The middle class was once a symbol of the American
dream, but the American middle class today paints quite a different picture. Being a middle class, I feel like you really just in
between a rock and a hard place. You know you're in a spot where everyone's like,
Hey, you're doing better than, you know, low class. You're doing great. You should be fine and you're
underneath the people who are actually doing fine. It was at least a secure category. Your kids would go to a school that you felt at
least OK about. You probably own a car or two and own your own home,
and you could pay for your kid's college educations. So there are certain kinds of assumptions around
being a middle class person that have sort of shattered. A survey in 2018 found that a third of middle-income
adults don't have $400 to cover an unexpected expense In polls, when people are asked about being middle
class, they frequently are less likely to say so, and more people now urge the pollsters to suggest that
they're working class. So I think that many people who maybe in prior years
would have thought of themselves as middle class now no longer think of themselves that way. So when we think about economic status, we think
about it as some static, you know, state of the world that you are either poor or not poor; your middle
class or you're not. But in fact, the reality is that many middle class
families will experience one or a few years in poverty. In fact, most American families will have
years where they'll be poor or near poor. That precarity, that uncertainty that is now a
feature of the middle class experience for most U.S. families. So, what exactly happened to the American middle
class? A study by the Pew Research Center discovered that
the middle class, which was once comprised of the majority of Americans, has steadily shrunk since the
1970s. About 61% of American adults were considered middle
class in 1971, compared to just 51% percent in 2019. However, the issue still remains widely debated When people think about the state of the middle class
and whether or not it's shrinking. It really is a difficult question, and I think the
reason why is that, as a nation, we've not actually established a formal definition of middle class. I was in a seminar recently where somebody literally
said there is no middle class anymore. The middle class is gone. And I thought, Oh dear, you know, that's political
rhetoric. And I understand that it's a sort of a standard for
saying that folks in the middle are hurting, but it's just really not accurate. We looked at the size of the middle class in these
16 rich countries in 1985 and again in 2016. And one of the things that surprised me was the size
of the middle class in the United States did not change. It was about 59% percent in 1985 and it was
59% percent in 2016 . Experts instead prefer the term "squeezed" to
describe what's happening to the middle class today, Even if the middle class hasn't statistically shrunk. I do think that the middle class faces more in the
way of pressures to maintain or even build upon their position. What it takes to actually live a middle class life to
have quality of life in many American cities is not what it once was. They're not necessarily able to pay their rent
easily. They can't own a property. If they're in their thirties, they may not feel
comfortable having kids because they'll realize that having a child would be too expensive. And, you know, forget about medical care if you have
one thing happens to you physically. Often people don't have good enough medical care,
they don't have any insurance. This all goes into making somebody part of the
squeezed middle class. As the middle class lifestyle grows more expensive
and uncertain, it's also moving farther beyond the reach of younger generations. In 2019, just 60% of millennials were part of middle
income households in their 20s, compared with almost 70% of baby boomers. Meet Chantal Jacob. Chantal lives in suburban Texas with her husband and
one child. And while a household income of just over $100,000
should put her family in the middle income tier. She says that her family is still struggling toward
financial stability. Sounds great. Six figures. But once we got married, the taxes that come out of
my check before I even get any money, before all of my benefits, $500 come out of my check
automatically. And then you add an insurance, life insurance for my
spouse, myself, and my son. And I also have money going aside for my son's
college fund. It's not a lot because I can't do that much, but I
want to have something for him. My check that starts off at about $3000 goes down to $2200 before I even get to touch it. Our rent's about $1700. Electricity is about $150. Phone bills, about $280. internet $60. We both have vehicles. Those are about $800. Insurance on those vehicles is about $400. On food, $400-$500 a month, but that's increasing. We budget down to the dollar, and sometimes it's
very disheartening to work all week and have people tell you like, "Oh, you're so lucky you have a great
job" and you're like, I don't know about that. There are several reasons why the middle class is
feeling squeezed. The first reason is stagnated income. Between 1970 and 2018, the middle class share of
aggregate income fell by 19% in the U.S.. In comparison, the share of aggregate income for
upper income households saw a rise of 19% . Another study by the Brookings Institute found that
income in the middle class has grown half as fast compared to both the bottom 20% and the
top 20% of income tiers, once taxes and transfers were taken into account, I stay at a company for a while. My income becomes stagnant, you know, it increases
by a couple thousand. I generally have to job hop to have increases in my
income, which in itself is not security. Middle class workers over the last 40 years have not
been able to adequately benefit from the productivity growth, the expansion of the pie in the economy. We've measured this and found that the typical
worker has fallen 43 percentage points behind the growth of productivity. What that means is that the middle class worker
could have earned 1 percentage point more per year in compensation growth, over the last 40
years. And they didn't get it because there was an erosion
of labor share of overall income and because of rising inequality such that the top 10%,
but particularly the top 1% and even more so the top 0.1%, took in much of the gains from the
growth of the economy. While incomes stagnate, the cost of living has risen
dramatically over the years. To put it into perspective, the average household
income in the U.S. saw just a 16% increase over the last 50 years. In comparison, housing costs increased by 190% and
college tuition shot up by nearly 264% in the same time period. I first moved in over here in these apartments I live
in five years ago. My income, my rent was like $1100. It's now $1700. That's $600 increase happened. I did not have a $600 increase. My income did not increase at the same rate. Rising expenditures, rising prices in health, housing
and education are very real, and they've put a tremendous amount of pressure on income on
households in the middle whose income simply doesn't go as far as it used to. The situation is even worse in cities where the cost
of living is already higher. An analysis in 2018 found that raising a family and
a middle class lifestyle in expensive coastal cities like San Francisco or New York needs
an income of at least $300,000 a year. For reference, just 10% of all households made
$200,000 or over in 2020. I recently saw an apartment next to the building I
work in Plano, and I was like, "It'd be great to walk across the street to work". And it was like $2,400 for an efficiency. And I'm like, "That's insane". And then it's like, for what I have, they call a
townhome three bed, two bath, $5,500. I'm like, "Well, absolutely not". Like, I'm going to pay $5,500 dollars and I don't
own it? It's not mine? It's just getting worse. And everyone is like, I feel like native people are
being pushed out into the suburbs and then people from out of state can come in and enjoy the
beautiful fruits of Dallas and have fun and be close to the restaurants. And you know, I have to live out here and you know,
it's not bad, but it's not Dallas. I'm from Dallas. I grew up there. That's where I want to be. But how it is now, you
know, it's just not affordable. Policy making might be both the fault and the
solution of the middle class squeeze. There is no help whatsoever. There is no policy in place to assist people, and I
feel like as soon as you get a job or as soon as you're working, they're just like, Oh, that's all
you need is a job. You got it, you know, go forth and have at it. The stagnation of wages and paychecks for people
started in the 70s, when productivity started growing more slowly, but really accelerated after
1970, 1980 when there was a huge growth of inequality when the top 1% took off, when the stock market
grew, but people's paychecks didn't. And that has to do with issues of deregulation and
excessive unemployment, the weakening of unions, the failure to raise the minimum wage. Globalization with low wage countries that really
put the kibosh on blue collar job opportunities in many places. The point is that it's not that the economy got
worse. It was that there were policy decisions made so that
the economic growth did not filter down to the vast majority. In response, the Biden administration came into
office in 2021 with a promise to revitalize the middle class. The one trillion dollar bipartisan infrastructure
bill from November 2021 and the upcoming Build Back Better Act both include provisions aimed at
financially supporting middle income families. But as Congress continues to find itself in
stalemate. Only time will tell whether these bills would really
have an impact on the survival of middle income households. I don't see any change affects my friends that were
struggling or are still struggling. You know, I'm still budgeting down to every dollar
trying to get things done. So I just feel like if the changes are happening,
they're not trickling down fast enough for us to see the effects of it. I think that overall, the team with the Biden
administration has done quite well. At the same time, they're up against really strong
headwinds. We're talking about a global pandemic that persists. We're talking about historic levels of inflation and
labor shortages that are leading to these sorts of supply chain gaps worldwide. So I think that both things are true. They've done a good job, but they also have a lot of
work to do. The fate of the middle class could determine the
future of the American dream. I just think we do need to be concerned because this
has an effect on how people perceive the American experiment working for them, and there are
expectations that there should be this upward growth in mobility. But I think we do have an increasingly
precarious labor market for many Americans, and so it's important to note that this
is also a feature of inequality. It's a shame that we have as much or more poverty now
than we did 40 years ago, that the middle class is earning somewhat higher wages, but not in proportion
to what they've increased their productivity over that time. And what this does is it adds to division. It hurts our democracy. It hurts our the upward mobility of the children of
these families. That whole middle class of people is like teetering
on the brink of ruin. One emergency, one catastrophe. And you can see even COVID shows you how quickly
people who were doing good can just fall off and have nothing that should have been a wake up call that we
need to change some things.
