Bert Whitehead, M.B.A., J.D. and Chip Simon, CFP © 2012
Much political patter is spent discussing how to bring back our middle class. Globally, the middle class is doing quite well, thank you. In fact, it has burgeoned exponentially in China, India, and other emerging economies. Fifty years ago we were admonished that, “rather than giving a man a fish it is better to teach him to fish.” Now much of the globe is fishing in our pond.
Sometimes I worry that the U.S. middle class may be facing a ‘lost generation’. The term "Lost Generation" was originally used to define a sense of moral loss or aimlessness apparent in literary figures during the 1920s, a result of their experience in the First World War.
But rather than being demoralized by the shock of a major conflict, consider that nearly half of our youth today between 17 and 24 can’t even qualify to enlist in the Army. Either they have no high school degree, can’t pass the reading or math tests, are felons, or are obese. If they have trouble keeping up to these basic requirements of citizenship or health, how can they keep up to other changes and demands in the world? How do we expect them to be in the middle class 20-30 years from now?
Why might much of our youth be lost? After all, we spend more per student for education than any country in the world. Yet our students rank in the lower 50th percentile in math and science compared with 34 other developed countries. SAT scores have declined over the past 40 years. Colleges and employers are increasingly burdened with remedial courses. In a nutshell, our youth are not as smart as they were in the past, and much of the rest of the world’s youth are smarter, and hungrier, than ours. They’re ready to catch most of the fish…
We can’t pin our current problems on the government, or parenting, or schools, or the breakdown of the social contract. All of these play a part. But over time there is a remarkable capacity for many social and economic problems to ‘self-correct.’ As we adapt we eliminate solutions that don’t work anymore and embrace new approaches.
The New York Times recently ran an interesting summary of current sociological research about family structure and its effect on inequality. (http://www.nytimes.com/2012/07/15/us/two-classes-in-america-divided-by-i-do.html?_r=1/). Many of the hurdles that are created for our youth can start early. Over 40% of children are currently born out of wedlock, up from less than 10% in the '60's. This has an alarming correlation to poverty, high school dropout rates, shorter life spans -- and the decay of our middle class.
My generation in the 60's and 70's often pushed social boundaries, which expanded civil rights, generated the sexual revolution, empowered women, and changed our society in other important ways. We also tore down a lot of fences without understanding why the fences were there in the first place. Many of the fences were there to enable future generations to build sound financial foundations.
The most successful financial pattern for the development of young adults has a defined sequence of events:
• First, finish your education;
• Then establish a career;
• Then get married;
• Then buy a house;
• Then have children.
When the order of these life decisions is changed, there are often severe financial consequences for the individuals involved and for society. Decisions to have babies before a parent is able to support a family leads to a lifetime of poverty. Since couples living together without a marriage commitment are twice as likely to break up, their children are more limited growing up in poor single parent homes.
It is very difficult, particularly in our technologically advanced society, for young people with inadequate education and experience to find a path to prosper in the workplace. Early financial setbacks generally limit their potential and their children's potential.
Of course there are many successful families that don't share this developmental pattern. But the data is clear. These stepping-stones are important and many of our social ills stem from missteps and ill-advised decisions made by our youth. Providing our youth with sound financial direction, and cementing expectations of sound financial decision making, are critical.
I believe that, ultimately, the changes that will avert our current social trajectory will develop from these ‘endogenous’ factors that we can control in our lives. We can’t predicate our lives on ‘exogenous’ changes or expect the government or other forces beyond our control to determine our fate.
Reverend Ike, the popular black prosperity preacher in the 60's and 70's often exhorted "The best thing you can do for poor people is not be one of them!" More recently Hillary Clinton's observation that "It takes a village to raise a child" reinforces the reality that bringing up the next generation must be an endogenous process, not an exogenous government activity. If we are to reenergize our middle class, I believe that a key driver will be providing personal attention to show our youth positive ways to make sound financial decisions.
Sitting around and playing 'ain't it awful!' with like-minded friends only induces frustration, hopelessness and depression. It’s also nothing new. We all want our children to have a better life than we have enjoyed. It is our responsibility to give them a sound financial track to follow in making adult decisions.
Rebuilding our middle class is not the provenance of politicians, but of parents. It is up to us to help our lost generation to find its footing.