Middle Class, but Feeling Economically Insecure – NYTimes.com

It’s not only what you have, but how you feel.

When it comes to membership in the middle class, earnings and assets are just part of the definition. Nearly nine out of 10 people consider themselves middle class, as a recent survey by the Pew Research Center found, regardless of whether their incomes languish near the poverty line or skim the top stratum of earners.

“Middle income is not necessarily the same thing as middle class,” said Rakesh Kochhar, a senior research associate at Pew. Even as the proportion of households in the middle-income brackets has narrowed, people’s identification with the middle class remains broad.

That’s because the middle-class label is as much about aspirations among Americans as it is about economics. But a perspective that was once characterized by comfort and optimism has increasingly been overlaid with stress and anxiety.

Part of the reason has to do with lost jobs and stagnating incomes. At the same time, the psychological frame — how Americans feel about their security and prospects — and the sociological — how they stack up in relation to their parents, friends, neighbors and colleagues — are just as important as purely economic criteria. And on both these counts, middle-class Americans say they are feeling increasingly vulnerable. 

“There is a very big difference between the psychological self-definition of class and anything approaching a useful economic definition of class,” said Richard Reeves, a senior fellow in economic studies at the Brookings Institution. “Policy in the end will hinge quite importantly on what you mean when you’re talking about the middle class and who you mean.”

And that’s the political challenge for Democrats and Republicans looking to inspire voters with policies to address what President Obama calls “middle-class economics.” Any appeals have to involve both cents and sensibility.

Middle-class anxiety has been driven by several factors: increasing instability in incomes, a sense among many Americans that they are failing to keep up with the gains of previous generations, and an increasing gap between themselves and the very rich.

A recent report from economists at the Federal Reserve Bank of St. Louis concluded that “families that are neither rich nor poor may be under more downward economic and financial pressure than common but simplistic rank-based measures of income or wealth would suggest.”

The study, conducted by William R. Emmons and Bryan J. Noeth, found that one reason many Americans viewed themselves as struggling was that their real incomes had not advanced significantly beyond their parents’ even when they reached higher educational levels, while those who matched their parents’ achievements were actually worse off.

econ1As J. Bradford DeLong, an economist at the University of California, Berkeley, put it: “People who thought they were upwardly mobile are finding themselves with no higher real incomes. And people who thought they were sociologically stable are finding themselves poorer.”

Money, of course, provides the wherewithal for acquiring what are considered the traditional bedrocks of a middle-class life: adequate health care, college for the children and retirement savings, generally with a car and a regular summer vacation thrown in.

Some version of that basket can be bought across a range of incomes, depending on location. It might include a used Pontiac instead of a late-model Lexus, or a small walk-up instead of a house with a backyard. And even though consumption was once a useful shorthand guide to a middle-class lifestyle, it is no longer as reliable in a world where cellphones and flat-screen TVs are staples in a majority of households below the poverty line and retirement savings, even among top earners, are often treated as a luxury.

There isn’t one middle class, but many middle classes. Still, what all of them ultimately require, experts say, is a sense of economic security.

“If there’s no security, there’s no middle class,” said Thomas Hirschl, a sociologist at Cornell and an author of “Chasing the American Dream.”

The Changing Nature of Middle-Class Jobs (Interactive)

That feeling of security has been eroded by several factors.

Median per capita income has basically been flat since 2000, adjusted for inflation. The typical American family makes slightly less than a typical family did 15 years ago. And while many goods have become cheaper or better, the price of three of the biggest middle-class expenditures — housing, college and health care — have gone up much faster than the rate of inflation.

Equally important, Mr. Hirschl found a high degree of income volatility among most Americans in the four decades between 1969 and 2011. At some point in their working lives, a full 70 percent earned enough to put them in the top fifth of earners, and as many as 30 percent reached the equivalent of $200,000 in 2009 dollars, or roughly the top 4 percent.

Similarly, nearly 80 percent at least temporarily plunged into a red zone, where their income dropped near or below the poverty line, or they were compelled to gain access to a social safety net program like food stamps or collect unemployment insurance. More than half of Americans ages 25 to 60 will experience at least one year hovering around the poverty line.

For most people, their 20s and 30s have traditionally been the least secure decades, with earning power building to a peak in their 40s and 50s, Mr. Hirschl said. But the recession upended that pattern for many Americans. Older workers experienced an extended bout of unemployment, often followed by a new job at a lower wage.

 A recent Pew Research Center poll found that four out of 10 Americans said household incomes had hardly recovered from the recession; most everyone else said there had been only a partial recovery.

And compared with the mid-’90s, a smaller share of Americans now say they believe it is possible to start out poor, work hard and get rich, the classic tale captured by the American dream.

“Income fluidity is a double-edged sword, creating opportunity for many, along with insecurity that this opportunity may end sooner than hoped for,” Mr. Hirschl concluded.

What is particularly surprising about the increasing income volatility since the 1970s, said Dan Sichel, an economics professor at Wellesley College, is that it coincided with an unusually stable stint of economic growth that lasted from the mid-1980s until the recession in 2007.

“There was a big increase in the number of people who saw big drops in their income,” Mr. Sichel said.

That psychological lens helps explain rising middle-class anxiety. What about the social frame? Here, increasing inequality has helped undermine middle-class security and optimism.

Economists and other researchers have repeatedly found that the satisfaction a paycheck brings is related not only to its size, but how it compares to other people’s. That verity is apparently more pointed for middle-income households than for those at the lower and higher end of the spectrum.

A review of the latest studies on the middle class by the Congressional Research Service concluded that “when those at the upper end of the distribution fare much better than they do, the level of middle-class satisfaction is generally lessened.”

Yet in the last 15 years, nearly all of the gains in income have streamed toward the upper end of the spectrum.

Robert H. Frank, an economist at Cornell University and the author of “The Winner-Take-All Society,” explains that across most white-collar professions — whether dentists or sales supervisors — a very small group at the top is doing spectacularly better even as a great majority is mostly plugging along. “No matter who you are, whatever group you define yourself in terms of, you’re poorer now in relative terms than you were earlier,” he said.

The feeling of comparative deprivation and the ultrarich separating themselves from the rest of society helps explain why only 1 percent of Americans accept the rich or upper-income label. Even most people earning over $250,000 — the top 5 percent of wage earners — identify as middle class. There’s always someone wealthier around. 

“The gap between you and them is much bigger than it used to be,” Mr. Frank said. “That’s why people feel more stressed out than they used to.”

Middle Class, but Feeling Economically Insecure – NYTimes.com.

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