Middle Class? Not So Fast. A Tale of a Downwardly Mobile Society

With election season starting to heat up, so is reporting on the so-called “middle class.” Apparently, 9 in 10 Americans consider themselves “middle class” (I’m no math genius but something tells me medians and averages don’t work that way.) Given most Americans are middle class in their minds, and middle class today isn’t what it used to be, in short, everyone is freaking out.

Ok middle-class math, why does America hate you so much?

“The middle-class label is as much about aspirations among Americans as it is about economics. But a perspective that was once characterized by comfort and optimism has increasingly been overlaid with stress and anxiety.” — Telegram

I see. So most Americans aspire to be middle class, as everyone has been sold this dream of working hard to get the basics in American life — a decent house, backyard, education, healthcare, maybe vacation once a year. No one is expecting to afford regular Gucci on a middle class income. We were just all told work hard and you too can be middle class, and quite frankly upwardly mobile from your parents lifestyles. Yet, even if you’re doing exactly the same thing your parents did, you’re actually worse off today. No wonder we’re all anxious.

“A recent report from economists at the Federal Reserve Bank of St. Louis concluded that “families that are neither rich nor poor may be under more downward economic and financial pressure than common but simplistic rank-based measures of income or wealth would suggest. The study, conducted by William R. Emmons and Bryan J. Noeth, found that one reason many Americans viewed themselves as struggling was that their real incomes had not advanced significantly beyond their parents’ even when they reached higher educational levels, while those who matched their parents’ achievements were actually worse off.”

The New York Times published an article this week titled “Middle Class, But Feeling Economically Insecure.” That headline, brilliant, sums the middle class anxiety up to a T.

I’m sure my own parents had financial anxieties throughout my life, but we lived a very comfortable upper middle class lifestyle on my father’s single income as my mother worked from home. While I didn’t realize it at the time, I had the perfect 1980s household – a home in the suburbs with a big backyard, a pool club down the street, access to quality healthcare via a PPO, a paid-for college education by my parents (which was definitely the “upper” middle class part of my youth – I went to public school K-12), and extra funds for outside hobbies like painting and dance lessons, plus the requisite annual temple contribution. And while we never splurged on great luxuries, the life I led was one I assume I could carry on into adulthood, at the least – even if my dreams of becoming world famous were unreached.

Of course, I never quite planned for wealth in any way. In high school I had no idea what I wanted to be when I got out of school and embarrassingly no real understanding of how much anything in life costs. I was a typical spoiled brat in many ways, and while I knew I’d have to earn my living, I didn’t start obsessing over the realities of this until I graduated college and shit got real.

The New York Times asserts that today’s middle class feels increasingly vulnerable due to feeling insecure about prospects, and how we stack up in relation to friends, parents, neighbors and colleagues. Perhaps once upon a time the middle class was too busy heads down working, trying to get past the poverty they grew up in (even my parents lived in lower middle class throughout their childhoods and were quite upwardly mobile) that they didn’t spend too much time comparing themselves to others. And comparing their lives to their parent’s lives was night and day, in many cases. AND people stayed in jobs many, many years – my father, despite not loving his career, stayed with his company from his 20s until the day he retired. For perspective, at 31, I’ve already worked for 6 employers.

For the Middle Class, the anxiety levels due to many variables working against them. The Times article covers this well:

  • Median per capita income has basically been flat since 2000, adjusted for inflation. The typical American family makes slightly less than a typical family did 15 years ago. And while many goods have become cheaper or better, the price of three of the biggest middle-class expenditures — housing, college and health care — have gone up much faster than the rate of inflation.
  • Mr. Hirschl found a high degree of income volatility among most Americans in the four decades between 1969 and 2011. At some point in their working lives, a full 70 percent earned enough to put them in the top fifth of earners, and as many as 30 percent reached the equivalent of $200,000 in 2009 dollars, or roughly the top 4 percent.
  • Similarly, nearly 80 percent at least temporarily plunged into a red zone, where their income dropped near or below the poverty line, or they were compelled to gain access to a social safety net program like food stamps or collect unemployment insurance. More than half of Americans ages 25 to 60 will experience at least one year hovering around the poverty line.
  • For most people, their 20s and 30s have traditionally been the least secure decades, with earning power building to a peak in their 40s and 50s, Mr. Hirschl said. But the recession upended that pattern for many Americans. Older workers experienced an extended bout of unemployment, often followed by a new job at a lower wage.
  •  The feeling of comparative deprivation and the ultrarich separating themselves from the rest of society helps explain why only 1 percent of Americans accept the rich or upper-income label. Even most people earning over $250,000 — the top 5 percent of wage earners — identify as middle class. There’s always someone wealthier around.

Oy vey. People sometimes think I’m crazy for worrying so much about massive savings at my income level, but this here spells out why. More than half of Americans ages 25 to 60 will experience at least one year hovering around the poverty line. I mean, that really says it all. Why are we anxious? Because instead of preparing for potential good years – when we can take a really fancy vacation – we’re all socking away for the inevitable bad years to come. There is no security anymore. People with kids much feel this pressure a hundred fold. I can only imagine.

Also, those of us in our 30s, we experiencing the great recession and saw what this did to our parents and their retirement savings. Holy shit batman. Who could we even trust for financial advice?

Robert H. Frank, an economist at Cornell University and the author of “The Winner-Take-All Society,” explains that across most white-collar professions — whether dentists or sales supervisors — a very small group at the top is doing spectacularly better even as a great majority is mostly plugging along. “No matter who you are, whatever group you define yourself in terms of, you’re poorer now in relative terms than you were earlier,” he said. (Times)

My income levels definitely put me in middle class (upper middle class) territory, but there is no way I can afford a house where I live, where the basic house today starts out at $1.5M. Sure, I could move somewhere with a lower cost of living, but my income would also go down dramatically.

The Comments Section in the NYT article is just as fascinating as the article. Here are some highlights:

“My husband and I are both professors, as were my parents. I have less disposable income than my parents did. My income has not kept up with inflation. Based on some measures we might be considered “affluent” but we feel poorer than we did growing up.”

“I’m a physician who makes about $250k a year now in my 40s. I’m doing well but I don’t feel rich. I have $250k of medical school debt accruing at a criminal 6.8% of federal student loan interest (while the federal discount rate charged to banks is 0.25%)… Many of us who are making a decent income sacrificed a good third to half of our working lives to achieve that. I know it may be blasphemy to some of the posters here, but despite making $250k, I am middle class and live a very middle class existence.”

“I’ve been a worker bee for over 30 years and am frugal. I own my own home free and clear, due to strict money management and being handy. I also have a six figure income (just barely), but, my salary has not gone up in five years and I lost my job twice in 2013… It’s probably me being neurotic, but I’ve known middle class people who’ve fallen through the bottom of society on the turn of a dime and died because they could not find a home and/or healthcare.”

“I was born into the middle-class, but now that I’m married, 30, and a working professional I’m not entirely sure where I fit in. I am highly educated along with my wife (both have Master’s) and both have what many would consider a good job. I’ve never felt secure in my work place, paid time off is almost non-existent, and frankly I don’t think I’ll ever be able to afford owning a home.”

“When I attended a private, Catholic 4-year university in the NYC metro area from the early to mid 1970s, the entire cost of tuition for the four-year period (not room and board) was anywhere from $10,000 to $13,000. And when I graduated with a bachelor’s degree, there was a good chance my first job would pay me an annual salary equal to what I spent for four years of college tuition.  My one additional year of graduate school at a private, Tier 1 university (a free ride, as I had a teaching assistantship) would have cost an additional $5,000. So $15K in all for 5 years of college and grad school. Even if I had to take out loans for some of that, my earnings would have outpaced my debts in short order. Today? A Tier 1 4-year private university can easily cost $50K, $60K, and more PER YEAR. Yet graduates of those universities are fortunate to earn that amount for a year’s salary, or about 1/4 of their total college tuition cost. (Again, I’m leaving out room and board.) And there is the biggest contrast in the middle class lifestyle over the last 45 years: Affordable higher education doesn’t exist anymore. No wonder younger families are “feeling economically insecure.””

“I am 35 years old. When my father was my age, he had a home, a full time job, spectacular benefits, two children, and a wife who was able to stay home most of the time. I am a college graduate, with a full-time job. But at this point in my life, despite a modest lifestyle and a strong watch on my finances, I cannot fathom owning a home.”

“My wife and I live in Brooklyn. We’re highly educated professionals (I have a PhD and she has an MBA), and together we earn about $250-300k/year. We’re certainly not struggling but in way do we feel affluent. We’re renting our apartment and would like to own a house, but the combination of astronomical real estate taxes, inflated housing prices, and the cost of child care means that we have to either resign ourselves to painfully long commutes or drastically lower our expectations in terms of what we can afford. We’re talking 1800 square foot split levels build in the 60s on 1/4 acre lots, hardly the lap of luxury.”

“I’m 34, grew up in a middle-class family (daughter of a technician and a nurse), and would certainly be considered middle-class in terms of my education and income. (I’m an attorney who makes somewhat more than the national average). In my day-to-day life, though, I live in constant fear of losing my job, of suffering a catastrophic illness that will render me bankrupt, or defaulting on my enormous and non-dischargeable student loans. (Ones that won’t be paid off for at least another 20 years). I would like to have children, but don’t feel financially able or secure enough to do so– possibly ever.”

“This article reinforces a very common believe among my peers, the late 30’s crowd, GenX, whatever you’d like to call it. Here is my middle class story: Grew up as an only child with a single mom. Neither of my parents ever made more than $40K. I went to a state school on a full half need/half academic based scholarship—graduated with zero debt with a liberal arts degree. Between my wife and I, we are making around $175k, far exceeding my parents, yet we are living paycheck to paycheck.”

“I’m in my mid-30s, a single mother of two, with a bachelor’s degree in a white collar job. I own my home, a very modest ranch that I’m fixing up as I save the money for each project… For retirement, for an emergency fund, for vacation, my budget is really tight. If I didn’t receive child support, my children would qualify for reduced price lunches, but I’m told at work that I receive a “good salary.” How is it a good salary if my children qualify for government aid as I work full time in a field that requires a bachelor’s degree?”

“I am a true blue collar man. I am 51 years old and worked most of my life as a machinist. I watched my wages go down and the opportunities go away for the past 20 years. The wages right now as a machinist in my town are less than they were 20 years ago. I had five kids…I know, I know, at the time I still believed in the American dream. My oldest is 28 and I am NOT a grandpa. None of my kids can have kids, they are way too scared!

“Most economists are a major contributor to middle class stress. They continue to gauge the economy by dollars rather than the value of those dollars right now. For example, $20+ an hour today is worth less in value, or what it can buy, than the $1.60 minimum hourly wage in 1968. That’s why we technically make more money than our parents, but not in any practical (real) sense.”

I’m 32, employed, have a masters degree, and own my home. I still don’t feel comfortable buying a new car, getting married, or having children. I live in an area where my 55k/ year salary can provide well for a single person, but not a family.”

“I’m a single mother; once upon a time I was professional-middle-class. Fancy education, summer camp, new cars, all that. All that ended when I got out of college, some 25 years ago. Mainly through location I’ve had more security than most of my peers — I live in a tax sink, a university/hospital town with relatively low housing costs, unions, and a liberal, everyone-should-have-good-public-services mentality. Life is still a white-knuckle affair, but despite below-average income I own property and can see retirement from here, unless the wealthy figure out how to rob me of it first.”

“I have been employed in one of the HCA hospitals for 11 years. Although the corporation is the largest owner of hospitals in this country and has yearly revenue in the billions (I checked), I have not had a raise in 3 years – and the last one was 0.5 percent. No mystery here. The problems for the middle class are generated by corporate greed. Period.”

“What has happened in the past 30 years is the billion dollar a year income as a result of managing, or owning a hedge fund, or founding a hugely successful tech start-up. This has set a new standard for the elite in America, and changed everything else around it. Millionaires are no longer the top mark. One needs to be a billionaire to be considered rich. Everything else adjusts downward from there.”

“I’ve been reading the comments on and off all day. What’s clear is that there are pockets within the US where people make $150,000–250,000 that are extremely expensive, and thus stressful, and there are the rest of us living where $100,000 makes you rich and $40,000 leaves you stressed out.”

“My wife and I have recent graduate degrees (MA and PhD respectively from tip-top programs) but cannot afford to save up enough money for a down payment on a house because we are paying down the 100,000 dollars in debt to our federal government (and counting) we incurred because we thought the debt would lead to higher paying jobs. We are also paying 25%+ in income taxes.”

It is not clear to me that there has been an actual deterioration of the middle class or simply a raising of expectations. My children have cell phones, internet access, multiple TV’s, cars, and I could go on and on. It is considered de rigueur. Credit cards are standard as is debt. People spend with abandon and sadly, so do I. My parents did not. Subscription based services, consumer excess in everything from electronics to clothing and autos dot the landscape.”

“My wife and I moved to Denver several years ago and our experience here has perfectly mirrored the trends described in the article. We’re both college educated, both have good jobs, have no children, and manage a large-but-not-too-large amount of student debt. Since we moved here, Denver has been growing at a staggering pace. Our rent climbed 20% in one year and we are now paying more than I ever in my wildest dreams thought I would pay for rent. We manage to save a little money each month but at our current rate of saving, it would literally take about fifty years before we could buy a house in our neighborhood. We talk about having kids, but are terrified when we hear our older, established coworkers detail the exorbitant costs of childcare.

“My wife and I together earn just above the $250,000 mark you mention. While we live comfortably, our budget is strict with not really any more extras than our parents had. As we’ve seen our parents age and the costs associated with that, we are saving as much as we can today for tomorrow. I’ll consider myself rich when my saved money earns more than I do.

 

 

 

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One comment

  1. anonymous says:

    Be grateful that you’re not living during the 1930s with 25% unemployment at its peak. Also, even in Bay Area, the basic house doesn’t start at 1.5mil if you’re more flexible instead of just focusing only on upper middle income Silicon Valley neighborhoods. Many places in East Bay and San Jose are priced much lower.

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