Middle-class squeeze
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The middle-class squeeze refers to negative trends in the standard of living and other conditions of the middle class of the population. Increases in wages fail to keep up with inflation for middle-income earners, leading to a relative decline in real wages, while at the same time, the phenomenon fails to have a similar effect on the top wage earners. People belonging to the middle class find that inflation in consumer goods and the housing market prevent them from maintaining a middle-class lifestyle, undermining aspirations of upward mobility.
Overview
[edit]Origin of the term
[edit]Former U.S. Speaker of the House Nancy Pelosi used the term in November 2006 to provide context to the domestic agenda of the U.S. Democratic Party.[1][2] The Center for American Progress (CAP) issued a report of the same title in September 2014.[3] The term was further propelled into the public consciousness when it was used by former UK Labour Party leader Ed Miliband, who promised to defend the middle class in 2010.[4]
Definitions
[edit]The term "squeeze" in this instance refers to rising costs of key products and services coupled with stagnant or declining real (inflation-adjusted) wages.
Charles Weston[5] summarizes the middle-class squeeze in this way: "Being middle class used to mean having a reliable job with fair pay; access to health care; a safe and stable home; the opportunity to provide a good education for one’s children, including a college education; time off work for vacations and major life events; 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."[6] This squeeze is also characterized by the fact that since the early 1980s, when European integration got into full swing, Belgium, France, Germany, Italy, and the United Kingdom have experienced strong real wage growth, while real wage growth in the United States has generally remained sluggish in comparison.[7]
Causes
[edit]Causes include factors related to income as well as costs.
Income changes
[edit]Another narrative described by Paul Krugman is that a resurgence of movement conservatism since the 1970s, embodied by Reaganomics in the United States during the 1980s, resulted in a variety of policies that favored owners of capital and natural resources over laborers. Many other developed countries did not have an increase in inequality similar to the United States over the period from 1980 to 2006, though they were subjected to the same market forces due to globalization. This indicates U.S. policy was a major factor in widening inequality.[8]
Either way, the shift is visible when comparing productivity and wages. From 1950 to 1970, improvement in real compensation per hour tracked improvement in productivity. This was part of the implied contract between workers and owners.[9]
Historical perspective
[edit]In 1995, 60% of American workers were laboring for real wages below previous peaks, while at the median, “real wages for nonsupervisory workers were down 13% from peak 1973 levels.”[10]
The other way in which income affects the middle class is through increases in income disparity. Findings on this issue show that the top 1% of wage earners continue to increase the share of income they bring home,[11] while the middle-class wage earner loses purchasing power as their wages fail to keep up with inflation and taxation. Between 2002 and 2006, the average inflation-adjusted income of the top 1% of earners increased by 42%, whereas the bottom 90% only saw an increase of 4.7%.[6]
A 2001 article from TIME Magazine highlighted the development of the middle-class squeeze.[12] The middle class was defined in that article as those families with incomes between the Census Bureau brackets of $15,000 and $49,999. According to the census, the proportion of American families in that category, after adjustment for inflation, fell from 65.1% in 1970 to 58.2% in 1985. As noted in the article, the heyday of the American middle class, and its high expectations, came in the 1950s and 60s, when the median U.S. family income (adjusted to 2001 price levels) rose from $14,832 in 1950 to $27,338 in 1970. The rising prosperity was, however, halted by the inflation of the 1970s, which carried prices aloft more rapidly than wages and thus caused real income levels to stagnate for more than a decade. The median income in 2000 was only $27,735, barely an improvement from 1970.[12]
Costs of key goods and services
[edit]While overall inflation has generally remained low since 2000,[13][needs update] the costs of certain categories of "big ticket" expenses have grown faster than the overall inflation rate, such as healthcare, higher education, rent, and child care. These goods and services are considered essential to a middle-class lifestyle yet are increasingly unaffordable as household income stagnates.[3]
Health care
[edit]The CAP reported in September 2014 that the real (inflation adjusted) cost of healthcare for middle-class families had risen by 21% between 2000 and 2012, versus an 8% decline in real median household income.[3] Insurance and health care is an important factor regarding the middle-class squeeze because increases in these prices can put an added strain on middle income families. This situation is exactly what the House of Representatives survey shows regarding health care prices.[2] In 2000, workers paid an average of $153 per month for health insurance coverage for their families; by 2005 these numbers had increased to $226 per month.[2] The number of people who are uninsured has also increased since 2000, with 45.7 million Americans now without health insurance, compared to 38.7 million at the start of the millennium. Also, 18% of middle income Americans (making between 40,000 and 59,999 dollars) were without health insurance during 2007, and more than 40% of the 2.4 million newly uninsured Americans were middle class in 2003.[14]
Other factors
[edit]Job security changes
[edit]More than 92% of the 1.6 million Americans who filed for bankruptcy in 2003 were middle class.[14] Along with this, manufacturing jobs have decreased by 22% between 1998 and 2008, largely due to American businesses offshoring (or outsourcing) production.[6]
Polls and perceptions
[edit]According to a Survey on the Middle Class and Public Policy,[6] just 38% of middle-class Americans say they live comfortably, and 77% believe that the country is headed in the wrong direction. Another 2008 report entitled "Inside the Middle Class: Bad Times Hit the Good Life"[15] states that 78% of the middle class say it is more difficult now than it was five years ago. The middle class also responded that 72% believe they are economically less secure than they were ten years ago, and almost twice the number of Americans claimed they were concerned about their personal economic stability.
Criticism
[edit]In a 2012 Brookings Institution article, economist Richard Burkhauser blames a misleading and narrow focus on the 1 percent as well as a dishonestly narrow definition of “income” that ignores the value of non-monetary work benefits and government transfer payments for propagating the myth. He argues that if the value of government benefits and payments to low-income Americans is included, the problem of income inequality comes into question. Burkhauser calculates the impact of government transfers, the value of health insurance not paid for by households and the decline in household size to find that the bottom 20 percent had about 25 percent more income in 2007 than 1979; thus, it could be seen that the bottom is in fact moving up.[16]
When comparing household incomes over time, critics of the middle-class squeeze emphasise the need to look at identical households. The U.S. Census Bureau defines a household as one or more persons living in the same abode. Fifty years ago,[when?] only 15% of all U.S. households had a single occupant; however, by 2017, that percentage had nearly doubled to 28% percent. Thus, the typical household today is much smaller, which could be causing a perceived shrinkage.[17]
See also
[edit]- Cost of living – Cost to maintain a standard of living
- Cost of living crisis – Situation where prices of essentials rise faster than wages
- Cost of raising a child
- Developing country – Nation with a lower living standard relative to more developed countries
- Economic inequality – Distribution of income or wealth between different groups
- Retail apocalypse – Widespread decline in physical retail stores
- Social status – Position within social structure
- Social Mobility – Mobility to move social classes
- Superwoman (sociology) – Term used in sociology
References
[edit]- ^ "Pelosi: Relieving middle class tops agenda". NBC News. Associated Press. 2006-11-20. Archived from the original on 2025-01-23. Retrieved 2025-05-04.
- ^ a b c United States House of Representatives Committee on Government Reform – Minority Staff Special Investigations Division (2017). "The Middle-Class Squeeze" (PDF). democraticleader.gov. Archived from the original (PDF) on 2017-08-02. Retrieved 2025-05-04.
- ^ a b c Erickson, Jennifer (2014-09-24). "The Middle-Class Squeeze - A Picture of Stagnant Incomes, Rising Costs, and What We Can Do to Strengthen America's Middle Class". Center for American Progress. Archived from the original on 2024-11-05. Retrieved 2020-09-18.
- ^ "Miliband comes to defence of 'squeezed middle'". BBC News. 2010-11-26. Archived from the original on 2024-09-24. Retrieved 2021-01-24.
- ^ Weston, Charles (2 September 2010). "Charlie Weston: Whole generation swimming against the tide". Irish Independent. Archived from the original on 2025-01-23. Retrieved 2013-07-25.
- ^ a b c d "The Middle-Class Squeeze 2008: A Drum Major Institute for Public Policy Overview". Drum Major Institute. 2008. Archived from the original on 2008-09-19. Retrieved 2008-11-21.
- ^ Holden, Barry, ed. (2003). Global democracy: key debates (Reprint ed.). London: Routledge. ISBN 978-0-415-19878-3.
- ^ Krugman, Paul (2007). The Conscience of a Liberal. W.W. Norton Company, Inc. ISBN 978-0-393-06069-0.
- ^ Hazlitt, Henry (1979). Economics in One Lesson. Three Rivers Press. ISBN 0-517-54823-2.
- ^ O’Meara, Patrick; Mehlinger, Howard D.; Krain, Matthew; Newman, Roxana Ma, eds. (2000-06-22). Globalization and the Challenges of a New Century: A Reader. Indiana University Press. doi:10.2307/j.ctt2005tk7. ISBN 978-0-253-02818-1.
- ^ Leonhardt, David (2007-04-25). "What's Really Squeezing the Middle Class?". The New York Times. Archived from the original on 2022-11-26. Retrieved 2008-04-03.
- ^ a b Koepp, Stephen (2001-06-24). "Is the Middle Class Shrinking?". Time. Archived from the original on November 21, 2007.
- ^ "Consumer Price Index for All Urban Consumers: All Items Less Food and Energy in U.S. City Average". FRED. Archived from the original on 2025-01-23. Retrieved 2025-05-04.
- ^ a b Schlesinger, Andrea (2004-06-03). "The Middle-Class Squeeze". AlterNet. Archived from the original on 2007-11-19. Retrieved 2008-11-12.
- ^ "Inside the Middle Class: Bad Times Hit the Good Life". Pew Research Center. 2008-04-09. Archived from the original on 2025-04-08. Retrieved 2025-05-04.
- ^ Haskins, Ron (2012-03-29). "The Myth of the Disappearing Middle Class". Brookings. Archived from the original on 2024-12-09. Retrieved 2021-01-24.
- ^ "The Middle Class Crisis That Wasn't". Competitive Enterprise Institute. 2019-07-15. Archived from the original on 2024-03-01. Retrieved 2021-01-24.