Millennials are falling out of the US middle class, and at a more rapid pace compared to developed nations around the world.
A new report from the Organization for Economic Cooperation and Development (OECD) has revealed that only 6 out of 10 millennials earn enough to be considered middle class.
While the middle class is shrinking across the globe, it’s millennials and Generation Z that appear to be in the biggest trouble.
Threatening the middle class lifestyle is stagnant wages, soaring house prices, health and education costs, and the rise of automation in many career sectors.
Millennials are falling out of the US middle class, and at a more rapid pace compared to developed nations around the world (file photo)
At just over 50 percent, the US middle-income class is much smaller than in most countries included in the new Organization for Economic Cooperation and Development report
And at just over 50 percent, the US middle-income class is much smaller than in most developed countries, according to the report.
Fifty-one percent of Americans are in the middle class, compared to 61 percent in other developed countries, OECD said.
And while 59 percent of baby boomers in the US were in the middle class when they were in their twenties, only 53 percent of millennials can now say the same.
The OECD defines middle class as those who earn between 75 percent to 200 percent of the median national income. In the US, that means between $23,416 and $62,442 for a single worker.
Middle earners have not done as well as those at the top, with average wages rising by a third less than those of the richest 10 percent over the past 30 years.
While 59 percent of baby boomers in the US were in the middle class when they were in their twenties, only 53 percent of millennials can now say the same
This has only gotten worse since the financial crisis, with average pay growing just 0.3 percent a year compared to 1.6 percent in the 1990s and mid-2000s.
Meanwhile, costs have risen much faster than inflation for some of the key pillars of middle class life including housing, which the OECD said had risen three times faster than household median income over the last two decades.
Middle class households have also been forced to fork out more more for education and healthcare.
This has left 20 percent of middle class households spending more than they earn, which is increasing indebtedness.
‘The middle class used to be an aspiration. It meant the assurance of living in a comfortable house and affording a rewarding lifestyle,’ the report stated. ‘It was also a basis from which families aspired to an even better future for their children.’
‘However, there are now signs that this bedrock of our democracies and economic growth is not as stable as in the past. The middle class looks increasingly like a boat in rocky waters.’
That means most families now need two earners to achieve middle class status, whereas in the past this was possible with only one person working.
Costs have risen much faster than inflation for some of the key pillars of middle class life including housing, which the OECD said had risen three times faster than household median income over the last two decades
And there are few hopeful signs of improvement, largely due to the fact that one in 10 current middle-income jobs are at high risk of automation
And, unless one person in the family is working in a highly skilled job, even two earners doesn’t automatically mean middle class status will be gained.
The share of middle class citizens has thus fallen across the developed nations, slipping from 64 percent of global households in the mid-1980s to 61 percent in the mid-2010s.
‘It’s a wake-up call to all of us about what, indeed, is the situation for the middle class,’ said Stefano Scarpetta, director for employment, labour and social affairs at the OECD.
‘It used to to be that you felt you accomplished something by reaching the middle class. You were stable. This sense of security is gone for many. Even if they reach it, it’s no longer a stable situation.’
And Scarpetta said the fact that the middle class are struggling should be a ‘source of concern’.
‘It’s the backbone of our society, both economically and socially,’ he added. ‘It’s the largest share of the population.’
To improve the lot of the middle class, the OECD recommended investment in training to boost their earnings potential and more collective bargaining to ensure good wages.
The OECD also suggested shifting the tax burden from labor income to income from capital and capital gains, property and inheritance, while also making income taxes more progressive.