It doesn’t take a math wizard for you to look at your checking account and know that your dollars aren’t going as far as they used to. And the current administration is telling you that things are better economically and you know this just isn’t true.
The real problem though is the middle class that built this country is losing more than all other economic classes combined. And there isn’t much you can do about it, other than find a way to get yourself out of this cycle. At the end of this post I will make several suggestions on things you can do to help yourself.
So who is the middle class?
According to the Pew Research Center, they define the middle class as households that earn between two-thirds and double the median U.S. household income, which was $65,000 in 2021, according to the U.S. Census Bureau. Using Pew’s yardstick, middle income is made up of people who make between $43,350 and $130,000.
Here are some statistics throughout history that show what percent of the population was in the middle class through today:
- In 1971, 61% of Americans were considered middle class.
- In 1990, 54% of Americans were considered middle class.
- In 2000, 51% of Americans were considered middle class.
- In 2010, 49% of Americans were considered middle class.
- In 2020, 52% of Americans were considered middle class.
- In 2021, 50% of Americans were considered middle class.
As you can see it has gone up and down over time, but it is at an all time low.
The next paragraph encapsulates the collapse in the middle class better than I can say it
It is important to note that these statistics are just estimates, and the definition of “middle class” has changed over time. For example, in the 1970s, a middle-class family might have been able to afford a single-family home, a new car, and two weeks of vacation each year. Today, a middle-class family might be able to afford a two-bedroom apartment, a used car, and one week of vacation each year.
It says the middle class can no longer afford a home, must be a renter of an apartment and drive a used car, and has less free time than a person in the 1970’s.
Sounds like progress doesn’t it? Obviously not.
So what is causing the middle class to continue to be hollowed out?
- The rising cost of living. The cost of housing, healthcare, education, and other essential goods and services has been rising faster than wages for many years. This has made it increasingly difficult for middle-class families to make ends meet.
Each one of these can be taken down its own path and discussed.
Housing: The Case-Shiller U.S. National Home Price Index showed that housing prices had risen by approximately 545% since January 1975. This means that housing prices had increased more than fivefold over that period.
Education: According to data from the National Center for Education Statistics (NCES), the average tuition and fees at public four-year institutions for the 1970-1971 academic year was approximately $481 (in current dollars adjusted for inflation). In contrast, for the 2020-2021 academic year, the average tuition and fees at public four-year institutions had risen to around $9,687 (in current dollars). This represents an increase of over 1,900% since 1970.
Healthcare: According to data from the Centers for Medicare & Medicaid Services (CMS), total national healthcare expenditures in the United States were estimated at approximately $75.2 billion in 1970. By 2019, total healthcare expenditures had risen to over $3.8 trillion. This represents an increase of more than 5,000% over the 49-year period from 1970 to 2019.
- The decline of manufacturing jobs. Manufacturing jobs have been declining in the United States for decades, and this has had a disproportionate impact on the middle class. Many middle-class families rely on manufacturing jobs for their livelihood, and the decline of these jobs has made it harder for them to find good-paying work.
- The increasing gap between the rich and the poor. The gap between the rich and the poor has been growing in the United States for many years. This has made it harder for the middle class to keep up, as the rich have been able to accumulate more wealth and power.
- Globalization. Globalization has led to increased competition for jobs, which has put downward pressure on wages. This has made it harder for middle-class families to make ends meet, as they are competing with workers from around the world for jobs.
Globalization is what the elites in power want. That is why the current administration has allowed an open border policy. This is why the current elites and politicians in power continue to work with the World Economic Forum which believes they should be the ones in control.
- Inflation: This is something that I have written about extensively on this site. This is something that the current Federal reserve is trying to combat. However, the Inflation numbers they use don’t count the things that cost the most for most people. Things such as housing is not calculated accurately in the inflation number also referred to as the CPI (Consumer Price Index).
Unfortunately, the above factors don’t appear to be changing anytime soon. And wages aren’t keeping up with the current rises in all costs. Inflation is expected to be at all time highs over the next decade or so. The current housing market, even with 30 year high interest rates, doesn’t appear to be slowing down. And college continues to be more expensive. Healthcare costs. I don’t even know where to begin with this. Go see a doctor and you tell me.
The reason I am focused on the middle class is because they typically carry burdens that the lower and upper economic classed doesn’t have.
For example the lower economic class which represents 29% of American adults. They have an annual household income of less than two-thirds the national median, which was $65,000 in 2021.
They typically may qualify for things for free:
- Food stamps: Food stamps, also known as the Supplemental Nutrition Assistance Program (SNAP), provide financial assistance to low-income individuals and families to purchase food.
- Medicaid: Medicaid is a government health insurance program for low-income individuals and families. It covers a wide range of medical services, including doctor visits, hospital stays, and prescription drugs.
- Housing assistance: There are a variety of housing assistance programs available, including public housing, Section 8 vouchers, and rent subsidies. These programs can help low-income individuals and families afford safe and affordable housing.
- Childcare assistance: There are a variety of childcare assistance programs available, including Head Start, Early Head Start, and child care vouchers. These programs can help low-income families afford quality childcare.
- Job training: There are a variety of job training programs available, including the Workforce Investment Act (WIA) and the Trade Adjustment Assistance (TAA) program. These programs can help low-income individuals learn new skills and find employment.
- Tax credits: There are a variety of tax credits available to low-income individuals and families, including the Earned Income Tax Credit (EITC) and the Child Tax Credit. These credits can help low-income individuals and families reduce their tax liability or receive a refund.
And the upper economic class just has more discretionary income as a percentage of their overall finances which gives them the ability to save, invest, and plan for the future and not having to worry about the things the middle class has to worry about and pay for themselves.
The middle class pays a significant percentage of overall taxes in the United States. According to the Tax Policy Center, the middle quintile of taxpayers (those with incomes between $43,350 and $130,000) paid 32.5% of all federal income taxes in 2020. This means that the middle class paid more in taxes than the top 1% of taxpayers, who paid 29.1% of all federal income taxes.
The middle class also pays a significant amount of state and local taxes. According to the Institute on Taxation and Economic Policy, the middle quintile of taxpayers paid an average of 11.1% of their income in state and local taxes in 2019. This is higher than the average of 9.6% paid by the top 1% of taxpayers.
The high percentage of taxes paid by the middle class is due to a number of factors.
First, the middle class makes up a large share of the population.
Second, the middle class pays a higher proportion of their income in taxes than the wealthy. This is because the middle class pays a higher percentage of their income in payroll taxes, which are not capped.
So what can a middle class earner do? Look, my advice isn’t as simple as it may come across. I realize this. However, there aren’t any easy solutions to this problem.
- Pay off all of your debts as quickly as possible and then do whatever you can to stay out of debt.
- Find a way to generate extra income. Again, not an easy thing to do. But if you can earn more money and get out of bad debt.
- Control your housing costs. Whether you rent or you own. Make sure your housing costs are as low as possible.
- Pay for tax advice. Get a full understanding of how much you are paying in taxes and find out ways you can lessen your tax burden. This one thing could be a game changer for you. It is going to cost you on the front end, but it is well worth it.
- Do the research and find out if you are being paid fair market value for the value you are bringing to your organization. The chances are if you have been with a company a long time, you might not be keeping up with the current fair market value for what you do.
- Don’t be afraid to switch careers or jobs. No matter what you are doing for work. You can’t be afraid to make a switch. You should be earning as much as possible for the time you are investing in your work. Period.
- Don’t take advice from people who are in the same situation as you financially. It’s not personal. But if they haven’t figured it out. They can’t help you figure it out.
- Shop around for the best prices. It is way too easy nowadays to compare prices. Do this for all purchases.
- If you have children, make sure they are doing well enough in school to earn a scholarship or if not, they should be working as soon as they possibly can so they can start saving for their college education.
- Go to the doctor and get regular check ups. It is much easier to fix issues when diagnosed early.
I could keep going with some other thoughts and ideas. However, regardless of where you fall on the economic scale the above ten things are things you should be doing.
To your success and your future.