For the past 50 years, Americans have come to expect their employers and/or government will finance their retirement, healthcare, unemployment, and other major dislocations, so personal savings became something one did with windfalls, but not on a regular, life-or-death basis. (My grandparents are fond of tellling me that in their childhood, people were "poor as church mice" before Social Security)
But these commitments are being tested as people are living longer, massive healthcare inflation is occurring, and the birth rate is falling, causing the ratio of wage-generating members of the US economy to constitute a shrinking portion of the population relative to retirees.
This also creates a problem because financial gains drive pensions, and absent capital accumulation, "normal" people (pensioners) can't participate in the upside of higher corporate profits and/or interest rates.
(2) Wages are stagnating. I don't know why this is happening, but suspect it's due in large part to globalization, in particular, better communication technologies being used to substitute cheaper labor for what was previously only available locally.
The decline of labor unions might be a good thing for owners, but it's unquestionably bad for wage-earners.
Also, more and more jobs are getting automated as technology gets better and better, which reduces the demand for unskilled labor.
(3) Major across-the-board inflation. Healthcare, fuel prices (which directly affect the cost of driving, flying, shipping, food production, pretty much everything), education costs, higher tax rates (Cook county, IL, where I grew up, has over 10% sales tax, a 5% state income tax, plus federal taxes -- not inflation as such, but it does have a big effect on depleting purchasing power), food -- EVERYTHING is costing more. "Six figure" incomes just aren't what they used to be.
I think the combination of no pensions + higher healthcare costs + more taxes (largely to fund government-sponsored retirement funds, not provide broad-based services like education/public works) + inflation is making 120k feel like 80k or less, it's just not that visible because in nominal terms, wages aren't going down.
(1) People aren't saving enough [1].
For the past 50 years, Americans have come to expect their employers and/or government will finance their retirement, healthcare, unemployment, and other major dislocations, so personal savings became something one did with windfalls, but not on a regular, life-or-death basis. (My grandparents are fond of tellling me that in their childhood, people were "poor as church mice" before Social Security)
But these commitments are being tested as people are living longer, massive healthcare inflation is occurring, and the birth rate is falling, causing the ratio of wage-generating members of the US economy to constitute a shrinking portion of the population relative to retirees.
This also creates a problem because financial gains drive pensions, and absent capital accumulation, "normal" people (pensioners) can't participate in the upside of higher corporate profits and/or interest rates.
(2) Wages are stagnating. I don't know why this is happening, but suspect it's due in large part to globalization, in particular, better communication technologies being used to substitute cheaper labor for what was previously only available locally.
The decline of labor unions might be a good thing for owners, but it's unquestionably bad for wage-earners.
Also, more and more jobs are getting automated as technology gets better and better, which reduces the demand for unskilled labor.
(3) Major across-the-board inflation. Healthcare, fuel prices (which directly affect the cost of driving, flying, shipping, food production, pretty much everything), education costs, higher tax rates (Cook county, IL, where I grew up, has over 10% sales tax, a 5% state income tax, plus federal taxes -- not inflation as such, but it does have a big effect on depleting purchasing power), food -- EVERYTHING is costing more. "Six figure" incomes just aren't what they used to be.
I think the combination of no pensions + higher healthcare costs + more taxes (largely to fund government-sponsored retirement funds, not provide broad-based services like education/public works) + inflation is making 120k feel like 80k or less, it's just not that visible because in nominal terms, wages aren't going down.
[1] http://research.stlouisfed.org/publications/review/07/11/Gui...