Is the American Middle Class Disappearing?
While the US Economy has improved after the recession that is not the whole picture. There are several worrying signs that are a genuine cause for concern. The economy needs a strong working and middle class yet a report by Pew Research Center has stated that of the 229 major U.S. metropolitan areas in the USA, 203 have a declining middle class presence over the last dozen years or so. They must logically moving up the social ladder or falling; the more likely is the latter and there are several reasons why this is happening:
· Wages are fairly stagnant while some costs are rising well beyond any published rate of inflation. Pew states that hourly paid workers have seen their wages rise by over 700% in the last 50 years. That takes the current average hourly rate to $20.50 per hour. When inflation factors are included the real percentage is just 8%. While this has been going on education and health costs far outstrip wages; 1,120% in just a 30 year period.
· Debt is widespread. Credit cards have allowed families to buy things they cannot afford to pay for with cash. When the monthly statement arrives far too many are simply paying the minimum payment required and therefore wasting money on the interest subsequently added. If more people paid off such balances, ironically by taking on other debt, an installment loan at a much cheaper rate of interest, their future prospects would be much better. The current level of debt in middle class families is double what it was 30 years ago
· Lending rates are at an historical low. That is positive for mortgages but certainly not from some of the savings accounts that the middle class have usually sought; US Treasury bonds, bank CDs and savings accounts.
· Savings habits are poor and less than half what they were 50 years ago. The figures for the vast majority of citizens, all but the top 10% of society, are dreadful and reflect how few people seem to be living with a proper budget that has identified both saving and spending within its means. The widening gap between the rich and the rest is a serious cause of concern. There was an interesting report last year by Credit Suisse which said that the middle class in the USA had more total wealth than any of the other 21 countries studied but when this was represented as a percentage of the total wealth in the country it dropped behind all the other 20.
· The Recession has had some lasting effects. The equity in real estate stalled completely during those difficult years and it is impossible to get back the growth that would have normally been expected. In some cases real estate is worth no more than it was a decade ago.
The Recession is still affecting American society
Average income is below the level pre-recession and wealth creation has obviously been hit by the real estate market’s problems. The environment is far different than it was then. The US Bureau of Labor Statistics identifies the number of people in part time employment has risen to a level that was the norm over 20 years ago. Even though the figure of 6 million has dropped from a peak of 9 million mid-recession it is far higher than it should be within a good economy. While unemployment levels have halved for the double figures at the height of the recession it does not mean that everyone can find a job to suit their skills or a wage to meet their needs.
There are no obvious answers to some of the problems in the USA. Obviously individuals should try to reduce their debts and live to a proper budget with sufficient put aside to save for the future. How many succeed in doing that cannot possibly be estimated but in recent years there have been few reports that have announced positive news on the subject. The middle class needs to recover if the US economy is to grow at a satisfactory rate. That cannot happen while most signs are stagnant and too few understand the seriousness of their current situation.