America’s middle class is worried about its finances. It is struggling with stagnant wages, slow employment, and rising costs. However, this is only part of the story. The other part is that the economic risks for middle-class families have grown, too. Should anything go wrong – job loss, medical emergency and the like – middle-class families will experience a sharper drop in their finances than in prior business cycles. The sharpest reflection of this trend is the growth of personal bankruptcies to record high levels.
Key findings of this report are:
Higher Risk of Long-Term Job Loss: In February, long-term unemployment rose to its highest level in more than 20 years and stayed high. In the fourth year of the recovery, the average length of unemployment was still at about 18 weeks.
Greater Debt: Despite lower interest rates, homeowners had to dedicate a record 10.8 percent of their disposable incomes to paying their mortgages in the third quarter of 2005. At the current rates, a household with a mortgage has a one-in-60 chance of being foreclosed on over the course of a year.
Shrinking Benefits: Four percent fewer private sector full-time workers had a pension in 2004 than in 2000, and the share of people with employer-provided health insurance declined from 63.6 percent to 59.8 percent at the same time.
Rising Oil Prices: Oil prices rose sharply. Higher energy prices and their unpredictable price increases make it harder for households to plan for their future and to save money.