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 an education
Get an education
Get an education
Get a good job
America’s Middle ClassIn Crisis
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
America’s Middle ClassIn Crisis
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”
America’s Middle ClassIn Crisis
Or Comfortable?
Live the “good life”
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:
Live the “good life”
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:
Live the “good life”
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:
Live the “good life”
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:
Live the “good life”
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
Percentage of households with:
Live the “good life”
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
Percentage of households with:
Live the “good life”
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
Percentage of households with:
Live the “good life”
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
Percentage of households with:
Live the “good life”
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
Percentage of households with:
Live the “good life”
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
Percentage of households with:
Live the “good life”
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
Percentage of households with:
Live the “good life”
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
Percentage of households with:
Live the “good life”
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
Percentage of households with:
Live the “good life”
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
Percentage of households with:
Live the “good life”
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
Percentage of households with:
Live the “good life”
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
Percentage of households with:
Live the “good life”
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
Percentage of households with:
Live the “good life”
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
Percentage of households with:
Live the “good life”
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
Percentage of households with:
Live the “good life”
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
Percentage of households with:
Live the “good life”
“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
Live the “good life”
“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
Live the “good life”
0
2
4
6
8
10
1919 1927 1935 1943 1951 1959 1967 1975 1983 1991 1999
12-Item Food Basket
Live the “good life”
1955$3,0301,638 hr.
Live the “good life”
2005$21,2001,290 hrs
Live the “good life”
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
Live the “good life”
1930 1951 2002$200 $110 $278366 hr. 71 hr. 18 hr.
Live the “good life”
1972 1978 1984 1990 2002$1,395 $985 $499 $329 $60365 hr. 160 hr. 54 hr. 30 hr. 4 hr.
Live the “good life”
1984 2002$4,195 $100456 hr. 7 hr.
Live the “good life”
1984$3,995435 hr.8.3 MIPS$479/MIPS52 hr./MIPS
2002$87358 hr.1600 MHz$0.55/MHz2 min./MHz
Live the “good life”
1954 1971 2002$1,000 $620 $229562 hr. 174 hr. 15 hr.
Live the “good life”
1916 1958 1970 2002$800 $700 $375 $9993162 hr. 333 hr. 112 hr. 66 hr.
Live the “good life”
1913 1954 1970 2002$100 $250 $230 $299463 hr. 140 hr. 69 hr. 20 hr.
Live the “good life”
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
Live the “good life”
Live the “good life”
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
Live the “good life”
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
Live the “good life”
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
Live the “good life”
Save for a rainy day
America’s Middle ClassIn Crisis
Or Comfortable?
Save for a rainy day
100,000
200,000
300,000
400,000
1975 1980 1985 1990 1995 2000 2005
Real dollars
Average financial wealth
Save for a rainy day
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
Save for a rainy day
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?
America’s Middle ClassIn Crisis
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.
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