Most Americans consider themselves middle class. Why is that? Most Americans can pay all their bills and keep a roof over their head and food in the fridge.
But the reality is that most American’s are one paycheck away from extreme poverty.
The government shutdown taught us one thing: Americans are living precariously close to the edge of poverty. 35 days without a paycheck nearly ruined the lives of almost 1 million Americans.
It’s Real Shame
To the regular outside person, someone with a stable home, a car in the driveway and food in the kitchen has most of the major components of their life in good order. However, most American’s don’t realize that without savings or availability of credit, all of that can come crashing down fairly quickly. And that is the secret shame of the Middle Class.
A recent survey made headlines when it announced that most American’s did not have $1,000 in cash to handle an emergency. When another survey was done looking to see if American’s have as little as $400 on hand for an emergency, the numbers were still dire. The reality for many Americans is that any financial emergency that isn’t in their regular budget can completely destroy their finances.
How Did We Get Here?
The sad reality of the modern economy is that you can have a decent paying job and not have much savings. Most people are not interested or inclined to make big sacrifices in the name of simply saving money. Most people will make sure that they have a decent place to live and basic necessities with a few luxuries. Only money that is not committed gets saved. For some, the only savings they really have comes in the form of a tax return from the federal government every spring. That money doesn’t get saved either. It’s often used to pay off bills or catch up things that are behind.
The High Cost of Living
A major factor in American’s lack of saving is the high cost of living. When rent/mortgage increasingly is taking an ever larger chunk of income and when you live in a country where having two incomes is nearly essential for families, there is little room to save. It’s hard to negotiate a break on a place to live and the grocery bill always seems to trend higher, not lower. That leaves even less room to save.
Many financial experts would say that Americans should find a way to save anyway. Advice comes in many forms like “pay yourself first” and the importance of “having a rainy day fund.” However, it’s difficult to save when the bills demand payment and they are only going up not down.
This is probably an area where the middle class is being squeezed. Middle class in the past meant having money enough to pay for basic survival with money left over. Now, middle class means just being able to pay the bills. The reality is that most people are actually one step away from poverty.
Middle Class Wages
The problem is straightforward: wages haven’t moved since 1977 and recently due to inflation and other factors, wages since the Great Recession have fallen for some workers. Most of the gains in wages that you hear about have gone to the bottom of the ladder. This means that for people who make enough money to not be in consistent poverty, their wages haven’t moved much at all and inflation is slowly eating away their wages. The increased cost living is taking an ever-larger share of their income. This means large purchases go on credit cards and a single financial setback can have catastrophic effects.
Middle Class Shouldn’t Mean Struggle
The Great Recession has introduced new economic vocabulary into the public consciousness. Phrases like “working poor” and “the 99 percent” have now permeated our consciousness. For many, simply having a job isn’t enough to survive. Someone working a job that only pays the minimum wage of $7.25, cannot rent an apartment in most cities and states. It’s just not enough money. Most of the people on food stamps have jobs, they simply can’t afford groceries. This is a travesty in a nation as large and as wealthy as the United States. In decades past, if you were middle class, you didn’t think of using a food bank or going on a welfare program. Now, being middle class might include both just to survive. In decades past, we would consider that poverty. Now, it’s been normalized.
Middle Class Doesn’t Even Including Owning Your Own Home
Owning your own home has been the crown jewel of the American dream since World War II. Indeed, our zeal for homeownership caused the last housing crisis. Banks lent money to anyone with a pulse buoyed by ever increasing home prices. However, in the years since the Great Recession, banks have tightened their lending practices. Many of the people who were foreclosed on are now eligible for home loans again. However, it’s more likely that Americans will rent than buy. Large companies have bought up thousands of homes creating conditions where those who are in the market for buying are competing with these companies and their all-cash offers. Many people, if they want to live in a house are renting from these companies with mixed results.
Buying, especially saving for a downpayment is a feat that many Americans can’t achieve on meager wages. For many Americans, middle class now means being able to easily afford rent and food. That’s not how we used to define Middle Class. We used to define Middle Class by being able to own things and be able to have a stable community. However, many in the Middle Class no longer have that option.
Middle Class Doesn’t Including Owning Your Car
Cars are the new houses in the credit market. They are giving away car loans, at higher rates and terms up to 7 years to anyone with a pulse. However, this is not great news for the economy. 7 Million Americans are late on their car payment.
In the past, financing a car was common, some people even bought in cash, but the terms meant that you wouldn’t need a new car before you paid the last one off. Now, many Americans are stuck in forever financing, trading in one car for a new car and taking out another loan on the next car without even getting to own the car outright.
The Middle Class No Longer Means Stable Healthcare
One of the reasons that the Affordable Care Act or Obamacare was so successful is that is allowed two things to happen: it allowed poorer people to get on Medicaid and it made health insurance much more affordable for those at the bottom end of the Middle Class. Many employers no longer offer healthcare or if they do, it’s too expensive for the workers leaving people to just cope with tooth ache or other maladies. This has long term health consequences and is one of the leading causes of bankruptcy.
GoFundMe reports that its most popular type of campaign is for medical bills. This amounts to a society where even people with jobs must seek the public’s help with their medical expenses. People who would never be panhandling on the corner must perform what amounts to digital panhandling. Because even basic healthcare is something that is not a consistent right or luxury in the Middle Class.
The Middle Class Is Not Doing Very Well
We can conclude from these dire trends that being Middle Class isn’t so bright anymore. The Middle Class of previous generations thrived because of high wages and an affordable cost of living. As costs are unlikely to fall, that means that the place where things must improve are in wages. If wages don’t increase, then the Middle Class will be scrapping by precariously staying just above poverty and living from paycheck to paycheck. Struggle will forever be just around the corner thanks to a medical bill or other major expense.
Your neighbors might look Middle Class and they might even look “normal” but the reality is that when you take a closer look, it soon becomes obvious that Middle Class no longer really means Middle Class.
That is the secret shame of the Middle Class.