Disappearance of the Middle-Class

A little over a year ago I recommended Losing Our Way, a book by Bob Herbert, a former columnist at the New York Times and now a Distinguished Senior Fellow at Demos, a national think tank.

As the title suggests, Mr. Herbert believes that the United States has lost its way, evidenced by our rampant unemployment and underemployment, neglected infrastructure, income inequality and the scourge of poverty. Following his departure from the New York Times three years ago, Mr. Herbert set off on a journey across the country to report on Americans who were limping from paycheck to paycheck and falling further behind in an economy that has yet to fully recover from the Great Recession.

Losing Our WayAmong the Americans Mr.Herbert meets during the course of his journey are a twenty-something woman who suffers devastating injuries in a tragic bridge collapse in Minneapolis; a twenty-four-year-old soldier from Peachtree City, Georgia, who loses his legs and an arm in a seemingly endless war; an exhausted high school senior in Brooklyn who works the overnight shift in a factory, packaging bread, at minimum wage to help pay her family’s rent; and a group of parents in Pittsburgh who fight back against the politicians who decimated funding for their children’s schools.

Throughout the book, Mr. Herbert reminds readers of a time in America when unemployment was low, wages and profits were high, and the nation’s wealth, by current standards, was distributed much more equitably. Mr. Herbert traces where we went wrong and highlights the drastic and dangerous shift of political power from ordinary Americans to the corporate and financial elite.

A recent essay in The Atlantic by Neal Gabler, The Secret Shame of Middle-Class Americans, which is getting a lot of attention lately, made me think of Mr. Herbert’s book and the common thread running through both; the disappearance of America’s Middle-Class.

Early in the piece Mr. Gabler discusses a survey where the Fed asked respondents how they would pay for a $400 emergency. The answer? 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?

Mr. Gabler responds he knew, because he would be included in that 47 percent. This is surprising because Mr. Gabler has enjoyed success as a writer and film critic; and lives in what many would consider an affluent area. He then goes into great detail about how he found himself in a position to be included in that 47 percent and how he came to understand that a significant number of Americans are ‘financially impotent’ and feel great shame for the position they have found themselves in.

I highly recommend that you find some time to read the essay; and if you have more time, listen to Tom Ashcroft’s On Point interview with Mr. Gabler and watch an interview with Mr. Gabler at The Atlantic Summit on the Economy.

Stay Savvy, my friends!

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.

9 Comments

  1. I read that Atlantic piece and about blasted through the rafters. The author sent both kids to private school. Freely chose to live in a high cost area. Freely chose to accumulate a lot of student loan debt. Chose to allow his parents to bankrupt their own retirement to put his kids through two prestigious universities. Chose to buy a home too big for him to afford…and then gives us the pity party that he can’t come up with $400’bucks. He didn’t just make a mistake or two – he has a lifelong pattern of abusive and destructive spending. Even though he admits his mistakes the thrust of his piece is that the American middle class is broken (he even cites the figure that it takes a $130k income to achieve it). What he needs is a kick in the ass and a dose of reality – the world doesn’t owe us an entitled life. It’s about choices.

    • Indeed. Clearly Neal Gabler is an individual that was making a reasonable salary but chose to live beyond his means and epitomized financial illiteracy in the United States.

      Thanks for stopping by and sharing your thoughts, my friend.

  2. I often have conflicting feelings where I’m grateful for what I have, but I also don’t feel what I have is a lot either. They talked about pay stagnation, which definitely seems to have hit me. From information I found, in 1982 average starting pay in engineering was around $62k and I’d be around $85k. Instead I started around $30k with student debt 5 years ago and have just past $60k this year.

    In reality it wouldn’t really take much to turn what I feel is small savings per year into living pay check to pay check which is a scary thought considering I live a pretty simple frugal life and makes me realize how ridiculous the situation is with many people have living on so much less. It’s sad that savings can be looked at like a luxury for so many. I feel like a lot of what I do financially should be at the minimum of what everyone should strive for and be able to do.

    It just feels like all the pay scales should be slid up. I should be a decent amount higher, average pay should be close to what I’m at now and minimum wage should be closer to $10-$15/hr. But I think you and me are more about getting people to make the best you can of their situation like we have and that financial literacy and working with what you have can make you feel like you’re more in control and in doing so raise your feeling of security and self worth/self-esteem.

    • Thanks for stopping by and sharing your thoughts, my friend. While the numbers vary depending on the source and specific starting point, it’s pretty clear that incomes, in inflation-adjusted dollars, have basically flatlined since the late 70s/early 80s. As you astutely note, a large segment of our population is either living paycheck-to-paycheck or are not that far removed from such a situation, even if they are college educated, have what generally passes for a good (professional) job manage their money wisely.

      Over the last few years I have settled on the belief that the trouble we’re in as a country is due to a belief that corporate profits are the single most important economic factor and those profits, and the income it generates for those that manage the profits, will ‘trickle’ down to middle and lower classes; and we have far too many individuals – even those with high salaries like Neal Gabler – who are financially illiterate. The combination of profits at the expense of everything else and financial illiteracy is killing us.

  3. Really interesting stats. I hope this problem is addressed soon!

  4. WOW what an eye opening interview when “49% of people who earn 100 to 150 thousand cannot come up with $2,000.00 in an emergency.” I think we have a serious financial ignorance problem.

    • Indeed. While I do believe there are systemic problems, the financial illiteracy in our country is killing the middle-class. Thanks for dropping by and sharing your thoughts, my friend.

    • 25% was that survey, still pretty ridiculous. I just met a guy who makes somewhere around $200k last weekend and I’ve heard he complains regularly about money issues.

      • Proof that a high salary does not equal high financial IQ.

Leave a Reply

Your email address will not be published. Required fields are marked *