Here’s the headline and an excerpt:
Whopping 62 percent of jobs don't support middle-class life after accounting for cost of living by Paul Davidson/USA Today October 30, 2018
“Sixty-two percent of jobs fall short of that middle-class standard when factoring in both wages and the cost of living in the metro area where the job is located, according to the study by Third Way, a think tank that advocates center-left ideas.
…A slight majority of Americans, 52 percent, do live in middle-class households, according to recent annual reports by Pew Research Center. And another 20 percent or so live in upper income households. But that’s because they’re juggling multiple jobs, for example, or relying on investments, an inheritance or other household members who may have higher-paying jobs.”
Sounds bad, but consider:
There is no mention in the Third Way or Pew reports that individuals in middle- and upper-income households are holding multiple jobs, relying on investments or relying on an inheritance. Since over half of middle-income and above households include two or more earners, it stands to reason that one of those earners will earn more than the other(s) – that’s just the law of probability.
Per the Bureau of Labor Statistics, the multiple jobholding rate has been steadily declining since the mid-1990s. In 2017, just 4.9 percent of workers held more than one job at the same time.
According to a recent paper by NYU economist Edward N. Wolff, the top 10% of American households, as defined by total wealth, own 84% of all stocks. According to a recent Gallup poll, less than a third of adults under 30 have investments in the stock market. Plus, those working-age adults who need investment income to achieve a middle-income lifestyle are unlikely to have much in the way of investments to tap into. For instance, the median value of liquid assets for Americans ages 35-39 is $8,000 – and that includes savings accounts as well as stocks and bonds.
As for inheritance income, the average age for receiving an inheritance is 40 and the money is usually split among multiple heirs (at the very least children and grandchildren). Most Americans do not receive a substantial inheritance – “in most cases, not enough to even pay for one year of retirement”, per Jamie Hopkins, professor of retirement planning.
Note that the Third Way report is about jobs, not occupations. It would have been nonsensical to speak about whether different occupations could or could not support a middle-class standard of living, because most occupations have a pretty wide range of pay, depending on experience, skill level and employer. For instance, these occupations have a pay range of over $100,000: psychiatrists, sales managers, real estate brokers, first-line supervisors of non-retail sales workers, actuaries, air traffic controllers, and commercial pilots (Same occupation, different pay: How wages vary/Bureau of Labor Statistics).
Speaking of the Third Way report, here’s the link. The authors matched job salary data with local cost of living for a bunch of cities and came up with the following classification scheme:
Hardship Job: Does not pay enough to allow a single, childless adult to support a basic standard of living for himself or herself (<$26,254 on average).
Living-wage job: Does not pay enough to allow a single, childless adult to support a modest standard of living for himself or herself (between $26,452 and $44,820 on average)
Middle-class job: Pays enough to support at least half the expenses of a family of four leading a middle-class life (between $44,820 and $80,426 on average)
Professional Job: Pays enough to support at least 75% the expenses of a family of four leading a more comfortable but still middle-class life (>$80,426 on average)
The first thing I noticed was that the lowest classifications assume the adult is responsible for all of his or her living expenses. No help with rent, utilities or food. Is this a common situation for working-age adults in our country? In a word: no.
The Census Bureau has been keeping track of adult living arrangements for over 50 years. As it turns out, in 2017 less than 12% of American men and women age 18-64 live alone without another adult in the household, as in spouse, partner, parent, other relative or roommate. Less than 10% of young adults (18-34) live alone.
If you assume that 90% of the individuals in “hardship” and “living-wage” jobs are actually sharing expenses with at least one other adult, that means most of them aren’t living off their salaries alone. They have help. Now consider that in 2017, the middle-income quintile starts at $47,110. If 90% of those working “living-wage” jobs are living with an adult with whom they share expenses, many of them are living the middle-class life. Ditto those working in “hardship” jobs. Of course, many in the hardship job group are suffering chronic personal hardship – and they need help. Others will age-out of hardship as they move up the salary ladder within their occupation (or switch to a better paying occupation).
Now the authors of the Third Way report don’t say directly that actual individuals in these jobs are struggling – but they sure as hell imply it. They refer to the job salary situation as an “opportunity crisis”. Unfortunately, exaggerating and misrepresenting a problem doesn’t help us solve it.