Middle Class Squeeze

Middle Class Squeeze

The middle-class squeeze is the situation where increases in wages fail to keep up with inflation for middle-income earners, while at the same time, the phenomenon fails to have a similar impact on the top wage earners. Persons belonging to the middle class find that inflation in consumer goods and the housing market prevent them from maintaining a middle-class lifestyle, making downward mobility a threat to counteract aspirations of upward mobility. In the United States for example, middle-class income is declining while many staple products are increasing in price, such as energy, education, housing, and insurance.

One group summarizes the middle-class squeeze in this way "Being middle class used to mean having a reliable job with fair pay; access to health care; a safe and stable home; the opportunity to provide a good education for one’s children, including a college education; time off work for vacations and major life events; and the security of looking forward to a dignified retirement. But today this standard of living is increasingly precarious. The existing middle class is squeezed and many of those striving to attain the middle-class standard find it persistently out of reach." This squeeze is also characterised by the fact that, since the early 1980s, when European integration got into full swing, Belgium, France, Germany, Italy and the United Kingdom have experienced strong real wage growth, while real wage growth in the United States has remained sluggish for the most part. From 1979 to 1995, hourly wages declined among men in almost every occupational category apart from the highest paid white-collar professions.

As noted by the British historian and journalist Godfrey Hodgson,

"On the basis of such evidence I myself have written that “by all statistical measures . . . the United States, in terms of income and wealth, is the most unequal country in the world. While the average income in the United States is still almost the highest in the world . . . the gap between wealth and poverty is higher than anywhere else, and is growing steadily greater”."

As noted by another historian,

“Not long ago, unskilled US workers enjoyed what might have been called an “American premium.” They were paid more than labourers with the same skills in other parts of the world simply because, as unskilled Americans, they would work with higher capital-to-labor ratios, better raw materials, and larger numbers of highly skilled fellow workers than their foreign counterparts. As a result, America’s unskilled workers were relatively more productive and thus earned higher wages than similar unskilled workers elsewhere in the world.”