Explained: Why it takes two incomes to be financially stable, vs the 1950’s when one was enough

There are many, many reasons behind this. Since I’m in manufacturing today, I’ll focus on what I know best.

The world of making things has changed enormously over the last century. We have moved from skilled labor to unskilled labor in making things. It’s really hard to underestimate how monumental this is and how hard it was to do at first. We have had interchangeable parts since the turn of the 19th century. We’ve had production line manufacturing since the turn of the 20th century. But even then, Henry Ford made a huge point of paying a premium for the best workers.

The factor that made American manufacturing so strong in the 50’s (World War II, as alluded to elsewhere) also gave birth to her fiercest competitors. The most well known example I can think of is that Joseph Juran, an eastern European immigrant in the US that traveled to a rebuilding Japan and literally wrote the book on quality. Manufacturing suddenly began to zero in on making processes foolproof. Even today we refer to this by the Japanese term (poke yoke). But this had a huge effect – we began commoditizing the jobs, rather than just the products. Make the worker as interchangeable as possible. This (along with efficient containerized shipping and free trade treaties) made globalization possible.

In the 1950’s an auto worker has a union job, with a middle class wage and a guaranteed pension, and he could always threaten to take his hard-to-replace expertise to another hungry employer. Today he has to compete with the hungriest man on EARTH for that job, rather than the employer competing for his service. Now Ford can choose between a union guy in the Midwest, a nonunion guy in the southeast, and guy in Mexico, a guy in China, a guy in Malaysia, etc. In a global sense this is sort of a good – third world countries are starting to slowly get elevated by having these jobs come to them rather than being hoarded in the U.S. But the effect to the American worker is clear.

But, here is the other side – things are, inflation adjusted, much better and much cheaper. Better manufacturing has unnoticed product quality and slashed costs, and by-and-large, this gets passed on to the consumer. Most companies now get rich like Walmart – take the thinnest possible slice of the biggest possible pie, and focus on making that puree as big as possible. (Notable exception: Apple). So, in a way, that’s a net win for consumers, too.

But consumers are also workers. And today, a worker is a cost, and one to be minimized. Workers are, by design, highly replaceable. Not out of malice, but because good manufacturing demands that every process friend as little on the worker as possible. But that is the effect.

Then this same officials has been exported to every other industry: what does Gordon Ramsay rant about constantly? CONSISTENCY. What was the McDonald’s innovation? Operations through Hamburger University. Sears and LifeTouch changed photography by developing their own education program so they could turn any idiot with a finger into a portrait photographer – and one that could not shop their wares elsewhere, either. The story you see over and over in industry is that the ones who get rich are the ones that eliminate the skill, commoditize the product and the employees, take a thin slice of a huge pie, and sell by the boatload.

The consequence then is that a lot of jobs that used to be middle class jobs are now “just scraping by.”

We also must consider that families now spend much more extravagantly than they did back then – many times taking out huge loans to cover all the extra costs, which require, many times, overtime and/or dual income to pay back.

Consider that families in the 50’s had only one car. Most families in the 50’s made siblings share a room. Not only that, but most 50’s homes were much smaller, on average, than homes built today. We’re not talking a couple hundred sq feet here. More like 1000+ sq feet diff. One bathroom, 2, maybe 3 bedrooms, small kitchen, and small living space. Add to that the fact that the finishing in today’s homes are much more extravagant.

How many people in the 50’s had granite or marble countertops on all counter surfaces? What about stainless steel fridge, oven, microwave? Oh yeah, they didn’t have a microwave. 🙂

The cost of a lot of technology has come down and that’s why you see households with multiple tv’s and such, but there’s also a plethora of other gadgets and electronics people buy today, most of which didn’t even exist in the 50’s, and many of which come with a monthly fee. Iphones, blue ray, playstations, etc. I know tons of families with monthly cell phone bills that are the equivalent of a monthly car payment – then on top of that they have 2, sometimes 3 cars…all on borrowed money.

This is really just scratching the surface, but you can quickly see that people now-days spend a lot more money on things they don’t really need. Compound this with the fact that the value of a dollar in 1950 was worth more, adjusted for inflation, than it’s worth now.

This isn’t really part of answering the question, forgive me for getting into this, and feel free to just stop reading now. But, I think this is important. We’ve bought into the idea that we have to have all this stuff, so we work extra, take out loans, get the stuff…then we go to work and feel miserable because we haven’t spent much time doing what’s important, spending time with our family or friends, and instead sat in rush hour traffic for a couple hours round trip, to go to a job we don’t really love, to make the money to buy the things that we don’t really need.

Then when we spend time with our family or friends we’re staring at our phone at pictures of people we haven’t seen in 6 months who are on vacation at the beach. Or we’re watching dancing with the stars, instead of communicating with the person sitting across from us.

The real reason why the 1950’s were so pleasant for the US is that Europe was decimated after WWII. There was a huge demand for manufacturing, and no infrastructure (supply) to meet that demand. The US manufacturing sector escaped WWII largely unscathed, and was able to quickly fill that void. Those manufacturing companies quickly grew, and needed Americans to fill those factory jobs.

The reason why the US wasn’t able to keep this up was because Japan, Germany, and many other countries were able to eventually rebuild their manufacturing sectors. Because they had the latest technologies in their plants, they were able to make higher quality products more efficiently than the outdated American factories.

Eventually other countries like China were able to build their manufacturing sectors too. In the 1950’s, the US prospered while the rest of the world languished. Now, those countries have caught up. Globalization has lifted hundreds of millions of people out of poverty, but the American middle class is now doing relatively worse (though they are still significantly wealthier than the middle class of most countries.)






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