Wednesday, September 9, 2015

The Middle Class is Shrinking

A business colleague just sent me a very kind note.

Our recent discussions had centered on financial literacy, more specifically the lack of it. Both of us were amazed at the state of our economy. Our national economy. Our world economy. The personal economies of most everyone who will share a candid conversation on the topic. Without a doubt, the same holds true for many not willing to address it (talk or action) as well.

In his note, my colleague reminded me of several blogs I had posted over the past years on the subject of financial literacy and complimented the fact that the insights were as relevant today as they were in the financial climate in which they were written.

My response? Principles are timeless.

He encouraged me to re-post a few of these blogs and see if they inspire thought and action today. I invite you consider what I wrote, from several perspectives… how they reflected the time in which they were written, how they apply today, and what lessons may apply looking forward.

This first commentary below was originally posted December 5, 2008. One CNN Money article of the day used terms like “indicators in a tailspin” and “very severe recession.” Thankfully, no one was worried about a depression.

Almost seven years later, would you agree that the middle class was shrinking and continues to do so at an even faster pace? What are your thoughts? What actions did you take then? What actions do you plan to take today?

Wealth, poverty, and the group in the middle. There is a distinct division within our society. Though we may debate the actual numbers, don’t miss the point.

We find the wealthy at one end of the spectrum. I reference Robert Kiyosaki and the Cashflow Quadrant for my definition of the wealthy, and the estimate that it‘s about 5% of the population.

On the other end are those below the poverty line. A year or so ago, that was about 15%. What would you think has happened to that number in the last few months?

For now, that leaves the remaining 80% in what would be called the middle class.

Kiyosaki and others have documented what we can see clearly. The middle class is shrinking. Jobs are going away by downsizing and outsourcing. Those reductions have recently accelerated through business failures and store closings. For those that remain, wages are dropping. Add global competition and a transformation of the business world, the rate of change is staggering.

Much of this change, and the impact, is outside of our direct sphere of influence. But not all of it.

I submit that where we find ourselves now (and the direction we move) relates directly to our ability to compete on an individual level. And it’s far beyond tactical execution. As an example, did you know that 80% of people that lose their jobs do so because of people skills rather than technical skills or expertise?

More than anything else, it's actually our thinking, the information that we obtain and leverage, that drives our results.

What I’ve learned is that, for me, I have to constantly develop myself to remain competitive. I have to grow to simply keep pace. As an employee, as an entrepreneur or as a business owner, the story is the same. Stop learning, and you start dying. In this case, that’s financial death and all that comes with it.

So what will you do with this information?

Do you agree that there is a 5/80/15 split?

Do you agree that the middle is shrinking?

Are they moving up to the 5% or down to the 15%?

By default or inaction, most are moving down to the 15%.

Will you follow them...

or will you chart a course towards the 5% instead?

Where are you now…

and which direction are you planning on going?

Will you take action?

What will happen if you don’t?

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