“Middle class” is a term politicians toss around all of the time. President Donald Trump calls the GOP’s tax plan a “middle class miracle.” Chuck Schumer says it amounts to “open warfare against the middle class.” Candidates of all political stripes, no matter how wealthy they are, claim to be living a middle class life. TV ads and political mailers all focus on this key constituency.
It makes sense elected officials talk so much about the middle class. It lies at the heart of the American Dream.
But the political speak obscures fundamental questions: What does “middle class” actually mean? Who actually is a middle class American? Unless we know these answers, we cannot develop economic plans to support the middle class.
According to Pew Research Center, although 70 percent of Americans say they are “middle class,” only 50 percent of us really are. Distressingly, there’s good reason to suspect the numbers are gloomier than Pew suggests.
By Pew’s definition, the middle class in Denver has an income range between between $42,000 and $136,000, but we really can’t take in that range without factoring in the “self-sufficiency” standard. “Self-sufficiency” is the bare-bones estimate of what it takes to live without public assistance. The income needed to meet this standard has been steadily increasing since 2001.
In Denver, it takes $47,000 for an adult and their preschooler to be self sufficient. For a household with two adults, a preschooler, and a school age child, self-sufficient income is $63,000. A “self-sufficient” life covers costs like rent, utilities, groceries, and basic clothing expenses. It rules out activities like going out for dinner, saving for retirement, paying off credit card debt, or saving for a college education.
Is “self-sufficient” what you see in your mind’s eye when you envision the middle class?
Within the range of income that we’ve been using to measure the size of our middle class lies a life far different one than you are probably envisioning. Unable to take a vacation, unable to give back, unable to afford college, unable to invest, and unable to shop on main street, these households are just hanging on and most certainly not living the lifestyle we’ve come to associate with middle class America.
Clearly, the targets we’re trying to hit are moving.
If you’re starting a family, one cost eating away at your budget is childcare and preschool. In Colorado, the average cost of a quality preschool for a 4-year-old is a little over $11,000 per year. That’s nearly 30 percent of the income at the bottom end of Pew’s definition of middle class, and that huge chunk of change has only been going up since 2000. A recent analysis shows that net income of families with young children has plummeted over the last decade, meaning that much of our middle class has no way to cover child care without falling into debt.
That sacrifice has far reaching consequences. In Colorado, the cost of attending a state college or university has gone up dramatically over the past 20 years. The state share has been cut in half while the share that families pay has doubled. To save the amount needed for a student to attend community college for two years, a family would need to put $1,000 per year for 18 years into a 529 plan, but that early child care hit makes that more challenging.
The cost that has spiked the highest in recent years is housing. Nearly 75 percent of Colorado renters are paying over one-third of their household income for housing, with a good chunk of these Coloradans paying over half of their family budget just to put a roof over their heads. This is to say nothing of the escalating costs of purchasing a home. When you switch from renting to owning your home, you begin to build wealth, but Colorado’s homeownership rates have been on steady decline — from 70.1 percent in 2005 to 62 percent today.
All of these pressures on our budgets leave us vulnerable to income stripping debt. A flat tire can ruin a holiday and a speeding ticket can lay waste to a credit history.
So how do we rebuild a diverse and thriving middle class? For starters, wages need to go up. Booming as Colorado’s economy has been, wages here have stagnated just as they have across the country. According to the 2018 Colorado Business Outlook Report, nearly three-quarters of the job growth in 2016 was in industries that pay below the state average.
Coloradans voted to raise the state’s minimum wage in 2016, and while this helps to raise the floor, more must be done. That’s why we are likely to see efforts to improve overtime wage standards for the jobs that have traditionally boosted the ranks of the middle class. We also need to do more to help Coloradans stuck in low wage occupations get training so they can compete for higher paying jobs.
But we can’t ignore our role in controlling costs. A government that works for Coloradans should be in aggressive conversations about alleviating the costs bleeding our wallets. For example, the only way education costs can come down is if our state government has enough funds to do things like expand full-day kindergarten, provide sizeable financial support for child care, and lower college tuition rates. For a state like Colorado that invests just 3.7 percent of its economic prosperity in state services, it may well be time to revisit the Taxpayer’s Bill of Right’s ban on taxing our wealthiest citizens at reasonably higher rates.
With all the mixed messages and definitions, it’s no wonder people can’t figure out if they’re in or out of the middle class. We can’t confuse economic growth with economic equality and that’s why my organization will be more deeply analyzing the state of Colorado’s middle class next year.
In the meantime, it’s clear that self sufficiency should be merely the entry level, not the standard accommodation that we’ve normalized and allowed to redefine our most cherished economic ideal. It’s time to take responsibility for this slide and realize that the less we invest in ourselves, the less we get back, and the more we get left behind.
Scott Wasserman is president of the Bell Policy Center, a nonprofit research and advocacy organization.
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