The Middle Class Comeback

Women, Millennials, and Technology Leading the Way

Munir Moon

• Publisher: Munir Moon LLC
• Year: 2016
• ISBN:
  9780991372171
• Topic: Política y relaciones internacionales
• Subtopic: Gobierno estadounidense

In a time when the one-percenters seem to have it all, author Munir Moon builds a case for the average Joe in his eye-opening new book, The Middle Class Comeback. So take heart and take control of your fears with Moon's informative--and ultimately inspiring--look at the middle class. Moon, a former financial-industry executive and current business owner, uses his years of expertise to paint a portrait of the middle class that is not nearly as grim as the media would have you believe. While it is true that the middle class has been consistently squeezed while facing higher costs in health care, housing, education, and taxes, there are many positive developments that spell hope for those making a moderate income. With clarity and insight, Moon details the ways in which the middle class is setting itself up for a comeback. This includes the increasingly strong presence of women in society; the rise of technology that will both create high-paying jobs and inspire different ways of approaching basic societal pillars; and the imminent takeover of the millennials, a generation that is poised to tackle our nation's problems in a whole new way.

One

THE MIDDLE CLASS

The lower and middle class represent the majority of Americans. This group will gain strength and influence in the coming years as it challenges the one-percenters’ power in shaping the policies and affairs of the country. The 2016 election may serve as a transforming event in history where the policies affecting the middle class were in the front, middle, and back of America’s public discourse.

Most Americans consider themselves to be the middle class. According to a survey by The New York Times in 2005, only one percent of the respondents considered themselves to be “upper class” and only seven percent considered themselves part of the “lower class.” The rest, 92 percent, considered themselves middle class.⁸ Most of the middle-class people are working people who do not have enough wealth to invest. However, a 2012 survey report by Pew Research states that only 49 percent (from 92 percent seven years earlier) of adults describe themselves as “middle class,” which seems to be manifested during the 2016 election cycle for a change.

There is a common desire among all Americans, regardless of their socioeconomic background, to have financial security and a better life for their children. They want to have affordable healthcare for their family, provide education to their children so that they can have a better future, own a home, and save for retirement. So how is the middle class defined?

There is no standard definition of the middle class. It has been defined in various ways. Some definitions are purely based in economic terms while the others are defined based on a combination of values, expectations, and aspirations. Shifting social values and expectations appear to influence whether one considers himself or herself as part of the middle class. Therefore, it is important to understand what middle class means through various lenses.

Economic Definition

Income is the sole measure by economic analysis to define the middle class. Some of the definitions include absolute dollar value income, income relative to median, or income level relative to the poverty line.⁹ According to the White House Task Report¹⁰, that estimate ranges from $51,000 to $123,000 for a married couple with two school-aged children in 2008. The reason for a wide range is that the cost of living in different parts of the country varies drastically where even a higher end middle-class family feels the budget squeeze.

The standard definition of household income is broken down into five quintiles, 20 percent each, the lowest, second, middle, fourth, and the highest income. According to a Congressional Budget Office (CBO) report, households with income before federal tax of $45,300 fall into second quintile, and those in the fourth quintile make $97,500 or less based on 2011 data.¹¹ Households between the second and fourth quintile are considered the middle class according to a report by the White House.¹²

Another definition is by the median income where 50 percent of the households make less and 50 percent more. The median income grew from $52,623 in 1990 to $57,843 in 1999 and then trended down to $53,657 by 2014 (Fig. 1.1). This reflects about a six to eight percent decline from its peak and gain from its bottom of twenty-five years ago.

A Pew Research Center study examined the changing size, demographic composition, and economic fortunes of the American middle class in 2015. It defined the middle class as Americans whose annual household income is two-thirds to double the national median, about $42,000 to $126,000 annually in 2014 (adjusting for inflation) for a household of three. Under this definition, the middle class is about 50 percent of the United States adult population in 2015, down from 61 percent in 1971.¹³

Self-Reported Definition

Another approach is simply asking people to identify their status in society. According to a Pew Research Survey in 2012, the median response for a family of four earning $70,000 considers themselves to be the middle class. Some estimate a median income of $85,000 in the East, $60,000 in the Midwest, and $70,000 in the South and West qualifies for the middle-class status.¹⁴

Qualitative Definition

By some accounts, the middle class seems to be defined by values, expectations, and aspirations rather than income. Income, however, is critical in order to realize the aspirations. The middle-class aspirations are affordable healthcare, college education for kids, owning a home, having a car, saving for retirement and occasional family vacations. Planning and saving for the future are critical elements in attaining a middle-class lifestyle for most families, according to a report by the United States Department of Commerce in 2010.¹⁵

Some researchers define middle class based on indexes that consist of income, education, occupation, and other measurable criteria to rank people by social standing and living standards. Other social scientists define the middle class more broadly from a qualitative perspective. They are based on values and expectations that are difficult to quantify:

•Strong orientation toward planning for the future.

•Control over one’s destiny.

•Movement up the socioeconomic ladder through hard work and education.

•A well-rounded education for one’s children.

•Protection against hardship, including crime, poverty, and health problems.

•Access to home ownership and financial assets such as a savings account.

•Respect for the law.

The bottom line is that the income level alone is not the only criteria to describe the middle class. However, it is the most important factor in defining it in public discourse.

Shrinking Middle Class

According to a Pew Research Survey, 85 percent of self-described middle-class adults say it is more difficult now than it was a decade ago for middle-class Americans to maintain their standard of living.¹⁶ One of the reasons is that the cost of key components affecting the middle class is growing at a faster rate than their income, which has remained relatively flat over the last twenty-five years (Fig 1.2)

The top one-percenters have gained more over the last decade than the rest of the 99 percent. However, blaming them does not solve the problem. To think that the top one- percenters would not look out for their interests would be going against the main tenets of capitalism. One-percenters and the large corporations have the resources to finance the political campaigns not the lower or the middle class. Therefore, it should not be a surprise that national policies favor those at the top of the economic ladder rather than the bottom or the middle. Gains at the top appear to be at the expense of the middle or lower class, but that is because the economic pie is not growing. The economy, despite all of the tax breaks, government stimulation, and lower interest rates, is not growing at high enough rates to help the middle class. Therefore, the size of the economic pie remained the same and the people with influence and power have been able to get a larger share of that pie. This makes it imperative to grow the economy at a faster and sustainable rate so that individuals on all social levels can benefit.

Changing realities and shifting priorities in American society may redefine what it means to be the middle class. Some of the historical norms of owning a car, retiring at 65, or even owning a home may possibly be things of the past as millennials are not necessarily interested in buying cars or homes.¹⁷ At the same time, the baby boomer generation may not want to retire because they cannot afford to or they want to contribute to society by sharing their experiences and wisdom.¹⁸

Income and Wealth Inequality

The highest one percent of income earners’ average income grew by 277 percent between 1979 and 2007 and went down to 175 percent after adjusting for inflation by 2011 due to the financial crisis of 2008. During the same time, the bottom 80 percent had only 15.6 percent growth in their income, according to the Congressional Budget Office’s (CBO) report of 2014.¹⁹ Figure 1.3 shows that income gains at the top were very high compared to almost none for the middle-income households from 1979 to 2007.

One of the reasons for the income and wealth inequality is underscored in Figure 1.4. The average tax rate for the highest income earners has been going down since the 1950s from a high of 60 percent down to about 25 percent by 2010. According to a CBO report, the top two quintiles’ households in 2011 earned an average income before tax of $83,300 and $234,700, and paid an average federal tax rate of 15.1 percent and 23.4 percent respectively.²⁰ Higher income leads to higher wealth accumulation. The top 10 percent in 2012. Most of the gains made by the bottom 90 percent during the 1960s until the 1980s have been lost over the last twenty years from as high as 36 percent in the early 1980s down to 23 percent by 2012 (Fig.1.5).

In addition to the tax policies, the corporate executive’s compensation plan is another factor that can be attributed to a wider income inequality. During the financial crisis of 2007 and 2008, a number of companies went bankrupt or were sold in a fire sale while the executives responsible walked away with millions of dollars in severance pay and were able to keep most of their pay collected prior to the companies’ failure. Some of the executives were able to keep hundreds of millions of dollars while the taxpayers were left bailing them out.²¹

In a step toward economic parity, in July 2015, the U.S. Securities and Exchange Commission (SEC) proposed rules that will require companies to adopt a clawback provision on executive compensation. The clawback provision states that executives are required to pay back incentive compensation if the results were not achieved or...

Table of contents

• Cover
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Introduction
• 1. The Middle Class
• 2. Women Leading the Way
• 3. Technology
• 4. Millennials
• 5. Jobs and the New Economy
• 6. United States Healthcare System
• 7. Hospitals
• 8. Doctors
• 9. Drugs
• 10. Health Insurance
• 11. Medicare
• 12. United States Education System
• 13. K-12 Education
• 14. Higher Education
• 15. Student Loans & Housing
• 16. United States Tax System
• 17. Personal Taxes
• 18. Corporate Taxes
• 19. The Beltway Beast
• 20. Independent Movement
• 21. Conclusion
• Acknowledgments
• End Notes