Middle class under stress

[Deleted]

What do you think? Chicken little or right on?

Some factoids from the newamerica.net/publications/policy/the_american_middle_class_under_stress


Jobs and Wages:High Unemployment
Jobs that pay middle class wages are essential to a healthy middle class. Nearly two years after the recession officially ended, the unemployment rate remains high at 8.8%. The broader rate of unemployment, which includes people who work part-time but want a full-time job and people who have given up looking for work, was 15.7%, nearly double the official rate.

A Jobless Recovery
Employment in recent recessions has rebounded more slowly than in the past. The jobs recovery from the Great Recession is the weakest yet. At the current pace of job creation, the economy won’t return to full employment until 2018.

More of the Employed Have Low-Income Jobs
Middle-income jobs are disappearing from the economy.
The share of middle-income jobs in the United States has fallen from 52% in 1980 to 42% in 2010. Middle-income jobs have been replaced by low-income jobs, which now make up 41% of total employment.

The Under-Employed American
The problem is not lack of skills, but the structure of the job market.
17 million Americans with college degrees are doing jobs that require less than the skill levels associated with a bachelor’s degree.
Just under 30% of flight attendants and 16% of telemarketers have bachelor’s degrees even though this credential is not necessary for these jobs.

Real Wages are Falling
Real wages have stagnated over the past two decades, and in recent months, have actually fallen. Over the past year, nominal wages grew only 1.7% while all consumer prices, including food and energy, increased by 2.7%. The spending power of many American families has therefore declined.

Government Transfers Have Partly Offset the Stagnation of Wages
Wages and salaries have fallen from 60% of personal income in 1980 to 51% in 2010. Government transfers have risen from 11.7% of personal income in 1980 to 18.4% in 2010, a post-War high.
There are 8.5 million people receiving unemployment insurance and over 40 million receiving food stamps.

The Erosion of the Social Wage: Rising Health Expenditures
Despite an increase in government transfers, America’s social wage has been eroded by the rising cost of health care and education.
Health care spending increased from 9.5% of personal consumption in 1980 to 16.3% in 2010. Many households cannot afford rising insurance premiums and out-of-pocket health care costs, leaving nearly 50 million Americans without adequate health coverage.

Higher Education is Not Affordable
A college education is considered necessary to get a good job, but for many families college is no longer affordable. The average cost of one year of college is $21,000. After adjusting for inflation, it has risen 72% since 1990. For households with incomes at the 40th and 60th percentiles, one year of college tuition makes up 54% and 40% of their annual income, respectively.

The Emergence of “Screwflation”
“Screwflation,” a term coined by Wall Street guru Doug Kass, describes how falling wages and rising costs of basic goods are squeezing the middle class. The share of personal consumption spent on food and energy has risen from 13.4% in 2002 to 15.3% in 2010. Elizabeth Warren warned that the rising costs of basic middle class goods and stagnant incomes have put many Americans in an “economic vice.”

The Great Recession Dealt a Blow to Middle Class Wealth
Household net worth declined from $65.7 trillion in the second quarter of 2007 to $56.8 trillion in the fourth quarter of 2010.
The middle class, which has much more of its net worth tied up in home equity, has borne the brunt of this decline. Wealth recovered $8.1 trillion since the first quarter of 2009 due mostly to the recovery in stock prices.

Home Equity and Wealth
Home equity makes up a greater share of total wealth for the middle class than it does for wealthy families. For families up to the 90thpercentile of net worth, home values make up over 50% of total wealth. But with the decline in home values, many homeowners are now underwater, meaning that the value of their home is less than the amount owed on their mortgage.

Uneven Recovery: Stocks & Home Prices
Equity markets have recovered much of their losses, but housing prices have not. While the outlook in the equity market is uncertain, housing prices have resumed their decline and could fall another 10% to 20%,due to the pressure from theshadow inventory.
At the end of 2010, 23.1% of all residential properties with a mortgage were underwater, with total negative equity nationwide of $750 billion.

Deleveraging Remains a Painful Reality
Over the past three decades, household debt as a share of disposable income increased from 68% to 116%.
Households have begun to pay down debt, but have a long way to go to get back to the 1990s average of 85% of disposable income.

A Less Secure Retirement
Many Americans were relying on rising home values to finance their retirement and have thus under-saved.
The median value of retirement savings for retirees is $45,000.
The average retiree has a retirement savings shortfall of $47,732, with larger shortfalls among low-income Americans.

Shifting the Risk of Retirement Onto Employees
Over the past three decades, American companies have shrunk their private pension programs. Defined benefit pensions now make up only 3% of private sector pensions. Public employee pension programs are also in decline.

Relying on Social Security
Income Sources for Persons Aged 65 or Older as a Share of Aggregate Income
Social Security39%
Asset Income13%
Pension Income19%
Public Assistance1%
Other Income2%
Earnings26%

Half of married couples and nearly three quarters of individuals over the age of 65 depend on Social Security for the majority of their income. But, Social Security is far less generous than most seniors need for a secure retirement. When Social Security is needed most, Social Security is under attack.

Signs of Middle Class Decline: More at the Top, Less for the Middle
The top 1% of income earners in the United States account for 21% of aggregate income. The wealthiest 1 percent own about 35% of the nation’s wealth. The top 20% of income earners account for nearly 40% of total consumption.

Signs of Middle Class Decline: Low Social Mobility
0.00
0.10
0.20
0.30
0.40
0.50
0.60
Correlation of Intergenerational Earnings
Source: OECD
Parental incomes in the United States are more correlated with children’s incomes than in most other OECD economies.
Educational achievement of children in the United States is more closely linked to parental background than in any other OECD country.
Intergenerational mobility is worse in countries with unequal wealth distribution, like the United States.

[❤ mollymouser ❤]

It doesn't seem like the article is saying anything new.

[sil]

I couldnt get the link to work

But my gut reaction to the pasted text is that repeated use of the phrase "Great Recession" is a chicken little response. For an unacceptably large percentage of Americans, the last 3 years have been very painful, but it's a bit much to draw a parallel with the Great Depression.

OTOH I really like the term "Screwflation" and I intend to use it as much as possible.

[BeenThere...DoneThat...]

<<< OTOH I really like the term "Screwflation" and I intend to use it as much as possible. >>>

;D

...or as Sheldon and Leonard described on "The Big Bang Theory,"
"I don't want to be positioned by an inclined plane, wrapped helically around an axis!"

[createmyown]

May 9, 2011 16:47:00 GMT -5 BeenThere...DoneThat... said:

<<< OTOH I really like the term "Screwflation" and I intend to use it as much as possible. >>>

;D

...or as Sheldon and Leonard described on "The Big Bang Theory,"
"I don't want to be positioned by an inclined plane, wrapped helically around an axis!"

I have no idea what the BBT quote means Does that make me dumb?

I`m not concerned. I`m in Canada, which is a country that is highly dependant on America`s continued success, but I feel that the stories I`ve read were sitting ducks. I felt they were privileged and silly twits who couldn`t make do because they were so entitled and confused about what a need actually is.

Every time I hear `middle class,`my vision is the iPhone, SUV, Starbucks, eating out, BUYING books (who does this?!) lifestyle. It no longer means living within ones means, brownbagging it to work, dinners out for special occasions, using the library and parks.

I think if the people who were hit by this awful situation were to make lifestyle changes, they would manage, so I`m not really seeing it as a problem.

[stats45]

Some of this is 'Chicken Little', but I think that some are reasonable concerns.

[Deleted]

It means screwed...an incline plane wrapped helically around an axis is a screw... so if you are positioned by it, you are screwed...

[Sum Dum Gai]

BUYING books (who does this?!)

We do. You've never wanted to keep a book around for reference, not trashy novels or whatever obviously, but manuals and whatnot? There aren't certain books that you own because you'll read it multiple times or want to share it with your kids? There isn't some part of you that wants books in the house? You don't need piles and piles of them, but I can't imagine not having at least some books around either.

[phil5185]

IMO, createmyown nailed it - today's notion of middleclass is far different than when I grew up in the 1940s. There were no multiple-car families, few 2500 foot houses, no one 'ate out'. Notice how many posters have a budget line item for 'eating out', that literally was not done 60 yrs ago, it is a societal shift.

Health care spending increased from 9.5% of personal consumption in 1980 to 16.3% in 2010.

That 9.5% of 31 yrs ago, and the current 16.3% bought completely different things. In the past 60 yrs we've invented penicillin, the polio vaccine, MRI, Cat Scan, most drugs. In 1940, healthcare was a home visit from a dr with a black bag. For your 9.5% 30 yrs ago you had to drive to town to see that dr with the black bag. The treatment was limited. Now most things can be accurately diagnosed and then treated - I like 'now' way better.

[busymom]

I see some improvement in the economy here, but very slow change. And not everyone is benefiting from improving conditions at this time. Three friends in our personal circle of friends have still not found full-time jobs after 2 years of looking (although they survive working whatever part-time jobs they can string together.) Two of the three have lost their homes, the 3rd has theirs up for sale. My own hours have been cut, DH's hours have been cut, insurance taken out of my DH's check continues to go up each year, while what the health insurance actually covers goes down. We are hanging in there, but it's not pretty. We never were living like "lifestyles of the rich and famous". We don't have cable t.v., we 've never had an iPhone, etc. I'm not whining, and certainly I've seen examples of people who could make do with less, but the middle class is still waiting for the improving economy to "trickle down" to us. (And frankly, I've never believed in trickle-down economics!)

[Deleted]

Who buys books?

I don't own an SUV, iphone or go to starbucks... but I couldn't give up books. Of course, i think the adage... you can have anything, just not everything holds. Its all what you prioritize...

I would be most content if my children grew up to be the kind of people who think decorating consists mostly of building enough bookshelves.
Anna Quindlen


Wait... is my Outback technically an SUV?

[busymom]

By the way, I like the term "screwflation" too! If the shoe fits, ...

[Sum Dum Gai]

I don't own an SUV, iphone or go to starbucks... but I couldn't give up books.

Exactly! Only my POS car is definitely nowhere close to an SUV.

[BeenThere...DoneThat...]

May 9, 2011 18:52:10 GMT -5 Sum Dum Gai said:

I don't own an SUV, iphone or go to starbucks... but I couldn't give up books.

Exactly! Only my POS car is definitely nowhere close to an SUV.

...this reminds me... a sporty car passed me on the road today and its emblem read, "POS Talon," which I found, well, unfortunate...

[createmyown]

Phil, I`m bowing to you as the grasshopper bows to the Master

To the book-buying folks, it`s just my own brand of freaky, I guess. I can`t stand stuff. Even when I am generously given a book as a present, I donate it to the library. I figure more people can benefit from having that book available in a public organization.

I do have books -- several used books that are falling apart, seams gaping to the sky, pages yellowed with years and the love that comes from passing on a cherished story to feed another soul in the family, that were saved from where I grew up on another continent.

I have never, ever read a book more than once. I have never felt the urge to `refer` to something other than Google. Different strokes for different folks, but my personal value system is that buying a book for one`s pleasure is a luxury when libraries abound.

[Sum Dum Gai]

Different strokes for different folks, but my personal value system is that buying a book for one`s pleasure is a luxury when libraries abound.

Well sure, but so is anything more than a tent with a few blankets, clean water, and a surprisingly small amount of food. Doesn't mean I want to live that way.

[Deleted]

Can't support libraries, they are almost as communist as the boyscouts...

I have books that i ready EVERY YEAR...

Yeah, I'm with Dark... everything not in Maslow's first stage is a luxury... prioritize as you like...

Does it matter that its a POS Outback? that i plan on running into the ground?

[createmyown]

I think you`re creating a straw man argument, Dark Honour. I`m not suggesting people should live a life with only the bare essentials and completely devoid of pleasures.

I also didn`t advocate giving up books. I just offered the opinion that buying books for oneself is a luxury when books are available for free.

Giving up books is not synonymous with buying books. Borrowing a book from the library, reading it and returning it is a free pleasure. Buying a book, reading it (repeatedly or not), and then storing the book is a pleasure with a price attached to it.

I will happily give up books in order to secure a college education for my children, for example. I think it is a new luxury that is rebranded by some people as a need.

If some of the folks who suffered unfortunate setbacks chose to utilize the library, they may find a lot of free pleasures available to them and be able to withstand the downturn in their luck a bit better.

Very sorry to hear, busymom. Stories like those are NOT what I`ve been seeing.

[busymom]

No offense taken, create. I'm praying the problems we see here are only regional and not national (but I wouldn't be opposed to moving elsewhere if the economy worsens here).

By the way, I like libraries too!

[constanz22]

May 9, 2011 19:42:19 GMT -5 busymom said:

No offense taken, create. I'm praying the problems we see here are only regional and not national (but I wouldn't be opposed to moving elsewhere if the economy worsens here).

By the way, I like libraries too!

Just out of curiosity, what part of the country are you in? I haven't seen any of this either. I don't know one person who has lost their job, house, etc. There have been a few positions cut at work (county government) but many of them were through retirement or already vacant positions.

[Sum Dum Gai]

I`m not suggesting people should live a life with only the bare essentials and completely devoid of pleasures.

Right, but of all the luxuries out there that people "waste" money on (in quotes because we all define waste differently) books seemed like an odd one to single out.

[createmyown]

Hmm, I guess I don`t see it as odd, Dark Honour, because I feel the library is such a great substitute?

It wasn`t really like an Abe Lincoln type speech. I was just writing what came to mind. Those things I listed are issues people around me struggle with so it`s possible they were just on my mind because I`ve recently dealt with them. It really wasn`t meant to be the Worst Sins of the So-Called Middle Class Lifestyle ;D

[dancinmama]

I think the whole darn thing is a huge cluster.

I am most worried about the value of housing, especially for people who may not have contributed to a retirement fund; but were faithful about their mortgages thinking that they'd use their equity to fund their retirement. Those people will have to keep working while they wait for the housing market to recover (years probably). This means that their jobs will not be available for other people to move into which will continue to put pressure on unemployment. Everything is in one way or another interconnected.

[formerexpat]

A college education is considered necessary to get a good job, but for many families college is no longer affordable. The average cost of one year of college is $21,000. After adjusting for inflation, it has risen 72% since 1990. For households with incomes at the 40th and 60th percentiles, one year of college tuition makes up 54% and 40% of their annual income, respectively.

Doesn't the average college student come out with about $25k in debt? The average starting salary for college grads in 2010 was $48k.

So, slightly over 50% of your first year salary that you can take what, 10-20 years to pay off...big f$@$%ing deal.

I think most people bitch about it being too tough to live a "middle class" lifestyle because they live way beyond their means and much more than a middle class lifestyle. How many times has this board, whether here, or rather more at YM, seen this in peoples budget?

[Sum Dum Gai]

Hmm, I guess I don`t see it as odd, Dark Honour, because I feel the library is such a great substitute?

Depends on the quality of the local library and what you like to read.

Besides, more people should be picking up books and turning off passive forms of entertainment. Even if they do spend as much on the books as they formerly did on cable.

[createmyown]

Dancinmama, when you say `they'd use their equity to fund their retirement,` what does that mean?

Does it mean, sell the house they`re living in and use part of it to buy a smaller home and then use the difference in price to live on?

[dancinmama]

May 9, 2011 20:03:45 GMT -5 createmyown said:

Dancinmama, when you say `they'd use their equity to fund their retirement,` what does that mean?

Does it mean, sell the house they`re living in and use part of it to buy a smaller home and then use the difference in price to live on?

Yes. I live in a very high cost of living area. Before the economy took a nose dive, many, many people we knew would sell their home in CA and relocate to a much lower cost of living area.

[createmyown]

To add to that formerexpat, I think people my age (26) would like to be where their parents are (in their 50s) right out the gate. Why don`t I have the 3 bdr 2 bath house? Why don`t we have two cars? Where`s the overseas holidays?

My people are a bit impatient

[formerexpat]

I think people my age (26) would like to be where their parents are (in their 50s) right out the gate. Why don`t I have the 3 bdr 2 bath house? Why don`t we have two cars? Where`s the overseas holidays?

It's not only your age. We have neighbors that just had a baby. They told us that cash flow was going to be tight for the next several months because she was taking some time off with the baby. But, they can't wait to get their tax refund back so they can build a deck onto the home. We all moved in last year and they want that tax credit asap.

Most people are financially irresponsible.

[midjd]

May 9, 2011 19:59:22 GMT -5 createmyown said:

Hmm, I guess I don`t see it as odd, Dark Honour, because I feel the library is such a great substitute?

It wasn`t really like an Abe Lincoln type speech. I was just writing what came to mind. Those things I listed are issues people around me struggle with so it`s possible they were just on my mind because I`ve recently dealt with them. It really wasn`t meant to be the Worst Sins of the So-Called Middle Class Lifestyle ;D

I get what you're saying, I kinda feel that way about paying full price for books... we have rooms full, but they are all dogeared and half of them still have the "USED SAVES" stickers on the bindings. I can't imagine spending $30 a pop on a single hardcover when I can get 30 paperbacks (or 15 hardcovers) for the same amount at a used bookstore. Even paperbacks are $8-$10 new these days, it seems.