As emerging countries' middle class prosper, the standard of living falls in financially-stretched countries like the United States with a few exceptions.
A recent jump in prices of commodities such as oil, crops, metals and other raw materials negatively affects the standard of living of America's middle class. These prices have risen due to strong global demand, particularly in emerging markets, and pockets of reduced supply.
With China importing 50% of soybean production and 40% of cotton their consumption demand increases an uneven supply and demand balance, resulting in the American middle class farmers doing just fine, thank you. However, with manufacturing production shifted to emerging economies, forcibly-retired and unemployed factory workers in the U.S. are facing a shrinking standard of living.
The globalization of the labor force continues to exert pressure on the U.S. job market even as it pushes up commodity prices by expanding the middle class world-wide. This vulnerability was highlighted in mid-2008 when oil prices soared and consumer spending promptly tanked. That was before the worst of the recession. Households today are hardly better able to handle such a run-up now.
U.S. businesses have found it difficult in many cases to raise prices to cover the increased costs, a reminder of the financial pressure many middle and lower-income Americans still face. Why? Household income has barely outpaced inflation since 1975, and gains are largely due to women entering the work force. Median income for men was actually higher, in real terms, in 1973 than in 2009.
Statistics tell the story. Over 75% of women age 25-54 worked in 1998. In 2009, 66 million women were employed in the U.S. with the largest percentage (40%) in management, professional, and related occupations; 32 percent worked in sales and office occupations and 21 percent in service occupations. Today, young college-educated women in New York City and other major cities are earning more than their male counterparts. It is estimated that 870 million women who have not participated in the mainstream global economy will gain employment or start their own companies over the next decade.
The credit boom, along with stock and housing bubbles, helped boost living standards for a time, but wasn't sustainable. A firmer economic footing requires steady job creation and rising wages, which remain elusive. The globalization of the labor force, meanwhile, continues to exert pressure on the U.S. job market even as it pushes up commodity prices by expanding the middle class world-wide.
This standard of living shift continues to create political unrest across the globe; from the United States government beginning to rethink its ability and the public's desire to wage war in foreign lands versus redirecting its limited resources toward domestic job-creation and social services---to---the political unrest spreading throughout the Middle East with the young middle class in Egypt continuing labor strikes, Bahrain's political demonstrations, and Iraq protesters demanding better public services.
Source: The Wall Street Journal, February 17, 2011