The Middle Class is Alive and Well

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If a young couple with a combined income of $21,000 can still manage to buy themselves a cozy, comfortable home, it’s premature to proclaim the death of the middle class dream.

Despite the painful setbacks of the Great Recession, nearly all Americans who find jobs and work hard will avoid poverty and climb the economic ladder. It’s simply not true that minimum wage jobs lock people into hopelessness and destitution. The president and his allies may insist that struggling families can’t rise without government assistance but the everyday experience of ordinary Americans, as well as statistics provided by Barack Obama’s own government, tell a very different story.

A recent trip to Arizona highlighted the durability of middle class aspirations with special force. Before my scheduled lecture to a group of young business leaders, I spoke with a mortgage banker who proudly described his work helping families purchase their first homes. He stressed his particular pleasure in assisting young people in the earliest stages of their careers who nevertheless managed to acquire real-estate. When I asked about the lowest-income household he could remember that had recently secured a mortgage, he proudly described a twenty-something guy and his girlfriend who earned just $21,000 a year, but nonetheless qualified for the loan they needed to buy a three bedroom, one bath home in an outer suburb of Phoenix. The purchase price of $130,000 gave them monthly payments less than $450 which they could handle even with their limited income.

In Arizona, the 2013 median sales price for existing homes amounted to $172,000, even with a recovering real estate market. This means, of course, that half of all homes sold in the state went for less than that figure – and some of them for much less, like the house that I heard about. Across the country the National Association of Realtors reported that the median price among 4.5 million existing homes sold in 2013 came to $196,900; in other words, a clear majority of the purchased real estate went for less than $200,000, which generally means payments well below $1,000 per month. Of course, some privileged enclaves featured far more expensive real estate: in San Francisco, the median price came to $682,000 and in Honolulu, it registered at $629,000. Other corners of the country offered relative bargains: houses in the state of Michigan sold at a median price of just $121,110 and West Virginia was even more affordable at $108,000. Not surprisingly, the states with less expensive real estate attained the highest rates of home ownership, including a stunning 76 percent in West Virginia, and 75 percent in both Michigan and New Hampshire.

These numbers offer slight comfort to frustrated strivers in California or Massachusetts, where most homes seem simply out of reach for ordinary earners. But nationwide, with the majority of home prices still below $200,000, and median household income above $50,000, the dream of property ownership remains surprisingly attainable in most regions of the country.

And what about the minimum wage workers who have become such an obsessive focus for the president and his party? If they receive the federal minimum wage (of just $7.25 an hour) must they give up all hope of ever buying property?

Actually, no; even the tiny number of laborers who earn the federal minimum – barely 1 percent of the US workforce — would rightly count as middle class if they worked full-time. With a 40 hour work week, and at the rate of $7.25 per hour, the federal minimum wage currently produces payment of $290 per week. Allowing for two weeks a year of unpaid vacation, that comes to a yearly salary of $14,500; hardly a princely sum, but well over the official federal poverty line of $11,670 for a single individual. For a family of four, with two parents and two kids, the poverty line comes to $23,850, so that even if both husband and wife received only minimum wage but both worked full-time, they would earn $5,150 more than the definition of poverty. That additional $5,150 would provide monthly payments of $429 –almost exactly what such a family would need to purchase a modest home like the one in Arizona described to me.

These calculations hardly suggest that minimum wage workers are rolling in dough, but it’s worth recalling that 19 states, covering the big majority of the national population, already require minimum payments that exceed the national rules. In my home state of Washington, employers must pay $9.34 an hour, or $2.09 above the federal minimum wage. Meanwhile, a recent tweet by the White House remains profoundly misleading, with the administration declaring: “It’s time to raise the minimum wage because nobody who works full-time should live in poverty.” Actually, both individuals and couples who work 40 hours a week will earn well above the poverty level – even without overtime, bonuses, incentives, or tips – and with that two weeks of unpaid vacation.

The problem of persistent poverty in the United States doesn’t flow from scandalously low wages, or even from outrageously high housing prices. It comes from the difficulty in finding a job, not the remuneration you receive once you get one. That problem also relates to a long series of self-destructive behaviors commonly associated with the most impoverished and dysfunctional neighborhoods, including dropping out of high school, compiling a criminal record, producing children out of wedlock, and investing in booze, drugs, cigarettes, lottery tickets, video games and flat-screen TVs rather than saving money to accumulate the small down payment necessary to buy a starter home. The fact is that two-thirds of all American adults – and an amazing 77 percent of all those over 55 — have managed to make the necessary sacrifices and plans to facilitate such a purchase, and currently reside in a home they own themselves. That doesn’t mean that most Americans live in luxury, but since property ownership represents the very essence of bourgeois status, it does indicate that the middle class remains alive, well and statistically dominant from sea to shining sea.


This column originally appeared at on February 17, 2014. 

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Comments (2)

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  1. Larry  •  May 10, 2014 at 10:35 pm

    This article is a fraud. In what world does a $131,000 home have a $450 payment. At 1%, 100,000 is $452.00 per month. And seriously, do you mean to tell me that a family with a combined income of $21,000 per year was able to save enough money for a down payment.
    Sounds like you have fabricated information to support your belief in slave wages for many workers in the nation. Shame on you!

  2. Roland  •  May 12, 2014 at 1:06 pm

    $450? There must be some evil liberal gov’t assistance program involved to have such a low payment. Or maybe this is the neighborhood where a fertilizer plant exploded a while back, killing people in a apartment building down the road and causing enough damage to the public school 2 blocks away to force its closure? That might get the bank to keep initial payments low enough to get a house sold (wait, I think that explosion was in Texas). A balloon mortgage?

    Last week Michael said that people who reach retirement age and are still barely surviving financially must be high school dropouts who spent too much $ on lottery tickets. A more likely reason is that as people age they develope health problems (especially if they worked at physically demanding jobs). Employers often lay off older workers as they develope health problems and replace them with younger workers. The #1 cause of bankruptcy in this country is a serious medical illness, which often occurs as people get near retirement age. Employers lay people off, overwork the rest of their employees to maximize returns to investors (yes there are a few enlightened companies that treat employees well, but most employees are just costly resources to be used up and discarded like any other resource).

    Since the Reagan administration the top 1% share of the wealth continues to increase, along with less taxation on unearned inherited wealth. The largest private employer in the country is now Wal-mart. A half century ago it was General Motors, whose average wage (adjusted for inflation) was much higher than what Wal-mart pays. Recent data indicates some other countries have more sensible policies than the every-person-for-themself approach in the U.S. Germany produces twice as many cars as the U.S. Unions exist in a co-operative environment where the gov’t focuses on the long-term picture and not just the short-term bottom line adversarial approach in the U.S. (Volkswagen was not opposing a union in the recent union election in Tennesee). The result has been a successful export economy with well-paid workers who are focused on producing a good product. Germany has accomplished this even though it had to integrate the former communist East Germany into it’s economy, which is equivalent to the U.S. suddenly having to absorb a country the size of Mexico into its economy. A serious illness does not require that you lose your home & go bankrupt; this is a result of a health care system that is a flexible public/private mix. Abortion is limited to the 1st 12 weeks of pregnancy, but it is covered by health insurance there are no ultrasound laws or “waiting periods”. The Teabillies will respond with cries of “socialism”, instead of trying to learn from the experiences of other countries.

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