The Sky Is Falling on America’s Middle Class

by Alyssa Oursler | August 28, 2012 6:45 am

All in all, Wall Street’s second quarter really wasn’t so bad. Corporate profits[1] actually did OK during the quarter, as countless stocks met or exceeded earnings expectations.

And they did that in spite of revenue weakness[2]. That’s good … right?

Maybe right now, but not really down the road. On top of meaning a dismal outlook for profits[3] down the line, it also means that companies are cutting their way to growth — the impact of which falls heavily on middle-income Americans.

Because cutting your way to growth means just that — cutting costs, which includes cutting jobs and wages.

That sure doesn’t help unemployment. If companies are trying to do more with less, they won’t be adding new workers to their payroll. The jobless rate ticked up slightly to a five-month high[4] in July, and the hiring outlook[5] isn’t any better.

But that’s only one piece of the puzzle. Even those who have jobs are being worked harder[6] to earn less so companies can squeeze more profits out of fewer sales.

Just look at numbers for wealth and income[7] for the middle class over the past decade: The median income of the middle class fell 5% since 2000, and median wealth declined by 28%. Meanwhile, lower-income Americans also saw wealth and income fall, but the upper-tier population remained generally unchanged.

And worse — that fall is coupled with an increase in the cost of living. Food prices are steadily on the rise and things are only looking to get worse next year[8], which will take an ever-bigger bite out of everyone’s wallets. Gas prices — now sitting at seasonal highs[9] — aren’t helping the cost of food either, nor the cost of other goods, nor your daily drives to get from Point A to Point B.

For middle-income Americans who have or plan to start families, the tab runs up even more quickly. Having a kid has become increasingly more expensive[10], from spiking child care costs to college tuition.

And frankly, paying for their children’s college education might not even be at the forefront of many middle-class Americans’ minds, as they are still trying to pay for their own schooling. College debt tends to fall heaviest on middle-income students[11] — and members of Generation Y saddled with that debt are very likely to hold low-paying job[12]s despite their degrees.

It’s no wonder that, according to a recent Pew study, 85% of self-described middle-class adults think it has gotten increasingly difficult to maintain their standard of living over the past decade.

It’s because the bottom line is clear: It’s tough — and expensive — to be in the middle.

Endnotes:
  1. Corporate profits: http://www.usatoday.com/money/perfi/columnist/krantz/story/2012-08-23/corporate-profits/57254878/1
  2. revenue weakness: http://investorplace.com/2012/08/forget-earnings-declining-revenue-and-dividends-the-real-story-in-q3/
  3. dismal outlook for profits: http://investorplace.com/2012/08/get-ready-the-earnings-floor-is-set-to-fall/
  4. five-month high: http://investorplace.com/2012/08/the-best-and-worst-states-for-jobs-2/
  5. hiring outlook: http://investorplace.com/2012/07/americas-hiring-outlook-still-mostly-cloudy/
  6. worked harder: http://investorplace.com/2012/08/the-economys-ever-narrower-margin-for-error/
  7. wealth and income: http://www.pewsocialtrends.org/2012/08/22/the-lost-decade-of-the-middle-class/
  8. get worse next year: http://investorplace.com/2012/08/5-ways-the-drought-could-dry-up-you-wallet/
  9. sitting at seasonal highs: http://investorplace.com/2012/08/record-gas-prices-a-state-by-state-look/
  10. increasingly more expensive: http://investorplace.com/2012/08/these-days-kids-dont-come-cheap
  11. on middle-income students: http://www.newstribune.com/news/2012/aug/23/college-debt-falls-heaviest-middle-income-students/
  12. very likely to hold low-paying job: http://www.newstribune.com/news/2012/aug/23/college-debt-falls-heaviest-middle-income-students/

Source URL: http://investorplace.com/2012/08/the-sky-is-falling-on-americas-middle-class/
Short URL: http://invstplc.com/1nFwGul