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Motley Fool: 7 Reasons Middle Class Faces Serious Trouble

Motley Fool: 7 Reasons Middle Class Faces Serious Trouble


By    |   Monday, 26 September 2016 12:36 PM

The U.S. middle class has been in a steady state of decline since the early 1970s, when median household incomes reached a high-water mark adjusted for inflation.

Investing website Motley Fool lists seven reasons the American middle class is in serious trouble as the U.S. becomes more divided by income.

“Families are either ascending the rungs of the socioeconomic ladder into more specialized jobs with higher income, or they're falling into lower-income groups,” writes Motley Fool’s Sean Williams in USAToday. “This is a nationwide trend that's pretty much been ongoing for at least the past three decades.”

7 Trouble Spots for U.S. Middle Class

1. Stagnant Wage Growth. “Nominal wages for average hourly workers jumped better than 700 percent between 1964 and 2014 to $20.67 an hour. However, when factoring in the effects of inflation over those 50 years, real wages grew by less than 8 percent.” Even worse, college and healthcare costs have grown faster than measures of inflation.

2. High Levels of Debt. “The debt burden of the average middle-class household in 2013 was 122 percent of annual household income. Although this is down from a peak of more than 140 percent in 2010, it's nearly double the debt burden of American families in 1989,” Williams writes, citing Federal Reserve data. Making payments on debt can get in the way of retirement saving.

3. Historically Low Lending Rates. The Federal Reserve has held interest rates near zero percent for the past eight years in an attempt to help the economy recover from the worst recession since the Great Depression. “Though some middle-class families have benefited from low mortgage rates, the overall effect on ‘America's backbone’ has been negative, with yields on bank CDs, savings accounts, checking accounts, and U.S. Treasury bonds tracking near all-time lows,” according to Motley Fool.

4. Poor Savings Habits. “It could be that high debt levels are preventing middle-class Americans from saving, or it could be something as simple as households operating without a working budget. Either way, the middle class doesn't get a passing grade in the savings department.”

5. Growing Income Inequality. “The 2015 Credit Suisse Global Wealth Report found that while the middle class in the U.S. has the highest total wealth of the 21 countries it individually examined, the U.S. middle class ranked dead last of the 21 countries in terms of the total share of wealth held, with 19.6 percent.”

6. Lingering Great Recession Woes. “With home prices still well below their 2007 peak, the net worth of middle-class families has taken a hit.”

7. Growing Reliance on Part-Time Work. “Based on data from the U.S. Bureau of Labor Statistics, more than 6 million people in August 2016 were part-time workers for economic reasons. In layman's terms, these are people who work under 35 hours a week but aren't part-time by choice.”

The White House this month congratulated itself on a Census Bureau report that showed household income grew at a record pace in 2015, but that 5.6 percent gain is at odds with the Fed’s narrative that the U.S. economy is weak.

The gain in household income also neglects to show how poor and middle-class families struggle to get ahead, according to economic columnist Eduardo Porter at The New York Times.

“Today, median household incomes are still 2.4 percent below the absolute peak they hit in 1999,” he writes. “At the bottom of the ladder, households at the 10th percentile — those poorer than 90 percent of the population — are still a bit poorer than they were in 1989.”

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Investing website Motley Fool lists seven reasons the American middle class is in serious trouble as the U.S. becomes more divided by income.
middle class, income, economy, jobs
Monday, 26 September 2016 12:36 PM
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