The financial struggles that occurred prior to and in the wake of the 2008 Great Recession are still fresh in the minds of many Americans. This is particularly true among middle-class Americans who suffered tremendous financial losses as housing values plummeted and widespread layoffs occurred. In the six to seven years since the global financial crisis, the American economy has continued to slowly rebound and grow. Some financial experts warn, however, that, based upon our nation's current economic model, sustained growth isn't possible.
A joint study conducted in Jan. 2014 by the Pew Research Center and USA TODAY, revealed that a record low number of Americans, 44 percent, identified as being part of the American middle class. This percentage has fallen considerably since 2008 when 53 percent of Americans identified as being middle class. At the same time, the percentage of Americans who identified as being lower to lower-middle class increased from 25 percent in 2008 to 40 percent today.
The results of the study compel many to question what it really means to be middle class in America today. Historically, the American economy has largely relied upon the middle class to borrow and spend money. Being middle class in America used to mean an individual could afford a home and car and still have the means to spend money freely on non-essential items. Financial experts contend the purchasing power of middle-class Americans has continued to diminish since the 1980s when companies took steps to tighten their purse strings and reduce annual salary increases.
Since that time, the American middle class grew increasingly reliant upon low interest rates and credit cards to not only afford large purchases like a home and car, but also many non-essential items which they could previously afford. As a result, household debt amounts among middle-class Americans increased significantly. Many economists argue the impetus of the Great Recession spawned from rising interest rates and reduced bank lending which resulted in many middle-class Americans defaulting on debts.
Unfortunately, it appears as though little has changed since 2008. The American economy is still heavily reliant on the dwindling middle class who, thanks to stagnant incomes, have even less purchasing power and must rely upon low interest rate loans and credit cards to afford both big and small purchases.
Middle-class Americans, who are struggling to repay debts, may choose to consult with a bankruptcy attorney.
Source: The Wall Street Journal, "Middle class is drowning in debt, hobbling the economy: Analysis: Without higher incomes, economic stagnation is almost assured," Rex Nutting, June 27, 2014 Pew Research Center, "Despite recovery, fewer Americans identify as middle class," Rakesh Kochhar and Rich Morin, Jan. 27, 2014