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Middle Class Woes — There’s a great rant from Bernie Sanders on the cost of everyday life as someone who has a close to minimum wage job, lives in an urban area, and can’t afford to move to somewhere with a lower cost of living. I recommend it – to me, it was eye-opening.
But it turns out that right now, it’s tough to be in the middle class, as households with incomes in the 60th to 80th percentile in America are feeling the squeeze the most.
During the pandemic, thanks to enhanced unemployment benefits, stimmy checks, and being locked down in their homes, the working poor actually ended up saving money. For many households, these stimmy checks plus enhanced unemployment benefits actually paid more than their jobs.
Contrast this with the middle class; if you lost your job in the middle class, your unemployment check plus stimmy checks didn’t make up the ground that you lost.
The middle class spends more of their income on goods and services that have gone up in price. Think about the cost of commuting into a city from a suburb or rural area.
Driving 50 miles per day in traffic has more or less doubled in terms of cost if you’re driving the same car as two years ago. If you were forced to upgrade, your new or even used car payment is higher than ever before.
According to Moody’s analytics, the upper middle class, defined as households making between about 75k and just shy of 130k, actually have less in savings per household and in aggregate than every other income bracket except for families making under 30k per year.
Many of these upper-middle class families have 401ks and IRAs. These retirement accounts have been crushed this calendar year, giving back, in many cases, all of their pandemic gains.
Those close to retirement in the middle class are in a rough spot. Their retirement accounts are dwindling, and the cost of living in many parts of the country is absolutely skyrocketing.
This is such a problem that some retirees are returning to the workforce. If you retired in early 2020 and then saw your investment account balances go up almost triple-digit percentages after the March 2020 pullback, you were riding high.
Now, sentiment amongst the middle class has taken a harder hit than any other income bracket. The psychological burden of losing loads of money in stonks has forced many middle class boomers to pull a Bret Favre and re-enter the workforce.
No one knows what the future holds. How high will rates rise? Will inflation be curbed by demand destruction alone? Will Daddy JPow take my job?
Even if I had a crystal ball, I wouldn’t share the answers with you.
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