What an incredible change the U.S. economy has gone through over the past 60-70 years. In terms of demographics, purchasing power, and ability to comfortably live; this country has seen some massive changes. Coming out of the Great Depression, we are talking about a society that was significantly limited in entitlements and government in general compared to today. Most households only required one worker because resources were plentiful in the United States and one income went a long way.
The One Income Household
Just going back 40 years, America was a one income household and savings rates were as high as 11%. In 2006, mainstream economists would call us more prosperous and say we have a higher standing of living. But if we look at today’s America we see two people working and saving nothing for a rainy day. After a horrible downturn in 2008 we’ve seen a little resurgence in saving, but nothing extraordinary. Today Americans save a measly 4%.
Unfortunately, households are spending all of dad’s income and nearly all of mom’s income as well. This means that the cost to live has gone up for families enjoying the same standard of living which decades ago only took the one income.
To add insult to injury, debt in households is as prominent as ever with debt percentage of annual income being as high as 12%. Consumer credit is a relatively new means of purchasing; ever increasing since its appearance in the late 1950’s. This has inflated the cost of living further because it is newly created demand; more cash chasing the same amount of goods than otherwise would exist.
So after the 1920’s our economy started off with everyone being unemployed after the stock market crash. Then there were 10-12 years of high unemployment and a war that “stimulated” the economy. This caused many men who would otherwise be unemployed to be employed by the military and many women to also get jobs with the military and other jobs in America that were being created from WWII.
The Destruction of Wealth
The ultimate destruction of wealth which is war temporarily fueled industry and a demand for progress in America. The 1950s were a result of men coming home from the war, having children, and consumer confidence soaring. This is the “good ol’ days” as referred to by many people such as the baby boomer generation. The dollar was strong and a blue collar job was all that a man needed to support his family. From this point on, women began to enter and stay in the workforce. This combined with rising prices, government spending and fueled bubbles has made living off of single incomes in America nearly impossible. As more families began relying on dual incomes and increasing a consumer lifestyle, again means more money chasing the same amount of goods; driving prices up.
The society of the 1950s compared to the society of 2010s are completely different. It would take individual chapters to go down and analyze the different reasons why it’s harder to live now than back then, however, easy to say that the dollar has lost purchasing power over the years, but have you considered the idea that job titles have lost purchasing power as well.
The phrase work smarter not harder really should sink into the mindset of the people reading this.
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To your prosperity,
Chief Editor of CrushTheStreet.com