If Americans are feeling the need to stretch their dollars more than ever, it’s not hard to figure out why.
The latest inflation data from the Bureau of Labor Statistics showed prices rose 8.3% year-on-year.
This not-so-good news is compounded by the fact that the average American doesn’t make enough money by comparison to keep up. The BLS noted in July that the inflation rate of 8.6% far outpaced wage increases of 5.3%.
While median wages continue to rise each year, purchasing power has fallen and wages don’t seem to have kept up. And as they are forced to forego their money, the 52% of American households that make up the middle class may be wondering if they’ll get relief any time soon.
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How much do middle-income Americans make?
As of 2021, America’s middle class remained steady at 50%, according to a Pew Research Center study released in April. This is largely unchanged from the 2011 figures.
But how do the percentages translate into income and earning power? Pew statistics show that the median income of middle-class Americans increased 6% from $74,000 in 2010 to about $78,500 in 2016.
Today, that number is around $90,000 — which seems like a big leap considering how much purchasing power a dollar has today compared to a dozen years ago. To have the same effective income as $74,000 in 2010, you would need to make approximately $101,000 in 2022 based on this CPI inflation calculator.
From a ‘lost decade’ to a widening rift
Arguably no factor has impacted the changing ranks of America’s middle class more than the Great Recession. Pew numbers show that the “aftermath” of the recession left median incomes broadly flat from 2000 to 2016. For this reason, the 2000s are sometimes referred to as “the lost decade”.
Meanwhile, middle class wealth has paled in comparison to those in higher income brackets. In 1970, Pew Research found that upper-class Americans earned more than twice as much as middle-income Americans and more than six times as much as lower-income households. As of 2016, the gap had widened even further.
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Even in the middle class there are differences.
As of 2022, Pew identified a middle-income household as anywhere from $30,000 (for a single adult) to $67,000 (for a five-person household). And depending on where you live, having the same middle-class income can mean living in relative comfort or enduring tight pressures.
Could COVID keep Central America down?
A 2021 Pew study found that the pandemic not only stalled economic growth, but also froze numbers in America’s middle class. In fact, this was happening all over the world, driving many middle-class families into poverty.
So it’s fair to ask whether the ranks and median income of America’s middle class will shrink — especially if rising inflation comes into play.
Those with crystal balls will want to take their best guesses – however, if you land on the wrong side of the mid-range equation in the coming months, crystal may become a luxury you can no longer afford.
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This article is informational only and should not be construed as advice. It is provided without any guarantee.