Home » Blog » Middle Class Struggling

Middle Class Struggling

A striking USA TODAY article caught our attention today. The piece summarizes a study about the financial struggles of the middle class, and its findings both confirm and explain a growing sense of unease about the future among many middle-income families.[1] The Pew Research Center for Social and Demographic Trends found that middle-class families finished the first decade of the 21st century with lower income than they had at the beginning of the decade.[2] This phenomenon had not previously occurred since World War II.

Overall, Americans’ median income fell around $3,500 and stood at $69,487 for a household of three, and it has been 11 years since the last peak in household incomes. In 2011, around half (51%) of adults fell within the income range that researchers defined as middle class for a family of three, $39,000 to $118,000, and that share had fallen from 61% in the early 1970s, adjusted for inflation and calculated in 2011 dollars.

For the first time in 40 years, the middle class earned less as a share of national income than the wealthy did during the latter part of the decade. While the middle class made up 51% of all adults, they earned 45% of national income. Upper-income households (above 200% of the national median household income) earned 46% of national income and comprise 20% of all adults. That figure represents a 50% increase for the upper-income households.

Regarding wealth, median household wealth fell 28% during the decade to $93,150. Perhaps most stunning was the June Federal Reserve report that the $7 trillion decline in home equity during the housing crash erased middle-class gains in wealth since 1992. In fact, the Pew study estimates that middle-income households’ net worth is just $2,100 greater than it was in 1983. Middle-income families have also had a more difficult time than their upper-income counterparts recovering from the Great Recession because they have invested a greater share of their net worth in their homes, while wealthier families have regained their wealth in the stock market. Pew researchers said that unemployment, underemployment, and workers leaving the labor force because of poor prospects also contribute to their difficulties. Together, these three groups represent 20% of the total work force.

Analyses by the New America Foundation and federal agencies have yielded similar findings regarding the financial stress of the middle class.[3] [4]

Americans blame several institutions for their enduring financial difficulties. Those in the middle class were most likely to blame Congress (62%), banks (54%), large corporations (47%), and the George W. Bush administration (44%).

The Affordable Care Act contains several provisions that will offer important assistance to many middle-class families. In particular, state health insurance exchanges will create more transparent marketplaces for families to compare and purchase insurance plans, and refundable tax credits will provide valuable assistance to help middle-class families, small businesses, the self-employed and other individuals who lack employment-based coverage purchase affordable health insurance.



[1] Available at: http://www.usatoday.com/money/story/2012-08-22/lost-decade-middle-class-pew-study/57206476/1?csp=34news

[2] Pew Research Center. Available at: http://www.pewsocialtrends.org/2012/08/22/the-lost-decade-of-the-middle-class/

[3] New America Foundation analysis available at: http://newamerica.net/publications/policy/the_american_middle_class_under_stress

[4] Congressional Budget Office. 2011. “Trends in the Distribution of Household Income Between 1979 and 2007.” Washington, DC.

Tags: , , ,