| Is the typical middle-class family doing better today than they were 25 years ago? The answer is no, according to new measures of economic well-being developed in this report. The combination of stagnant incomes and staggering cost increases for important middle-class items—housing, health care, education and transportation—have left families with less money to save and spend than just a few years ago, and working longer to achieve the same results as in 1980. According to the analysis here: • In 2005, the average two-earner family needs to work 31.5 weeks to pay for taxes and a range of middle-class items (health care, housing, college, and transportation). That is an increase from 30.2 weeks in March 2001, and from 28.7 weeks in March 1979. • In 2005, after paying for the items outlined above, the average two-earner family had about $19,542 left to pay for basics—such as clothing, food, and utilities—to save for retirement, to improve their economic well-being, and to spend on any leisure and recreation. That is $951 less than families had in 2000 and $1,702 less than in 1980. • While families spend less today on taxes than in 2000—the tax cuts were real—those tax cuts do not offset the cost increases of expenditure items, particularly housing, health care, and education. • Middle-class families have addressed the economic squeeze by working longer hours. This has meant less time to spend with children and higher out-of-pocket expenditures for child care and for food outside the home. • Over time, middle-class families have also maintained their consumption levels by borrowing more money. Household debt soared to a record 116 percent of disposable income in March 2005. Average debt service burden levels have remained high throughout the current business cycle. • The economic squeeze tends to be worse for minorities than for whites. Specifically, income declines have been larger for Hispanics than for African-Americans and greater for African-Americans than for whites. America’s middle class is nervous about its future. By the end of 2004, people were generally less optimistic about their future than they were at the same point in revious recoveries. Consumer survey data from the University of Michigan showed that people’s assessment of their current personal finances rose by 4.7 percent, compared to an average increase of 17 percent in prior recoveries.1 Over this same period, people’s assessment of their economic future actually declined by 4.5 percent, compared to increases in prior recoveries. The anxieties of middle-class families mirror their economic struggles. It has become harder for middle-class families to pay for the basics of a middle-class existence. ....shows that a hypothetical two-earner family is earning only slightly more today ($49,596) than in 2000 ($49,012) in inflation-adjusted 2005 dollars. Yet, after paying for the fundamental costs of middle-class life—taxes, transportation, housing, health care, and college—that family has $19,542 in 2005, $951 less than in 2000 and $1,702 less than in 1980. This means less discretionary income to pay for a range of basic items — like food, clothing, and utilities; improving their standing and that of their family (bank fees, book purchases); paying interest on non-mortgage debt; and every form of recreation and relaxation, like going out for dinner and vacationing. ....While a typical two-earner couple would have had, in March 2001, to spend 30.2 weeks out of a year to pay for taxes and the middle-class items outlined above—health care, housing, college, and transportation—that family required 31.5 weeks per year in June 2005. That is, after four years, middle-class families had to work one additional week per year to afford the same middle-class items as at the end of the last expansion, and 2.8 weeks more than at the end of 1980... |
Hmmm... Economically, things seem to be getting worse overall since 2000. I wonder what happened that year to start the downturn? Let me think...
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