Middle Class Squeeze

Citizen Wealth Financial Justice

topicssqueeze3New Orleans         There were a couple of random headlines and a paragraph or two on the wire services, but the recent report, “Middle Class Squeeze,” by the DC-based progressive think tank, Center for American Progress, is actually pretty startling on a closer look.

Here’s the bottom line. Defining the middle class as those individuals and families between the 20% quintile and 80% quintile or fifth of income groups in a dozen years between 2000 and 2012, median income in middle class dropped by 8%. Families with two parents working and two children, who usually do much better on the numbers, saw their income stagnate in this period. While income dropped, basic costs that define middle income life rose significantly by almost $10,000 according to the CAP researchers work. Rents went up 7%, medical costs 21%, child care 24%, and higher education 62%. At one level you just have to gasp, but living through America in this dirty dozen, there are probably few of us who are surprised at these numbers.

Besides the Great Recession, what happened here?

The report underscores that this has not just been the money grab of the 1% through wealth transfer, though tax and public policy has made this part of the rip and run. Other research has established that 98% of the wealth went to only the top 10% of earners from 2001 to 2007. The report underscores the breach of the social contract between business and workers over recent decades when there was a decoupling of growth in productivity with growth in compensation.


Productivity growth from 1991 to 2012 averaged 2.2 percent per year, yet compensation growth only averaged 1 percent per year. A worker today is almost 60 percent more productive than a worker in 1991 but has seen only half of that productivity growth translate into higher compensation.


And, that’s just income. The actual wealth of a family has been hammered underscoring the huge gap in inequality.


Among the top 20 percent of families by net worth, average wealth increased by 120 percent between 1983 and 2010, while the middle 20 percent of families only saw their wealth increase by 13 percent, and the bottom fifth of families, on average, saw debt exceed assets—in other words, negative net worth. Families of color have fallen further behind white families in building wealth: A survey that tracked white and African American families between 1984 and 2009 found that the wealth gap between them nearly tripled, from $85,000 to $236,500. Homeowners in the bottom quintile of wealth lost an astounding 94 percent of their wealth between 2007 and 2010.

The policy proscriptions focus on doing more to increase the number of family-supporting jobs and aggressively reducing living costs to pull them in line with incomes.
Talk is cheap, but truth to tell, we don’t hear many politicians in this election season speaking to solutions that would loosen the squeeze felt by the vast majority of families.