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Families go deep in debt to maintain a middle-class lifestyle
- sarcasmatwork 7y agoWe have been told to get a good education, to get a good job and to live happier every after. For most, this is far from the truth. Wages have not increased in decades, while everything else is more expensive. Corps would rather hire you as a contractor, to pay you less so they make more. There are not enough jobs, because there is no process for teaching about free enterprise in America. Its jobs jobs jobs, but you need people to create those jobs. When H1Bs take your jobs, its hard to compete when they are paid less and willing to take less. So many issues, but we have an inept Congress and elected officials that care for more their power, and their greed that the American people. </rant>
- solotronics 7y agoMany in Congress are not just inept, they are carpetbaggers. They line their pockets by selling out the American people.
- madsid 7y agoAs an H1B, I can say that I get equal pay as an American/any person gets for the same job I am doing. I don’t think the issue is with immigration but more of businesses bring greedy to make more money skimping on paying decent pays. (On the side note, I don’t understand the concept of borders, when you have absolutely no control over where you are born. I can say I am intelligent than an average person regardless the ethnicity/country or what ever, which is why I am able to survive in the industry I am working)
- jimbob45 7y ago>When H1Bs take your jobs, its hard to compete when they are paid less and willing to take less. I think you're going to have a bad time arguing that point. H-1Bs constitute an fraction of the overall tech sector jobs. Personally, I might agree with you on the grounds that those H-1Bs cause a domino effect on overall job openings. However, the argument, at face value, that H-1Bs are a significant factor in the difficulty of finding a tech sector jobs is, in my opinion, largely a scapegoat.
- toomuchtodo 7y ago... “We demonstrate that H-1Bs given to a firm on average do not raise the firm’s patenting and/or other employment, contrary to firms’ frequent claims. Overall our results are more consistent with the second [i.e., the critics’] narrative, in which H-1Bs replace other workers to some extent, are paid less than alternative workers, and increase the firm’s profits (despite little, if any, effect on firm patenting).” In addition, “we robustly find that new H-1Bs cause no significant increase in firm employment. New H-1Bs substantially and statistically significantly crowd out median employment of other workers,” they continue. This result conflicts with the widely repeated claim that foreign workers create American jobs, which is based, as we have previously reported, partly on the work of economist Madeline Zavodny of Agnes Scott College in Decatur, Georgia. Furthermore, “[o]ur results are consistent with the possibility that H-1B and non-H-1B workers are perfect substitutes. This is notable in light of frequent claims that H-1Bs have unique skills that cannot easily be obtained elsewhere.” The authors of this “important” study “have done an exhaustive analysis, given the data available, and they have better data than anyone to date, best I can tell,” says labor force expert Hal Salzman of Rutgers University in New Brunswick, New Jersey, by e-mail. “And their findings are consistent with all the other analyses that were done competently—and consistent with what the companies themselves state is the function of H-1B (to lower wage costs and raise profits).”" https://www.sciencemag.org/careers/2015/05/economists-h-1b-visas-suppress-wages https://www.sciencemag.org/careers/2015/05/economists-h-1b-v... (Economists: H-1B visas suppress wages) https://gspp.berkeley.edu/assets/uploads/research/pdf/h1b.pdf https://gspp.berkeley.edu/assets/uploads/research/pdf/h1b.pd... (The Effects of High-Skilled Immigration Policy on Firms: Evidence from Visa Lotteries)
- commandlinefan 7y ago> an fraction of the overall tech sector jobs Wait, what? Where have you been? I mean, 9/10 is a fraction, so yeah… but I’ve been in software development for 25 years across five different geographic regions (of the United States) and I’m usually the _only_ non-Indian non-H1B software developer there.
- jimbob45 7y agoI'm only seeing a total of < 500,000 according to the below link. That's a pretty small fraction of the total number of workers. I'm very open to anyone disputing that number. https://economictimes.indiatimes.com/nri/visa-and-immigration/three-fourths-of-h1b-visa-holders-in-2018-are-indians-us-report/articleshow/66289772.cms https://economictimes.indiatimes.com/nri/visa-and-immigratio...
- maximente 7y agoi would say that you can't talk about this completely without mentioning health care. the US health care system will absolutely extort and annihilate your net worth at first opportunity (legions of unnecessary tests/unaffiliated personnel/surprise billing/etc) should something bad happen to you. good luck starting a business like that. yes those words are appropriate: they are criminals that extort and ruin for profit. many in US are tied to jobs solely for health coverage. so you need to divorce those to have any chance at spinning up entrepreneurship, education, and so forth.
- war1025 7y agoHealth Insurance is the only thing that makes me feel like my employer has "leverage" over me. That is such a back-breaking expense when your employer is not footing most of the bill that basically all of my other expenses are insignificant by comparison. Thankfully, I think we're finally nearing critical mass of people who realize health insurance in the US is completely fucked, that something has to change before long (a decade maybe?).
- H8crilA 7y agoThis is an incorrect statement to make with the red hot jobs market that we have now. Extremely low unemployment, sky high salaries in a typical H1B sector - tech. It has rarely been easier to get a job than it is now.
- whenanother 7y agothis has been debunked. some speculate that most of the difference in employment is in how the us counts uber drivers as being employed. considering that it is the tech companies most involved in hiring h1b. it is not surprising that they are the main entities pushing this lie.
- H8crilA 7y agoWhy don't you show those studies that prove how the world finance, including the FED, has it backwards so I can pull a 2008-style big short? If you're right it shouldn't be hard to pull off a 5x return on investment through well placed shorts. Also, the hot jobs market is not an American phenomenon. It's worldwide: The Economist | The great jobs boom https://www.economist.com/leaders/2019/05/23/the-rich-world-is-enjoying-an-unprecedented-jobs-boom https://www.economist.com/leaders/2019/05/23/the-rich-world-...
- whenanother 7y agouber is global. bet there is a direct correlation with uber setting up shop and countries suddenly getting low unemployment.
- H8crilA 7y agoLet's make that bet together! I'm willing to put 50k USD on this. Show me the numbers.
- whenanother 7y agohttps://www.businessinsider.com/uber-lyft-drivers-gig-economy-unemployment-numbers-2019-4 https://www.businessinsider.com/uber-lyft-drivers-gig-econom... It's so obvious that this is a gig economy thing where survey data are being manipulated for the benefit of these tech companies. the issue is that these companies can't justify all the h1b requests if so many us citizens are out of work. to fix that it's clear they are fudging the definition of an employee. https://www.cbsnews.com/news/feds-first-rate-cut-in-10-years-what-it-could-mean-for-your-finances/ https://www.cbsnews.com/news/feds-first-rate-cut-in-10-years... they've lowered the fed fun rate for the first time in over 10 years. the unemployment numbers are effectively a sham. you can't have recessionary pressures and "full employment".
- Havoc 7y ago>We have been told to get a good education, to get a good job and to live happier every after. This sentiment seems very US specific (maybe 1st world). My background is ahem classic western 1st world culturally, but grew up in a 3rd world country. And for me that cliched recipe worked exactly like it says on the tin. Even with a 3rd world university name on my CV I'm comfortably competitive globally. So when I read the US guys struggling I'm left a little puzzled. Not arrogant enough to assume I'm better so this smells like a country-structural issue. Which to me suggests the 1st world countries have moved into a post uni-edu era if that makes sense?
- CalRobert 7y agoUS-specific, rather than 1st world, is enormous student debt.
- Havoc 7y agoSo true. I racked up a grand total of 4k USD (fees) debt. 3k legit expense, 1k me fkin up. Parents covered the 3 clean, 1k parental loan. I enter adult life nearly (1k) debt free with a world competitive degree. And that's for an education I'll happily stack 1:1 with against other top unis globally. I look at the US guys with 100k debts and my god...I'm thankful for my roll of life dice...competitive degree with near zero debt must be 0.1%
- CalRobert 7y agoMy word... Books cost more than that.
- commandlinefan 7y ago> Even with a 3rd world university name on my CV Actually I think that works to your advantage. There’s a class of hiring managers who figure that if you went to college in America but didn’t go to Harvard, Yale or MIT, you’re not qualified to tie your own shoes. They don’t know anything about foreign universities, though, so they figure one is as good as any other.
- balthasar 7y agoWith the 60% majority required in the Senate, entrenched two party system, lifetime appointment of judges, President's power of veto, I could go on forever but all the different aspects of the Constitution discourage any change to happen. It as much if not more of an issue with the American political system as it is the people who are elected. Although they are not without reproach considering the current campaign finance laws are a joke.
- eanzenberg 7y agoFor "most", this is close to the truth.
- refurb 7y agoWe have been told to get a good education, to get a good job and to live happier every after. If that's what people believe, then it's a problem. Even when people think back to the 1950's, people still struggled with money. It certainly wasn't "live happily ever after".
- thephyber 7y agoYour complaints are misdirected. > Corps would rather hire you as a contractor, to pay you less so they make more. There are not enough jobs, because there is no process for teaching about free enterprise in America. Corps would rather hire you as a contractor exactly because free enterprise is taught in America. Milton Freeman made a famous speech where he decried that any businessman who doesn't maximize returns to the shareholders is violating the ethics of the "free enterprise" system. That speech was coincidentally timed about the time wages stopped rising for US workers. > We have been told to get a good education, to get a good job and to live happier every after. I hate this trope for the same reason I hate people saying that the USA is "exceptional": it breeds complacency. It's Disney fairy tale junk that should be left in sunday school where it's taught.
- narnianal 7y agoWhat a creepy slave attitude. When you go to jail and someone tells you to pick up the soap, do you just do that?
- mempko 7y agoThis is why Bernie's Cancel all Student Debt and make colleges tuition-free makes really good economic sense. Student Debt is a huge weight on our economy. Our economy runs on consumer spending and Bernie's policies, including Medicare for All will increase consumer spending and make starting businesses a lot easier. EDIT: Here is an interesting interview from Asher Edelman about the velocity of money and Bernie. https://www.youtube.com/watch?v=a9xSVzdUNqo https://www.youtube.com/watch?v=a9xSVzdUNqo
- maximente 7y agocoupled with changing the law so that this debt is dischargable - like any other - so that the economics of private uni/college also improve alongside (i believe his proposal is free public college/U). it currently is not, which is just asinine; it's modern indentured servitude by any other name (naive 18y/o signs up after getting hustled, etc.)
- mempko 7y agoYes, this would be a really good change. As you said, it's insane you can't bankrupt on that debt.
- HappySweeney 7y agoI'm no expert by any means, but isn't this due to the idea that nearly all students would simply declare bankruptcy upon graduation?
- dsfyu404ed 7y agoThat's always brought up but the debt used to be dischargeable and people didn't default on it at any abnormally high rate. With current loan inflated tuition prices I bet there would be a spike in "intentional" bankruptcy as tuition prices plummet towards their new equilibrium.
- whatshisface 7y agoCan those of us who were terrified of student loans and who scrimped through on extra hardship to avoid them have some of that money?
- Merrill 7y agoIf you are deep in debt, you are not middle class.
- simonebrunozzi 7y agoA bit pedantic, I guess. I interpret the title as "getting deep in debt to continue living like someone in middle class"
- deleted 7y ago[deleted]
- phil248 7y agoYou just expelled every family with a mortgage or a car payment or a student loan from the middle class. You also radically redefined the concept of "middle".
- mattferderer 7y agoI didn't down vote but I think the clarification for "deep debt" would not include a low interest home mortgage or a car payment which you can also get as low as 0% interest on. Also many people have a student loan debt that can easily be paid off in a few years. On a side note, I think all the above are excellent ways of debt. Right now you can get a mortgage for under 4%. Mortgages typically do not compound interest. So it makes more sense to dump your savings into one of many savings that pay a similar interest rate or higher & do compound interest. Many car dealers have 0% interest if you want to buy your car & not lease. Of course any education debt that gets you a salary much higher than the debt makes sense as well.
- deleted 7y ago[deleted]
- firstplacelast 7y agoUnpopular opinion: If you can't afford to buy the crappiest home within a somewhat unreasonable commute to your office, you are not colloquially middle class. While you may fall in the middle of the distribution, when most people say 'middle class' they mean you have a reasonable amount of stability and security in your life.
- neogodless 7y agoHow does this math work? They take home $8070 [0]. The mortgage might be $2130 (assuming $360k house, $300k initial mortgage @ 5%) [1]. Credit cards of $50k - if they put $1000 on it each month @ 12% that's 70 months to pay off [2]. For $51k of student loans, lets say they are paying $985/month (which would take 5 years [3].) So far I've used up $4115 and have $3955 left. Let's assume they pay $2000 for childcare and $1000/month for groceries for a family of three. They'll also have utilities and insurance payments to make. These are all insane number in my opinion, and I was already generous with overpaying on the credit cards and rapidly paying towards the student loans. Now they've only got $955/month left (which some people are actually able to live on.) What did I miss from their budget and which of the numbers did I get wrong? I'm not saying the article is wrong. I'm saying what was the point of their example household? [0] https://smartasset.com/taxes/connecticut-paycheck-calculator#vm51vOqdhz https://smartasset.com/taxes/connecticut-paycheck-calculator... [1] http://www.calcxml.com/do/mortgage-calculator?skn=292#calcoutput http://www.calcxml.com/do/mortgage-calculator?skn=292#calcou... [2] https://www.bankrate.com/calculators/credit-cards/credit-card-payoff-calculator.aspx https://www.bankrate.com/calculators/credit-cards/credit-car... [3] https://www.bankrate.com/calculators/college-planning/loan-calculator.aspx https://www.bankrate.com/calculators/college-planning/loan-c...
- yardie 7y agoCar payment, insurance, food, gas, tolls, oh and healthcare.
- dnadler 7y agoThe mortgage would actually be closer to $1600 unless I'm missing something.
- rootusrootus 7y agoTaxes & insurance.
- abarringer 7y agoTwo cars at $706 a month each.[0] [0] https://www.nerdwallet.com/blog/loans/total-cost-owning-car/ https://www.nerdwallet.com/blog/loans/total-cost-owning-car/
- nostromo 7y agoI've actually seen the opposite. Most people who get to the upper-middle class do so by smartly using debt. Beyond the obvious examples of borrowing to get an in-demand education and buying real estate in an in-demand location -- there are other smart times to borrow as well, like to expand a business. It's quite difficult to really get ahead without at least a little leverage. The irony is that the poorer you are, the more likely you are afraid of any and all debt -- which can be a very bad thing. In philanthropy I've seen many stories of young people who refuse to go to college due to a cultural fear of debt -- which often gets them stuck with a lifetime of low earnings. Or folks avoid taking on a mortgage only to find that rent inflation makes it difficult for them to retire later in life. (I realize that the article is much more focused on "bad" debt: car loans and running up credit cards to buy consumer goods.)
- basch 7y agoThe way I see it 0% APR is getting paid to take out debt. 2% APR is breaking even. Inflation is 2% and Cash pays 2% in the right places. Any time you have a chance to stash spending you were already making into 0% debt, you are coming out ahead.
- war1025 7y agoWhat a lot of it really comes down to is investing in yourself as if you were a business. There are plenty of reasons to take on debt that make business sense. Most of what people go into this kind of debt over is not debt that a well-managed business would take on.
- tehjoker 7y agoTwo definitions of middle class: Marx: the section of society that makes their income from a combination of capital and labor. WSJ: people that buy more expensive things than Doritos
- sremani 7y agoThe Credit Card interest rates are at all time high, in spite of the fact the PRIME interest rates at historic lows. This is something no one is talking about. The Corporate Debt is going to BITE so hard in the next recession -- I say, bring them the pitch forks and every person who had a C in their title be prepared for clawbacks!
- 40acres 7y agoWhat are the yields on corporate debt? Companies will certainly downsize when the next recession hits, but if the interest rates are low and locked in, how bad will it be?
- phil248 7y agoCredit interest rates are low for those who have access and the ability to carefully utilize credit. Balance transfer and introductory offers are as low as they've ever been and you can get away with paying 4% interest annually, occasionally even 3%. That's competitive with the best mortgage rates! But "Standard APRs" are crazy high at around 14-18%. I have never understood why credit rates are so high compared to literally any other type of borrowing. I also don't understand how standard rates are sky high while promotional rates are near the rock bottom. It's baffling. But it's helped me manage big sums of debts during a couple of professional transitions I've gone through over the years. Without those 3-5% balance transfers I would still be deeply in debt today.
- whatshisface 7y agoThey're high because there's no collateral. When people default on credit cards the money is just gone, when people default on mortgages it's as if the bank owned the house and was renting to them.
- thephyber 7y ago> don't understand how standard rates are sky high while promotional rates are near the rock bottom. Promo rates are the bank's marketing department paying to hook in the card holder on the probability that they will use the card for a long time. The standard rate largely factors in the cost of doing transactions (shared with the merchant percentage) and covering the risk of default. The 14-18% rates go to 24%+ if the card holder moves to a higher risk class (recently defaulted on another card, missing payment dates, etc).
- amzpix 7y ago"Earlier this year, Mr. Guzman put his credit cards in a Ziploc bag with water and placed it in the freezer." Mr. Guzman literally froze his credit!
- vorpalhex 7y agoThis article has me shouting at my screen. I'll try to condense to one point: > Earlier this year, Mr. Guzman put his credit cards in a Ziploc bag with water and placed it in the freezer. In May, however, they went to two weddings, and needed a card to cover the cost of a gift and a rental car. 1. You're never required to attend a wedding 2. You can give gifts with minimal cost When I got married, I had a friend who was unemployed at the time. Didn't expect a gift, but they still took the time to go out of their way and provide baked goods they homemade for the wedding party. Can't bake? Write a nice letter or compose a song. You can't mismanage your money, go into debt, and point your finger at anyone but yourself. Can't afford a new car? Don't buy one - buy a used one instead. Can't afford to travel to a wedding? Don't go, send the appropriate cards and letters and niceties. Buried under credit card debt? Don't have a kid yet, don't go get a dog, stop buying on credit. Yes there are some terrible woes around medical debt, and that's a serious problem we should evaluate and fix, but you can't blame "the economy" or "society" for what is just an inability to manage your money.
- maximente 7y agosociety fails to teach us basics of personal finance. or at least in public K-12+4years at uni i was never exposed to this once. most people don't understand exponents, they don't understand the power of compound interest (in either direction), ... society also amps up weddings, resort style vacations, excess, and so forth. so yeah, you can certainly blame society.
- vorpalhex 7y agoSociety has no duty to you. You have a duty to yourself to survive, and to learn the skills necessary to do that.
- m0zg 7y ago>> fails to teach us basics of personal finance Actually that's not true anymore, at least where I live. My 15 year old had a class where they explained in pretty good detail how loans work, how one would go about getting a loan without getting ripped off, and how much one would have to pay back. I was very pleased when I saw homework related to this. I don't know which percentage of kids will absorb (let alone retain) this, but they can no longer claim that society "fails" to teach them.
- 40acres 7y agoRule #1: Do not use debt to fund consumption or purchase assets that historically are not expected to appreciate within 5 years. People are getting into debt to buy cars and go on vacation, this is ridiculous. Buying a house, even if it's a stretch on your income -- is not too bad. You can build equity and there is lots of support, you can even rent out a room. But going into debt to buy a luxury car? Absolute stupidity.
- dnadler 7y agoUsing debt to buy a depreciating asset is fine in a lot of situations, and different people are in different situations. For example, I'd rather have $20k in cash and a 3 year 1% loan for a car than have $0 in cash and no loan. Making hard rules about debt is what gets people into trouble in the first place. We need to spend some time teaching/learning how to reason about debt in order to make these decisions.
- jumbopapa 7y agoYou can make greater than a 1% return on your cash, so yeah that makes sense. Debt can be a valuable tool, but most people aren't using it correctly.
- whatshisface 7y agoBuying cars with debt isn't insane because oftentimes the appreciating asset you're getting is your job.
- m0zg 7y agoTo me "middle class lifestyle" means no debts other than mortgage, a place to call your own, and a car. With very heavy emphasis on "no debts". Car can be just about any decent car, doesn't even have to be new. Anybody can get a loan for a fancy car, so it no longer means what it used to. That's "middle class".
- dsfyu404ed 7y agoI agree with you but I think a lot of people have a definition of middle class that includes whatever Toyota 4Bagger Reddit is fawning over and a few of the designer whatever's that the Instagram influencers are shilling (i.e. a few "nice things") and excludes things like Walmart jeans and any lawnmower that you have to push yourself. You can do all that on middle class money, but you can't do all that and raise your kids in a good school district and pay down your student loans, etc. etc.
- deleted 7y ago[deleted]
- 40acres 7y agoBuisness investment was negative last quarter but consumer spending was robust, we're a service economy now and people are going into debt to keep it growing. The next recession will be caused when all these middle class folk are forced to deleverage or foreclose.
- thephyber 7y agoPlease let me know 1 month before that starts to snowball. Thx.
- allthecybers 7y agoThis is an interesting article and much of the discussion points out the structures in our society that are not optimized for the consumer. For example student loans, medical debts and high interest on credit cards. But I would like to highlight that "middle class" is a made up concept and a fairly arbitrary estimation of class based on net mostly consumeristic factors. For instance, to be middle class I should be able to pay for college with loans, own a home of ample size, have two cars and afford to have a child and pay for child care while both my partner and I work. I must maintain this definition of 'middle class' at all costs, even if that that means taking on $50,000 of credit card debt. Because I am middle class and I have the stuff to prove it. Unfortunately, this means the middle class will continue to get poorer and deeper in debt because yes, wages have stagnated, but we continue to go into debt to maintain the appearance of middle classism based on consumeristic targets.
- jammygit 7y agoReminds me of Russian literature where there is almost always some technically-still-aristocrat who is broke and going into debt to maintain his status, while scheming to regain his fortune through marriage or else inheritance
- thephyber 7y agos/are not optimized for the consumer/optimized against the consumer/ Subtle, but important, difference.
- deleted 7y ago[deleted]
- rhacker 7y agoThey need to do a large consolidation loan and cut up the cards. paying 6 or 7 different cards at the mins kills people. I did this myself and my score went up 70 points. However, it's hard to convince a lender you're worthy of it. I think a lot of people need to change their ways after getting consolidated. So now instead of 2100 a month paying mostly minimums and looking at 8 years I'm doing 1450 and looking at 3 years. The extra 600 I'm "saving" per month may sometimes go towards the consolidated loan, but often I need to use it - which is what the credit cards were piling up for. Debt can be a trap because people are simply not paid enough but their expenses outweigh their income. If this happens you need to change jobs, ask your boss for more or change your budget. In my case I asked for $30k more per year and got $20k more per year. Other tricks: Go to ting or a cheap MNVO, Stop justifying yet another $10 / month netflix/prime/hulu - they all add up quickly. Get off the $160/mo cable plan. Buy your own cable modem and don't rent it from the cable company. They cost $40 and your cable provider is renting it to you for $10 per month. Food: Set up a "chipotle" at your house, cook in large batches and think of ways to make Tacos or Burritos quickly. This is the most complicated area - people get tired of food quickly. Food can be the most expensive if you just keep eating out. And of course, as mentioned many times - budget budget budget. There's no way to get out of debt if you don't simply have a balance sheet showing income and expenditures per month. If you don't know then there's no way to stay below the line. I'm sure there are some banks out there now that help with this. I'm sure it's been said elsewhere but you don't owe society anything - you're just here like everyone else. Stop gifting people, stop xmas shopping, stop going to weddings, stop having kids. I've done all these things and I'm quite happy. My parents stopped sending me stuff and there's no expectations either way now, it's fabulous for everyone.