In the old days if you worked hard, kept out of trouble and saved a little money, you’d end up doing all right in life. It was a simple formula, and for the most part it worked. Today those simple rules have been replaced by advice like “work smarter, not harder” and “it takes money to make money.” The shift in advice mirrors a shift in the fundamentals of our economic structure, a reordering that’s been underway, more or less, since the 1980s.
A few decades ago we might have described the stratification of our economic world in terms of the “haves” and “have nots.” But that fails to accurately portray our current economic circumstances. Such a faulty analysis can also lead to the popularity of flawed solutions, like redistribution of wealth. Consequently, it’s important to understand the precise nature of the issues, even though few people can accurately articulate them.
The Tale of Two Economies
If someone told you the U.S. economy has never been better or provided more opportunities for more people to increase their standing in life, statistics suggest you’d think they were crazy. According to CNN, a full seventy-one percent of people say the economy is rigged against them. In fact the “rigged economy” has become one of the biggest talking points on the presidential stump with virtually identical language coming from the far left, the center left and the far right of the American political spectrum. It’s a belief that crosses racial barriers, gender barriers and political identification. But that’s where the agreement ends and disagreements about how to right the situation begin.
Our Economy Works (But Requires a Strategic Approach)
Understand that this is merely background and by no means a suggestion that the way you feel is invalid. The fact is our economy is good, but not for everyone. For about a third of the population the economy is a Yee-ha! good time. Those are people who earn a substantial amount of their income from capital gains and who have built their own successful businesses. Those who think the economy works are people who invest money and those who concentrate their hard work into building their own businesses.
Working for Wages is a Tougher Row to Hoe
What we’re seeing today is an economy that works best for the most entrepreneurial among us and those who invest money. It should come as no surprise to discover then that only about half of Americans have any money in the stock market at all! Right off that bat, half the U.S. population is aced out of investment earnings. Fewer still have the entrepreneurial drive to start their own business. That means the vast majority of people in the U.S. are working for wages and wages have been basically flat for decades. As housing prices creep up due to the availability of cheap mortgages, wage earners fall farther and farther behind.
The Wealthy Invest in Hard Assets
If you want to emulate your wealthy neighbors then think about tangible assets. Look at buying an income producing property instead of an owner-occupied home. The wealthy don’t buy a home; they invest in real estate, which is both higher-cost and higher-reward.
Don’t have the cash on hand to buy an apartment building? Think about tangible assets with a smaller buy-in, like investment-grade precious metals. You’ll find the wealthy lined up to buy there too.
One option is to work for changes to tax laws that would incentivize companies to share more of their gains with workers might help. But even more useful in the long term would be teaching our young people how to invest wisely, as well as the basics of starting and running a business.
So, yes, the economy is rigged in favor of those who invest and work hard at building a business. But the most meaningful change would be to dismantle the myth that you can get ahead simply by working hard for someone else, keeping your nose clean, and taking only what’s handed to you by employers, investment advisors and more. Sometimes the fastest route to sustainable wealth is looking beyond the menu of options that’s offered to you.