The Vanishing Middle Class

In case you haven't been keeping up with the fortunes of the fortunate, the private jet business is booming. In the first quarter of this year, shipments of private jets were up 41 percent. It seems that servicing America's elite is a thriving niche. There are so many new mega-yachts that owners can't keep them staffed, says the New York Observer.

Now, back on Earth, let's look at how the rest of us are doing. Hmm. Not so well. Even for those in steady jobs, there is a creeping sense of instability, a generalized disquiet and unspoken worry that sits on one's shoulders adding drag to the day.

Packaged in this malaise is the spike in oil prices and what that will mean for gas prices and every other thing we buy, the bottoming out of the housing market, companies announcing huge layoffs, and rises in food and health insurance costs outpacing salaries and wages.

This volatility has led to a shift in how we see ourselves. "Vulnerable" is probably the best descriptor. Our thoughts turn to hunkering down rather than plans for the future.

But what makes this coming decline in economic security different from the one visited upon American families in the 1970s, for example, is that we are much less well-positioned to withstand the financial buffeting. The work of Harvard law professor Elizabeth Warren indicates there is a coming collapse of the middle class and she can prove it with a raft of scary statistics and charts.

Warren says we are moving toward a two-class rather than a three-class society, where there is a somewhat larger upper class made up of the financially comfortable and then there is the rest of America, people who are "constantly living on the edge of a cliff." These are families who might appear to earn a decent income but they enjoy none of the financial security that we normally associate with middle-class status.

Warren compares the median American family of 1970 with that of 2003. She unpacks why our savings rate has dropped to zero from a rather healthy 11 percent of take-home pay in 1970, even as the family added Mom as a breadwinner.

Typically, blame for this lands on families themselves. They're spending themselves into penury by buying designer clothes for their kids and indulging in $4 lattes, say social commentators.

Not so, Warren counters. She says that Americans are actually spending far less in inflation-adjusted dollars for things like clothes and food, including eating out, than they did in 1970. What has substantially changed, Warren reports, is the cost of big-ticket, fixed expenses. So that even though the income of the median two-parent, two-child family is higher, because both parents are employed, the family has less income available to shore itself up against a rough patch.

Housing costs for a median-sized house (which has gotten modestly bigger since 1970 by adding either a second bathroom or a third bedroom but not both) have increased 76 percent. Health insurance costs are up 74 percent. Also up sharply are taxes (due to the second income), child care and car-related expenses. Americans keep a car more than two years longer than they did 30 years ago, but they now need two cars to get to two jobs.

These big, inflexible expenses cost the median family three-fourths of its two-earner income. In 1970 they cost half of the single breadwinner's.

We now live in a country where there is no financial margin for most families to fall back on in case someone gets sick or a job is lost. Life is far riskier.

Then add on an energy crisis and you can almost hear the foundation cracking.

Sen. Bernie Sanders, I-Vermont, has received hundreds of e-mails from Americans who suddenly have found themselves in desperate financial straits. He's been reading their plaintive stories on the Senate floor. How they were middle class but are no longer.

I fear that Warren's collapse has begun.

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Comments

[deminmo]

Starting back in the 60's there was a push for unfettered
capitalism. The founding father was Milton Friedman. He
believed the rich deserved to be even richer, and to do that
society had to be reinvented. Doing away with the welfare
system, social security, unions and any regulations that
would restrict capital gains. So, systematically, the middle
class is disappearing. When the rich need labor, they can get
it from people who have no other choice than the low wages and
instability of working for mega-rich employers. Bush and Chaney
have used Disaster Capitalism for almost 8 years.

[ibsteve2u]

I'd note another facet to "free trade" and "trickle down economics" that I've not seen commented on:

You can see from the price surges that those people who are about to retire or are already living on fixed incomes are much more likely to have to supplement their incomes with part-time or even full-time work in order to survive than ever before.

"Free trade" sent far too many of our jobs offshore - we have a surplus of labor and many, many boomers getting ready to retire, many of whom lost their pensions as companies eliminated them in order to cut costs so that they could compete with the goods that Wal-Mart imported from cheap labor nations. Living on Social Security won't get it - doesn't get it now, in far too many areas of the nation.

It is bad now - but in 10 years? It may well be a disaster.

And that, dear reader, is why I advocate tossing the illegal immigrants...your grandma and grandpa or your mom and dad are either going to have to move in with you, or the America job market will have to have some of the slack in the labor supply yanked out of it.

[KenFL]

Good grief.

First Ms Blumner tells us that there are rich people who have a lot of money - I guess to activate some jealousy in the reader.

Then she tells us everyone else is doing terribly these days compared to the '70s, and uses untrue "facts" to back it up.

The median house in the US is not a 2-bedroom,/2-bath, or a 3-bedroom,/1-bath house, as stated in the article.

In fact, the median size of houses sold in 2007 was 2,277 square feet, according to:

http://www.census.gov/const/C25Ann/sftotalmedavgsqft.pdf

This is up from 1,525 square feet in 1973, hardly a "modest" size increase (almost 50%).

Air conditioning use has gone way up since 1970.

Almost everyone has a cell phone and cable or satellite TV on multiple televisions.

Most homes have computers with internet access.

Today's first-time home buyers wouldn't touch the home my wife and I owned in the '70s - it would be considered a tenement by today's standards.

Yes, costs are high today for fuel. But only a few percent higher than in the late '70s and early '80s, when adjusted for inflation.

Health care costs a lot, but we use a lot more health care services than we did in the '70s.

Taxes for the median family are about the same, depending on how you count them.

All in all, the "good old days" were not so good, and today is not so bad.

Cheer up.

[ibsteve2u]

Ummm....your "almost everyone has blah blah blah" and "air conditioning" and "health care" remarks make it sound like you live in one of those exclusive condo communities in Naples, Florida and still have a fat pension and health care benefits...

[KenFL]

ha. wrong, wrong and wrong :-)

Why do you think that?

My opinion that folks have exaggerated how bad things are, and waxed nostalgic about the long gone "good old days" for as long as I can remember, has nothing to do with my personal circumstances, of which you are completely ignorant. My beef with this article is the lack of data and misstated "facts".

I don't think it's all that relevant that lots of folks have iPods now and such, that's why I focused on housing. But $100 a month cell phone and cable/internet bills are considered normal by almost everyone these days. I think that's a fair generalization.

If you bought my house from the '70s, and had the same type of car (4-cyl, no A/C or power anything), and lived like I did in the '70s as far as eating out etc, you could do just as well today. But nobody would accept that lifestyle today - so too-high expectations seem (to me) to be a big driver of today's unhappiness.

[Liberoservative]

When we have children starving in America........
Today is bad.l

When we have families waiting till their illness is so bad that it might be beyond repair because they can't afford healthcare....
Today is bad

When we have declined in the education of our children to the point that we will not be able to compete against a global economy...
Today is bad

When families have to choose between healthcare or food...
Today is bad..

I am not saying that it is all any one thing or any one person's fault... but we have lost our moral compass.... When we are living in a plutarchic fascist state...
Today is bad

[knowhelpnow]

If we would have started to go energy independent in the 70's we would be better off now, we wouldn't have gone to war in Iraq or as we are not going to go to war in Iran. These would be mute to us what ever was happening over there. I don't know all the answers or many of them except we have to get out of these wars and we need to get back our national money machine from the Federal Reserve and we must nationalize independent energy plans and we must spend money to make this work, we know longer can afford to be dependent on anyone for our energy and we must make it a national priority to make it nationalize. This Super Capitalism is a failure and we must get back to regulating our natural resource's not giving them to companies that hold us hostage. Free trade has made only a few rich and the rest of us are on the edge.

[Yasir]

Shaping society based on ecstasy of a fantasy is from apostasy.

[janmarbol]

tell this to the right wing... they say it's our own fault that we dare want to own a home like they do. We were the irresponsible ones who bought what we couldn't afford (like me who with a THEN 800 credit score, could have qualified for a 700k home but instead bought a 280k townhouse two years ago- to be conservative - and now it's worth half as much) I lost my job due to illness/doctor's recommendation; i can't find another. My husband works for the airline industry so of course, his plummet in salary is due to gas prices, but NO, this is ALL OUR FAULT. . .

Anything so they don't admit they voted TWICE for an idiot and his idiot people.

[Trittydi]

From where we're sitting - there's no hope for recovery. Completely beaten down by health concerns and lack of affordable health care - loss of second income because of the health issues. Imminent loss of our home. No retirement. Warren is right.

And for our Children? No healthcare, no affordable education, no jobs, no prospects.

Just a War-only-and-forever driven economy which also threatens America's youth unceasingly with drafting or communities of deliberately under-educated children to drive them into military to serve the obscene and ravenous blood-thirsty American War machine -- forever enabled and fed by BOTH political parties complicit in these war crimes against humanity and the rest of the world..

This is all we have to offer our children in this country.
*

[swift goat pet for truth]

After 12 years the GOP has demonstrated it does not know how to manage an economy, nor preserve the value of the dollar.

[Cathexis]

When the GOP is in charge, they are right: Government IS the problem. Lack of decent government, to be specific.

[benglert01]

Ok, so I got a 3% raise this year. $1500 more per annum. My wife gets no annual raises. My gas cost is up 61%, food is up 21%, utilities up 18%. Just average food and utilities, and my household costs went up 19.5%. Add my 3% raise, and my money is now worth 16.5% less than it was last year. But I'm working harder, and costs are only going up up up. This is basic economics. Bush set us up for the destruction of the middle class. The bankruptcy bill overhaul to keep you paying, turning a blind eye to credit card piggyback rate increases, etc. Look at how many average people can't keep their homes. Our government has failed us. And they want me to spend my stimulus check? Sure . . . .

[SCG]

The only measure this government ever heeds is the Stock Market. This didn't happen a year ago, eight years ago, but decades ago. And it doesn't look like more debt will band-aid the problems anymore.

http://www.amazon.com/Myth-Free-Trade-Pooring-America/dp/0684833557

[SeriousBlack]

"Warren says we are moving toward a two-class rather than a three-class society, where there is a somewhat larger upper class made up of the financially comfortable and then there is the rest of America, people who are "constantly living on the edge of a cliff." These are families who might appear to earn a decent income but they enjoy none of the financial security that we normally associate with middle-class status. "

I think we're already there. I'd really like to see a nationwide poll that asks only one question: Do you live from paycheck to paycheck? And see what the percentage is that answers yes.

[GrandeLatte]

I think your poll will be too unsettling. Hence it's ignored altogether.

I agree with you that you're ALREADY in a 2-tier society. There's no doubt.

[Danigirl65]

I do agree that we are moving towards a two-class society. Some of us are childless and can work two jobs - I have for the better part of 20 years (I'm 42). This move is not just the result of the current administration, although I'd love to blame it on them. It's been years in the making and I think you can look at the 70's as the big turn.

[jcorrington]

All one need to do is look around. Our gov and economy are broken, thanks to the repugs.

[deminmo]

This problem isn't just Republican, there are plenty of
greedy people out there. When you buy all the "toys" money
can buy, when you have trillions invested and in the bank,
but the lure of money keeps you pushing for more, then that
is greed. If you notice a lot of mega wealthy people do not
share the wealth, they do not support local food banks or
homeless shelters. But they do build wings on libraries, so
they are automatically on a board. And the cornerstone bears
their name for posterity.