Goodbye American middle class: New report reveals that 62 percent of Americans earn $20 or less per hour. Household income stuck in neutral for a generation

April 12, 2014 in News by The Manimal

Source: My Budget 360

The latest figures from the Bureau of Labor and Statistics (BLS) reveals that 62 percent of Americans earn $20 or less per hour.  And this only examines those that actually have a job.  Most of the new jobs added since the Great Recession ended have come in the low-wage segment of our economy which seems to be adding the bulk of employment.  These are certainly interesting times that we live in.  The US has close to 130 million jobs.  18 million jobs pay less than $10 an hour and 63 million pay between $10 and $20.  These two segments makeup 81 million jobs so it is understandable why the two income household is more of a necessity rather than a luxury.  The median household income in the US is roughly $50,000 per year.  Adjusting for inflation income is back to levels last seen in the 1980s.  Americans feel poorer because their purchasing power has been eroded by inflation and also the swarm of lower paying jobs that now dominate the market.  The US middle class is shrinking and to ignore this is to ignore the actual facts.

What is causing the middle class to disappear?

The mainstream press rarely talks about the disappearing middle class.  If this issue is brought up it is in the context of the inevitable.  The middle class is declining simply because of global competition and a race to lower prices, or so the argument goes.  There simply isn’t enough money to go around.  However, compensation at the top has never been better.  What is occurring is basic items like health benefits, access to affordable schooling, and livable wages are being neglected for fast profits.

If you really want to feel how little purchasing power you have you need to travel outside of the US.  Take a look at what has happened to the US dollar in the last generation:

us dollar

The US dollar has lost more than 50 percent of its purchasing power since the 1980s.  The impact of all of this is reflected with inflation.  Inflation is problematic in itself but it is much more challenging when prices are going up but wages remain stuck in neutral.

All you need to do is look at household incomes to see this stagnation:


Adjusting for inflation household incomes are back to levels last seen in the 1980s.  Are you noticing a pattern here?  The middle class has been losing ground for a generation here.  Some mitigated this impact by going deep into debt to finance the following items:


-College tuition

-Automobile purchases

Most of these big ticket items have seen massive price increases but if you look at monthly payments, they are moving up slowly to stay on pace with many struggling Americans.  It once was thought to be shocking for a student to graduate with $50,000 or $100,000 in debt but those stories are all too common today.  The sticker shock is stunning but the Fed has forced rates to as low as they can go to keep this debt binge going.

Wealth distribution is highly tilted today because most of the gains in productivity are flowing to a small group:

wealth distribution

Wealth is the best measure of financial success.  Most Americans in the past were able to build up wealth in housing but that avenue is being closed off thanks to Wall Street and the Fed turning this market into another speculative vehicle.  The result?  The home ownership rate in the country continues to decline.  This used to be a major cornerstone and brass ring of the middle class.  Not anymore.

Lower paying jobs, stagnant wages, and rising costs.  Will politicians bring this up in the 2014 elections?  It doesn’t seem like the middle class is on their radar.