The $120,000 Gap

Paul Hawken has me thinking again about the undeniable link between social justice issues and environmental issues. Together I call them Sustainability issues, as one without the other is impossible. So I’d like to bring a discussion that I have frequently at work to the blogosphere-and it seems have a lot of “hitting power” in making people think.

It usually goes something like this: most Americans think they are “middle class”, but while the extremes of poverty/welfare on one side and the millionaires on the other seem well defined, the middle is awash with layers of wealth. Much of my team, like much of middle America lives in 2 income families. We are able to pay a wage that most consider the low end of living: about $40k annually, or about $20/hr. If you had a dual income family at this level you have $80k annual family income. Here in WI that gets you a decent home in a suburb, two new(ish) cars, and the ability to go out once in a while and put your kids through college with some help or loans. It is a good, satisfying life with moments of monetary concern.

To counter point that, much of more urban America is making significantly more. True their education levels are higher, housing rates are higher, yada, yada, but thier income levels more than make up for it. For simplicity’s sake let’s call their income family income level $200,000. Many dual income families of college education are making at or significantly over this.

Now for discussions sake lets take a brief minute to compare the two. Now granted, housing rates vary wildly from rural to urban settings, but the price of a Camry or a gallon of milk or gas does not. The difference between the two is $120,000. That also works out to $10,000 per month of gross income. Let that sink in for a moment and you suddenly realize how people can afford $50k beemers, 24′ ski boats, and 6000lb SUV’s… and put gas in all of them.

In our family we do budgeting by week, so lets break it down again. To keep the math simple, lets say $10k/mo is $2500 a week. Sweet Jesus! That one week would pay my mortgage, both car payments and most of my monthly grocery and utility bills. And the $200k family still has $7500 left per month to play with. Again, these numbers are only the difference in excess of the $80k families income.  Frankly it is hard to wrap my head around.

The point of the discussion is to lend some perspective on how Congress and The Street can continue to say that “everything is fine”. The policy and decision makers are making far beyond the $200k family- they have no concept of the impact of doubling college tuition rates, tripling gas prices, or the cost of corn meal going up 150%. It simply has no impact on them except maybe getting the 330c instead of the 330x BMW. But, of course, if you are making less than the $80k family gas at $4/gln might mean the difference between getting to work or new clothes for your kids in the fall. This is not hyperbole, it is reality for millions in America, let alone the rest of the world.

The kicker is that most people at the $200k level talk about themselves as Middle Class Americans. And they are, since they are between the uber rich and the uber poor. But the cold, hard truth of our age is that the working poor level is creeping up very close to what my parents would have thought of as Middle Class incomes due to the rising inflation of our times driven by out of control consumption and depleting global resource levels. In other words The Funnel of Peak Resource is closing.

This reality, whether they are willing to admit it or not, is what I believe is driving the Change push from the Middle in this years election. The lower Middle Class knows they are getting screwed and they are (finally) getting pissed.

Something has to change in our thinking, and soon, for us to be able to create the Future that I want for my children

Be The Change!



9 Responses

  1. Wow. That’s just…wow. It’s funny; our household income is just under $100K and I consider us to be stinkin’ rich. I can’t imagine having a spare $7500/month to play with.

    To be fair, though, take those home prices into account. In the rural town I grew up in, you can get a decent 2-bedroom house for about $80K. In the city I now live in, that same house would run about $325K. I live 11 miles out of town – out of bike range, no bus lines, no natural gas – because for my money I could get our current 4-bedroom house on 1.5 acres, or I could live in town in a 900sf crackerbox with no land.

    But that’s still not a difference of $7500/month…

    Just out of curiosity, where did you get your income figures? Here I’ve been assuming I make more money than most Americans, but maybe I’m more average than I think?

  2. The $200,000 came from looking at many of my friends and extended family. I didn’t pull it from any reports or nationwide databases. It just came about from talking to people at parties and over the water cooler. We are about $80k and do very well by living frugally compared to my co workers, but agreed. We think we’re rich (I’m typing on a new Macbook and listen to my Nano at work all day).

    That is the whole kicker, we ALL think we are middle class. Look around on the commute or in the next parking lot: well appointed F-150’s cost as much as BMW’s, the 3/4tons with diesels go for almost $50k as do most uber ‘utes. Then look at all the ’91 Geo Prisms and such in the next lane. Both the Tahoe driver and the Prism driver think they are middle class. But one is really more working poor who will be feeling the crunch well before the other.

    Here is the kicker, go to this site if you ever feel the need to be humbled:

    We are truly blessed, and with great wealth (i.e. Power) comes great responsibility. This is a reoccurring theme on One Straw:

    Be the Change!

  3. or you could try makin’ under $12K. That really lowers your impact. Instead of complainin’ ’bout others. Just sayin’.

  4. […] 8, 2008 · No Comments Beo has an interesting post up about how some people can afford all the crazy luxury items they’ve been buying.  It makes […]

  5. Wow! Here I thought we were doing well with one and a half incomes making under 100K per year. I thought we were well off – not rich by any means, but I would never have considered us “working poor.” We don’t live paycheck-to-paycheck and even have a small surplus each month. We’re not terribly frugal (although I’m working on this :), and we eat out at least once a week. I never considered that the pinch would pinch us. I guess I should probably wake-up and smell the (locally roasted) Wicked Joe’s Coffee!

  6. Wendy, you (we) are doing fine. We’re saving money, making our mortgages and putting our kids through school. We MAY feel the pinch sooner, but that is only because the rising costs of resources will have a higher impact on us do its higher percentage of our gross incomes. The counter argument is that we are used to living with less and arguably have habits of self reliance ingrained. To reference the quote I posted recently: we are the learners, not the learned.

    But the point of the post, in addition to raising the issue of income disparity in the middle class, was to draw interest into the complete disconnect between the lives of our policy makers, supervisors, and Big Decision Makers and the lives of the work a day Americans. I have seen it at the facility I work in, the complete lack of empathy for the struggles of our team members. The difference between $1 and $4 gas has no impact on those on the higher end. None. Meanwhile you and I are taking mileage into account on our car purchases and are only buying kids clothes on sale/clearance.

    Thanks for commenting!

  7. Wikipedia actually has a nice summary and graphs of US household income taken from US Census data and other reliable sources:
    Their figures suggest that people making $200K are, in fact, wealthy, not middle-class.

    Isn’t it curious how people perceive themselves as belonging to certain groups (or at least, say so to others) that others wouldn’t put them in? Is it “hip” to be middle-class? Or do folks just not realize that the true middle incomes in the US are between $25K and $75K…and what a huge difference it makes to be on either end of that spectrum!

  8. Thanks Emily! I think “rich” is something that you can’t acceptably call yourself, others must place it on you. Those numbers jive more with what I would think, though the $25k seems very low.

    I wonder how much of the “middle class” is that we spend our money so much differently now-cell phones, iPod’s, laptops, cable instead of the trappings of the rich from former generations; we are left with somewhat less to spend on jewelry, art, and trips to the Mediterranean on our Yacht.

  9. My wife and I make a combined $200K per year. We have a small house (950 sq. ft.) on 1/4 acre (paid for) where we garden a portion of our food. We have a 2005 XB and a 2000 Ranger (my wife commutes by bus most days). We are saving $100K per year and living comfortably on the other (minus taxes). No need for bmw’s or F150’s or the latest gadgets from Apple and Sony. I look forward to retireing in a few years when we can spend more time hiking, reading, gardening, bicycling, volunteering and enjoying the occasional glass of wine.

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