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09-15-2005, 10:07 AM
The Middle-Class Squeeze: An Overview

2004 was a challenging year for America's middle-class families. Inflation grew faster than wages, so that the same middleclass paychecks bought fewer daily necessities. The cost of everything from food to gasoline was up relative to pay, but housing prices, college tuition and the cost of prescription drugs grew especially quickly. Meanwhile, even as the pace of job creation started to pick up, a record number of jobless Americans used up their unemployment benefits, leaving them unable to support themselves or their local economies.

While the U.S. Census Bureau has no official definition of the "middle class," conventionally it has come to represent the large swath of the American people with incomes between approximately 200 percent of the federal poverty threshold and those of the nation's top five percent income earners--roughly $25,000 to $100,000 a year. But the meaning goes much deeper than that. Americans have historically associated being "middle class" with the relative comfort that comes from having a good job that allows families to own a home, send their children to the college, and save for retirement. Increasingly, however, this American Dream has been replaced by the reality of today's squeezed middle-class.

Being middle class is more than just earning a middle-class income--it's about being able to afford the American Dream: a home, family health plan, and a college education.

Roughly six in ten American families are "middle-class" based on their income and ability to afford things like a home, health insurance, and a college education for their children.
In 2003, nearly 60 percent (45.5 million) of American families earned a middle-class income--approximately $25,000 to $95,000 a year.
Sixty-eight percent of American families own a home.
Seventy percent of American adults are covered by private health insurance.
Almost three in four American families are able to save money from month to month in the hopes of sending their child to college.
Today, America's middle class is increasingly uncertain about whether they can attain the American Dream.

Only four in ten families with incomes between $40,000 and $60,000 a year-- technically "middle class"--self-identify as "middle-class" or "working class."
One in two Americans with incomes between $25,000 and $75,000 the definition of middle class -- were "worried about their financial condition" in 2003. And, one-third of those earning over $75,000 were also worried.
Eighty-four percent of Americans worry that the middle class is living paycheck to paycheck, and being left behind in general.
The middle class is being squeezed. Since January 2001, middle-class Americans have seen their paychecks shrink , their jobs disappear, and their expenses swell.

The Bush tax cuts of 2001 and 2003 may have improved the corporate bottom line, but not that of Americans . During the first two years of the president's first term, Americans' incomes declined by more than $1,400.
Middle-class Americans are experiencing long-term unemployment. In 2003, those employed as public administrators, teachers, and retails sales workers, earning anywhere from $488 to $1,124 a week, experienced average periods of unemployment as long as eleven weeks.
Following the last recession and "jobless recovery," it is estimated that the newly created jobs of 2004 paid $8,000 less than those lost between 2001 and 2003, and were less likely to offer health insurance to their workers.
Working Americans are paying significantly more to hold onto their health insurance. In 2003, working Americans with employer-provided health insurance programs saw their premiums increase by nearly 14 percent. It's no wonder, combined with the increase in unemployment, that more than 40 percent of the 1.4 million newly uninsured in 2004 were middle class.
A college degree is widely recognized as a key to realizing the American Dream, and Americans support programs that promote access to these middle class goals. However, during the 2002-03 academic year, one third of all states lowered their appropriations to public universities by as much as 11 percent, and 49 of the 50 states raised their tuition by amounts ranging from 1.7% in Montana to 39% in Arizona, and averaging 14 percent for the year.
More middle-class families trying to live the dream are winding up in a nightmare of debt and bankruptcy

In 2003, more than 90 percent of the 1.6 million American families that filed for bankruptcy were middle-class --more than half named job loss, a health emergency, or divorce as the reason for filing.
To cover their monthly bills more American families have turned to credit cards as means of payment. In 2003, the average American family held more than $2,295 dollars in credit card debt.
More than 640,000 family homes were in the process of foreclosure in 2003, and more the 53,000 families actually lost their home.
College students are now also being crushed by the middle-class squeeze. In 2003, American college students graduated with an average of $18,000 in student debt, more than $3,000 in credit card debt.
As the middle-class squeeze becomes pronounced, it also reflects the increasing difficulty for working Americans to earn their way into the middle class, leaving the American dream even more elusive.

Last Updated:
April 11, 2005

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