Burdens Posed by Low Income
What is killing the stability of middle-income families in the United States? This question raises concerns about a large number of American households belonging to the middle class. The middle class has always kept the economy balanced; however, in modern society, the financial condition of the class in question necessitates attention from the government. Without a stable middle class, income accumulates at the very top, creating a black hole that absorbs the ever-increasing amount of national wealth. However, instead of recreating high-paid jobs with a salary from $19.05 to $31.40 an hour after the Great Depression, the government increases only the number of low-paid jobs with the payment that varies from $9.03 to $12.91 per hour (Reich 405). As a result, working families carry burdens and financial challenges that prevent them from having an enjoyable life. The analysis of the study shows that understanding the problems that the U.S. middle-class faces highlights the existence of burdens posed by low salary, income inequality created by the gap between the rich and the average, as well as the inability of people to cope with health and retirement issues.
Middle-class families living in the United States face a number of obstacles that prevent them from not only leading the lifestyle similar to the one led by the rich but also saving money for the future or avoiding bankruptcy. According to Reich, “the U.S.economy is in trouble because so much income and wealth have been going to the top that the rest of us no longer have the purchasing power to keep the economy going” (401). The rich do not invest in the creation of new working places or the maintenance of the existing ones (Reich 401). Instead, wealthy individuals choose to invest businesses located in South Asia and Brazil with the aim of getting the highest returns from their ventures (Reich 401). The situation explains the fact why nearly all American wealth belongs to the rich while common Americans face a variety of challenges because of low income.
American citizens who belong to the middle-class get wages that are hard enough to survive. An average household income in the United States in 2011 constituted slightly more than $49,000 (Friedman par. 3). However, due to inflation, the average income is just below the one that citizens got in 1989 and is $4,000 less than they did in 2000 (Friedman par. 3). The data shows that a monthly income per family accounts for about $3,300 (Friedman par. 3). Unfortunately, half of all U.S. citizens earn even less than that (Friedman par. 3). In the 1950s and 1960s, middle-class families earned income that allowed them to live with a single earner, usually a husband, while a wife typically worked as a homemaker and raised two or three children (Friedman par. 4). The earnings permitted them to purchase one new and one old car, modest tract housing, as well as plan a driving vacation or saving money for the future (Friedman par. 4). Nowadays, with the average wage of up to $13.50 per hour, Americans cannot afford such luxuries as the cost of living for one individual in America constitutes slightly more than $20 (Mills par. 5). People living in such expensive cities as Washington DC or New York are barely surviving with low income (Mills par. 5). The evidence shows that, in comparison with the twentieth century, where people could buy cars and plan vacations, Americans living in the twenty-first century cannot afford those things.
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A high level of living expenses forces most of the Americans to just get by and live from payday to payday. In his article entitled “The Crisis of the Middle Class and American Power,” Friedman explores the spending of a typical American household belonging to the middle class. According to Friedman, if a person has two car loans, he or she would have to pay $700 per month (par. 5). Approximately $1,200 a person has to spend on buying clothing and food, as well as covering utilities for a month (Friedman par. 5). Another $1,400 per month he or she should give for real estate taxes, mortgage, and insurance, as well as fixing the dishwasher or air conditioner (Friedman par. 5). In case his or her employer does not cover health insurance, constitutes about $4,000-5,000 for three or four individuals, a person would have little left over for a week at the seashore with the children (Friedman par. 5). If an individual wants to enjoy a middle-class life with a house, car, and other related amenities, he or she must receive a salary that accounts for at least $70,000 (Friedman par. 6). These luxuries might be available for a typical middle-class representative only in case he or she has favorable individual circumstances and whose parents can help cope with the financial situation (Friedman par. 6). As a result, people who want to have these luxuries but do not have enough money, usually face bankruptcy.
Most who experience bankruptcy are middle class. In most cases, they are well-educated individuals with own homes and work at good jobs (Littrell et al. 91). Besides, households with children have a higher probability of facing bankruptcy than those without children (Littrell et al. 91). About 90% of families for bankruptcy because of job, medical, as well as divorce expenses (Littrell et al. 91). The government might help them avoid bankruptcy by raising the minimum wage to at least $22 per hour (Mills par. 6). Mills argues that the minimum income from the 1960s should be $22 in the productivity terms of modern American society (par. 6). During that time, managers earned a couple times more than the average worker did while now, they get several hundred times more than middle-class employees do (Mills par. 6). Nowadays, the workers are more productive; however, only managers get the benefits from such a circumstance. Income inequality is the issue that hence worries most of the families belonging to the middle class.
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Americans who belong to the middle class earn wages that are far from the ones got by wealthy individuals. Reich argues, “A larger and larger share of the nation’s income and wealth was going to the very top—not just the top 1 percent, but the top of the top 1 percent—while other Americans were dividing up a shrinking share” (399). While the rich own the country, more and more working US citizens retain their jobs by settling for lower pay or even work at jobs that do not provide any increases (Reich 405). The proportion of earned salary by the representatives of the middle class decreased from 17.3% in 1967 to 14,6% in 2005 (Littrell et al. 88). From 1974 to 2004, the average pay of men in their 30s was reduced by approximately 12% (Littrell et al. 88). From 2000 to 2004, the income of individuals who graduated from colleges declined by nearly 5% (Littrell et al. 88). One might ask who gained from this drop. Littrell et al. report that the income of the rich from 43.8% in 1967 to about 50.4% in 2005 (88). Wealthy Americans account for only 1% of the U.S. population. Despite such fact, they own over 39% of all assets of the United States, including real estate (Littrell et al. 88). Moreover, 1% of the top leaders own approximately 49.5% of stocks whereas 10% of all American rich individuals possess up to 83.6% of all stocks (Littrell et al. 88). The evidence proves that there is a large gap between the wealthy people and the representatives of the middle class. One should also agree with Reich’s statement that rich persons “have become far wealthier over the last three decades, but the rest of us haven’t benefited” (400). It means that the rich own almost the entire economic sector of the country while the middle class receives a salary that is hardly enough for daily needs, including the ones related to the healthcare industry.
Although the growth in overall healthcare spending is slow, the share of middle-class households on health insurance gets bigger by squeezing those families that have already faced financial problems. Polsky and Grande argue changes in health care spending are disproportionately felt by the U.S. citizens as middle-income working families struggle the largest with it (438). The health-care spending across the national economy accounted for about 18.2% of the gross domestic product in summer this year, which is almost 5% more than in 2000 (Sussman par. 2). To assist people with low wages, the government has developed such programs as the Affordable Care Act and Medicare, as well as provided subsidies for poor families by providing them the opportunity to buy healthcare insurance on state exchanges (Sussman par. 3). However, these actions do not refer to middle-income households who “are finding more of their health-care costs are coming out of their own pockets” (Sussman par. 3). As a result, working individuals face the challenge of coping with health issues.
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Many middle-income families do not have enough money to pay for their insurance. Households “face the mounting risk of receiving giant hospital bills yet having no way to pay them” (Reich 403). According to Reich, few large and medium-sized organizations provide their employees with full healthcare coverage while in 1980, up to 74% of all American companies offered it (403). As a result, workers should spend a significant part of their income on health expenses. Sussman reports that in 2014 representatives of the middle class devoted about 8.9% of their spending to health care, which is 3% more than they spent in 1984 (par. 5). Such changes forced a number of households to noticeably reduce the level of their expenditures on more discretionary categories, including clothing and dining outside their homes (Sussman par. 6). Despite the fact that the U.S. economy-wide perspectives suggest that “rising health care spending can be sustained,” many working families already experience the “eroding standards of living” (Polsky and Grande 439). Therefore, the growth in the rate of spending on health care affects the finances of middle-class households to a larger extent than that of the rich, because health care covers a large part of their budget (Polsky and Grande 439). Ultimately, middle-income employees face the challenge of saving money for the future after they retire as they devote their wages to daily needs.
Another issue experienced by such families is an insecure retirement. Many individuals face the increased risk of not having enough money to retire on after quitting their jobs (Reich 403). Reich claims that in the 1980s, up to 80% of large and medium-sized companies gave their employees defined benefit pensions, which guaranteed that after people retired, they would get a fixed amount of money each month (403). By 2003, only one-third of all middle-income employees received guaranteed pensions (Littrell et al. 90). In modern society, there are less than 10% of all American corporations and organizations that provide their workers with such retirement conditions (Reich 403). Instead, businesses give “defined contribution plans where the risk is on the workers” (Reich 403). Such 401Ks are very risky as their value depends on the stock market (Littrell et al. 90). When the stock market plunges into a crisis as it did in 2008, defined contribution plans plunge along with it (Littrell et al. 90). While the rich earn tens of millions for their retirements by paying little or even no taxes, as well as enjoying large government subsidies, the middle class has to solve the problem on its own by saving little amounts of money to have at least a slightly secure future (Reich 403). As a result, approximately half of American retirees might run short of their financial needs in the future by getting less than 70% of their pre-retirement salary upon retirement (Littrell et al. 90). Thus, a problematic retirement is another issue along with healthcare insurance that middle-income families have to face in the United States.
Some people state that the living conditions of the middle class have substantially improved under the Obama administrations. In the article entitled “Middle Class Shrinks Further as More Fall out Instead of Climbing Up,” the authors argue that the middle-income “group began to fall because the shift was primarily caused by more Americans climbing the economic ladder into upper-income brackets” (Searcey and Gebeloff par. 2). The writers emphasize the fact that as the number of people belonging to middle-class narrows, their financial conditions improve. However, such an incremental improvement has not changed the situation. The introduction of a new plan of healthcare spending and taxes has significantly worsened the lives of working families as the salary they receive is hardly enough to cover daily spending.
Taking into consideration the findings of the study, one may conclude that the middle class in the United States faces a number of challenges that affect their economic stability. In comparison with the twentieth century, where middle-income households could buy cars or plan vacations, in the twenty-first century, people not only cannot afford those things but also other essential elements including healthcare insurance and savings for retirement. While the rich own almost the whole economic sector of America, the working people live on a salary that is hardly sufficient for their daily needs. Consequently, the income inequality between the rich and the representatives of the middle class create burdens that significantly undermine the financial condition of almost all working families.
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