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AARP Maps Fight to Rebuild Middle Class

Philip Moeller

AARP announced a major policy and research initiative Tuesday drawing attention to the economic decline of the American middle class. In the run-up to what will surely be a bruising Congressional battle over Medicare, Medicaid, Social Security, and other federal benefit programs, the powerful seniors' group said it would push for strengthened supports for all generations.

Calling the declining fortunes of the middle class the new "impossible American dream," AARP CEO A. Barry Rand said the organization's Middle Class Security Project would target the five needs that Americans have identified as crucial to people being part of the middle class and securing their future well-being.

Citing public polling from the Pew Research Center, Rand said those things are:

1. A secure job

2. Health insurance

3. Owning a home

4. A college education or some form of higher education

5. Stocks, bonds, or other investments--in other words, the ability to save and invest for the future

Rand said AARP would work in all five areas to "rebuild and restore prosperity to the middle class." He also called on federal lawmakers in Washington to broaden and redirect the current deficit-reduction debate "towards the larger goal of economic growth and maintaining the health and economic security of all Americans."

[Read: The Middle-Class Retirement Delusion By the Numbers.]

"Over the past generation, more and more of the middle class have fallen off the cliff into economic insecurity and even poverty," Rand said. The organization unveiled a new Middle-Class Tracking Index. It shows that as of 2010, only 16 percent of people in the middle class faced secure economic futures. The figure was only 10 to 11 percent in African American and Hispanic middle-income families.

"This is not just about economics," he added. "A strong middle class is the bedrock of a functioning society. An ever-widening gap between the 'haves' and the 'have nots' leads to instability in families and in society and makes it much more difficult for people to move up the socioeconomic ladder, achieve the American Dream and live their best life."

AARP also released a group of studies Tuesday documenting the serious erosion of the middle class. Declines in real wages, employment prospects, healthcare affordability, home equity, and retirement prospects occurred steadily in recent decades and this deterioration accelerated during the steep recession. Here are some highlights from study fact sheets provided by AARP:

Building Lifetime Middle-Class Security

This report provides AARP's policy recommendations and calls for increasing access to affordable healthcare coverage and slowing the growth of healthcare costs. It also recommends ensuring that Social Security continues to provide the foundation for a secure middle-class retirement and is improved for those most vulnerable. Benefits must continue to be progressive, guaranteed for life, and protected from inflation.

[Read: The Long Slog Toward Dangerous Debt Continues.]

Tracking the Decline: Middle-Class Security in the 2000s

A new Middle Class Tracking Index measures five factors: income, health insurance coverage, housing affordability, money for extras and savings, and assets to cover an emergency. Among working-age middle-income families, the proportion defined as "secure" fell by 38 percent from 2004 to 2010, and the proportion defined as "vulnerable" grew by 42 percent.

The Elusive Middle in America--What Has Happened to Middle-Class Income?

The middle class comprised 51 percent of American adults in 2010, down from 61 percent in 1970. From 1979 to 2007, average household income for the middle class grew by about 16 percent--one-third the growth (48 percent) for households with the highest income. From 1979 to 2011, average income for the middle class grew by only about 8 percent.

The Effects of Rising Healthcare Costs on Middle-Class Economic Security

Healthcare spending grew at more than twice the rate of inflation between 2000 and 2010. Middle-income households spent 51 percent more on healthcare in 2010 than a decade earlier. Companies shifted more health insurance costs to their workers over the last decade, more than doubling premiums for family coverage, from $1,787 in 2001 to $4,129 in 2011.

What Are the Retirement Prospects of Middle-Class Americans?

The average retiree income is projected to fall from 80 percent of average career earnings for current retirees to 73 percent for future retirees. Factoring in higher healthcare costs, the report shows retiree income falling to 55 percent of average career earnings, assuming no changes in current Social Security rules. Social Security will account for 51 percent of per capita household income for future middle-income retirees--69 percent for low-income workers and 35 percent for high-income workers.

In the Red: Older Americans and Credit Card Debt

Older Americans carry more credit-card debt than younger people--an average of $8,278 in 2012 versus $6,258 for borrowers younger than 50. With incomes averaging $20,000 for many retirees, it is becoming harder for many to ever pay down their credit-card debts.

[Read: 10 Signs American Families are Falling Behind.]

Loss of Housing Affordability Threatens Financial Stability for Older Middle-Class Adults

The percentage of middle-income families age 50 and older that spent 30 percent or more of their income on housing increased from 20 percent in 2000 to 29 percent in 2009. More than half of borrowers age 50 and older in foreclosure (53 percent) in 2011 were middle-income households.

Stories from the Middle Class: How Older Americans Are Dealing with New Economic Realities

This work is based on in-depth interviews with Americans 50 years of age and older in Milwaukee, Philadelphia, and Tampa Bay. Participants were universally pessimistic about the current state of the middle class and its future. They felt that middle-class life has changed from being able to live comfortably to having to struggle more and more.

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