Can't Get Ahead, Hard To Keep Up
Thursday, April 10, 2008
Offering the gloomiest assessment of economic well-being in close to half a century, a new survey has found that most Americans say they have not made progress over the past five years as their incomes have stagnated and they have increasingly borrowed money to finance their lifestyles.
As many Americans struggle with declining housing values, increasing food and energy prices and growing unemployment after a long period of flat wages, well over half of respondents said they are either losing ground economically or are stuck in the same place, according to the report released yesterday by the Pew Research Center. Only four in 10 said they have moved forward in the past five years -- a record low, Pew says, and far off the record 57 percent who in 1997 said they had moved forward in the previous five years.
The squeeze is particularly tight for those who have low incomes and for the 53 percent of Americans who classify themselves as middle-class. Nearly four out of five middle-class adults say it is more difficult for people like them to maintain their standard of living. In 1986, fewer than two of three middle-class people shared that opinion.
Only two in five middle-class Americans say they "live comfortably," while one in five says he is just able to meet expenses. The others say they are able to meet expenses with some money left over. Overall, slightly more than half said they had to "tighten their belts" to adjust to the increasing economic pressure.
"Everything is going up, and our incomes are not," said Lorraine Conrad, 77, a Virginia Beach widow who lives on Social Security and her husband's military survivor benefits. "I am able to get by, but I have to be really careful about how I spend my money."
The Pew report, based on a telephone survey of a nationally representative sample of 2,413 adults taken from Jan. 24 to Feb. 19 and overlaid with demographic information from the Census Bureau, adds new information about how Americans feel about their economic situations in the midst of a presidential campaign in which the plight of the middle class has been at the heart of the debate. Democratic candidates Hillary Rodham Clinton and Barack Obama have argued that ordinary Americans are slipping backward economically. The two have proposed expanding health-care coverage, increasing financial aid for college students and cutting taxes for the middle class. Presumptive Republican presidential nominee John McCain also has promised to cut taxes for the middle class and to expand the availability of health care through tax incentives.
Even as they struggle, however, nearly two-thirds of Americans say they are better off than their parents were when they were their age, an important marker of upward mobility. That fulfillment of the American dream has persevered as the nation has entered a period of widening income disparities and creeping insecurity brought on by the rise in income volatility, the decline in fixed-benefit pensions and the increasing need for households to send two breadwinners to work to maintain a middle-class life.
"Most Americans see in the sweep of their lives a long arc of progress," the report said. "Most expect to face some belt-tightening -- or worse -- in the coming year, but a majority is confident that their quality of life in five years will be significantly better than it is now. And, gazing into a more distant future, most expect their children's standard of living to be better than their own."
Median household income increased 41 percent from 1970 to 2006, though it never returned to its 1999 peak. Seven in 10 survey respondents said they have cable or satellite television as well as two or more cars. Two-thirds reported having high-speed Internet service, and 42 percent said they have a high-definition or flat-screen television, the report said, adding that the typical house is 50 percent larger and nearly twice as expensive now as it was in the mid-1980s.
But those luxuries have come at a price, as middle-class households are assuming more risk and borrowing more than ever before. Debt-to-income ratios more than doubled from 1983 to 2004, going from 0.45 to 1.19, the report said, as more families leveraged their lifestyle with larger mortgages, home-equity loans to pay down other bills and larger college loans to keep up with soaring tuition.
At the same time, more Americans have managed to move up the income ladder, particularly as they approach middle age. From 1970 to 2006, the share of Americans whose income was 75 to 150 percent of the national median contracted to 35 percent from 40 percent. But the percentage of people earning more than 150 percent of the median ticked upward from 28 to 32. The proportion of the lowest income group also grew, from 31 to 33 percent, led by a sharp increase in the number of young people, aged 18 to 29, who are lower-income.
Americans are also wealthier than ever, with the median net worth of middle-income families peaking at $98,286 in 2004, up from $77,031 in 1992. That growth has been most impressive for families in the upper-income group, who had a median net worth of $439,390 in 2004, nearly double the figure of 12 years earlier. But some of that wealth has likely eroded with the recent downturn in housing prices.
Among the groups to substantially improve their economic standing since 1970 are senior citizens, native-born Hispanics, African Americans and married couples, the report said. Meanwhile, single men and people with high school diplomas or less and immigrant Hispanics are among those who have lost ground.
Those surveyed agree that it is harder to maintain a middle-class lifestyle, but they do not agree on whom to blame for their plight. About one-quarter blame the government, 15 percent blame the rising price of oil, 11 percent blame themselves and 8 percent blame foreign competition.
"Part of it is the natural cycle," said Vicki Cool, 61, a retired nurse who lives in Salisbury, Md., and worries whether the Social Security payments she receives as a surviving spouse and her savings will keep her afloat through retirement. "Everybody wants to point a finger. But I'm not sure that I know enough to point fingers. I just know it's unfortunate."