Is the American Dream still a reality? (MadAnthony say yes)...

This week's issue of Parade Magazine (the magazine that comes in a bunch of Sunday papers and includes celebrity interviews and Ask Marilyn) has a cover story today asking if the American Dream is still a reality or if more Americans are finding themselves unable to achieve it.

I tend to be a bit of a futurist. I think technology has made people's lives much better - easier, more enjoyable, and longer - and will continue to do so. I think most of us are better of than our parents, often in ways that have become so common we don't even realize them. I tend to think we are doing pretty well.

The article doesn't do much other than present some profiles and the results of a survey that Parade did. The survey defines households as middle class if they are earning between $25,000 and $99,000 a year, which they say is the middle income range. $25,000 seemed kind of low to me for middle class, although $100,000 a year probably isn't unreasonable for a two-income family.

Here's one of the negative paragraphs:

Yet behind this prosperity is a growing unease. Half of the employed respondents say that they’ve experienced either increased health-care costs or a cut in health benefits over the last three years, and 39% have had cuts in their overtime, raises or bonuses. Almost two-thirds say they live from paycheck to paycheck, and 47% say that no matter how hard they work, they cannot get ahead. More than a third worry about job loss.

Increased health-care costs and benefit cuts is not a very specific description. My insurance company increased it's copay for non-generic medication, so my health care costs have argueably gone up, but that doesn't mean I'm significantly worse off. The other thing that springs to mind is why have people's costs increased - is it because they've required more care or had a medical emergency? While those things can cause financial problems, it's hard to blame them on a problem with the system.

And health-care costs are always a strange thing. In a way, rising health care costs are a sign that we are doing better - that we actually have the technology to make people better. A few hundred years ago, health care costs were minimal, because all "doctors" had was a hacksaw and some leeches, which didn't cost much. However, people also died a lot younger, and of things that today can be treated with a pill or an outpatient procedure. And because people live longer, they require more medical care, especially as they get older - as they are treated for stuff that would have killed them in the not-too-distant past.

The other thing that drives health care costs up, but is a sign we are better off, is the treatment of things that wouldn't have been treated in the past. Things like depression, allergies, and erectile disfunction used to just be the kind of things you lived with, that you dealt with. Now days, we have the knowledge and medicine to treat these things. So we have clear sinuses and better sex, but it costs us money.

The fact that people are living from paycheck to paycheck isn't terribly revealing either - is it because they aren't saving enough, or because they aren't making enough, or both? Part of the issue may be that people aren't earning enough, but I bet that much of it is because people are spending more than they should, that they are living above their means, that they have decided to trade future savings for a nice car and a nice house and frequent dinners out. Which is fine - it's their money - but I wonder how many people spend beyond what they can afford and then declare the American dream dead because of it.

I actually fall into the "cuts to overtime, raises, or bonuses" catagory - or at least will soon. My overtime that I've worked the last 2.5 years will probably come to an end in the next few weeks or months. I'm not happy about it, but as much as I want to complain, it is overtime and is not guarenteed. If you are depending on raises and bonuses and overtime to meet bills, it's probably a good idea to look at your spending (something I have found myself doing).

I was actually surprised how low the 1/3 of people worry about job loss figure was. I'm not sure that it's a bad thing that people are worried about it - it is always a posibility, and if you are thinking about it, there is a good chance that you will do things like put away money for a rainy day or start improving your skills so you can find a better job if you lose your current one. It's unfortunate that people lose their jobs, but it is a fuction of our economy - part of the creative destruction of captialism, and it's better to be aware of it and prepared for it than get hit by surprise.

The article also has a number of stats on the bottom to "prove" that people are worse off - increased credit card debt, slight decline in real wages, declines in household income, higher college costs. But the thing with statistics is that that they often don't tell the whole story. I can't help but wonder if there are factors that have influenced some of those things - like household income dropping is influenced by increases in stay-at-home moms, or more likely by more people retiring.

And much of the stats, and the survey results below them, come from things that are part of the way people spend their money, not necessarily from the way the ecomony is doing. Living paycheck to paycheck, or having credit card debt, or not saving, can be because of low wages, but they can also be caused by poor spending choices.

And whose fault is this? Well:

89% of the respondents believe that businesses have a social responsibility to their employees and to the community, but...

81% believe that American businesses make decisions based on what is best for their shareholders and investors—not what is best for their employees.

Yup, it's those evil corporations fault. Nevermind that if a company doesn't do what's best for it's shareholders and investors, it will have a hard time finding capital to do things like expand and hire more workers, or even to stay in business. I tend to take the Milton Friedman view that companies don't have social responsibility, that they should make money and as a spillover effect of this consumers and employees will be better off. But I realize that this opinion is in the minority. But I think that a company that always puts it's employees ahead of it's investors and shareholders is likely to be a company that will go out of business, driven out of the market by companies that did look on making money. That isn't to say that I don't think businesses should take care of their employees - they are an important asset, and a company can make more money by keeping good employees happy. But that can't be their only focus.

The other interesting thing about the article is that there are a bunch of positive stats from their survey - More than 52% of middle-class Americans think that they’re better off than their parents were, 80% say they believe it is still possible to achieve the American Dream. - yet the article is pretty much all negative.

And then there is this:

74% of the middle class say they take responsibility for their own financial success or failure.

Who do the other 26% think is responsible for their sucess and failure?