Middle Income America: "Hanging By a Thread"

An important and fascinating new study by the New York-based think tank Demos details the precarious situation of middle income Americans. Authors Jennifer Wheary, Thomas M. Shapiro, and Tamara Draut define "middle class" in terms of "having financial security, raising a family with a reasonable standard of living, building a solid future for the next generation, receiving quality healthcare, and retiring in comfort." They identify four factors critical to satisfying that definition (assets, education, income, and health care), and develop a "Middle Class Security Index" for measuring those factors.

Applying this metric, the authors come up with some very sobering observations, including these:

* Only 31% of middle-income families match their profile for being securely middle class (i.e., the rest lack one or more of the four factors that ensure middle-class security).

* 21% of white families are at high risk for slipping out of the middle class, as compared to 33% of African-American headed households and 41% of Latino families.

* More than half of middle-class families have no net financial assets whatsoever -- that is, no financial assets or debt levels that exceed their assets.

* Only 13% of middle-class families have sufficient assets to meet three-quarters of their essential living expenses for nine months, should their source of income disappear.

* 21% of middle-class families have less than $100 per week ($5,000 per year) remaining after meeting essential living expenses. These families are living from paycheck to paycheck with very little margin of security.

* In 23% of middle-class families, at least one family member lacks health insurance of any kind.

* 27% of middle-class families do not have any education beyond high school, placing them increasingly at risk in a rapidly developing global economy.

The report is about 14 pages exclusive of notes and appendix and is well worth reading.

Among all the alarming data, I was particularly struck by the finding that the median debt of middle-class families is $3,500 and the median net assets is $0 (i.e., more debts than assets). The national economy is premised on exuberant consumer spending, but consumer debt is already out of hand. There really is no cushion for middle-class families to absorb the shock of declining home values and an economic slow-down, not to mention the rapidly rising costs of food, energy, and health care. This is a very troubling situation.