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Honey, I Shrunk The Middle Class: Less Than One Third Of Households Qualify
Submitted by Charles Hugh-Smith via OfTwoMinds blog,
If it takes more than $126,000 to fund a qualitatively defined middle class lifestyle, what sense does it even make to call this "middle"?
The Pew Research Center's recent report The American Middle Class Is Losing Ground: No longer the majority and falling behind financially made a media splash, as it reported that less than 50% of adults are members of the Great American Middle Class.
My analysis suggests that by more qualitative measures, no more than a third of U.S. households qualify as middle class: claiming 49% of the nation's households are still middle class is a gross exaggeration.
My analysis starts with the minimum fundamental lifestyle and wealth requirements of middle class membership: In What Does It Take To Be Middle Class?, I listed these requirements:
1. Meaningful healthcare insurance ($5,000 deductible healthcare plans don't qualify; they are simulacrum/phantom coverage).
2. Significant equity (25%+) in a home or other real estate.
3. Income/expenses that enable the household to save at least 6% of its income.
4. Significant retirement funds: 401Ks, IRAs, etc.
5. The ability to service all expenses over the medium-term if one of the primary household wage-earners lose their job.
6. Reliable vehicles for each wage-earner.
7. The household does not depend on government assistance to maintain the family lifestyle.
8. A percentage of hard assets beyond the family home that can be transferred to the next generation.
9. Surplus income to invest in children (extracurricular activities, lessons, etc.).
10. Leisure time devoted to the maintenance of physical/spiritual/mental fitness.
In other words, middle class cannot be meaningfully defined by income alone. The middle class is more than owning a home (especially if the equity is modest or dependent on the asset bubble du jour): then most fundamental qualities of the middle class are not measures of income or bling, though obviously income is necessary to provide them:
-- real healthcare coverage
-- wealth that can't be destroyed by one bad break or one popped asset bubble
-- the ability (and willingness) to invest in children
-- the ability (and willingness) to transfer accumulated real wealth to the next generation.
Income is not an accurate proxy, as many high-income households are living paycheck to paycheck: regardless of their income, they don't qualify as middle class by qualitative standards.
$100,000 and up is not enough – even the 'rich' live paycheck to paycheck
Middle class is more than income--it's a value system that recognizes the necessity of sacrifice, frugality, capital and long-term planning. If high-income households squander all the income on eating out, lavish vacations, matching luxury-brand autos, etc., they aren't middle class: their values do not support investing in their children's future, their own retirement (so they won't be a burden to their adult kids) and on building wealth that won't vanish when the current asset bubble bursts.
By my calculation (admittedly coarse, given the huge range of living expenses from lower-cost regions to sky-high locales on the Left and Right Coasts), around $100,000 for state/corporate employed adults (i.e. jobs that provide healthcare and retirement/401K benefits) and $130,000+ for self-employed people (who have to pay their own healthcare and retirement costs) is more or less the minimum required to fund the qualities described above.
It's remarkably easy to earn this income and have very little to show for it by year-end, so this is (at least in many areas) bare-bones.
As you can in this chart of nominal (not adjusted for inflation) median household income, this is roughly double median household income of $52,000 annually.
The Pew report places households with incomes from from $42,000 to $126,000 as middle class. Judging by my estimates, it would very difficult to meet these qualitative standards on $52,000 household income unless housing was nearly free (for example, the family house was owned free and clear and property taxes were low).
In many Left and Right Coast cities, $52,000 is essentially poverty level. Even in lower-cost areas, it would take at least 50% above median household income to fund a middle class life.
Meanwhile, the Federal Reserve's policy of inflating bubbles in assets that were once stable places to build lasting equity (for example, housing) has devastated middle class wealth. Adjusted for inflation (which is likely under-stated, since big-ticket items such as college tuition and healthcare are under-represented in official inflation), household wealth has gone nowhere for over 20 years.
Two immense asset bubbles have inflated and popped in the past 15 years, and what has that done for middle class wealth? Nothing positive.
We should also note that most of the "middle class" wealth is held by the top slice of the upper middle class and the wealthy Aristocracy above them:
The current credit-asset bubbles are now poised to burst. What will that do to what remains of middle class wealth? We can be sure it won't be positive.
If we consider the qualitative requirements, it is unlikely that more than one-third of households qualify as middle class. If it takes more than $126,000 to fund a qualitatively defined middle class lifestyle, what sense does it even make to call this "middle"?
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Back in the Greenscam era, I remember hearing a quote that the goal of the Fed was to reduce the average 'merican salary to $20K. Couldn't believe it at the time.
The middle class is pretty much gone, sad times
Layoff / Closing List: http://www.dailyjobcuts.com
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Middle class=a screwing from above and below......
That's right. Obozo was really the first President who grew the free shit army big time and acted in the best interest of the multinationals. The Hildebeast would do the same, the Donald would cut down on the free shit for the free shit army at least ...
You sir, are insane. The"Donald" is a pragmatist and will gladly buy votes. He is no different then any of the other whores. Maybe worse for being a wolf in sheepskin.
"That's right. Obozo was really the first President who grew the free shit army big time and acted in the best interest of the multinationals."
Probably started with Bush Sr/Clinton, with the Push for NAFTA and granting China Most favored nation status which promoted Job outsourcing. That said, The largest contribution to the downfall of the middle class was the expansion of quick & easy credit that began in the 1970's with Credit Cards and Auto Loans. This make it easier for americans to dig themselves into a hole by borrowing money that ended up wasted on expensive luxary cars (imports) and using Credit cars to fund everyday living expenses (resturants, spur of the moment purchases).
"Donald would cut down on the free shit for the free shit army"
I doubt that. Congress has been a very willing contributor to the FSA movement. Donald owes billions to the bankers and they are going to keep him on an even shorter leash than Obozo. US debt is at 18.8T today and will be about 19.6T come Jan 2017. By the time Donald is up to speed the US debt will be over 20T.
Lets Presume that Donald is the world's best race car driver in the World, but instead of a race car, he's given a busted up 1970's era pinto that thrown a few rods (aka broken economy) and the car has already plunged off a cliff (debt). There absolutely no chance that he is going to save the day.
I define middle class much more simply: Do you have a positive net worth?
If you're in the negative net worth zone you are a DEBT SLAVE, no matter your income. You don't have the ability to make meaningful decisions and act on them. Many young people are in this situation with student loans, etc. And for short periods this can be OK- you're not going to get an engineering job without an engineering degree (or at least an H1B visa!). But if your income statement can't make your balance sheet healthy relatively quickly, YOU WILL BE A DEBT SLAVE FOR A VERY VERY LONG TIME. Perhaps the rest of your life.
The Feral Government's income statement has zero possibility of making it's balance sheet healthy ever.
If one has running water, a roof over their head, a toilet that works, reliable electricity, sanitary sewer, access to landfills for solid waste, clothes, air conditioner/heater, and electronic gizmos, I consider them "middle class" which is pretty much most of the United States. This even includes "low income" people. This is why "refugees" and "illegals" still flock to the US in droves despite this Titanic ship sinking.
There are Billions of people on this planet living TODAY in 2015 that don't have this.
The "good old days" of 1950s America that most of these financial commentators compare to was a fluke in World History, not the norm. Take 10 steps back and look at world history and the competitiveness of globalization and the 1950s that the boomers grew up in as children was not how the rest of history had for humanity. Even in the 1950s the ENTIRE world, albeit the US, was third world conditions. The US was the only game on earth. The rest of the world was devastated by WWII, or they were agrarian to begin with.
Lets put this in perspective guys.
The middle class is a useless sack of shit for Big Politics. They are too rich to need help from the Democrats and too poor to afford help from the Republicans. Unfortunately I am in the middle class and not represented by any elected official.
If you think any elected official is there to represent you, then you're a big part of the problem. SMH
"The middle class is a useless sack of shit for Big Politics."
Not true! the middle Class is uncle sugars cash cow. Without the middle class the politicans (both sides) wouldn't be able to dole out billions (trillions) to buy votes. Its the backs of the middle class the support the gov't. That said the MC is being driven towards extinction as they lose their higher wage jobs to automation/outsourcing and increase taxation. BTW: I didn't down vote you.
About $300 a month puts you in the middle class in India
The only constant bills I have are property taxes, the power bill and gas and groceries. Everything else is gravy for me.
Not to mention with asset classes that look like this, we won't be getting any help from appreciation anytime soon. Much more likely to be a head wind.
This is the US recovery we have heard so much about. The sad part is that the media continues the lie!
It appears to be very Robust!
The problem with the middle class in America is the term middle class.
I'm suprised the MSM has not coined a new term, more commiserate to driving whats left of this 20th century aboration into the ditch for good.
+1 America was formerly known for the fact that everyone had a chance - i.e. could aspire - to join the "middle class"
but a lot of things that imho ail America are indeed in the terminology used both by the US MSM and by reflection the people
a socialist can't be called a socialist, for example. it has to be a "statist" or a "liberal". who cares that liberal has a completely different meaning, elsewhere? or before, in the US itself?
or here: "We should also note that most of the "middle class" wealth is held by the top slice of the upper middle class and the wealthy Aristocracy above them"
first, Old World classes were about wealth, not income. and the middle class is that class that holds roughly 50% of the wealth, and makes 20% of the population... according to Pareto
second, it's not aristocracy. the proper term is plutocracy. aristocrats can have varying levels of wealth, a plutocrat is defined by wealth, and his political power through that wealth
~ Robert Heinlein
The new Obama class!
Two people making the same income will end up with two very different outcomes. This stuff is difficult to measure with any objective results.
CNN attempting to conduct jedi-mind tricks so voters will buy-into obama-nomics
For some Middle Class Americans, the economy is 'booming' - CNNMoney
http://money.cnn.com/2015/12/28/news/economy/middle-class-economy/index....
Sure, if you redefine "middle" then all the old measures go out the window. Who gets to decide what "middle" means?
First, you're not on government welfare programs. That's over 50% of the population. The middle class is self supporting and has to work in order to survive. The wealthy can stop working and maintain the same lifestyle. Very few can do that.
We gave up on the idea of children so we could travel the world. Every lifestyle decision requires sacrifice.
Middle Crash...Mission Accomplished. - Team Obama, Transformation you can really feel!
Been happening way before obama
Yes but a lot of middle class voters went with Obama so this fucking shit stops. He had a clear mandate, 59 1/2 seats in the Senate, the House, everything. What's he done? he kept the banksters around, Bill of Rights still gone, Too big to fail now even bigger, no bankster went to jail, multi-nationals are fucking us in both ends. Don't really give a fuck what happened before Obama. Lot of people voted for that guy and he stopped pretending after 18 months.
18 months? Probably closer to 18 minutes. FDR took what Wilson created and expanded it in every direction, LBJ then blew the New Deal into a really big effn deal and enticed an entire race of people back onto a plantation while E-GOP stooges grew their favorite parts of the beast and the Red/Blue tango continued until B Hussein O decided it was time to go beyond hyperspeed into plaid. And now that pos is going to hand this turd off to Hitlery and let it explode in her face. But let there be no mistake, the middle class is all but extinct and that happened to accelerate like never before under the current asshole-in-chief.
True. Obama just floored it - all out destruction of what's left of the semi-capitalist system in favor of Central Planning and gubmint dependance - while others were putting along.
Where's the picture of Obama with the "Mission Accomplished" sign in the background ?
Where would one invest in the current Ponzi any savings that wouldn't be stolen in the next stock market bubble pop, 0.25% rates, or a bail-in?
How can one save when wages are stagnant or declining, the cost of living rising, and lawless parasitism is the rule of the land?
Grocery clerks, food service workers, and other laborers are paid the same hourly wage they were 25 years ago - yet rent, healthcare, and utilities are double or triple the cost since.
It's a French Revolution scenario - this time it is not the Monarchy that must be destroyed but the Kleptoligarchy.
Houston oil and gas companies likely to freeze pay in 2016, survey says
http://www.bizjournals.com/houston/blog/drilling-down/2015/12/houston-oi...
Only for the ones that still have a job.
The current credit-asset bubbles are now poised to burst"
Could be decades.
The PPT can borrow all they want.
As long as we have the worlds biggest killing machine the game goes on.
$126K? nigga please
The MSM would have the entire Middle Class destroyed (driven to lower class status) and they'll then rename it the "New" Middle Class. Everything will be AWESOME then.
CHS is onto something. This is a truer standard of living metric than a CPI-U basket. He mentions aspects of risk adjustment, too. Forty years ago people had less volatile balance sheets and the option to add a second earner.
If you adjust this for major urban (high tax) areas then the middle class threshold moves closer $200k/year.
Everyone in the country except for less than one million people are being completely sold out. Of course, that is not news to ZH'ers.
What do you expect when the country spends over $1 trillion annually on warfare and over $1 trillion on excessive healthcare costs. Add to that $250+bn in interest expenses unnecessarily taken away from issuing UST w coupons versus zero interest notes. Enter into trade agreements that eviscerate manufacturing and production jobs that reduce the size of the economy, but inflate the wages of the C*O suite.
Don't be middle class. Strive to become more than middle class. Or don’t. Blame Yellon.
I was definately miidle class. May still be. But I chose to educate my three kids. 2 of them are currently in medical school (Johns Hopkins and North Carolina). The 3rd is undergrad at Auburn. They'll all be be better off than me. That's the classic "middle class" approach; sacirfice so the next generation does better
Education is expensive. You should have your kids get student loans. You can back them up and pay them off anytime if you wish. The reason for getting student loans? Ben Bernanke's kids all have student loans that he knows will be forgiven at some point.
Amazes me the number of simpletons who read a piece like this and then declare: Obama! Laughable, yet frighteningly tragic.
It's obvious we need MOAR government.
Yea baby.
this has been going on for 40 years. started with outsourcing of drives via seagate. i know because i worked in a machine shop that did the cray reasearch supercomputer and control data drives. gone, poof, all to the pacific rim 30 some years ago. survival is a bitch when slave labor is ready willing and able. but, congress could have enacted corporate tax laws to protect our knowledge and development of now known industry standards. but, yea right, congress- bot and paid for protecting mericans standard of living and research and brain trust, ha, treasonous bastards. slo mo treason one donation at a time...
Statistically you will always have a 'middle class' - the large midsection of a bell-shaped curve of incomes. It is just that the "folks" in the middle will not be able to live a decent lifestyle anymore. The middle class will be the 'new poverty' class.
My personal assessment of middle class goes something like this for two parents and two child dependents. This is assuming the family is morally responsible and financially prudent.
Everybody wants shelter, safety, cleanliness, education, healthcare, good food, transportation and clothing, these are the material basics. In addition to this they need enough time to get enough sleep, relax, attend to the wellbeing of their children, enjoy a hobby, save a relatively secure investment nestegg, do a little shopping and have a vacation with the family every now and then.
I think this should all be acheived with one parent working 40 active hours and the other staying home to watch over the kids and maintain the house. That is quality of family life as defined by middle class by me and it costs $125,000 USD per annum where I live, in your hand, to get that done. Thats about $75 USD in your hand per hour for the one working parent doing about 1680 hours work per year. If that is not happening you are not middle class, you are on the serfdom treadmill and having some other definition of middle class conned into your psyche by the parasite "financiers" who structure our "free market" economy and the government puppets who kowtow to them.
Technological increases in productivity should have allowed mankind to acheive a peaceful and sustainably progressive "middle class" lifestyle by now, the fact that this is actually in retreat in the face of evolving technology, is evidence to me that skilled parasites are gaming the system to transfer the wealth of others into their pockets to a live a lifestyle way above what is "middle class" and removing the incentive to produce at the same time.
P < P + I
#BankstersAreTerrorists
#AusterityIsCode4Looting
enough said. stupidity? Ignorance? NO. Design
1) Deregulate global "financial" markets
2) Deregulate Global Trade
3) Destroy sovereignty of nations and leave them bankrupt, impotent
4) Privatize Everything
government is merely a proxy for global banksters. teaching the honey boo boo inbreds to hate government sure was a boon for the Oligarchy!
our main problems are SCALE. things are not manageable on this scale, without overt corruption being predictable, natural.
We now have 2 very distinct classes in America. The Nordstrom-Von Maur Class and The Goodwill-Dollar Store Class. It’s like visiting a zoo. After seeing the monkeys go a block down the street to view the apes.
You are on to something.
I see this in my family. Either the household earns over 100K annually or is basically poverty.
Getting rid of $400 per month phone/connection plans would be a small start to saving money. The middle class thinks they have to have all the goodies. And just because I'm replying to your post does not mean I am talking to You. I'm talking, "if the shoe fits" to everyone. $100K a year is a Lot of money actually. From where I sit you are doing it wrong.
Government parasites are the new middle class,,, at least until the host is dead.
All opportunity for a decent lifestyle has been shipped overseas. Won't return until our children are all beggars that will work for food.
America was screwed by too much "free trade" policies. Not only was America's economic biodiversity washed away by low tariffs and even "free trade" deals with 3rd world countries, but the loss of tariff income forced the US government to become much more dependent on personal and business income taxes for revenue.
Drive around rich neighborhoods and tell yourself: "One day I can be like this if I work harder".
Per Marco Rubio, that is.
Serfs uP!
The main barrier to ushering in the One World Economic System has been the American Middle-class and the dismantling has been going on and will continue until complete.
It is my opinion that was the purpose for both the war on terror and Obama. Many say he has done a bad job; depends on what his mandate is/was.
We lost the nation officially in 1913 and our moral compass in 1925 with the Scopes Trial; where our fixed moral compass was shattered; now we are just reaping what past generations and current generations have sown.
The sad reality is we still have much further to fall and for most the "survival of the fittest" will be a realty; meaning is one fit to stand before the Judge of all the world?
I'm part of the "upper class", but live in a 500sqft 40 year old apt just outside of Manhattan. No savings, but we "contribute" the maximum $29k to socialist insecurity so grandma and grandpa can fly first class to their vacation time shares in the Caribbean and suck at the healthcare system in their last year of life. Oh yea, we can't get married either because our tax bill would take away anything that we do have extra at the end of the month.
So, I can just imagine what it's like for a household with $125k/Yr income in the NJ/NY area when we have $300k/Yr and live like debt serfs to the seniors, the sick, my landlord and the welfare mamas with 10 kids.
we have $300k/Yr and live like debt serfs to the seniors, the sick, my landlord and the welfare mamas with 10 kids.
I would suggest you are doing something wrong if life is hard at $300k. I'm doing well with a lot less income. I don't live in fucking NYC though.
This is a good example of doing it wrong. Is there something wrong with your legs that make you stay there.
"I listed these requirements:
4. Significant retirement funds: 401Ks, IRAs, etc."
Could you please define "significant"? In some minds I guess that would mean someone who can be classified as a High Net Worth Investor*, but I would like to know what your definition is.
* I believe that is someone with more than $500K as defined by Fidelity, et al
Dude, it all seems those middle class families have moved up to the upper class.
Why is this not a good thing? Thanks Fed.
The gated communities should serve as icons for roaming gangs when this planned theft unravels.
They came for the rich people behind their gates and I did nothing... when they are done with the rich they will lower their sites to us less wealthy.
Martin Niemoller
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Civilian Labor Force Participation Rate
https://research.stlouisfed.org/fred2/series/CIVPART
Inactivity Rate: Aged 25-54: Males for the United States©
https://research.stlouisfed.org/fred2/series/LRIN25MAUSM156S
The real key metric is that in 1985, our balance of trade with the Chinese was 6 million dollars.
https://www.census.gov/foreign-trade/balance/c5700.html#1985
Now?
$350 billion. https://www.census.gov/foreign-trade/balance/c5700.html#2014
All those jobs.
Gone.
Do the 'goezintas' on that number, for the number of jobs gone. (2 goezinta 4, twice.)
We’re not only eating our seed corn, we’ve killed the golden goose.