Why we need two incomes nowadays

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by Andy Like 0 Disike 0 Reply Quote Report  
8th September 2016 at 8:48PM Be the first to comment 
It's down to a combination of many factors:

*Prior to WW2, most families could not get by on one income. Dad worked, mom worked around the house and sometimes in a factory or other capacity. Many kids also worked on the farm or in the plant. Labor was cheap because supply was high and life was expendable. People barely got by. Just before WW2 (1938), child labor was made illegal. After WW2, most industrialized nations had their infrastructure destroyed, except for the US. This meant we had excellent infrastructure built during the war and a ready labor force. Global demand for the goods we made such as cars outpaced labor supply and unions formed and used this labor demand as leverage to demand higher wages and safer working conditions. Now with higher wages, families could thrive on a single income. Companies paid record high taxes (as high as 91%) on profits and so did the very wealthy and we had a thriving middle class.

*Then things began to swing too far the other direction. Labor unions began becoming corrupt, would demand more for the workers even at the detriment of company competitiveness. Europe and Asia began retooling and rebuilding their infrastructure and economies and started to once again compete globally. Trade was normalized with China. Companies began to ship factories and jobs overseas free from the pressure of unions. New found profits were used to lobby lawmakers and the global competition gave companies a great argument that high taxation on the wealthy and high minimum wages would just force them to ship jobs overseas in order to stay competitive. Therefore, unions lost their teeth for the most part and so did the ability to argue for a higher minimum wage. Taxes on the rich were beginning to go down.

*To help support the family as wages' buying power decreased, women enter the work force in the 1960s. The adds more supply for labor with an already decreasing demand. But together it is enough to support a family as the net decrease it causes in wages is less than the combined wages.

*To differentiate themselves from the low-cost developing world labor pool, Americans start heading to college in droves in hopes of a higher income for skilled work. For many this works and helps them remain competitive. The internet opens up a global knowledge and skill marketplace and people in the developing world also go to college in droves to enter the skilled labor market. Once again creating a global supply of skilled labor, thus bringing down the benefit of a college education. Regardless, more and more Americans head off to college as their only means of competing for a decent wage, which increases demand for college, incentives private colleges and increases tuition costs.

What we had after WW2 was really a temporary environment created by a combination of a decimated global marketplace in need of the resource to rebuild and no local infrastructure to support it where one person could make a high wage due to labor shortage and product demand. Now that America is back as another (albeit still very powerful) global competitor with access to a global labor pool and in competition with companies with global labor pools, it is natural that we "correct" in the direction of the global standard of living, which, outside of first world developed countries, is much lower than our own.


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