$150K: The New "Middle Class"
Truly, where is our middle class? What amount of income qualifies "the middle class"? We're hearing it non-stop with politicians speaking about saving the middle class, but does anyone really know where this widely-spoken-of middle class lies in terms of income? In 2010, the national median income was $49,445. But although the numbers show our country's middle-ground, does it mean that those making the national median are feeling financially secure?
What do you think it would take for you personally to feel financially secure?
$50,000? $75,000? $100,000?
Well according to a new survey of Americans by WSL/Strategic Retail, those that make $150,000 said they feel the most financially secure. That amount is enough to put a household into the top 10% nationally. But just below that threshold, those making $100-150k income are saying that they can only afford the basics with a little extra on the side. Six-figure incomes are not what they used to be these days. Although the national median is three-times less than $150k, it's looking like we've found a more reasonably logical "middle class", no?
The way the survey was conducted was to have respondents choose which of four categories best described them:
I can't even afford the basics
I can barely afford the basics and nothing else
I can afford the basics plus some extras
I can afford the basics, the extras, and I'm able to save too
The vast majority of consumers making 150k, 88%, say they could buy what they need, afford some extras, and still be able to save.
More than half of Americans, 52%, feel like they can only afford the basics and some of these are people with six-figure incomes!
“We clearly have what used to be upper middle income – 75 to 150k – folks who are saying, it just isn't so,” said Candace Corlett, president of WSL/Strategic Retail. “A quarter of them are saying 'I can barely afford the basics.'”
Only 18% of households that earn between $100,000 and $150,000 said they could only afford the basics, with another 10% saying they sometimes can't even afford those staples!
But for everyday purchases, such as the “essential basket of goods,” it is becoming more difficult to provide for your family with basic goods, which includes foods, fuel, public transportation and occasional gifts. Back in December we reported that since 2000, the price of basic purchases has jumped by 43% and households are struggling to pay for the basics.
According to the WSL/Strategic Retail survey, the youth market, 18-34 years old, is being hit the hardest with these price increases. They are the highest percent of those who do not have enough money to cover their basic needs, with about a quarter (24%) in financial turmoil. As for those over 35, they were able to kickoff their careers 10 years ago, when economical times were much better than they are now. Although the group of 35 years and older are better off than the youth market, they still are struggling and retailers are losing their business.
Branded products [are] under threat, the study shows. Shoppers in general are placing a greater focus on price, with two thirds (67%) of women agreeing that trusted brand names are not worth paying more for. More than a quarter (26%) of women admit that while they used to buy brand names they could not afford, they are no longer giving in to this indulgence. This figure is up seven percentage points from 2010.
In reference to the overall data put forth by WSL Strategic Retail, the company's CEO, Wendy Liebmann says that the U.S. has some seriously deep rooted issues to deal with:
“There is a huge fundamental issue when more than half of Americans can only afford basic necessities and people who earn up to $150,000 think they are poor. Look, American shoppers are moving on and coming back to shopping, but at their own pace. As a result, retail sales are precarious and likely to fluctuate up one month, down the next. That’s not going to change any time soon. Brands and retailers cannot ignore this. They will need to re-think the way they do business over the next three to five years — or longer.”
The purchasing power for the average American paycheck has shrunk significantly along with home prices. T actually see how much it would take to have a decent middle class life within some of America's cities, they calculated the difference between their sample subject town of Peoria, Illinois to the top 6 highest cost of living comparisons. Here is the data they found:
1. The New York metropolitan area was the most expensive. Equivalent income: $337,311.87. Percent increase to maintain standard of living: 124.87%.
2. Honolulu: Equivalent income: $258,099.19. Percent increase to maintain standard of living: 72.07%.
3. San Francisco: Equivalent income: $255,409.43. Percent increase to maintain standard of living:70.27.%
4. San Jose: Equivalent income: $243,260.85. Percent increase to maintain standard of living: 62.17%
5. Washington, D.C. area: Equivalent income: $218,127.70. Percent increase to maintain standard of living: 45.42%.
6. Chicago area came in with a 21.36% increase to maintain the standard of living. Equivalent income: $182,045.06.
The struggling economy has clearly created a recession mindset among consumers. When asked how long the recession will continue, 80 percent of people say three years or more, Corlett says – up from 43 percent back in 2010.
“They may not literally mean the government’s definition of a recession, but they certainly mean a recessionary mindset for them,” Corlett says.+16
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