- In recent years, wealthy Americans have gotten richer and low-wage workers have bargained for higher pay.
- But middle-class Americans have seen their wages stall, economists have found.
- And the real estate market was a double blow for them.
The pandemic economy has been tumultuous, to say the least.
Wealthier Americans have seen an influx of cash, while low-wage workers have managed to secure historic raises through bargaining, despite inflation creating a tight squeeze for anyone on a budget.
But the middle class hasn’t had such a bright side, with their earnings stalling, according to a recently updated paper by three University of California, Berkeley economists who run a project called Realtime Inequality, where they track growth statistics. for each income group. And this adds to the housing affordability issues that have stalled the middle class out of their traditional avenue to wealth creation in recent years.
The bottom 50% in the US, who have an average income of $20,000 a year, saw their income grow by 6.4% between September 2019 and September 2022, according to the website Realtime Inequality. 7.6% for the top 10% of earners, who earn approximately $420,000 annually, and 2.6% for the middle 40%, who earn approximately $92,000 annually.
That wage growth for the bottom 50% of Americans since the start of the pandemic has caused a “reduction in wage inequality among the bottom 99%,” the authors noted, which is a departure from the trend the country has seen. since the early 80s. This comes on top of incomes for the bottom 50% temporarily improving when COVID first hit, due to rising jobless benefits and stimulus checks.
When those avenues of government liquidity ended, income growth slowed from its peak, the researchers said, but continued to rise, which shows that the job market is strong and workers with lower wages higher salaries are secured. Lower-wage workers, such as leisure and hospitality workers, are the only ones seeing the higher pay they are bargaining to beat the price of inflation.
As the US approaches a probable, albeit relatively shallow, recession in 2023, it is also dealing with a very different wage growth picture than in the Great Recession. In the years since that recession, all income levels have seen stagnant pay; now the opposite is true. But even those who see wage gains aren’t guaranteed it will last. The Fed is trying to cool them to avoid a price-wage spiral and bring hikes in line with “sustainable and consistent with 2% inflation,” Chairman Jerome Powell said in early November.
Middle-class Americans are losing out on options for wealth growth
A July Primerica survey of 1,400 people found that three-quarters of middle-income Americans reported that their earnings are not enough to pay the cost of living.
The survey also found that concern about the economy continues to be a major pressure, with around 41% inflation being the main concern. Being able to pay for food and groceries is also high, and higher than when people were surveyed in March.
Additionally, middle-class Americans are losing access to real estate as the most reliable source of wealth creation. Over the past decade, middle-class families have earned more than $2 trillion from home ownership.
But today, housing remains unaffordable for many Americans, especially after nearly two years of price hikes in a hot market. Millions of homebuyers have been discounted this year, according to economists, and the average home price has hit a record high. Now, however, home values are starting to decline, siphoning wealth away from homeowners. Also, an ever-growing housing market isn’t a guarantee, as Yale economist James Choi recently told Insider.
America’s middle class has shrunk since 1971, according to the Pew Research Center, continues to face headwinds as home values fall, inflation rises and wages remain in the doldrums.