The Fall Of The Shining City On A Hill
The United States is known as the top economic superpower in the world, but it may come as a surprise to some that the country also has one of the fastest declining middle classes among developed nations, second only to Japan. This is a controversial and concerning issue, as the middle class is often considered the backbone of a strong economy. However, today, middle income Americans are facing issues that would have been unimaginable to the middle classes of the 70s, 80s, or 90s.
One of the most pressing issues for the middle class is the rising cost of living. According to a report by Bloomberg, a majority of middle-income families, about 84 percent, reported facing difficulties in affording non-discretionary items such as food and gasoline over the past 12 months. This is coupled with the fact that credit conditions have not been this tight in almost 15 years, making it harder for middle-class Americans to access loans and credit.
The high cost of living also means that many middle-class families have to cut back on non-essential purchases in order to cope with rising expenses. In fact, a study conducted by Primerica found that 76 percent of middle-class families reported that they will continue to cut back on non-essential purchases in order to cope with rising living expenses. Additionally, about half, or 51 percent, of middle-class families reported having to tap into their emergency funds in the past year or dipping into their personal or retirement savings.
This high cost of living has also led to a decline in buying power for many middle-class families. An analysis conducted by Primerica found that 61 percent of middle-class households noticed a five to ten percent drop in their buying power since 2020. At least half of them noted that most of that decline has been felt over the past 12 months. This is a concerning trend, as it means that despite earning more money, middle-class families are not able to purchase the same amount of goods and services as they could in the past.
Another factor contributing to the decline of the middle class is the rising costs of housing, child care, and healthcare. According to a study published by researchers Krauss and Sawhill in September 2022, which analyzed changing middle-class trends since the year 2000, 46 percent of middle-income Americans believe that the U.S middle class is being wiped out by increases in the price of these items. About 21.5 percent cite the rising costs of education as a primary contributor to the decline of the middle class, and roughly 30.2 percent mentioned the rising reliance on having two incomes per household.
Additionally, there is a decreasing number of middle-class jobs in the United States, and many middle-class workers are finding that their wages are barely keeping up with inflation. This makes it harder for them to make ends meet and maintain their standard of living.
However, the researchers explained that no factor impacted the shifting ranks of the American middle class more than the Great Recession. Middle-class incomes were largely unchanged from 2000 to 2016, and this is often referred to as the last decade of stability for the middle class. With another recession on the horizon, it's fair to worry about how much the average income and the size of the American middle class will diminish during this downturn.
Data released by the U.S Bureau of Labor Statistics indicates that for middle-class Americans, average incomes for families with two working adults jumped six percent from $74,000 in 2010 to about $78,500 in 2016. Today, that figure sits at about $90,000, which may seem like a big leap, but when you account for how much buying power a dollar has today versus a dozen years ago, it's not as impressive. To have the same effective income as $74,000 in 2010, the average middle-class family would need to make roughly $112,000 in 2023. This shows that while middle-class Americans are earning more money, they are still struggling to maintain their standard of living due to the rising cost of living.
At the same time, while middle-income Americans have seen their earnings barely increase in the past couple of decades, upper-income Americans have made significantly more. In 2022, the top five percent of income earners made an average of $343,000, while the middle class made an average of $90,000. This disparity in income highlights the growing income inequality in the United States, which is also contributing to the decline of the middle class.
The decline of the middle class in the United States is a concerning issue that is being caused by a combination of factors. The rising cost of living, coupled with high levels of debt and stagnant wages, is making it increasingly difficult for middle-class Americans to make ends meet. Additionally, the decreasing number of middle-class jobs and the growing income inequality are also contributing to this decline. It is important for policymakers to address these issues in order to ensure that the middle class can continue to be the backbone of a strong economy.
Solutions
There are several potential solutions that could help address the decline of the middle class in the United States. Some of these include:
Increasing the minimum wage: One way to address the problem of stagnant wages is to increase the minimum wage. This would provide a much-needed boost to the incomes of low-wage workers, many of whom are middle-class.
**Investing in education and training programs: **Education and training programs can help workers acquire the skills they need to access better-paying jobs. This can help to ensure that the middle class has the skills they need to succeed in the 21st century economy.
Providing affordable healthcare and childcare: The high cost of healthcare and childcare is one of the main factors contributing to the decline of the middle class. Providing affordable options for these services would help to ease the financial burden on middle-class families.
**Tax reform: **Tax reform can help to reduce income inequality by increasing taxes on the wealthy and using the revenue to support programs that benefit the middle class, such as education and healthcare.
Addressing the housing crisis: The high cost of housing is also a major factor contributing to the decline of the middle class. Increasing funding for affordable housing programs and addressing zoning laws that limit the construction of new housing units could help to make housing more affordable for middle-class families.
Investing in infrastructure: Investing in infrastructure can create jobs and stimulate economic growth. This can help to ensure that the middle class has access to good-paying jobs and can maintain their standard of living.
