Hard times tighten middle-class squeeze
After the Great Depression, the US made major policy changes to support average Americans. Is it time to launch such efforts again?
The decline of the middle class has become a focal point of this year's presidential election. Each candidate claims his plan would end the middle-income slide that accelerated during the Great Recession and shows no signs of abating.
But lost in the rhetoric is the reality of the decline. Nearly everyone is aware that the middle class is struggling, but few people understand how the struggle plays out in everyday life.
According to experts, the decline is fundamentally reshaping the U.S. economy. The Great Recession has affected the way the middle class feels about higher education, government and the future. Even their health has suffered.
"Their economic future isn't very bright," says Timothy Smeeding, the director of the Institute for Research on Poverty at the University of Wisconsin Madison. "Wages and income are flat. Transportation, childcare costs and health care costs are going up, and . . . income isn't."
Smeeding calls the current state of the middle class "the squeeze." Even people with jobs are having to squeeze more and more out of their income, despite the fact that incomes aren't growing. "These people live on earnings. They're working on not great wages, and their jobs are threatened," he says. "They don't see any hope in the future of things getting better."
Hard numbers paint a stark picture of the middle-class decline. According to an August 2012 Pew Research Center report, only half of American households are middle-income, down from 61 percent in the 1970s. In addition, median middle-class income decreased by 5 percent in the past decade, while total wealth dropped by 28 percent. According to the Economic Policy Institute, households in the wealthiest 1 percent of the U.S. population now have 288 times the amount of wealth of the average middle-class American family.
The income decline has caused many people to accumulate high levels of debt. And as the cost of college increases, more people are saddled with tens of thousands of dollars in student loans after they graduate.
Only 23 percent of people are confident they have enough money to get them through retirement, according to the Pew report. It also found that fewer people believe hard work will get them ahead in life.
"You have far less disposable income and increasing levels of debt," says David Madland, the director of the American Worker Project at the Center for American Progress. "You have this fundamental squeeze on most members of the middle class. It's impacting their quality of life and their outlook for the future."
These are the kind of statistics used by politicians to sell policies, but they tell little about the realities behind the numbers or how the decline of the middle class plays out in people's everyday lives.
More and more middle-income families are turning to government programs such as food stamps, Medicaid and unemployment insurance. According to a recent Senate Budget Committee Report, "Among the major means tested welfare programs, since 2000 Medicaid has increased from 34 million people to 54 million in 2011 and the Supplemental Nutrition Assistance Program (food stamps) from 17 million to 45 million in 2011. Spending on food stamps alone is projected to reach $800 billion over the next decade."
People are also saving less. Wage increases have not kept up with increases in the cost of living, prompting people to dig deeper into their savings to make ends meet. Meanwhile, many middle-class workers who lost their jobs during the recession remain unemployed.
"The most pressing worry is the diminished economic security of middle-class families. The long-term unemployed have completely drained their savings," says Kristen Lewis, a co-director of Measure of America, a project of the Social Science Research Council that explores the distribution of opportunity and well-being in the United States. "Those who are working have jobs without health care or sick leave. They have no retirement savings plan. There's no end in sight to that."
Lewis adds that the economic state of the middle class takes its toll on their health. A series of recent reports found that life expectancy for whites without a high school diploma, once the backbone of the middle class, has dropped faster than for other groups. The reports link the decline in large part to the lack of access to health care.
Can the middle class come back? According to Lewis, current economic and political conditions won't provide the middle class with the same security it needed to rebound after World War II. "In the postwar period, there were a lot of programs put in place to help people," such as education and homeownership assistance, Lewis notes.
Madland says increasing the minimum wage and improving entitlement programs like Social Security are key to rebuilding the middle class. After the Great Depression, "we made major policy changes to ensure we have a strong middle class. We let too much of it wither on the vine," he says. "We need something approaching that kind of effort."
But for Wisconsin's Smeeding, one thing has to happen before such policy changes can occur. "We have to get the economy growing again."
More from U.S. News
- 10 Signs American Families Are Falling Behind
- Real Source of Middle-Class Money Woes
- Where Do You Fall in the American Economic Class System?
If a company like jp morgan loses billions of dollars of money that is not theirs, where does it go and who acquires it. When the middle class was forced to take 401k's and when the 401k's tanked, where does the money go and who aquires it. It's questions like these that make me wonder why we argue about liberal or conservative when what we really should be asking is why and who is robbing us blind right from under our noses. I know these are just a couple of examples but if anyone has an answer for either one I would love to hear it.
What many people dont realize is that the poor in this country are very well taken care of, close to 1 trillion spent on them last year alone. The middle class are the workers that dont qualifiy for many federal/government programs and are forced to fight it out on their own.
Please people, wake up! By increasing government, you are taking the edge off the middle class and teaching people who used to be self sufficient how to lean on Government help.
This clown spent 5 trillion dollars and unemployment is still over 8%? Yes they revised that number up on Thursday.
You may think well everyone else does it, why not me? Well start thinking, I am stealing from my children and their childrens future.
Selfish, tsk tsk.
My job now has the insurance premiums scaled to salary. So those making over $15 an hour pay 2-4 times as much in health insurance premiums than those making less than $15 for the exact same coverage! Nothing illustrates the problems of the middle class better than this. People can talk about the 1% as much as they want but at the end of the day, no matter how much money they have, there isn't enough of them to subsidize things. All wealth redistribution comes from the middle class--my company's health insurance plan as exhibit A. My wife and I joked the other day that if I lost my job and had to get a minimum wage job we might not be any worse off because we could get food stamps, health insurance, free childcare, subsidized housing and everything else that we pay a fortune now for. Some good two masters and a PhD does.
If the author is truly talking about the middle class, then increasing minimum wage and improving Social Security will do very little to help. Any family dependent on minimum wage or social security benefits is close to the poverty level. My understanding is that middle class would be household income in the $50,000 - $150,000 level. Above that and you're in the top 10% of all households.
So the question should be how to help those in that $50,000 - $150,000 range. First, allow everyone to refinance to the lower rates, even if their house is underwater. Just because the value of the home has dropped, that doesn't mean they want to move, but they sure could use the lower monthly payments.
Second, allow consolidation of all student loans, not just government backed loans to allow them to again, qualify for the lower current interest rates.
Third, mandatory financial basics to be taught in both senior year of high school and freshman year of college.
This is not about which party is in power. Both major political parties are to blame, as are we, for allowing our elected officials to run US into the ground. Having had a very nice income only 10 years ago, lost to off shoring and onshoreing of cheap labor I am now on public assistance, much to my chagrin. The Newspapers here report the elitist company owners grousing that they cannot find the trained labor that they seek. Those of us who even read their accounts know that is simply not true...what they are saying is that they can not find Americans who will work for the low wages corporate America is offering and they need to import offshore workers who will work cheap. Their education subsidized by their respective governments competing against US and our Children who had to pay or borrow for our respective educations. By Law being forced to pay back student loans at rates that take the greatest part of take-home-pay. Our kids (and many of US Parents) just can not afford to work for those low wages and pay back student loans, pay for housing where we are not stacked 8 deep in an apartment or buy American made vehicles.
The corporations will reap what they sow. If Americans can not buy the products, houses and eventually even not the education that will return America to the vibrant economic leader that we once were then we, the corporations and America will suffer...continue to suffer. Our position in the world is sliding downhill fast...we need to reverse that fast. And it is the right and duty of all Americans elect leaders who will do this not just those with good sound bites. One only has to look to the debates to understand.
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Breaking up big banks is an untested solution to the too big to fail problem that attempts to isolate and dismantle large, troubled institutions while protecting the rest of the economy.
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