Is the Middle Class An Endangered Species?

In late December, my grade 10 students were taking a semester final exam.

It was an American Literature class, with a single essay-type question that they had to respond to, based on various readings that we did last semester.

Their question was this:

“Is the American Dream a myth or a reality?”

The ideas they dealt with include whether wealthy people remain wealthy, and poor people remain poor.

It’s a difficult question to answer.

But even in Canada, according to this Globe and Mail article, it appears that there’s a growing divide between the “haves” and the “have nots” in Toronto, with the casualty being the middle class.

If that’s the case, then what’s happening, economically?  Are the middle class getting wealthy, or are they becoming poorer?

And has there been socioeconomic mobility in your family, for example, over the past three generations?  Or are you, relatively speaking, in the same comparative relative position that your grandparents were in?

no one has more first hand experience helping expat investors

Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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7 Responses

  1. essential reading for visitors to andrew hallam website

  2. My maternal grandfather was a woodcutter during the depression, as close to subsistence living as he could be, and died in his mid 30s due to lack of access to medical care. His five young children were raised in an orphanage. My paternal grandfather had a third grade education, and worked in a shoe factory. Ironically enough, he was an officer in the charity that supported the orphanage where my mother grew up. When the shoe factory closed down, he went to work part-time selling clothes on commission in a department store and earned more than most full-time workers. He was very tight with his money, saved a great deal compared to what he earned, but didn't invest in stocks and bond, kept his money in FDIC insured CDs. He would have been much better off financially had he taken some risks, but he was very conservative.

    Am I better off than they are? Without a doubt. I'm better educated, have had more opportunities to move up the social and income ladder. I started out lower middle class, and now I'd say I'm upper middle class and want for very little. Will my children be better off than I am? I'm uncertain about that. Life has been very easy for them and they have not had to work as hard as their ancestors and don't necessarily have the same kind of drive to succeed. There are limitless opportunities before them, but they've had so much the will to achieve isn't the same as past generations.

    "The American Dream is that dream of a land in which life should be better and richer and fuller for every man, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, also too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position." — James Truslow Adams

    No, I don't think the American dream is dead, but the inheritors of the dream seem to have grown complacent, and are willing to give up freedoms in exchange for welfare state benefits.

  3. @The Biz of Life

    Hey Biz,

    Thanks for posting such an amazing account. I wonder if the same things that happen with families (ie. those who have it easy because their parents set them up don't achieve as much) pertains to prosperous nations as well. I wrote recently about the 3-4 cycle generation of wealth. I wonder if that pertains (although it might be a longer cycle) with countries. That said, do you think there are opportunities for the lower income earnings of today to do the same thing your grandparents did?

  4. Hey Andrew,

    I remember your article about multigenerational wealth. We see that enacted out all the time in the US, so I don't think it is a unique phenomenon to a single culture.

    I think the American dream is just as obtainable today. For instance, my parents were both very intelligent people but couldn't go to college because no money was available to them from their families and the banks would not take a risk on them. Today the government literally throws money at the underclass in order to attend college. For those with the drive, the opportunities are there, but they have to leave the welfare plantation. They have to take calculated chances to improve their lot in life. Most won't do it, and create a cycle of poverty and ignorance that lasts many generations. Many of the anti-poverty programs with their good intentions can actually lock people into this cycle of poverty. In a sense my grandparents and parents were lucky not to have these programs of dependency because it meant they had to raise themselves up by their bootstraps and weren't looking to someone else or some government to fix their life for them.

  5. @The Biz of Life

    Hey Biz,

    I never really thought about welfare as a crutch (as obvious as it seems to me now). In Singapore, welfare doesn't exist. People lean on family when there's trouble, and for the most part, it seems to be effectively reciprocal. I wonder what would happen if the U.S. government started to slowly reduce welfare. There would likely be some casualties, but in the end, do you think the country would be stronger for it?

  6. I may be in the minority on this opinion, but I do think the country and most people would be better off if these programs were scaled back. However, there would be a gigantic outcry from the media and those who make a very nice living off of the poverty industry (they're affectionately called "poverty pimps"), and few politicians have the guts to be perceived as heartless. It's no secret that what a government subsidizes they get more of, and right now in the US we have an entrenched dependency class that always has their hand out for more. The way to get more is to keep issues like income inequality, fairness, and wealth redistribution in the forefront of the news and the nation's economic discussion. These concepts are the antithesis of the American Dream.

  7. I was going to write something up, but I think The Biz of Life has written a fantastic account.

    I personally see the forces as tearing from both sides: Politics favors the rich: the rich have access to the halls of power, and can easily manipulate the laws and regulations in their favour (military-industrial complex, agricorps, etc…). When government spending is via money creation, this becomes outright theft, though it is not spoken of as such by the politicians.

    The same political process also hurts the poor and the middle-class over the long haul. Politicians sell them sweet lies: "We'll take care of you from childbirth into your old age, your drugs will be free, you don't have to worry about your medical costs". Well guess what happens? People stop saving and live and spend for the present, but the costs are still there.

    Since the government spends the money far less efficiently than the private sector would, the excess ends up being essentially destroyed in unproductive activities of one sort or another. The poor and middle class become ever-more dependent on a government that is forced to levy higher taxes and go more into debt in order to provide ever-declining services. This government spending and economic manipulation drives up the price of housing, tuition, and other essentials, hurting the poor and middle class more and more as time goes on.

    Nonetheless, even though the gap has widened, I do think that people still have amazing opportunities, if only they seek and grab onto them. Pure technological advance has created so many new avenues of exploration and there are simply so many more possibilities today. The costs of many areas NOT as controlled by the government has come down, such as technology and material goods. This has helped out the poor and the middle class substantially. The existence of a powerful government pulls on the middle class from both sides due to corruption and inefficiencies, but the progress of civilization lifts everyone up. Which force will be more dominant remains to be seen, but I am still optimistic overall.

  8. Richard Stooker says:

    Hi, Andrew,

    I believe there is a growing gap between the wealthy and the poor in the U.S. (and maybe Canada, though I'm qualified to comment) — and it's a good thing.

    The advances of science and technology are creating more advantages and opportunities for people who are motivated to become wealthy. It takes drive, education and work, but it's there. How many people make six figures plus just through the Internet – which has been available only about sixteen years?

    Yet it's also harder for the unskilled, uneducated and unmotivated to earn a decent living – and the welfare system encourages them to remain on passive. I was in the welfare industry for over thirty years, so I agree that it creates an "entitlement" mentality that is difficult to escape.

    At the same time, there is very little REAL poverty in the U.S. Yes, there are people who live below average standards, but they have adequate food, clean water and TV. By the standards of 85% of the rest of the world, they're middle class.

    I see you've traveled around Asia, so you know real poverty is watching your child die of dengue fever because you can't afford medicine – not using a Medicaid card instead of private insurance to get them the finest medical care available in the world.

    Progress will mean even more opportunity for everybody who wants it. Living standards will gradually rise for everybody. But it will take time, and there will be a human cost.

    Income Investing Secrets affiliates

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