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For many families, gap's getting wider PERCENT CHANGE IN FAMILY INCOME SHARE: 2005 RELATIVE TO 1953

October 26, 2008 12:16 am

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By HOWARD OWEN

Should the American middle class be placed on the endangered species list?

The numbers suggest that while the rich are getting richer, not only the poor but also everyone in the middle are getting poorer.

That was the main message of a tele-seminar presented last week by the Foundation for American Communications, titled "The Middle Class Squeeze."

"The vulnerability of the middle class is really increasing," said Kristen Lewis, who led the seminar. "Middle-class families are looking more like working-class or poor families."

A few facts:

One percent of Americans control about one-third of the wealth.

Real median household income is $48,200, down $1,175 from 2000 figures.

Because mortgage payments, utilities, food, day care, health insurance and just about everything else is up over that same period, the median household's expenses are up about $4,600.

To make ends meet, the average household has about $8,500 in credit card debt, and the average college graduate finishes school with about $20,000 in educational debt.

Forty-five million Americans have no health insurance. Over a two-year period, 80 million will go without health insurance at some point.

You get the picture.

Lewis, co-author of "The Measure of America," whose subject is the growing gap, says the middle class isn't in its current malaise because of too many lattes.

"Fixed expenses are putting families under water, not sneakers or takeout [food]," she said. "Taken on the whole and on average, that's not what's driving the middle-class squeeze."

To make matters worse, the middle class seems to be working harder for less.

Americans, Lewis said, work more hours on average than they did 30 years ago, and we work about 350 hours more a year than our counterparts in peer countries in Europe.

And while household incomes are up, much of that is because Mom and Dad both are working, where a similar family might have gotten by on one income in the past.

"Relying of two incomes doubles vulnerability," Lewis said. "In the past, if the mill closed, there was this extra worker, sort of an insurance policy in a second potential income. Now, that income is already being counted on, not something you keep in your back pocket just in case. If one person loses his job, you're in bad shape."

American society, she added, has not adjusted to the "new normal" of Mom and Dad both in the work force as well as other countries.

We are, for example, one of four countries in the world with no federally mandated paid maternity leave. The others are Liberia, Papua New Guinea and Swaziland.

"We are far behind in child care, preschool and federally mandated sick leave and vacation," Lewis said. "Other countries provide universal health coverage so parents can care for children and themselves."

She sees the idea of a social contract between employer and employees as fading.

"People who entered the system when it worked a certain way," she said, referring to baby boomers and other older Americans, "they had expectations of what retirement would be, what the rules would be, and the rules changed.

"They entered under one set of rules and are facing retirement with different rules."

She thinks the idea of expecting everyday people to manage their own retirement savings "is crazy. Like most of us are not good at fixing our own plumbing or fixing our cars, we're also not that great at investing. It's not in the skill set. Putting that on people near retirement is not in the best interest."

And the fact that about 1 percent of Americans control one-third percent of the wealth puts us in special company. Among countries in the Organization for Economic Cooperation and Development, we are more unequal than all the others except Mexico and Turkey.

A 20-year study released this week by the OECD concluded that inequality is growing among the world's richest countries, and especially in the U.S. The specter of a long-term global economic crisis makes pros-pects more grim.

"What will happen if the next decade is not one of world growth but of world recession?" asked British economist Anthony Atkinson. "If a rising tide didn't lift all boats, how will they be affected by an ebbing tide?"

"The middle class is shrinking," is Lewis' message. "Wages in the middle class have fallen, wages at the top have skyrocketed.

"The top earners are peeling away and leaving the rest behind."

Howard Owen: 540/374-5539
Email: howen@freelancestar.com




TOP 5 PERCENT

Share of income has gone up significantly for the top 5 percent of U.S. households.

BIG DROP FOR MOST

Share of income has gone down for 80 percent of U.S. households.

35%

30%

25%

20%

15%

10%

5%

0%

-5%

-10%

-15%

-20%

-25%

-30%

-14.9

-23.2

-15

-4.2

--Author's calculations, based on data from the U.S. Census Bureau

POOREST 20%

20%--40%

40%--60%

60%--80%

family income share




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