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Anne, 45, has always considered herself middle-class: As a single mom earning $65,000 a year in ad sales, she was able to rent a one-bedroom apartment on the Upper East Side for $1,000 a month and send her daughter, now 12, to private school. “I was able to make it,” she says. “Even go on vacation sometimes.”
In the span of 15 months, she has come to define herself as poor — even if the government won’t, denying her multiple applications for welfare and food stamps because, she says, she once made “too much money.”
Upon losing her job in June 2009 — her company was going under — “I was plunged into immediate poverty,” she says. “It was a surprise attack.”
Anne has borrowed money from her sister and her retired parents — who are struggling themselves — to pay the rent; she applied for a Section 8 and was able to slash it in half, to $500 a month. She depleted her 401(k). She had no savings, was living paycheck-to-paycheck. But she still felt economically safe, given her location and her tax bracket and her white-collar job.
“Now, when I go to the grocery store, I have to decide what is absolutely essential for my child,” Anne says. “Sometimes, I’m eating whatever-in-a-can. A lot of the time, I’m literally walking around without a penny in my pocket.” She deliberates before taking her daughter on a day trip downtown, because a round-trip subway fare will cost $9. She negotiated a tuition break with her daughter’s school, and the ease of that leads her to believe she’s not the only parent who’s asked, which she does not find especially comforting.
She’s $16,000 in debt to credit card companies. One of her local grocers, who once let her buy food on a running tab, now has a bill collector after her. She has her résumé up online, but when headhunters call and ask her age, “suddenly they never call me back,” she says. “I’m depressed. None of my friends are able to find jobs. I am living day-to-day.”
Anne’s biggest fear is that her daughter finds out how dire the situation is.
“She’ll say to me, ‘Are we poor?’ And I keep lying,” Anne says. “I think it’s a very traumatic thing for a child. I don’t want her to feel like she’s the only one, or a victim.”
When the recession does ease up, Anne fears that she will emerge as a permanent member of the lower class.
“The world kind of betrayed us,” she says. “The salary I was making — I don’t think I’ll ever make it again.”
This is what President Obama spoke of last week on “60 Minutes”: the threat that America adapts to the point where this economy is considered “a new normal, where unemployment rates stay high, people who have jobs see their incomes go up, businesses make big profits, but they learn to do more with less and so they don’t hire.”
In other words: The new normal is most defined by the decimation of the middle class.
The decline of the middle class in America has been debated and discussed for 30 years — it was in the 1970s that middle-class wages began stagnating and education levels began declining — but it’s the Great Recession that has accelerated and intensified this decades-long trend. There is wealth and there is poverty, and the middle class — a category so vague that the majority of Americans, if asked, define themselves as such, whether they make $30,000 or $200,000 a year — are, in greater and greater numbers, downwardly mobile.
The median income is the US is now $50,000 a year, 5% less than it was in 2000. But whether one is middle class on that salary depends on a host of factors — your education level, how many dependents you have, where you live, whether you’re still paying off college loans, whether your mortgage is underwater.
“People with a college degree are the new working class,” says Lawrence Mishel, president of the Economic Policy Institute. He points to the long-term, exponentially increasing gap between rich and poor in America: from 1989-2007, the upper 1% of the population gained 56% of all income growth, while the bottom 90% gained just 16%.
“People have been doing poorly for a long time, but it’s not because they haven’t been working,” Mishel says. “It’s because the economy is working the way it’s designed to work.”
In his recent paper for the Center for American Progress, MIT economist David Autor studied the increasing polarization in the US job market, finding that the highly educated upper class and the less-educated lower class are faring far better in the recession than the middle class, which has been crushed by off-shoring and technology. (Other factors, such as the housing crisis, financial deregulations and the decline of unions, are cited by nearly all economists as contributors, but Autor focused on job availability and creation.)
From 1979-2009, there was a nearly 12% drop in the four “middle-skill” occupations: sales, office/administrative workers, production workers, operators. Meanwhile, people in the top 20% of the economy earning $100,000 or more a year, says Peter Francese, demographer at Ogilvy & Mather, “have barely been touched by this recession.” They average an unemployment rate between 3% and 4%, the lowest in the nation. The US Bureau of Labor Statistics projects a 14% increase in low-education service jobs between 2008-2018. “The only major occupational category with greater projected growth,” Autor writes, “is professional occupations, which are predicted to add 5.2 million jobs, or 17%.” These sectors include medicine, law and middle- and upper-management.
What is left, when this recession finally recedes, is a landscape where mid-skilled jobs are fallow, where someone who once worked in retail has lost their job due to the rise in online shopping, or an administrative executive has been replaced by new software. Economists fear this trend may be compounded by what Obama, too, sees coming: a dearth of mid-skill positions offered by businesses who’ve managed to raise productivity and profit margins while slashing jobs.
Without the training or the education for the formerly middle class worker to move up, the only direction is downward. So those by-now-familiar tales of former white-collar workers with master’s degrees competing for one part-time position as a floor manager at Home Depot — displacing a lower-skilled worker in the process — will become more common. As will the former mid-skill worker who takes a job for less than he was previously making, struggling to replenish his hollowed-out savings and attempting to rebuild a 401(k). Getting especially hurt: the 40- to 50-something who is “too old to hire, to young to retire,” in the words of Barbara Ehrenreich, author of “Nickel and Dimed: On (Not) Getting By in America.”
“This is an apocalyptic situation,” Ehrenreich says. Underemployment, she adds, does not just describe people who want to work full-time but can only find part-time jobs: “It also means white collar professionals in low paying jobs,” she says. “When the middle class disappears, you have the rich and the poor. And this is called ‘being the poor.’ ”
“Every indicator we have shows that the country is becoming more and more unequal,” says Dennis Gilbert, professor of sociology at Hamilton College. When people are asked which class they belong to, he adds, the bulk of the population says middle class, as they have since WWII. “There is a general idea that everyone thinks they’re middle class,” he says. “Regular folks — not rich, not poor.” He is alarmed that, in the most recent survey by the University of Michigan, more Americans have begun to identify themselves as lower class. “That tells me,” Gilbert says, “that people think things are pretty hopeless.”
It’s very American for anyone who isn’t extremely wealthy or extremely poor to define themselves as middle class: It’s the great leveler, one that speaks to neither indebtedness nor snobbery. It seems to imply a healthy value system in which hard work translates into a better life for each successive generation.
Now, though, “we’ve redefined the middle class as a segment that is the upper end,” says demographer Francese. “And these are not rich people. Someone making $150,000 in New York is not well-off.”
‘I don’t know if I’m middle class anymore,” says Mark Lieber, 54. “From what I read, if you’re earning over $150,000, you’re in the top 5% of earners.” He echoes Francese: “In New York, that’s not rich.”
Lieber worked in IT at a Manhattan law firm, earning a low-six-figure salary. He commuted each week from his home in Rockville, Md., where still he lives with his wife and children, working 13-hour days and renting “a dinky room in a dinky apartment.” It was October 2007, and the economy was beginning to falter; he needed the job.
The Liebers own their home and have three cars. He lost his job last year, and after months of unemployment found a similar-paying job in a different field, writing government proposals for contractors. Still, he feels that he could lose everything at any given time.
“Being middle class in America once meant you achieved the American Dream,” he says. “Financial independence, sending your kids to college, not taking government handouts. That’s a lot harder now.”
This conversation — what it once meant to be middle class and what it will mean after the recession — is one that’s not really been part of the national discourse, and it’s not hard to see why: What legislator wants to admit that the middle class has been most devastated by this recession and is going suffer the real hangover? And what middle-class person wants to admit that, in the looming “new normal,” they may actually be working-class, or lower-class, or poor?
“This is a real serious problem, because we have not had a real growth strategy in America for years,” says Jeff Madrick, economic policy consultant and analyst. “People are not asking about what kind of economy we’re going to have. We’re not going to get unemployment down by more than 1% a year. People in their 20s are not getting jobs, and people who are taking jobs are taking them at low incomes.”
He agrees with Lieber’s fear-based assessment of his future: “I think a middle-class person,” Madrick says, “will essentially be a financially insecure person.”