A Shrinking Middle Class: Where Is Our Money Going?

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The middle class is roughly defined as households that earn between 67% and 200% of their area’s average income. This is a wide spread, but even so, the number of people who are within this group are shrinking. Even worse, as cost of living rises while wages remain stagnant, the middle class is struggling more than ever just to keep bills paid. The security once associated with the middle class, including home ownership, college education, and retirement savings, is no longer a reality for many households that technically fall within this category. What is happening to the American middle class?

The Tightening Belts of the Middle Class
Unfortunately, the shrinking numbers of middle class households are not due to people becoming wealthy, but rather joining the lower classes. The American economy, while improving, is paying record low wages while workers have less security than ever. Housing prices have risen, as have food costs, and the prices of many necessities. The website, myLumpsum.com says more and more people are getting structured settlements to help decrease debt. Families want to stay financially independent, but it’s getting harder. The result is that the middle class is smaller than ever, and families in the middle class no longer enjoy the security we associate with the middle class and the American dream.

Possible Causes of a Shrinking Middle Class
The recession disproportionately affected middle class jobs, especially affecting small business, the financial sector, and technology careers. In addition, many American families lost their homes in the housing crisis or went far into debt to save them. The United States government policy has swung to favor corporations and the very wealthy, which is called ‘wedge economics’ due to its divisiveness. All these reasons and more have contributed to shrinking the middle class earners.

The Inherent Problems of Measuring Socioeconomic Class
One of the reasons lawmakers and other people in power are not alarmed by the shrinking middle class is no one can definitively define who they are. The standard economic measurement, which places people by income, does not take into account household size, expendable income, possible high cost of living in the area, and other factors. Other analysts define middle class as a set of values that include solid work ethic and economical habits. Thus, American middle class households often appear to be fine as a whole, when in fact many are struggling with basic expenses. It’s a flexible definition and makes it hard to see what the limits of each class is.

While the exact causes of the shrinking middle class are not definite, it is becoming clear that the middle class is struggling. Because it is traditionally the foundation of American society, this should be alarming to policy makers and government. Hopefully with more research, lawmakers can find a way to address these issues and help American families get back on track.

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