the solution should be to increase wages to cover the rising costs.  Of course, it is more complex than that, however, there is a certain reality to what we can impact and control and what we can't.  Lets focus on what it would look like to increase wages.  Quite simply, a business that is not realizing profits and growth will not hire and pay good wages.    The answer is for businesses to realize profits and growth.  This is not even logically debateable.  Here are some of the factors preventing growth and profitability.

  1. The Velocity of the dollar-We want and need wages to increase but we are spending at a lower rate than we did in the great depression.  The velocity of the dollar is at an all time low.  Again, in order for a business to make money, a consumer has to spend it.
  2. Expectations of price-As consumers, we somehow bought into this concept that it is our duty to be fiscally responsible and drive merchants prices down as low as possible.  The merchants keep dipping to meet the customers expectations and with that go profits.  All too match a scarcity mentallity that says in order to get ahead financially I need to spend less.  This is not sustainable and it violates the laws of success.  There is only one good answer and it is to pay a fair price, nothing more and nothing less.  
  3. Sharks and Dragons-There are so many expenses, pitfalls and obstacles preventing a business from profits and growth.  If it takes a village to raise a child it takes a community to grow a company.
It is not easy to create an eco-system that is sustainable.  It requires that consumers, companies, governments and nonprofits collaborate.  If you want to be part of the solution, register for this live event and attend in Boise or via webinar as we map out a total community solution for every community.   Last modified on