Few Americans not currently attending a quarterly earnings call have anything positive to say about the ongoing slope of inflation in the US. Still, few can decisively predict the long-term impact it signals. Are we merely witnessing the latest tour of economic hardship for a beleaguered population, or is this the long-foretold death knell of the American middle class?
Inflation in recent months has reached levels not seen in two generations in the US, and everyday Americans are feeling the heat. As to whether this latest trial will be more than they can handle, we have a few things to consider.
The Song of the American Middle Class
Existing in the nominal middle between the upper and working classes, the middle class is a relatively modern concept.
Much of human economic history paints a picture of a few people holding most of the available wealth while the majority struggled for the remaining resources.
However, from the early days of US history, the potential for a robust middle class has been a strength that distinguished the nation from its peers.
Not beholden to the ancient social hierarchies and rigid aristocracy of its peer nations, the US was a place where upward economic mobility was possible. As a result, most, though still not all, ordinary citizens could reach for wealth, education, property ownership, and political ambitions.
The middle class rose to particular prominence roughly a century ago in the US. Sweeping advances in industrial technology and the global economy empowered a growing population of educated professionals to accumulate wealth. The flood of resources into the country in the postwar era of the mid-twentieth century compounded this trend.
A growing percentage of the population could now build wealth with the right combination of intelligence, hard work, and good luck. People of this rising class owned homes, small businesses, and modest investments. They were not titans of industry, but nor were they destitute.
Marking the Decline of the Middle Class
In recent decades, numerous financial and political shifts have steadily degraded the country’s once-thriving economic core.
Measuring this trend is tricky, because no universal standard metric divides the middle class from those above and below.
Some sources rely on easily-quantifiable financial figures, like salary or net worth. On this basis, the middle class has unequivocally receded in the past few decades.
There are also more qualitative traits of a robust middle class, such as:
- Ability to access higher education opportunities
- The relative ease of survival on one’s regular income
- Upward professional mobility and access to higher-paying jobs
- Freedom to own property
- Availability of investing opportunities
- The possibility of leisure time
Things appear to be slipping for many Americans on these metrics, too.
Stagnant wages and slimming job prospects make it difficult to earn an income that keeps pace with the cost of living. Though technically available to all, higher education and property ownership offer an ever-increasingly high barrier to entry. Moreover, insufficient pay leads to more working hours for many families, narrowing the window for leisure time.
Further compounding the difficulties, the average American must now contend with generational wealth rivaling the aristocracies of old.
With historic inflation tightening the clamps further still, has the American middle class reached the end of the road?
Inflation Hurts, But Will It Leave a Lasting Mark?
Most Americans need no convincing that the current state of inflation hurts. Goods and services are rapidly escalating in price, while typical wages offer no relief to many families. Before our eyes, this has accelerated the trend of wealth transfer to the upper class.
Even so, the question remains: does the financial hardship of the current inflation spike portend the dissolution of the middle class?
The answer is a bit more complex than we may like. With no clear metric dividing the three classes, there is no discrete point at which one ceases to exist.
On most factors we can observe and measure, the American middle class appears to be in one of its tightest spots since the rise of the early twentieth-century industrialists. However, there is optimism still to highlight in this story.
For instance, while the cost of living continues to rise, it also funds a significantly higher standard of living than it did 100 years ago. Likewise, economic inclusion continues to increase, bringing financial opportunities to more people than ever before.
Yes, the American middle class is struggling, and this latest development will continue to make things harder for them to build wealth. However, the more you zoom out, the clearer the pattern becomes that struggles come and go, but life and possibilities continue to get better for ordinary people.
Is This a Requiem for the American Dream?
The inflation of the early 2020s is a burden no reasonable soul could ask of the American middle class. Macroeconomically, this demographic has struggled and lost ground for more than two generations, and this latest trial will no doubt challenge them further.
By most measures, the US middle class faces more financial obstacles than it has since it first rose to prominence a century ago.
However, matters may not yet be as bleak as they appear. Despite being more challenging to attain, traditional modes of economic mobility are available to more Americans than ever before. So long as those mechanisms of progress and prosperity remain within reach, no matter how steep the climb, the American Dream will continue to live on for ordinary people.Â
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