Existence and Stability of Middle Class - Term Paper Example

Will Middle Survive in the United s? Introduction Economic debates on the presence or absence of social es in the modern day and age characterized by equality topics seem to be an interesting concern for economic managers and policy makers. Despite the fact that the economic interpretation in the modern capital economy environment does not reflect the actual social equality issues, it is important to acknowledge the freedom of the capital economy in resource distribution. To this end, there are distinct economic class issues that often cross over apparent social trajectories. In this discourse, the presence of the middle class in the modern day capital environment is discussed using the American economy as an illustration. Alternatively, a counterargument is presented to the effect that the middle class does not exist. Definitions and Illustration of Existence and Stability of Middle Class The most important rhetoric of the modern society is perhaps based on the financial integrity and performance and the interplay with benefits and liabilities presented to individuals’ financial abilities. While social stratification may not be a welcome idea in the modern society, economic potential unfortunately creates an imprint of social classes dependent primarily on the economic status of individuals. Among the five presumed socioeconomic classes is the middle class which can be defined as the class comprising of between one-third to a fifth of employees in an economy and has white-collar employees, junior managers, small and middle entrepreneurs. In the apparent social stratification and classification, there are two lower classes ranking below the middle class and two classes higher in ranking than the middle class. Figure 1.: Table showing the origin of middle class in the American population earnings Population Group Earnings Lower Limit Upper Limit Class 1st quintile $0 $19,177 Poor/working poor 2nd quintile $19,178 $35,999 Lower middle class 3rd quintile $36,000 $57,657 Middle class 4th quintile $57,658 $91,704 Upper middle class 5th quintile $91,705 Bill Gates? Upper class (Adopted from, Weston, 2011) From the table above, Weston (2011) tries to illustrate the definition of the various socioeconomic classes based on the range of earnings that they make and the position of the middle class has been highlighted in bold. Below and above this class, there are two socioeconomic classes with a possibility to move up and down the classes being dependent on the performance on earnings and individuals’ financial status. Depending on the general performance of the national economy, the distribution of the classes across the population may depict certain patterns. As an illustration, in the developed economies, the population in the advanced classes is higher than in the lower classes, which is the exact opposite in developing economies. Equally, the possibility of movement up and down the classes is reminiscent of the prevailing economic environment. It therefore implies that the middle class is composed or relatively better category in terms of economic liberation amid the economic difficulties experienced in this capital economy environment. The relative comfort in meeting basic life wants and needs motivates the working class and the lower middle classes to push up the classes. On one hand, the middle class is capable of supporting all the human needs as well as the corresponding wants that the category faces without difficulties experienced by the classes lower in the ranking. On the other hand, the middle class is capable of making savings for future financial needs from the balance after expenditure, which is difficult in the lower classes. Using the classical example of the American middle class, it is perhaps one of the best growth and sustainability target groups that the economy can have. According to Fried (2010), the bulk of national revenues arising from taxation is generally borne by the middle class due to their relative stable incomes and numbers. The US the government in the President Bush’s regime was aware of the importance of the middle class to the sustenance of growth and development, thereby developing an incentive tax regime to spare them until 2010. The number of individuals making the middle class earnings in the US economy by far surpasses the other classes, which makes the class very important to tax policies. Whereas the government would want to gather as much revenue from the middle class population, a progressive tax regime would necessitate the protection of such an important class to promote their contribution to the economy. Such tax cuts as introduced by the Bush and Obama administrations to protect the middle class from unfavorable economic times is a demonstration of the seriousness with which governments take this class. Older definitions of the middle age in American economy classify the peasantry and the vibrant economic players of the early times (Jacoby and Mills, 2002). Modern interpretations of the constitution of the middle class can be traced back from post-World War II economic events and phenomena. Servicemen returning from the war front were assisted by the government to rebuild their lives in a number of benefit programs (Suddath, 2009). Access to credit and investment opportunities enabled the rest of the population to enjoy economic liberalization and advance their social status. This did not discriminate against any individual despite the past social stratification based on race in the American history. However, with growth and development over the years, it was possible for the transformation of the economic opportunities that such a group had before the economy. White collar job position holders in the capital economy constitute the average American homeowner in the modern day, which reflects the financial liberation to ownership of property in the market today (Suddath, 2009). With housing business such as mortgage lending being key in the modern day economy, the position of the middle class is important in defining the direction of national economy. Perhaps the most affected class during the recent collapse of the global economy arising from irregular trade activities in properties and derivatives is the middle class. The most lucrative and easily achievable economic liberation where individuals can take care of their bills and make savings begins to be realized in the middle class. The struggle for liberation by the lower classes is sufficiently won if the individual stabilizes at the middle class, even if further progression may not be as easy to achieve. This implies that the centrality of the middle class in the sustenance of the economy of the developed and perhaps that of the developing countries places the class as among the most important in the society today. From the above insights, the idea of a world economy without the middle class is unconceivable at its best and naïve at its worst. It therefore implies that the stability of the middle class determines the development and growth trajectories of the developed and developing economies. With strict guidelines and policies from the government such as the one demonstrated by Bush and Obama regimes for the specific concerns of the middle class is an illustration of the existence and importance of the class. Counterarguments Despite the enormous evidence on the existence and role of the middle class in the economy, there are certain missing links to its existence and the argument of possible disappearance. According to Collado (2010), the debate of the middle class can be forgotten in the near future due to the volatility of economic niche in which it is presumed to be established. According to the author, the recent global economic crisis was a phenomenon that characterizes the free market which operates in pure market forces beyond which human intervention cannot intervene. It therefore implies that the establishment of a stable economy devoid of human error arising from such interventions is the only reflection of a capital economy. The existence of a presumed socioeconomic class worth special protection of economic policies and leadership is not only incorrect but also disallowable in a free economy. To illustrate the presumption held in the mentality of the middle class, governments pay a special attention to the vulnerable group. The rich and poor are not particularly affected by the interventions since their role is overshadowed by the economic impact they make to the economy. While the poor may be too many for special arrangements to cater for all of them to be effected, the rich are so few and may not make sufficient gains to the economy. In this erroneous thinking, the middle class presents better a better chance for the government and investors to propel growth agenda in a preferential way. However, the volatility of such a setting presents a serious challenge to the economy which may be hinged on the middle class thinking. According to Collado (2010), there are important lessons that can be drawn from the recent economic crisis, which touch highlight the risks involved in the presumption of the special role of the middle class. Collapse of an economy founded on such grounds is imminent and irrecoverable such as the case with the American mortgage business. Based on the importance of economics to the society, the existence of a special class is also not only unwelcome but also retrogressive in case it would arise. The existence of progressive tax regimes ensures that the individual tax liability is equitably considered across earning capacity of the population. It is difficult to presume that a certain group possesses better social status due to their economic potential in a world deeply founded on social equality that disallows any form of discrimination including economic status. It is therefore a mere creation of schools of thoughts that there is a middle class that ought to obtain preferential treatment before the rest in whichever perspective. In conclusion, middle class concept is a construction of real events in the capital economic environment, despite the debate that also argues on the contrary. The existence or absence of the socioeconomic stratification in the society is a question of fact that clearly emerges from the earning categories and the contribution made by the classes to the overall performance of the national economy. However, considering the undoing of the apparent constructions may shed some light on the way to deal with future challenges such as the recent economic crisis that adversely affected the middle class. Consideration of economic decisions and policy formulation must continue to be based on the reality of the actual developments in the free market. References Collado, E. (2010) The shrinking middle class: why America is becoming a two-class society. Bloomington, IN: iUniverse Fried, C. (2010) “Are You Middle Class?” Retrieved from: http://www.cbsnews.com/8301-505123_162-41141728/are-you-middle-class/ Jacoby, R. & Mills, C. W. (2002) White collar: the American middle classes. New York, NY: Oxford University Press Suddath, C. (2009) “A Brief History of the Middle Class,” Retrieved from: http://www.time.com/time/nation/article/0,8599,1882147,00.html Weston, L. P. (2011) “Middle-Class Crunch: Who’s to Blame:” Retrieved from: http://articles.moneycentral.msn.com/SavingandDebt/LearnToBudget/TheSecretToSuccessInTheMiddleClass.aspx Read More