Sunday, April 6, 2014

The Obama Economy and the Middle Class

The Obama Economy and the Middle Class

By Associated Press April 4, 2014 12:10 pm
middle_classWASHINGTON (AP) — A sense of belonging to the middle class occupies a cherished place in America. It conjures images of self-sufficient people with stable jobs and pleasant homes working toward prosperity.
Yet nearly five years after the Great Recession ended, more people are coming to the painful realization that they're no longer part of it.
They are former professionals now stocking shelves at grocery stores, retirees struggling with rising costs and people working part-time jobs but desperate for full-time pay. Such setbacks have emerged in economic statistics for several years. Now they're affecting how Americans think of themselves.
Since 2008, the number of people who call themselves middle class has fallen by nearly a fifth, according to a survey in January by the Pew Research Center, from 53 percent to 44 percent. Forty percent now identify as either lower-middle or lower class compared with just 25 percent in February 2008.
According to Gallup, the percentage of Americans who say they're middle or upper-middle class fell 8 points between 2008 and 2012, to 55 percent.
And the most recent National Opinion Research Center's General Social Survey found that the vast proportion of Americans who call themselves middle or working class, though still high at 88 percent, is the lowest in the survey's 40-year history. It's fallen 4 percentage points since the recession began in 2007.
The trend reflects a widening gap between the richest Americans and everyone else, one that's emerged gradually over decades and accelerated with the Great Recession. The difference between the income earned by the wealthiest 5 percent of Americans and by a median-income household has risen 24 percent in 30 years, according to the Census Bureau.
Whether or not people see themselves as middle class, there's no agreed-upon definition of the term. In part, it's a state of mind. Incomes or lifestyles that feel middle class in Kansas can feel far different in Connecticut. People with substantial incomes often identify as middle class if they live in urban centers with costly food, housing and transportation.
In any case, individuals and families who feel they've slipped from the middle class are likely to spend and borrow less. Such a pullback, in turn, squeezes the economy, which is fueled mainly by consumer spending.
"How they think is reflected in how they act," said Richard Morin, a senior editor at the Pew Research Center.
People are generally slow to acknowledge downward mobility. Many regard themselves as middle class even if their incomes fall well above or below the average. Experts say the rise in Americans who feel they've slipped below the middle class suggests something deeply rooted.
More people now think "it's harder to achieve" the American dream than thought so several decades ago, said Mark Rank, a sociology professor at Washington University in St. Louis.
Three years ago, Kristina Feldotte, 47, and her husband earned a combined $80,000. She considered herself solidly middle class. The couple and their four children regularly vacationed at a lake near their home in Saginaw, Michigan.
But in August 2012, Feldotte was laid off from her job as a special education teacher. She's since managed to find only part-time teaching work. Though her husband still works as a truck salesman, their income has sunk by more than half to $36,000.
"Now we're on the upper end of lower class," Feldotte said.
Americans' self-perception coincides with data documenting a shrinking middle class: The percentage of households with income within 50 percent of the median — one way to define a broad middle class — fell from 50 percent in 1970 to 42 percent in 2010.
The Pew survey didn't ask respondents to specify their income. Still, Pew has found in the past that people who call themselves middle class generally fit the broad definitions that economists use.
Roughly 8.4 percent of respondents to the National Opinion Research Center's survey, last conducted in 2012, said they consider themselves lower class. That's the survey's highest percentage ever, up from 5.4 percent in 2006. NORC is a social science research organization at the University of Chicago.
Tom Smith, director of the NORC, said even slight shifts are significant. Class self-identification "is traditionally one of the most stable measures" in the survey, he said.
By contrast to the most recent recession, the severe 1981-82 downturn had little effect on class self-identification in Smith's survey.
Why do so many no longer regard themselves as middle class? A key reason is that the recession eliminated 8.7 million jobs. A disproportionate number were middle-income positions. Those losses left what economists describe as a "hollowed out" workforce, with more higher- and lower-paying and fewer middle-income jobs.
Rob McGahen, 30, hasn't yet found a job that paid as well as the purchasing agent position at Boeing's defense division that he left in 2011. Nervous about the sustainability of that job because of government defense cuts, McGahen quit after buying a bar near his St. Louis home.
The bar eventually went bankrupt and cost him his house. He and his wife moved to Pensacola, Fla., where he's had little luck finding work in defense contracting.
Now, he works in the produce section of a supermarket. His wife earns the bulk of their income as a speech pathologist. Their household income has been cut in half, from $110,000 to $55,000, and he and his wife have put off having children.
"It's definitely been a step back," McGahen said.
Now living in an apartment, he misses the couple's three-bedroom house on a quiet cul-de-sac in a St. Louis suburb.
Home ownership is among factors economists cite as markers of middle-class status. Others include being able to vacation, help children pay for college and save for a secure retirement.
Yet stagnant middle-class pay, combined with steep price increases for college, health care and homes, have made those expenses harder to afford. Median household income, adjusted for inflation, hasn't budged since 1996, according to the Census Bureau. Average college tuition has soared 174 percent in that time.
Many of the formerly middle class are still struggling with student debt. McGahen, who has an MBA, estimates he'll be making $600 payments on student loans each month for the next decade. Feldotte, with two master's degrees, says she has "lots and lots of debt."
And she isn't prepared to help her children pay for college.
"There's no money to help them," she said.
Some people feel they've fallen out of the middle class even as their incomes have remained stable, because their costs have risen. One is Richard Timmerman, 66, a retired postal employee in River Falls, Wis.
He's been living off his pension since retiring five years ago. His wife, a sales manager at a hotel and conference center, hasn't had a raise in that time. The recession hammered the hotel's business, though it's slowly recovering.
Yet his cost of living has risen in the past decade or so. Gas prices have surged over that time. So has food. And only this year did the value of Timmerman's retirement savings regain its level of six years ago.
"I see my position in the social structure having gone down a notch," Timmerman said. He considers himself lower-middle class, compared with middle class a few years ago.
A slowly improving U.S. economy could lift some people back into the middle class. Still, the recession and slow recovery have left permanent scars.
McGahen and his wife are trying to rebuild their savings. They no longer have credit cards. Timmerman travels much less than he thought he would in retirement.
"I have really beat myself up a lot over the last 2½ years," McGahen said. "Until I get myself up and going again and in a good place ... it is tough."
AP Writer Melissa Nelson in Pensacola, Fla. contributed to this report.
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