Being middle class used to mean having a reliable job with fair pay, access to health care, the chance to own a home, the opportunity to provide a good education for one’s children, and the security of looking forward to a dignified retirement. But today this standard of living is increasingly precarious. The existing middle class is squeezed and many of those striving to attain the middle-class standard find it persistently out of reach. With this overview, DMI brings together the latest data to shed light on this troubling state of affairs.

American Anxiety 

?        According to the “American Dream Survey” conducted by MetLife in November 2006, 65% of Americans agree that “when it comes to my financial future, I feel like nobody’s looking out for me.” 72% say they worry that “the financial burden shift will lessen future generations’ (such as my children’s) ability to lead a comfortable life.”  (click here)

?        According to exit polls in the 2006 midterm elections, half of voters said they have “just enough to get by” economically, and 17% said they are falling behind economically. 28% think life for the next generation will be about the same, 40% think it will be worse. (click here)

?        73% of Americans are concerned that they may not be able to count on government-sponsored benefits such as Social Security and Medicare like previous generations could, while 63% express frustration that they can no longer count on employer-sponsored benefits like health care and pension plans. (click here)

A Reliable Job with Fair Pay 

?        Despite recent gains, job creation has been slow compared to previous economic recoveries, and employers like Whirlpool, AOL and General Motors that offered well-paying middle-class jobs have just announced thousands of lay-offs, and many of the new jobs that replaced those that were lost during the recession are lower-paying and offer fewer benefits. (click here)  

?        American businesses are increasingly outsourcing finance, technology, production, and marketing jobs. More than half of all U.S.-owned manufacturing production is now based in foreign countries, and a quarter of the profits of U.S. multinational corporations are made overseas—with these shares constantly expanding. (click here)  

?        The percentage of the GDP belonging to wages and salaries in 2006 had never been lower at any point over the past 77 years where data was available. (click here) 

?        Income disparities are again widening in the United States even though they were already at near-record levels.  Data from the Congressional Budget Office that go through 2004 show that income inequality that year was wider than in all but two years since the middle of the 1930s. (click here)  

?        The number of Americans living in poverty increased by 5.4 million between 2000 and 2005. (click here, see page 53)  

?        Unions enable working people to earn a middle-class standard of living. Workers represented by unions earn, on average, 30% more than nonunion workers: $833 in median earnings a week compared with $642. (click here)  

?        Some 80% of union members have employer-provided health insurance, compared with 49% of nonunion workers. The rates are nearly identical for employer-sponsored retirement plans. (click here)  

?        57 million workers say they would want to be in a union if they could. (click here)  Yet the percentage of U.S. workers in unions declined last year, from 12.5% in 2005 to 12% in 2006. (click here) 

Access to Health Care 

?         46.6 million Americans are currently without health insurance. (click here, see page 27)

?         Members of the middle class are increasingly joining the ranks of the uninsured and under-insured. According to the Commonwealth Fund, 41% of people in the U.S. of working age with moderate incomes who went without health insurance for at least part of the year in 2005, up from 28% in 2001. In addition, 18% of middle-income Americans, making between $35,000 and $59,999 a year were without health insurance. (click here)  

?         People are going without needed coverage because health care is simply too expensive – health care coverage costs have outpaced increases in wages by a ratio of 4:1 since 2000. (click here)  

?         Health care premiums have increased 87% since 2000, with the average employee contributing 143% more to their company-sponsored health insurance. Meanwhile wages have only increased 20% over this time period.  (click here)

?         The rising cost of health care is making it more and more expensive for employers to cover their employees: 61% of U.S. companies that offered their workers health insurance in 2006, down from 69% in 2000. Among U.S. businesses considered "small," less that half offered health benefits in 2005. (click here)  

?         Health care costs are a leading contributor to financial hardship for middle-class families. In 2003, nearly one in four middle-income Americans spent more than 10% of their family’s disposable income on health costs. (click here)  Among those with private health insurance, one in six still report difficulty paying medical bills, while a quarter or more of those with insurance and medical debt reported not filling prescriptions or skipping medical treatments because of the cost. (click here)

?         Soaring health care costs even lead middle-class families to bankruptcy: a study by professors at Harvard Law and Medical schools found that the average person who declared bankruptcy in 2001 was a middle-aged, middle-class homeowner – more than half cited illness, injury, or medical bills as a contributor to their debt. (click here)

Homeownership 

?        An annual income of $84,957 was needed to qualify to purchase the median priced U.S. home, which cost $248,000 in the third quarter of 2006, according to the Center of Housing Policy. This put homeownership beyond the median annual salaries of such solidly middle-class occupations as registered nurses (median salary $58,640), elementary school teachers ($47,104), police officers ($45,780), and accountants ($47,604). (click here)  

?        Rising housing costs meant that a growing number of Americans resorted to adjustable rate mortgages and other non-traditional financing mechanisms to buy a home. As the rates on these mortgages increase over the next few years, middle-class homeowners who are already struggling to make mortgage payments will find themselves even more squeezed, forced to sell their homes or foreclose. (click here)    

?        Homeowners are increasingly cashing out the equity in their homes just to meet basic living expenses. According to Demos, households cashed out $715 billion worth of home equity between 2001 and 2005.  As a result homeowners’ equity actually fell – meaning that American homeowners now own less of their homes than they did in the 1970s. (click here)  

Good Education 

?        Quality early childhood education has a tremendous social and economic payoff – generating a return to the public of as much as $13 for every dollar invested. Yet the federal government provides no assistance to middle-income families to afford pre-school and only a few states and cities offer universal preschool. This makes it harder for middle-class families to balance work with parental responsibilities as they struggle to locate and pay for quality preschool. (click here)  

?        President Bush underfunded his own No Child Left Behind Act by $15.41 billion in his 2007 budget, forcing schools across the nation to cut or scale back programs in music, the arts, physical education, and even history and science to keep up with the budget crunch amidst new demands for testing reading and math skills. (click here)  

?        Tuition and fees at the average public four-year college have increased 35% in the past five years. (click here)

?        Two out of three college graduates begin their careers with student loan debt, amounting to $19,300 for the median borrower. (click here) 39% of Americans under 35 who have college debt report that they expect their loans will take more than ten years to pay off, more than a quarter report delaying a medical or dental procedure due to the debt, and 14% reported that their debts caused them to delay marriage. (click here and click here)

Retirement Security 

?        Three out of ten American workers haven’t saved at all for their retirement. (click here)  Nearly half of workers aren’t part of employer-sponsored retirement plans. (click here)

?        Even those who do have retirement plans at work must assume a greater degree of personal risk, as employers increasingly shift from traditional defined benefit pension plans (in which individual benefit levels are guaranteed and the employer bears the risk of a market downturn) to defined contribution plans like 401(k)s (where there is no individual guarantee about the amount of retirement income that will be available). (click here)

?        Americans have a historically low rate of personal savings— only 11% of eligible workers contribute the maximum to their 401(k) and about 21% who contribute nothing. While financial advisors recommend setting aside 10-12% of wages for retirement, middle-class Americans are juggling debt, buying a home, sending their children to college, and dealing with unexpected medical costs, making this unrealistic for many. For those who participate, the typical contribution rate is 6%. (click here)