This article was written by Charles Hugh Smith and originally published at his Of Two Minds blog.
Editor’s Comment: It just ain’t what it used to be. The dollar has been stretched to the max, and most people have been stretched too thin. While many Americans have been out of work and discouraged from returning to the work force, many more people are holding on to what they’ve got, but finding that what they earn hardly qualifies for the standard of “middle class,” especially when all the costs, taxes, penalties, accumulated debt and necessities are taken into account.
Let’s hope someone does ‘make America great again,’ because where we’re headed now is just a long, cold slide into oblivion as more and more find themselves on the margins, and in between the cracks. Who is it that put down the squeeze, again?
Honey, I Shrunk the Middle Class: Perhaps 1/3 of Households Qualify
by Charles Hugh Smith
If it takes more than $126,000 to fund a qualitatively defined middle class lifestyle, what sense does it even make to call this “middle”?
The Pew Research Center’s recent report The American Middle Class Is Losing Ground: No longer the majority and falling behind financially made a media splash, as it reported that less than 50% of adults are members of the Great American Middle Class.
My analysis suggests that by more qualitative measures, no more than a third of U.S. households qualify as middle class: claiming 49% of the nation’s households are still middle class is a gross exaggeration.
My analysis starts with the minimum fundamental lifestyle and wealth requirements of middle class membership: In What Does It Take To Be Middle Class?, I listed these requirements:
1. Meaningful healthcare insurance ($5,000 deductible healthcare plans don’t qualify; they are simulacrum/phantom coverage).
2. Significant equity (25%+) in a home or other real estate.
3. Income/expenses that enable the household to save at least 6% of its income.
4. Significant retirement funds: 401Ks, IRAs, etc.
5. The ability to service all expenses over the medium-term if one of the primary household wage-earners lose their job.
6. Reliable vehicles for each wage-earner.
7. The household does not depend on government assistance to maintain the family lifestyle.
8. A percentage of hard assets beyond the family home that can be transferred to the next generation.
9. Surplus income to invest in children (extracurricular activities, lessons, etc.).
10. Leisure time devoted to the maintenance of physical/spiritual/mental fitness.
In other words, middle class cannot be meaningfully defined by income alone. The middle class is more than owning a home (especially if the equity is modest or dependent on the asset bubble du jour): the most fundamental qualities of the middle class are not measures of income or bling, though obviously income is necessary to provide them:
— real healthcare coverage