An Inside Look at the Middle-Class Squeeze

US News

The decline of the middle class has become a focal point of this year's presidential election. Each candidate claims their plan would put an end to the middle-income slide that accelerated during the Great Recession and still shows no signs of abating.

But lost in the rhetoric about the decline of the middle class is the reality of the decline. Nearly everyone is aware that the middle class is struggling, but few understand how the struggle plays out in everyday life.

[In Pictures: 10 Signs American Families Are Falling Behind.]

According to experts, the decline is fundamentally reshaping the U.S. economy. The Great Recession has affected the way the middle class feels about higher education, government, and the future. Even their health has suffered as a result of the decline.

"Their economic future isn't very bright," says Timothy Smeeding, director of the Institute for Research on Poverty at the University of Wisconsin--Madison. "Wages and income are flat. Transportation, childcare costs, and healthcare costs are going up, and your income isn't."

Smeeding calls the current state of the middle class "the squeeze." Even people who have jobs are being forced to squeeze more and more out of their income, despite the fact that incomes aren't growing. "These people live on earnings. They're working on not great wages and their jobs are threatened," he says. "They don't see any hope in the future of things getting better."

By the numbers. Hard numbers paint a stark picture of the middle-class decline. According to an August 2012 Pew Research Center report, only half of American households are middle-income, down from 61 percent in the 1970s. In addition, median middle-class income decreased by 5 percent in the last decade, while total wealth dropped 28 percent. According to the Economic Policy Institute, households in the wealthiest 1 percent of the U.S. population now have 288 times the amount of wealth of the average middle-class American family.

The income decline has caused many people to accumulate high levels of debt. And as the cost of college increases, more people are saddled with tens of thousands of dollars in student loans after they graduate.

Only 23 percent of people were confident they had enough money to get them through retirement, according to the Pew report. It also found that fewer people believe hard work will get them ahead in life.

[Read: Where Do You Fall in the American Economic Class System?]

"You have far less disposable income and increasing levels of debt," says David Madland, director of the American Worker Project at the Center for American Progress. "You have this fundamental squeeze on most members of the middle class. It's impacting their quality of life and their outlook for the future."

Behind the numbers. These are the kind of statistics used by politicians to sell policies, but they tell little about the realities behind the numbers--or how the decline of the middle class plays out in people's everyday lives.

More and more middle-income families are turning to government programs such as food stamps, Medicaid, and unemployment insurance. According to a recent Senate Budget Committee Report, "Among the major means tested welfare programs, since 2000 Medicaid has increased from 34 million people to 54 million in 2011 and the Supplemental Nutrition Assistance Program (SNAP, or food stamps) from 17 million to 45 million in 2011. Spending on food stamps alone is projected to reach $800 billion over the next decade."

People are also saving less. Wage increases have not kept up with increases in the cost of living, forcing people to dig deeper into their savings to make ends meet. Meanwhile, many middle-class workers who lost their jobs during the recession remain unemployed.

"The most pressing worry is the diminished economic security of middle-class families. The long-term unemployed have completely drained their savings," says Kristen Lewis, co-director of Measure of America, a project of the Social Science Research Council that explores the distribution of opportunity and well-being in the United States. "Those who are working have jobs without healthcare or sick leave. They have no retirement savings plan. There's no end in sight to that."

[Read: The Real Source of Middle-Class Money Woes.]

Lewis adds that the economic state of the middle class takes its toll on their health. A series of recent reports found that life expectancy for whites without a high school diploma--once the backbone of the middle class--has dropped faster than for other groups. The reports linked the decline in large part to the lack of access to healthcare.

Can the middle class come back? According to Lewis, current economic and political conditions won't provide the middle class with the same security it needed to rebound in the years following World War II. "In the post-war period, there were a lot of programs put in place to help people," such as education and homeownership assistance, says Lewis.

Madland says increasing the minimum wage and improving entitlement programs like Social Security are key to rebuilding the middle class. "[After the Great Depression], we made major policy changes to ensure we have a strong middle class. We let too much of it wither on the vine," he says. "We need something approaching that kind of effort."

But for Wisconsin's Smeeding, one thing has to happen before these policy changes can occur: "We have to get the economy growing again."



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