america’s middle class

America’s Middle Class

In Crisis

Or

Comfortable?

Richard Alm

Federal Reserve Bank of Dallas

What is middle class?

Get an education Get a good job Own a home Live the “good life” Save for a rainy day

Get an education

America’s Middle ClassIn Crisis

Or Comfortable?

Get an education

Get a good job


Or Comfortable?

Get a good job

40

60

80

100

120

140

1950 1960 1970 1980 1990 2000

0

4

8

12

16

20Millions Percent

Employment

Unemployment rate

Get a good job

$0

$2

$4

$6

$8

$10

$12

$14

$16

1897 1918 1939 1960 1981 2002

Get a good job

Economic Downturns, 1855-2002

1855

1863

1871

1879

1887

1895

1903

1911

1919

1927

1935

1943

1951

1959

1967

1975

1983

1991

1999

Get a good job

Get a good job

5

6

7

8

9

10

11

12

13

14

15

16

1980 1983 1986 1989 1992 1995 1998 2001

Dollars

Manufacturing (less overtime)

Private service-producing (less retail trade)

Other services (excluding retail trade)

Get a good job

Stand in an assembly line.Operate dangerous machinery.Time-motion studies.Punch in and wait for the 5 o’clock whistle.15-minute break, sack lunch and thermos.Smoke, soot and stale air.Dark, dank, dangerous conditions.Join a union to be heard.No phone, no window, no visiting.Work at the office, play elsewhere.Commute.Work your way up the company ladder.50 years and a gold watch.Starched collar and necktie.Power is position and job tenure.Trade school and ratchet set.Blue collar, grease and Borax soap.A good job is hard to find.Search the local paper’s help-wanted ad.Look for a job.Boredom from repeated tasks.Just do what you’re told.

Get a good job

Sit in a cubicle.Operate a computer.Ergonomic workstations.Flextime, just get the job done.Go out to eat, outside to smoke.Constant indoor air-quality analysis.Indirect lighting, central heat and air.Employee empowerment.Access to e-mail, Ebay and coworkers.Work and play blur.Telecommute.Cultivate your core competencies.Portable 401(k) plans and an early out.Khakis and a polo shirt.Power is ideas and vision.Technical school and software certification.Lab coat and a clean-room suit.Four job offers and a signing bonus.Park your resume on the Net.Pursue a career.Interesting and meaningful work.Think and grow rich.

Get a good job

•Death and accident rates are down at work

•Jobs are less repetitious and boring

•Work is more interesting and meaningful

•Work schedules are more flexible

•Employees are freer to come and go

•Workers are more independent

•Finding a new job is easier than ever

•Even stress levels have abated

Get a good job

InitialClaims*

Net Job Gains*

End-of-year Employment*

UnemploymentRate

Productivity(1980=100)

1990 4,616 309 109,118 5.6 1191991 5,363 (857) 108,261 6.9 1211992 4,905 1,157 109,418 7.5 1261993 4,117 2,785 112,203 6.9 1271994 4,076 3,853 116,056 6.1 1281995 4,298 2,154 118,210 5.6 1281996 4,223 2,793 121,003 5.4 1321997 3,858 3,358 124,361 4.9 1351998 3,810 3,003 127,364 4.5 1391999 3,563 3,172 130,536 4.2 1432000 3,590 1,948 132,484 4.0 1472001 4,869 (1,779) 130,705 4.7 1502002 4,852 (544) 130,161 5.8 1562003 4,823 94 130,255 6.0 1632004 4,114 2,194 132,449 5.5 1682005 3,985 2,019 134,468 5.1 172

Total for 1980-2005 117,924 43,799 * Establishment survey, data are in thousands. Avg. Per Month 378 140

Own a home


Or Comfortable?

Own a home

62

64

66

68

70

1965 1975 1985 1995 2005

Percent

Homeownership rate

Own a home

60

80

100

120

140

160

1970 1975 1980 1985 1990 1995 2000 2005

Index

Affordability index

More affordable

Less affordable

Own a home

1920$4,7007.8 hr./sq. ft.

Own a home

1956$14,5006.5 hr./sq. ft.

Own a home

1996$140,0005.6 hr./sq. ft.

Own a home

2003$193,900

5.9 hrs./sq. ft.

Own a home

20

30

40

50

60

70

80

90

100

1970 1975 1980 1985 1990 1995 20001,350

1,450

1,550

1,650

1,750

1,850

1,950

2,050

2,150

2,250

Percentage equipped with

Dishwasher

Mediansize

2+ baths

Central air/heat

Garage

Averagesize

Live the “good life”


Or Comfortable?


0

10

20

30

40

50

60

70

80

90

100

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Electricity

Range

Telephone

Automobile

Percentage of households with:


0

10

20

30

40

50

60

70

80

90

100

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Electricity

Range

Refrigerator

Radio

Telephone

Automobile



0

10

20

30

40

50

60

70

80

90

100

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Electricity

Range

Refrigerator

Radio

Telephone

Automobile

Clothes Washer



0

10

20

30

40

50

60

70

80

90

100

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Electricity

Range

Refrigerator

Radio

Telephone

Automobile

Clothes Washer

Air Conditioning

Clothes Dryer

Dishwasher



0

10

20

30

40

50

60

70

80

90

100

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Electricity

Range

Refrigerator

Radio

Telephone

Automobile

Clothes Washer

Air Conditioning

Clothes Dryer

Dishwasher

Color Television



0

10

20

30

40

50

60

70

80

90

100

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Electricity

Range

Refrigerator

Radio

Telephone

Automobile

Clothes Washer

Air Conditioning

Clothes Dryer

Dishwasher

Color Television

Microwave



0

10

20

30

40

50

60

70

80

90

100

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Electricity

Range

Refrigerator

Radio

Telephone

Automobile

Clothes Washer

Air Conditioning

Clothes Dryer

Dishwasher

Color Television

Microwave

VCR

Computer



0

10

20

30

40

50

60

70

80

90

100

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Electricity

Range

Refrigerator

Radio

Telephone

Automobile

Clothes Washer

Air Conditioning

Clothes Dryer

Dishwasher

Color Television

Microwave

VCR

Computer

Cellular Phone



0

10

20

30

40

50

60

70

80

90

100

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Electricity

Range

Refrigerator

Radio

Telephone

Automobile

Clothes Washer

Air Conditioning

Clothes Dryer

Dishwasher

Color Television

Microwave

VCR

Computer

Cellular Phone

Internet



0

10

20

30

40

50

60

70

80

90

100

1900 1920 1940 1960 1980 2000

Electricity

Range

Refrigerator

Radio

Telephone

Automobile

Clothes Washer

Air Conditioning

Clothes Dryer

Dishwasher

Color Television

Microwave

VCR

Computer

Cellular Phone

Internet



“Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.”

Joseph SchumpeterCapitalism, Socialism, and Democracy

1942


“The cost of a thing is the amount of...life which is required to be exchanged for it, immediately or in the long run.”

Henry David Thoreau


0

2

4

6

8

10

1919 1927 1935 1943 1951 1959 1967 1975 1983 1991 1999

12-Item Food Basket


1955$3,0301,638 hr.


2005$21,2001,290 hrs


0

5

10

15

20

25

30

35

40

45

1920 1930 1940 1950 1960 1970 1980 1990 2000

Minutes of work Gallon of Gasoline


1930 1951 2002$200 $110 $278366 hr. 71 hr. 18 hr.


1972 1978 1984 1990 2002$1,395 $985 $499 $329 $60365 hr. 160 hr. 54 hr. 30 hr. 4 hr.


1984 2002$4,195 $100456 hr. 7 hr.


1984$3,995435 hr.8.3 MIPS$479/MIPS52 hr./MIPS

2002$87358 hr.1600 MHz$0.55/MHz2 min./MHz


1954 1971 2002$1,000 $620 $229562 hr. 174 hr. 15 hr.


1916 1958 1970 2002$800 $700 $375 $9993162 hr. 333 hr. 112 hr. 66 hr.


1913 1954 1970 2002$100 $250 $230 $299463 hr. 140 hr. 69 hr. 20 hr.


1970 Latest

Percent of households with:

Microwave oven: <1% 86%

VCR: 0% 92%

DVD: 0% 35%

Answering machine: 0% 78%

Cordless phone: 0% 81%

Cellular phone: 0% 68%

Camcorder: 0% 44%

CD player: 0% 57%

Computer: 0% 69%

Computer printer: 0% 58%

Digital camera: 0% 28%

Total number of:

Software titles: 0 250,000

.com web sites: 0 21,582,000


1970 LatestAverage work week: 37.1 hours 34.2 hours

Average daily time spent working in the home: 3.9 hours 3.5 hours

Annual paid vacations and holidays: 15.5 days 22.5 days

Number of people retired from work: 13.3 million 28.5 million

Household daily hours:minutes spent watching TV: 5:59 7:35

Annual movies attended per person: 4.5 5.0

Annual hours spent viewing video movies at home: 0 58

Adult softball teams: 29,000 157,000

Recreational golfers: 11.2 million 25.8 million

Amusement parks: 362 1,164

Attendance at pro sporting events: (per 100,000) 24,766 48,935

Attendance at symphonies, operas, and theaters: 30.3 million 83.5 million

Per capita real expenditures for recreation: ($2000) $515 $2,102

Share of household budget spent on recreation: 6.7% 8.5%

Americans taking cruises: 0.5 million 6.9 million

Recreational boats owned: 8.8 million 17.0 million

Manufacturers shipments of RVs: 30,300 239,300

Physical fitness facilities 4,909 11,241


Vehicle models 140 260Vehicle styles 654 1,212SUV models 8 82SUV styles 18 192Personal computer models 0 400Software titles 0 250,000Web sites 0 4,757,394Movie releases 267 458Airports 11,261 18,292Magazine titles 339 790New book titles 40,530 77,446Community colleges 886 1,742Amusement parks 362 1,174TV screen sizes 5 15Houston TV channels 5 185Radio broadcast stations 7,038 12,458McDonald’s menu items 13 43

Item Early 70s Now


KFC menu items 7 14Frito-Lay chip varieties 10 78Breakfast cereals 160 340Pop-Tarts 3 29National soft-drink brands 20 87Bottled water brands 16 50Milk types 4 19Colgate toothpastes 2 17Mouthwashes 15 66Dental flosses 12 64Prescription drugs 6,131 7,563Over-the-counter pain relievers 17 141Levi’s jean styles 41 70Running shoe styles 5 285Women’s hosiery styles 5 90Contact lens types 1 36Bicycle types 8 31

Save for a rainy day


Or Comfortable?


100,000

200,000

300,000

400,000

1975 1980 1985 1990 1995 2000 2005

Real dollars

Average financial wealth


30,000

60,000

90,000

120,000

150,000

180,000

1975 1980 1985 1990 1995 2000 2005

Real dollars

Average real estate wealth

America’s Middle Class

In Crisis

Or

Comfortable?

Richard Alm

Federal Reserve Bank of Dallas


30,000

60,000

90,000

120,000

150,000

180,000

1975 1980 1985 1990 1995 2000 2005

Real dollars

Average real estate wealth

Average real estate wealthnet of mortgage

Two Incomes?


Or Comfortable?

In Crisis or Comfortable?

Two Incomes?

What will five weeks of work buy?

Two Incomes?

Dell Dimension 2400 PC* $513 Dell.com19" Color TV 119 Best BuyVCR with Remote 60 Fry’s ElectronicsSony DVD/ CD Player 169 Fry’s Electronics2.4 GHz Cordless Phone 25 Fry’s ElectronicsFax Machine 70 Fry’s Electronics3-CD Stereo Shelf System 80 Best BuyPanasonic Microwave Oven 50 Fry’s Electronics1.8 Cu. Ft. Compact Refrigerator 80 TargetBlack & Decker Toaster Oven 30 TargetEspresso/ Coffee/ Cappuccino Maker 100 Fry’s Electronics10 Speed Blender 20 TargetIron & Ironing Board 30 TargetDirt Devil Hand Vacuum 20 TargetTable Lamp 30 TargetAlarm Clock 15 TargetBraun Oral B Electric Toothbrush 35 TargetHomedics Back Massage Chair Pad 20 TargetDigital Camera 90 Fry’s ElectronicsPalm m500 SuperSlim 200 Fry’s ElectronicsTI BA II Plus Financial Calculator 30 OfficeMaxCreative Labs 128MB MP3 Player 130 Amazon.comTOTAL $1,916

Two Incomes?

Black and White TV $150Clock Radio 20Used Typewriter 59Electronic Adding Machine 99Stereo System 299TOTAL $618

Two Incomes?

Two Incomes?

Just 0.7 people working today will buy a 1970s living standard, not two.

Two Incomes?

Just 0.7 people working today will buy a 1970s living standard, not two.

It’s not the high cost of living, it’s the cost of living high.

america’s middle class

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