Middle class hollowed out? Kind of. Unhappy? It depends . . .
Progressives like Bernie Sanders and Michael Moore are fond of excoriating the rich and powerful for the “hollowing-out of the middle class.” What they fail to mention—either for lack of information or for political expediency—is that, money-wise, more families are leaving the middle class on the upside rather than the downside. There’s plenty of evidence for this. Check out the following, which is similar to other reports, but I especially like it because it is based on Pew research findings:
https://qz.com/1005068/the-upper-middle-class-is-the-new-middle-class/
A larger segment of the middle class, it seems, is rising into the highest and upper-middle class than is falling into the lowest class (the lower middle has remained unchanged), and the net effect, dollar-wise, of “hollowing out” appears to be a positive. Is this a Good Thing? After all, can’t money buy happiness?
Yes, up to a point. Research on that has been around for a while, as reported in CNBC in 2015 (I confidently cite the CNBC report because it falls in line with what I’ve been hearing for the last 10+ years; if there’s a contrary study, please let me know):
https://www.cnbc.com/2015/12/14/money-can-buy-happiness-but-only-to-a-point.html
What’s missing from this picture?
Call me a glass-half-empty guy, but finding that the lowest income class in the U.S. has increased to twenty percent in 2017 mutes the cheerful tone of the article in Quartz. Bernie Sanders and Michael Moore are most worried for these truly suffering people, but they have to frame their message as doom for the middle class, or the increasingly well-off middle class wouldn’t pay much attention. The hollowing-out-of-the-middle-class mantra has to be repeated enough to convince middle and upper-middle-classers that they are getting a really raw deal.
So why IS the middle class paying so much attention to Bernie and Michael and Elizabeth Warren? Upward-creeping income and its concomitant increase in happiness should be giving more and more in the middle class a sense of contentment. Sure, the tax cuts went disproportionately to the rich, but if you’re already comfortable, a little moral outrage shouldn’t cast a serious cloud over your generally sunny outlook.
No?
No. Two principal reasons (leaving out Trump for the moment):
1) The dread of financial ruin from medical expenses. Half of the personal bankruptcies in the U.S. are due to health care costs. High premiums and high deductibles—particularly in the individual market—can be crushing in the event of a serious illness of one or two family members. Get so sick you can’t work and you need months of expensive treatments and medicines? There goes your contentment. Apart from the craziness of the Trump White House, health care appears to be the leading issue for middle class voters in this year’s midterms—I’ve been canvassing for a month and that’s what they’re telling me.
2) “Happiness” – really? Wealth is relative: you need less in absolute assets to be relatively wealthy in Kenya than to be relatively wealthy in the U.S. “Happiness” can also be relative—and according to a World Economic Forum report in 2018, the U.S. is well down the list of happiest countries, all of which are developed economies. Behind such countries as Finland (Number One!) and Canada (Number Seven!), the U.S. ranks 18th. (See W.E. Forum Happiness Rankings)
Canada’s happiness index is 7.328, the U.S.’s 6.886. The U.S. only six percent worse—not that big a deal, really, especially because the measures of “happiness” are admittedly a bit squishy. But why should it be lower at all, given that the “average” wealth of a U.S. adult is $388,000 versus $259,000 for a Canadian? Why aren’t Americans far happier than Canadians?
A more comprehensive look at the numbers suggests why the “hollowing out of the middle class” war cry, while much overstated, resonates so well with the middle stratum of middle class America. It brings us to the difference between two “averages,” the mean on one hand, the median on the other. The “average” stated above ($388,00 for the U.S., $259,000 for Canada) is the mean—the total wealth divided by the number of adults. But the median—the number at which half the individuals are below, and half above—is $56,000 for the U.S., and $91,000 for Canada. (All these stats are drawn from the Wikipedia entry to be found at Wikipedia: wealth per individual, countries of the world.)
The differences between the medians and the means of the two countries is an almost complete reversal. The difference between the means in wealth has the U.S. on top by 50 percent. The ratio between the medians has Canada on top by 62 percent! There’s the basis of a strong argument that middle class Canadians are more financially secure than middle class Americans. By a lot, I’d say. No wonder Donald Trump wants to punish Canada for existing.
The large discrepancy between the mean and the median in the case of the U.S. is due, of course, to the top-heaviness of the income and wealth scale in The Land of the Free and Home of the Frightened of Going Broke. The immense wealth of those at the top pulls the mean upwards, while the median stays pretty much stuck.
Wealth Matters
As I discussed in an earlier post on Wealth Gap Multipliers (find here.), you get a better assessment of economic security from looking at wealth than annual income. Incomes may be rising for middle class Americans—giving rise to chipper reports like the one from Quartz linked to above—but building wealth usually lags well behind mere increases in income. For a piece in Forbes magazine that describes the problem of the racial wealth divide (a key part of a the larger wealth gap in general) much better than I can, look to Brian Thompson on racial wealth gap.
Middle class Americans, even those whose rising incomes are propelling them into the upper middle class, have a sense of financial insecurity for good reason. This is partly because of the desire to have an abundance of Stuff, much of which is unnecessary to, or even damaging to, happiness.* That aside, the numbers speak for themselves: too many Americans live on the edge, with too little wealth to keep them afloat during hard times, especially hard times precipitated by a health care crisis.** Literal “hollowing out” be damned—it’s a catchphrase for something more fundamental at an emotional level. It’s an expression of a mood so compelling it overrides statistics. Whether it will fundamentally change attitudes in the high middle class—enough to spark a real progressive political awakening—is still open to question.
============== footnotes ===============
* I intend to address the dilemma for both humans and the environment of accumulating Stuff as a source—or not—of happiness in another post. Once more I recommend Annie Leonard’s https://storyofstuff.org/
** Consider lower life expectancy as a sign of unhappiness—even, some say, outright despair. While Trump celebrates an economy that’s expanding, human lives in the U.S. are contracting.
See in Fortune: U.S. life expectancy drops again