Marketers aim for its money, politicians insist they are looking out for its best interests, and the vast majority of Americans claim to be members of this club.
Yet there is no universal agreement of what it means to be middle class.
Democrats in the state House of Representatives released their “Michigan’s Middle Class Plan” in March, but failed to define the group it purports to help. President Obama mentioned the middle class at least a dozen times in his last State of the Union Address, and Mitt Romney said it members are those making less than $200,000 a year, which would include 96 percent of all Americans.
“The American myth is we’re all middle class,” said Charles Ballard, a Michigan State University economist. “We all want to think we’re middle class.” That’s because, unfairly or not, poverty carries the stigma of laziness, he said, while extreme wealth implies greed.
Middle class, it turns out, is as much a state of mind as an economic status.
Still, it’s worth taking a shot. In Michigan, the bottom 25 percent of households have incomes under $22,000 a year, said George Erickcek, an economist and senior regional analyst with the W.E. Upjohn Institute for Employment Research in Kalamazoo; the top 25 percent earn more than $86,100. Michigan’s middle class, therefore, could be defined as the 50 percent of households between those two amounts, with a median household income of $46,000 a year.
Those in the American middle class traditionally have enjoyed secure jobs, earned a moderate income, owned homes, had health insurance, made enough for an occasional vacation and saved toward retirement and their children’s college.
Within those broad parameters, the meaning shifts with the fortunes of those who think of themselves as middle class. Homeownership and a college education were the keys to the middle class, according to seven out of 10 respondents in a 1991 Time/CNN/Yankelovich survey. By last year, nine out of 10 surveyed by the Pew Research Center said a secure job is far more important.
The first 10 years of this millennium – the “lost decade for middle-income Americans” according to Pew – have not been kind to the middle class. During that period, the middle class shrunk, and 85 percent of those who described themselves as middle class said it was more difficult to maintain their standard of living now than a decade before, Pew reported last August.
Their median income fell by 5 percent, and, even worse, their net wealth (assets minus debt) dropped by 28 percent from $129,582 in 2000 to $93,150 at decade’s end. During that time, a large portion of the nation’s wealth shifted to the top 1 percent, a group whose annual income averages $1 million. Since the end of the Great Recession, income for the wealthiest Americans grew by 11 percent, as it continued falling for most middle-income earners.
“When we’re talking about the struggles of the middle class, we have to realize that wages are stagnant,” even as corporate profits are rising and the economy is growing, Erickcek said.
For example, in 2003, the average worker in transportation manufacturing, which includes the auto industry, was paid $34.45 an hour (adjusted for inflation to 2012 dollars), according to the U.S. Bureau of Labor Statistics. By March 2013, the average hourly wage in that industry had dropped to $25.52.
Michigan was particularly hard hit in the Great Recession, which began in December 2007 and ended in June 2009. Two months after the recession officially ended, Michigan’s unemployment rate climbed to a high of 14.2 percent. By May, it had dropped to 8.4 percent, ninth worst in the nation and more than twice what economists consider full employment.
All of these wrenching economic changes have re-arranged Michigan’s economy with particular force.
Throughout the 1990s, Michigan’s per capita income – a key indicator of middle class health – was among the highest in the nation. In 1999, the state ranked 17th in per capita income. A decade later, it had dropped to 40th among the 50 states. By last year, Michigan’s per capita income had climbed back to 35th in the nation. With a per capita income of $37,497, Michigan is well below the national average of $42,693.
“Our comeback has been rather sluggish,” Erickcek said. The hundreds of thousands of jobs Michigan lost in manufacturing “we have not made up in services,” he said, such as health care, one of the few growing sectors.
One other factor to consider in assessing the state of the middle class is how its members feel about their own economic security.
The Conference Board’s Consumer Confidence Index, which measures how people feel about the business and labor market, rose to 76.2 in May, its highest level since February 2008. Still, that’s well below the benchmark of 100 and the 140 the index sometimes reached in the 1990s.
The negative impact of unemployment goes beyond the purely financial, placing significant psychological distress on families, said Clifford Broman, a sociology professor at MSU, who studied the impact of auto industry layoffs for a 2001 book, “Stress and Distress Among the Unemployed.” In 2011, he co-authored a similar study, “Families Coping with Economic Crisis,” for MSU’s Institute for Public Policy and Social Research.
“Struggling financially has huge effects on the family,” he said, including increased conflicts between couples and between parents and children. “Basically, we found a huge impact on declining mental health. People really start to feel worthless. It leads to greater levels of depression, greater levels of anxiety. It really takes a toll on self-esteem.”
The 2011 study found that those who lose their jobs have “a significant increase in symptoms such as perceived physical illness, hostility, paranoia, drinking problems, and demoralization, as well as depression, anxiety, and somatic symptoms.”
That level of stress is not limited only to the unemployed, but can spread to those who fear losing their jobs.
“Even for those who have jobs, there’s an uneasiness,” Erickcek said. “We all know somebody who’s been unemployed for a long time. They still don’t feel the economy’s up to snuff.”