Subscribe

How is middle class doing? Four gauges show why politicians are talking fixes.

Despite signs that the US economy is rebounding, the middle class continues to struggle. Politicians from both sides of the aisle have set their sights on boosting the middle class.

  • close
    Sen. Marco Rubio (R) of Florida talks during a news conference at the Capitol in Washington, Dec. 17, 2014. Senator Rubio released a new book Tuesday, 'American Dreams: Restoring Economic Opportunity for Everyone,' highlighting a path forward for improving upward mobility among the middle class.
    J. Scott Applewhite/AP
    View Caption
  • About video ads
    View Caption
of

From President Obama to aspirants to succeed him, politicians seem to agree on one big theme these days: America’s middle class is hurting and in need of revival.

Sen. Elizabeth Warren (D) of Massachusetts said last week that the middle class “is in deep trouble” despite recent improvement in the job market.

On the Republican side, Sen. Marco Rubio of Florida is out with a new book, “American Dreams,” pitching ways to restore upward mobility for working families like his own immigrant parents.

Other potential candidates have expressed similar themes, and these concerns are expected to feature prominently in Mr. Obama’s State of the Union address on Jan. 20.

So how is the middle class doing?

The good news is that many households have clawed their way back from unemployment, foreclosure, or other hardships since the Great Recession of 2007-09. But it’s equally true that this remains an era of financial anxiety and stagnant wages for millions of working families. 

These challenges are significant because middle-income America is large (by some measures about half the population) and vital to the health of the larger society.

The following four gauges give a reading of how people in the middle of America's economic spectrum (those who aren’t poor or rich) are doing:

Standard of living. Average household income hasn’t grown much in recent decades, once you adjust for changes in the cost of living. For the middle 20 percent of US households, it was actually lower in 2013 (at $52,322) than in 1989 (at $52,467), according to the most recent income report from the US Census Bureau.

Since 1970, inflation-adjusted incomes are up 12.5 percent for this middle chunk of households.

Since 2013, wages for US workers have gone up modestly, and they promise to accelerate at least a bit in 2015 thanks to a tightening job market.

What's behind slow wage growth? It's a matter of debate, but the phenomenon has coincided with an era of global competition that includes exporting nations with much cheaper labor. Then the 2008 financial crisis squeezed consumer activity, eating a hole in the job market. And some economists say the policy climate has favored investors over workers.

Upward mobility. Americans have long thought of their nation as a land of opportunity, but rising from poverty to the middle class or beyond isn’t as easy as America’s Horatio Alger ethos might imply. Miles Corak is among the economists who have documented greater economic mobility in other advanced nations (Canada, much of Europe) than in the United States. Research by Mr. Corak in 2006 classified the US as a low-mobility society, measured by how closely a son’s earnings tend to track with what his father earned.

As with wage stagnation, the roots of the challenge are probably varied. But stable family life and solid education are two factors that can greatly improve the odds of a child rising higher economically than his or her parents. Policies that support families and nurture good schools in low-income neighborhoods appear promising.

Financial security. By some measures, the financial security of the middle class is weaker than today’s unemployment rate suggests. (The official jobless rate is now 5.6 percent of the labor force.)

American workers are having to pay out of pocket more for their employer-sponsored health insurance. Many workers don’t have such coverage at all.

Most large employers have health plans, but only about half of firms with fewer than 50 employees offered coverage to their workers in 2014, according to the Kaiser Family Foundation. For all US firms, the percentage offering health benefits has fallen to 55 percent, down from 66 percent in 1999.

And the share of workers who will get a traditional pension continues to decline. Only 18 percent of private-sector workers had a defined-benefit pension plan in 2011, down from 35 percent in the early 1990s, according to the US Labor Department.

These challenges have risen against the backdrop of declining labor union clout, soaring health-care costs, and a shift away from employment "for life" at a single company. An increasingly peripatetic workforce now relies more on save-for-yourself 401(k) plans than on company-guaranteed pensions.

Wealth. Just as incomes have stagnated, so has household wealth. Although family net worth has roughly doubled for the typical upper-income family since 1983, it has fallen for lower-income households and changed little for the middle class (up 2.3 percent). That’s according to a Federal Reserve survey that tracks family assets (like houses, savings, and investments) and debts.

Middle-income households had a median net worth of $96,500 in 2013, about $2,000 more than in 1983. Lower-income households, by comparison, had $9,300 in median net worth, an 18 percent drop.

One key factor behind these wealth trends: Upper-income Americans tend to have more money in the stock market, which has recovered since 2008 much more strongly than the home-and-mortgage balance sheets of middle-income families.

About these ads
Sponsored Content by LockerDome
 
 
Make a Difference
Inspired? Here are some ways to make a difference on this issue.
FREE Newsletters
Get the Monitor stories you care about delivered to your inbox.
 

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK