| > How do other countries do it? The system in each country is very complex and it's hard to tell which parts make it work better and which parts make it worse than another. The effects are all related. First of all, the middle class is not well defined in many of the popular articles. There can also be a significant difference between middle class defined by income vs. by self-identification. See Figure 1.1 in [oecd]. I'd start with the premise that the US is an outlier in many areas - tax system, health care, pensions, education... All of which dramatically changes how the middle class is able to structure its finances. My guess is that many of the US citizens have higher disposable funds in absolute value than Europeans but it helps them mostly in international travel and when buying easily transportable goods. Not as much in day-to-day living. I'll try to compare with my country (Central Europe, laws similar to Germany's but with slightly worse execution). There's a healthy middle class but according to studies, it's shrinking. It seems middle class is shrinking worldwide. Even the [oecd] study I link is named "Under Pressure: The Squeezed Middle Class". I think this feeling also led to the rise of populist governments in many of the European countries. I'll give some facts first, then try to interpret them: - Effective tax rate at ~50 - 60 % for employees, ~30 % for IT freelancers. I'm including mandatory social and health insurance. - Median wage: $15,500/year, typical IT wage around me: $30 - $60,000/year. - Supermarket cashier earns 85 % of median wage, public bus driver at around the median. - Served restaurant lunch (just meal) costs ~$7, dinner ~$10. - Appartments cost (capital city) at around $300/sq ft - Most (78 % [wiki]) of people own their housing (vs. 65 % in USA). - Mortgage rates are at 2.5 % APR, some going as low as 2 % APR (10 years fixed), inflation at similar levels (last year around 2.8 %). - I know personally just two people who went to private universities (one because he liked the school, the other one because it was easier) and no one who went to private primary or high school. The public schools are generally free. - My family's out of pocket medical expenses amounted to $ 500 last year, mostly over-the-counter medication for our two kids (common cold, cough, supplements, vaccinations...). - In hospital, you can pay around ~$10/night for the privilege of a private room but there's usually a shortage of them. There wasn't a shortage 10 years ago. People just
weren't used to paying in hospitals. - The medical services are free. There was a HUGE political fight around paying $4 flat for emergency (out of working hours) doctor visits. - Fuel is taxed at 30 % extra to VAT, there are similar extra taxes for tobacco and alcohol. - When you buy a real estate, you're immediately taxed 4 % of the value. - Only 20 % of people use credit cards. Most of the credit is mortgages (which were mostly profitable due to rising prices so far) or car leasing. Outside of these bigger tickets, most of the credit seekers are low income. I feel I live in a safe environment, the public transport is well functioning and clean (daily user). You can screw up, not save for some time, get ill and you're still likely to recover financially even if you work for a median wage. You may not be able to buy housing if your parents can't help you. But in general, I think the ability to experiment a bit and a general feel of stability allows for much more effective negotiations with employers, even for comparatively lower income people, driving minimal wages down. On the other hand, because so big share of the money goes through the government, there are many inefficiencies. If I moved for example to the US, I might end up in higher percentile of earners and most probably I'd have more money to spend on international travel and electronics. On the other hand there are the costs of the move (family away, frequent travel across ocean) and it would be partly paid off by worse public services and higher risks if unemployed/ill. [oecd]: https://www.oecd-ilibrary.org/sites/689afed1-en/1/2/1/index.... [wiki]: https://en.wikipedia.org/wiki/List_of_countries_by_home_owne... |