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The middle class is a thing of the past

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The middle class is a thing of the past

The share of Americans who consider themselves middle class is now the minority. According to a Pew Research Center survey, just 44% of Americans believe they are part of the middle class. That is the lowest level ever, down from 54% as recently as 2008. 40% identified themselves as lower-middle class or lower class in the January survey, compared to 25% in 2008.

According to the definition offered up by the White House’s “Middle Class Task Force”, the middle class in America is a thing of the past. How can that be? It is precisely because there is no empirical definition of what the middle class is or even a middle income range that defines the class. The fundamental principal that defines the American middle class is aspiration. The task force determined that: “middle class families are defined more by their aspirations than their income.”

Based on that definition, the middle class is eroding simply because aspiration is eroding - and quickly. According to a Washington Post/Miller Center poll, just 39% of Americans believe their children will have a better standard of living than they do. A similar poll conducted by Gallup found the share of Americans who believe today’s youth will have a better life than their parents has fallen sharply in recent years to 49% from 66% in 2008.

The White House Task Force report listed typical American middle-class aspirations as “home ownership, a car, college education for their children, health and retirement security, and occasional family vacations.” Even those specific measures offer evidence of the decline of the middle class. Just 18% of Americans said owning a home is the definition of the American Dream, according to a GFk/Credit.com poll. The share of Americans who believe a college education is a part of the American dream also has declined. In 1986, 68% said going to college was part of the American dream. Today, just 52% do, according to the Washington Post.

It's all about the money

So, why has there been such a sharp decline in hope and aspiration? Yahoo Finance Senior Columnist Michael Santoli believes income is the biggest factor. “Median wage in the country has not remotely kept pace with the expansion of the economy, even with inflation if you go back let’s say 15 or 20 years.” Santoli said that reality, combined with the fact that there was such a burst of downward mobility during and after the financial crisis, shocked many Americans into realizing they no longer think of themselves as middle class.

The median income in the United States as of 2012 was $51,017. That’s down 10% from 1999 when the median income was $56,080, according to the Census Bureau. As incomes have declined, the Americans who still are acquiring some of the above hallmarks of the middle class - a home, a car, an education – are increasingly doing so by going into debt. According to a report from the New York Federal Reserve, Americans’ debt jumped in the third quarter of 2013 by the largest amount since 2007. Including mortgage debt, credit card debt and auto and student loans, Americans’ outstanding debt increased 2.1% to $11.52 trillion dollars.

A state of mind

The White House Task Force report acknowledged that aspirations are not enough. The report stated that “middle class families know that to achieve these goals they must work hard and save.” Unfortunately, those two things - work and savings – also have been hard to come by. Political ideologues can argue the causes, but the facts remain that participation in the American workforce is near a 35-year low and roughly three-quarters of Americans are living paycheck-to-paycheck, according to Bankrate.com.

“In this country, calling yourself middle class was usually the default, almost regardless of exactly where you sit on the income or wealth spectrum,” said Santoli. “Being middle class meant you felt as if you had a path to improving your economic position or have your kids do so and that’s the cycle that I think has been interrupted, at least the psychological piece of it and that’s something that obviously is a very long-term concern.”

Poll: do you consider yourself middle class?

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