Author | Mr.K Editor | Emma
Source | Technical Leadership (ID: jishulingdaoli)
At a recent dinner, I heard a friend who was in the "second luxury" business lament his bitterness, saying that his business had dropped off a cliff recently, and that in his 6 years of business, it had rarely been so cold. According to him, many customers in this industry are the so-called urban middle class. They cannot buy famous brands like cabbage like the really rich people. However, this group’s desire for famous brands is still buried deep in their hearts. I will still be cautious and frugal, save some money, and buy a few decent second-hand luxury or second-hand brand-name goods. My friend came to the conclusion that the serious decline in the second-hand luxury business shows that many "middle class" people may not have much "surplus food" on their hands.
This friend's complaint aroused the emotion of other friends present. They talked about various stories of "consumption downgrade" and "middle class returning to poverty" by themselves or those around them. They also talked about the common "middle class committing suicide". "Three-piece suit"...Looking around at these friends, most of them are also "middle class" in the eyes of others. Are they using their own personal experiences to footnote the theory of "the middle class returning to poverty"? Is the real trend really so terrible?
01
Why are the middle class “returning to poverty”?
1. How did the middle class emerge?
What is the middle class? Brother K checked it out and found that he didn’t seem to have a very clear concept. Some domestic scholars believe that the middle class mainly refers to whether a person's comprehensive situation of career, prestige, and culture can reach a certain level, that is, based on the amount of cultural resources, economic resources, and power resources that person possesses. Whether he belongs to the middle class. The "American Middle Class" report uses a combination of values, expectations, dreams and income levels to define what the middle class is.
Brother K further agrees with the definition of the middle class based on the "Maslow's Needs" theory: that is, "physiological needs" and "security needs" have been met, "emotional needs" and "esteem needs" have been partially met, and "self-actualization needs" are being achieved. "The group that works tirelessly and diligently on the road to success can probably be called the middle class. With this definition, the contrast between the ordinary grassroots (whose physiological needs and safety needs have not yet been met) and the wealthy class (who only care about "self-actualization needs") has become relatively clear.
How did the middle class, as a stratum that "connects the upper and lower" in the entire social structure, be conceived and developed? We can refer to the United States and Japan, where the middle class developed earlier and was more stable and mature.
Many scholars believe that the earliest middle class in the United States was created by the Ford assembly line. In 1913, Henry Ford used inspiration from the slaughterhouse to creatively invent assembly line production for automobile manufacturing. This not only marked the birth of the modern industrial production system, but also caused unprecedented oppression of workers on the assembly line. Even Ford's good friend Chaplin used the movie "Modern Times" to mock the inhuman "enslavement" of workers on the assembly line.
Ford was aware of the unfriendly workers' sentiments and social public opinion that were spreading everywhere, so he raised the daily wage from $2.50 to $5 a day, shortened the working hours from 12 hours to 8 hours, and implemented a five-day work day for employees. 6-day salary and a series of system changes. These measures by Ford not only reversed its reputation, but also made its employees a new class between the poor and the rich through increased wages and reduced working hours, and also became a new consumer group for Ford cars. Since then, a new economic group has slowly formed in the United States, the middle class. At the same time, there is also the simplest and crudest definition of this new class: workers who can afford Ford cars can be called the middle class.
Japan's middle class began after the war. After World War II, Japan took only 20 years to grow from a devastated defeated country to the world's second largest economy. At that time, the average annual growth rate of Japan's GDP exceeded 10%, and the average annual growth rate of per capita real income exceeded 8%. Its advantageous industries such as culture, automobiles, and semiconductors provided a large number of high-paying jobs for the society, creating a milestone in the world economic history at that time. of miracles. Against the backdrop of the booming national economy and lifelong employment in companies, Japan's middle class has taken shape. In 1967, the Japanese government conducted a public opinion survey, in which nearly 90% of the respondents believed that they had entered the middle class. To this end, they are quite proud to have invented a new word: 100 million total midstream .
The concept of China's "middle class" has only slowly become popular in the past 10 years or so. During this period, our economy has continued to rise, with rising incomes and booming consumption. This has also been accompanied by the wealth effect brought about by rising housing prices. Although for many home buyers, this kind of "wealth" is only at the numerical level, owning a house worth one or two million yuan, it cannot be ignored that this kind of paper wealth has indeed brought psychological shock to many people in society. level of satisfaction and some "illusions" in the perception of personal wealth and worth.
In 2022, after the three-year pandemic ended, several industries that "produce" high-paying people, such as the Internet, real estate, education and training and other industries, have either entered a cold winter or encountered a turning point in life and death. The two-way growth model of "personal income + wealth appreciation (mainly property appreciation)" has begun to become precarious and in danger. When they find that promotion and salary increase are no longer possible, and even "having a stable job" is a luxury, many talents suddenly understand that the reason why they were able to achieve a class jump in the past is not how great or talented they are. , but caught up with the tide of economic rise, happened to be in an industry with faster growth, and happened to buy a house (several houses) during this period, so that my income and wealth outperformed The social average level takes the lead in becoming the "middle class" in one's own mind and in the eyes of others.
Take the Internet industry as an example. What is the essential difference between this so-called "technology industry" that has created more "middle class" and the Ford assembly line that opened up the modern industrial production system? Not always in the era of rapid economic growth, in advantageous industries (automobile/IT), through high-intensity labor, employees can earn more income, and then become the people who own cars (Ford cars) and houses (code farmers) in their respective eras. Large flat floor) middle class. Although the time difference is a hundred years, there is no fundamental difference in the essence of becoming "middle class".
2. The emergence of “M-shaped society”
There is a line from Yan Chixia in "A Chinese Ghost Story": "Being born at the wrong time is worse than being a ghost." Even if you do the same job and put in the same effort, as long as you are born at the wrong time, the results will be the same. The difference is huge. In the past two years, the middle class in the cold wind have had to face an embarrassing reality. Their labor income and wealth accumulation have been declining. Not only can they no longer grow at a rate that exceeds the social average, but they have even been slightly careless. , and may also slip into the low-income group. What is even more cruel is that in reality, many middle-class people who have had their salaries cut or lost their jobs have become low-income or no-income people.
From a larger perspective, in the atmosphere of the recession, the middle class has rapidly collapsed and differentiated, resulting in a sharp decline in the number of people in this class and a substantial expansion of low-income groups; while the truly wealthy who are more resistant to risks or have more resources People will not be greatly affected, and may even see their value rise significantly. As a result, the social income structure began to deviate more and more from the healthy olive-shaped social structure in which "the middle-income group has the largest number, and the low-income and high-income groups account for smaller proportions." Instead, it slid towards the lower middle class (middle class), the left and right High (high-income class and low-income class) "M"-shaped society .
This phenomenon is not uncommon. The United States and Japan also provide us with lessons. How American society is moving towards an M-shaped society can be roughly felt from a set of figures. According to statistics, in the 40 years from 1978 to 2018, the wealth proportion of the top 1% of the United States' richest people increased from 21% to 37%; while the wealth proportion of the middle class 40%-90% increased from 37% dropped to 22%.
A 2018 financial survey by the U.S. Central Bank found that one-third of the middle class in the United States may not be able to afford even $400 if they face unexpected expenses; less than 25% of middle-class families can afford six Savings for monthly living expenses. Therefore, when people are asked in public opinion polls whether they belong to the middle class, most Americans are afraid to "claim" it. They would rather call themselves "working class." You must know that in American culture, the middle class has never been summed up by a number, but represents a lifestyle, quality of life, and even a representative of success.
The "decline" of Japan's middle class began in the 1990s. Looking at the same set of figures, in the 10 years from 1992 to 2002, the annual income of Japan’s middle class dropped from 4 million yen to 3 million yen, while the number of high-income people with an annual income of more than 12 million yen continued to increase. . The distribution of income classes is obviously moving towards the two poles, and a typical "M-shaped society" phenomenon has emerged.
Faced with this phenomenon, Japanese sociologist Miura Ken created another term - " lower society " to describe Japan's class situation, that is, a large number of middle class people are in the intergenerational transition of "parents are middle class and children are low class" Slowly flowing downward, people can live with enough food and clothing but are not rich, and use low desires and low consumption to paralyze themselves, a social phenomenon.
3. The nature of the middle class’ “return to poverty”
1) The decline of advantageous industries has led to a sharp decline in the income of the middle class;
There is an old saying in China, "Success is a failure, failure is a failure." Just as the rise of advantageous industries gave birth to the middle class, the decline of advantageous industries also led to the decline of the middle class. Take the United States as an example. After World War II, the United States ushered in huge development opportunities, and the market also released a huge number of jobs. Not only did they have jobs with stable and growing salaries, but they also had paid holidays and pensions and health insurance to relieve their worries.
The economic prosperity of this period formed the transition from the bottom class to the middle class in the United States; but in the 1970s, with the wave of economic globalization, U.S. manufacturing began to shift to overseas regions with lower production costs. The direct effect was to Millions of direct and indirect jobs have been lost in the United States. Statistics show that after World War II, manufacturing accounted for as high as 40% of U.S. employment, falling to 27% in 1981, and then to 8.1% in 2010. This phenomenon has a direct impact on the income, life and size structure of the American middle class.
The same is true for Japan. Industries such as semiconductors, consumer electronics, home appliances, and automobile manufacturing that rose rapidly and made a lot of money in the world have suffered from the bursting of the economic bubble in the early 1990s and the steady decline in market competition. The defeat and gradual decline also directly led to the continuous bubble formation of Japan's middle class.
Our situation is actually similar. In the past 20 years, with the continuous leap of China's economy, the Internet, automobile and other industries have also developed rapidly. While accommodating a large number of employed people, they have also created a large number of people through market dividends and industry dividends. Highly paid middle class. However, in the past two years, the Internet industry has been cold and lacks endogenous development momentum. As a "middle-class manufacturing base", large manufacturers have begun to significantly and continuously cut wages and layoffs; traditional car companies are also being pursued by new forces in new energy car manufacturing. It is difficult to resist the current situation. The market weakness and the pain of transformation have directly had a real impact on a large number of employees in these industries. Not to mention "stable and growing" salaries, even "stable and regular wages" jobs are becoming increasingly difficult to find. Naturally, the middle class is slowly withering away in the process of "development".
2) Low economic growth has caused substantial losses in middle class wealth
Another culprit is destroying the middle class: the economic crisis. Take the United States as an example. According to data from the Federal Reserve, during the three-year financial crisis from 2008 to 2010, the wealth of middle-income families in the United States shrank by 39.8% (calculated based on the median wealth of the middle-income group); the richest one-tenth Not only did the wealth of American households not fall, but it increased by an average of 2%. In addition, the bottom third of Americans with “nothing to lose” did not have a shrinking or increasing wealth.
It can be seen from this that the economic crisis is a disaster for the "property but very fragile" middle class, and it is the target of the wealthier class who use various tools and means to cut leeks and gather wool. The middle class will suffer heavy losses, and even if they die, they will have to shed their skin.
The same is true for Japan. After the "Plaza Accord", they began to shout "lost N years" in the collapsing bubble (N can be 10, 20 30). What they lost due to the economic crisis was also the once huge The middle class, the "middle class of 100 million" who are generous with money and particular about taste, is no longer. There is only a "bad society" and a "low life" that are burdened with debts and lose their desires.
Looking back at our society, the news that comes from time to time about the high-level executives of large factories losing their jobs and being unable to repay their loans and having their houses repossessed due to failure to pay, as well as the rising number of foreclosed houses in major cities, is this also the case? Telling about the helplessness and vulnerability of the middle class in the context of depression?
02
3 measures to save the middle class from returning to poverty
1. Cut down on all “natural” expenses
In the book "M-shaped Society", Kenichi Ohmae gave a piece of advice on how the middle class can make their lives better: do n't consider yourself middle-class . He believes that the reason why most people feel that their lives are not well-off is because their thinking about money is still guided by the inertia of "middle class consciousness" and they have not adjusted their lifestyle according to the actual situation of work and income. Keep spending money on unnecessary things.
According to Brother K’s observation, most of China’s new middle class have experienced a class jump (the same is true for Brother K). Their previous families may have been ordinary working-class families or rural families. Through their own hard work, they have established a foothold in big cities. , and become the backbone of the city. They have seen the world that the middle class should enjoy, and have experienced it briefly. They feel that the "taste" is really good. They want to continue this kind of life, but after all, they are the first generation in the big city where they live. The foundation is not strong and the strength does not allow it. Therefore, the "middle class consciousness" often feels that it "should have it", but the economic strength warns itself that "it cannot have it". If you are not sure about it, you may make some irrational and "overwhelmed" consumption (such as the often-called "three-piece middle-class suicide suit"), trapping yourself and embarrassing yourself.
Navarre said: The purpose of making money is to solve financial problems, but the best way to get rid of money greed is not to upgrade your lifestyle after making money . This sentence is similar to Ohmae Kenichi's advice, and it is worth copying in a small notebook for the middle class as a motto to remind themselves at all times.
2. Reserve cash flow
The middle class usually has an obvious characteristic: they use debt to support their lives, and then use income to fill the debt. Think about it, among the people around you who dress well, drive fancy cars, and live in big houses, how many of them have to pay their mortgage and car loans on time every month? Being accustomed to overdrafting future income to satisfy current desires is actually very fragile and difficult to sustain. Once there are some changes in work, career or family, these monthly bills may instantly overwhelm a person. Like a decent middle-class family.
Therefore, if the middle class wants to live a solid life, they must have the awareness of renunciation, learn to reduce unnecessary expenses, and reserve a cash flow sufficient to survive the cycle based on their actual situation. For example, if you are a member of the system, your cash flow will be relatively stable and sustainable, your benefits will be relatively good, and other expenses will be relatively small. Making progress while maintaining stability is your best strategy; if you are a small boss, your cash flow will fluctuate. It is usually relatively large. Sometimes business is good, sometimes performance is poor. This requires you to have the ability to assess the situation, seize opportunities, control desires, and achieve reasonable profit and loss stops. If you are a middle-level or senior-level person in a large factory, your cash flow may be good and your growth may be good when you are most productive, but you must also have the awareness to prepare for a rainy day and realize that the sustainability of this situation is not very strong. Try to plan ahead for workplace crises that may come one day.
3. Increase effective capital expenditures
A far-sighted middle class may not buy luxury cars or famous brands, but it will definitely not "save" effective capital expenditures? Effective capital expenditure refers to various expenditures that help provide production efficiency and productivity, can be converted into assets and release cash flow, help improve competitive advantage, and help extend the long term .
For example, buying a house in a big city within your means and at a reasonable price is considered a valid capital expenditure. Because owning a house will give you and your family a greater sense of stability and happiness, and will also give you a stronger motivation to fight. For another example, make more meaningful self-investment in yourself, improve your skills and cognition, expand your horizons and circles, so that you have more ability and resources to resist risks, and when encountering the impact of the times or industry , have more means and confidence to resist.
There are several lines in the movie "Hungry Platform": There are three kinds of people in the world, people at the top, people at the bottom, and people who are falling. In an era full of uncertainty, it is difficult for us to determine who will be the one who is falling, but what seems certain is that the person who is falling is most likely to be from the middle class. This is as certain and true as those who sell their labor and time will never be richer than those who "make money from money". Facing this era, the middle class should probably think more and do more to avoid becoming the "falling person".
Introduction to account owner
Introduction to the account owner: Mr.K , Huang Zhekeng, an expert in enterprise digital transformation, founder of "Sudden Enlightenment Hill", technology blogger, former technical executive of Haier, Zhongtong, and Yiyao.com, author of "The Way of Cultivation of Technicians" "The Top of Technology Management". Share: growth tips, technology trends, digital transformation, and business insights.