The Middle Class Meltdown: The Alarming Crisis Facing the Middle Class in America

#economy #business #finance
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Over the past decade, the American middle class has witnessed a significant decline. In the last ten years alone, individuals with middle incomes have experienced a more substantial loss in purchasing power than they did between 1970 and 1990. This trend is primarily attributed to the escalating cost of living in the United States, which has propelled median home prices from $117,000 in the '70s to nearly $450,000 today. Various aspects of daily life, such as cars, healthcare, education, gas, utilities, and other consumables, have seen a marked and exponential increase in prices. However, incomes have only seen a 66% rise over the last five decades. Inflation further compounds the issue, eroding a larger portion of people's income each month.

The traditional American dream of attaining financial security and building wealth through home equity is increasingly unattainable for a significant portion of the population, even those classified as middle class. The current labor market lacks an adequate number of middle-income jobs to sustain the contemporary middle class, leading many households to rely on multiple jobs to maintain their living standards. A substantial number of individuals may have already fallen out of the middle class without realizing it. The current job market is highly polarized, where individuals must either pursue an expensive college degree for top-tier positions or settle for lower-paying jobs. Having a degree does not guarantee a six-figure salary, given the prevalence of more available roles at the lower end of the job market.

An August 2023 survey by American Compus revealed that a majority of American workers lack job security, with only 40% having secure jobs that pay at least $40,000 annually, inclusive of health insurance and paid time off, while also offering predictable earnings and a regular schedule. Despite the historical role of the middle class as an engine of economic growth in the U.S., it currently contributes a smaller share of income than it did from 1960 to 1980, according to Pew Research Center data. The middle class has contracted by 11% since the presidency of Richard Nixon in 2023, accounting for less than half of the country's population.

There is a prevailing belief among economists that the official figures may underestimate the true size of the middle class due to ambiguity in its definition. The Department of Labor places the federal poverty level for a family of four at $30,000, while those earning between $30,000 and $43,372 are considered middle class. However, critics argue that categorizing a part-time bartender and a suburban power couple with significantly disparate incomes in the same bracket is peculiar. The Federal Reserve defines the middle income level as individuals falling within the middle 50% of all income, but concerns arise about how this average is calculated, considering extreme income disparities. A more accurate median income could be up to 10 times higher than the current figures suggest.

In essence, the middle class is not precisely positioned in the middle today, and the current definition reflects more on demographics than actual purchasing power. While middle-class families may not be miserable, their financial security is not guaranteed, and the foundational support for this group appears to be deteriorating. A growing number of middle-class Americans are being excluded from homeownership, with approximately 11 million families that were once part of this income bracket no longer included since 2020. This situation has been exacerbated by inflation, reaching a peak of 9.1% in June.
In 2022, property values have experienced a substantial surge, leading to a boon in home equity for some. However, this has resulted in most young adults being entirely priced out of the housing market. With the highest mortgage rates in over two decades, middle-income households can now only afford homes that are worth half as much as they could just three years ago. Fannie Mae reports a significant decline in median purchasing power for families, plummeting to $189,900, compared to $356,550 when interest rates were near zero. While purchasing power has diminished, list prices have seen a sharp increase, with 45% of markets in 100 major U.S. cities, as tracked by Redfin economists, reporting list prices exceeding half a million dollars in 2023.

[Mrshuster]

The bank crisis isn't over yet, and experienced individuals know credit crises don't end quickly. Some find it amusing that some think it's resolved, but in reality, we're headed for a major economic downturn due to this credit contraction.

[shellylofgren]

So how exactly can we guard against the coming financial reset for 2024? Like what are really the best strategies to make our portfolio recession proof against the incoming financial reset? I'm very worried about my $110k stock portfolio.

[Patriciabanks]

The ongoing banking crisis is far from reaching a resolution. Those with more than a decade of experience understand that credit crises do not dissipate within a mere two weeks. It's amusing to witness some people believing that everything has already concluded so swiftly. We are currently witnessing a credit contraction that will inevitably result in a substantial overall contraction.

[helenedwards]

I’m 68 years old and working a 40 hour week, I’m college educated still working by Gods grace for less than 50000 per year. I’m grateful

[The-Thinking-Cat]

One result of all this may be a restructuring of family in America, with less expectation of independence at a young age. Daycare for an infant is 1600 per month. I think we are all going to live in multi-generational households with a lot of sharing of responsibilities and resources in order to have a decent life.

[paultarp]

Yes. The Middle Class is now the "Low Class". The "Low class" is now the homeless. I used to have a well paying job. Well, I still have that job.. As the inflation has mounted, the minimum wage has increased while mine has not kept up. Employers give $0.26 cost of living increases. while minimum wage gained a 25%. So, what that means for me is my dollar means so much less than it used to. It puts me so much closer to poverty level.

[PatrickLloyd-]

The financial system has been artificially pumped for over a decade to ensure big pockets were lined; and now those same hands will make a fortune in the largest transfer of wealth in human history by shorting it on the way down. Inflation does have a roll, but that's to keep everyone panicked, and focused on their bills and expenses, rather than focus on the capital crimes of politicians and corporations, I'm still at a crossroads deciding if to liquidate my $338k stock portfolio, what’s the best way to take advantage of this bear market??

[rubyruby]

I am in Australia. It's criminal the way house prices have become an investment rather than a roof over people's heads. The modern family unit has all the cards stacked against them if they cant afford to keep a roof over their heads.
I am not certain that our kids will ever be able to afford to get into the Australian housing market and own their own home, Housing in Australia has become unattainable for many and rent prices are quickly becoming out of reach for many families.

[fdm]

$43K for a family is 'middle class'? Where? There's nowhere in America a couple with a child could live comfortably on $43K unless they own their home and are debt free...

[pucker]

There's no way the median cost of a house in the 70's was $117k. More like $35k.

[szvqorwnpstahskypfwmp]

I am dead serious!
The New American Dream is
to leave and move to a country
where it is much more affordable!!
Many Latin America and SE Asia look
very attractive and livable.

[meleepinata]

I'll gross about 63 this year. I don't own a home. I don't have a car payment. My car is 26 years old. I keep the lights on, but I've had a couple of really sketchy weeks this year. I've managed to save up a little safety net but all it takes is a nasty car repair or getting sick for a week to put a crater in it. I work like a dog and I'm constantly exhausted. My dad made significantly less (like 20k less) and had a house, two cars, and fed a house of 4-5.

[katie]

It's worse than ever but the middle-class erosion has been going on for quite some time now. The politicians are owned by their wealthy donors, and tax laws are implemented to benefit the donors who are typically rich.

[susanverhoeven]

Just a few comments some may not like to hear. I am almost 75 and was a worker bee for just short of 40 years. The people I worked with back in the 1990s began talking about the middle class disappearing and predicted a lot of the changes we have now seen. We wondered why the government and those in power never talked about what was so obvious to us. Most of us had grown up in households that just made ends meet, never took vacations, never ate out, had only one car, and a father who worked two jobs. We were considered the middle class then. I graduated from college, but I went for 11 years while working. Back in the 1970s I read an article in the Sunday Chicago Tribune in which demographers correctly predicted steep rises in house prices and predicted "the USA will become a nation of renters" and that, except for the wealthy, the other most common home owners would have inherited their homes. I read this nearly 50 YEARS AGO. What is happening was predicted long ago. THE QUESTION IS;: WHY DID THE GOVERNMENT DO NOTHING ABOUT IT?

[glorialovesChrist]

You raise wages you have raised prices so they cant get ahead anyway. .

[joanneburford]

First time I've been able to listen to an American talk on economics without getting a headache. Well done on not yelling or speaking in a condescending tone. My favourite is still Economics Explained, for obvious reasons, thanks mate.

[Captseed]

Let’s keep working people so we can send our money to other countries who will never help us 😂

[juventinorodriguez]

Oligarchs are achieving what they wanted, that is to force the workforce to have two jobs.

[tomkarnes]

You can't have a middle class without democracy, we don't have it, oligarchy is the cansor through out all of human history

[WorkingNationDiscourse]

This comprehensive overview of the middle class's decline is a wake-up call to the realities many Americans face today. The stark contrast between a 66% rise in incomes over five decades against soaring costs in every aspect of life, from housing to healthcare, underscores a deepening economic divide. It's particularly alarming to consider that the traditional American dream, anchored in homeownership and financial security, is slipping away from the grasp of many who would historically be considered middle class. This situation calls for a critical reevaluation of our economic structure and policies to address the growing gap between the cost of living and earnings.