Tuesday, May 20, 2008

(Not) Keeping Up with Our Parents: Just Being Middle Class Is Becoming out of Reach

(Not) Keeping Up with Our Parents: Just Being Middle Class Is Becoming out of Reach

By Nan Mooney

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The following is an excerpt from "(Not) Keeping Up with Our Parents" by Nan Mooney (Beacon, 2007).

Since the 1950s, what we've considered the American experience -- be it sock-hopping, suburban living, or SUV buying -- has been largely dictated by the professional middle class. In her 1989 social critique, Fear of Falling: The Inner Life of the Middle Class, Barbara Ehrenreich defined this mainstream population in terms of education, occupation, lifestyle and tastes, but also in terms of income. "Middle class couples," she wrote, "earn enough for home ownership in a neighborhood inhabited by other members of their class; college educations for the children; and such enriching experiences as vacation trips, psychotherapy, fitness training, summer camp and the consumption of 'culture' in various forms."

This thriving middle class didn't develop by accident. It emerged with the introduction of government and social policies designed to lift the country out of the Great Depression and sustain economic health in the postwar era. By the 1950s, a combination of social programs including Social Security, unemployment insurance, the GI Bill, and federal housing loans helped middle class salaries stretch. Employers supplied health insurance and pensions. A surge in suburban building made housing widely accessible. You no longer had to be a doctor or a businessman to afford a two-story Colonial with a dishwasher and a color TV. For a white male supporting a family -- the typical middle class profile at the time -- it was possible to work in an array of professions whereby you didn't necessarily get rich, but you could count on being fairly comfortable. A house, a job, a car or two in the garage, a fun summer vacation, these were absolute indicators of middle class success.

Economic realities have undergone seismic shifts since our parents' and grandparents' generations. Education and housing cost more. Incomes have leveled off for all but a small minority. Employers and the government supply few social safety nets, cutting health insurance and pensions and replacing them with new "benefits" like 401(k)s and health savings plans that benefit only those with income to set aside. But many of those middle class expectations set in place back in the '50s still hold.

Alongside our schooling in philosophy and economics, today's college-educated professionals have been conditioned to see ourselves as among the financially stable, mainstream haves. Many of us attended what are considered strong academic institutions. Others come from families with comfortable financial backgrounds. Our childhood friends, our college roommates, the couple we met at that holiday party are those same lawyers and financiers who've hit the financial jackpot, driving multiple Mercedeses and buying $2 million starter homes. We know we aren't like them. We've aspired to different career and financial goals, those more rooted in education, the arts or public service. But, given our often-similar backgrounds and educations, it's clear we aren't entirely unlike them either. This rising and dramatic economic inequality among college-educated professionals, leaving so many of us to struggle while a select few enter the strata of the "super rich," was not supposed to be part of the package.

When we read about the middle class squeeze, we tend to think blue collar -- the machinist who used to make $25 an hour now making $15, the vocationally trained worker whose job just got cut. But what about the social worker who makes $30,000 a year, the environmental scientist who makes $40,000, the college professor who makes $50,000? The rules of the game have changed. The educated professional middle class experience no longer guarantees two cars in every driveway, or even the driveway itself. Instead we face relatively low-paying jobs in fields requiring a high-cost education, increasing mortgages, student-loan and credit card debt, less employer or government help with health care, retirement, education and child care, and an overall higher cost of living. As the gap between the rich and the middle class widens, a huge segment of that once-comfortable center section is finding that reality means plummeting financial and emotional security and lack of control over our lives.

Difficult times

Diana, 36, is a licensed psychologist with a PhD in clinical psychology. She splits her four-day workweek between two jobs: maintaining her own private practice and working as an assessment director for a nonprofit where she supervises and helps place school counselors. Though her income varies, she typically earns about $35,000 a year. Her husband, Byron, who has a BA in engineering, makes $40,000 as a technical writer for a patent attorney. They're both contract workers, getting paid on a per-project or per-client basis, so the size of their paychecks fluctuates from month to month. On months when the money coming in doesn't stretch quite far enough, they turn to credit cards to pay bills and buy groceries. They're currently carrying $17,000 in credit card debt.

Before the birth of their son five years ago, Diana worked 80-hour weeks as a clinician at a major research hospital in Cincinnati. "I was making $38,000 a year and working nonstop," she recalls. "The administration promised me raises and promotions, but they never came through. Instead, they demoted me when I came back from maternity leave. So I cut back to part-time work and opened my own practice."

The couple now has two children, a 5-year-old son and a 5-month-old daughter, plus a third on the way in the spring.

"This child was unplanned," Diana admits. "And I'm terrified how we're going to afford her. We haven't even recovered from the financial hit we took on my last maternity leave."

Both Diana's previous pregnancies were difficult, and she anticipates having to cut back her work hours as this one advances. In addition, her son suffers from a kidney disease that requires occasional hospital stays. The family has health insurance through Byron's job, but any days her son spends in the hospital are days Diana has to take off work.

Up until a month ago, the family paid $1,200 a month for child care, which included preschool for her son and day care for the baby. But when the day care shut down -- the family who owned it sold the building to real estate developers -- Diana and Byron decided the most economically feasible choice was to keep the kids home, hopefully until her son starts kindergarten in the fall.

"I'm only in the office two days a week and my husband works at home, so it's the best option right now," she explains. "We're saving on the child care bill, but we're also getting less work done, which means less money coming in. Until I had kids, I had no idea how insanely expensive child care would be. We'll see how long we can keep this up."

Though they own their house in a Cincinnati suburb -- a fixer-upper they bought six years ago and "put back together piece by piece all by ourselves" -- it currently contains very little equity. They pay $1,150 a month on a 30-year fixed-rate mortgage, and two years ago they maxed out their home equity line of credit to purchase the condominium that houses Diana's office space, plus two offices she rents out to other therapists. The 15-year mortgage on that property, plus condo fees, come to $750 a month. Diana also still pays $450 a month in student loans, a graduated plan that will go up to $550 next year, when their new baby is 6 months old.

"We're definitely not doing as well as my working-class parents did," Diana tells me. "My father owned his own garage for 30 years, and my mother worked for him. They raised seven kids on what he made, and though we didn't live extravagantly, we never wanted for anything. I was the first one in my family to go to college."

Diana and Byron have no savings left to raid and no equity, except for the $10,000 invested in Diana's office space. Though she had a 401(k) from her hospital job, Diana cashed it out last year to float them through her maternity leave. Neither she nor Byron have room for raises or promotion in their current jobs, save an annual cost-of-living increase, so the only way to boost their income is for Diana to add hours in her private practice.

"I feel like we've cut every corner we can cut," she says. "We don't take vacations. We never go out. Right now, I just keep my fingers crossed that nothing breaks. We need a new roof and new tires for the car. And we're going to get hit hard by taxes this year, because we haven't been able to set anything aside."

She wonders if she and Byron made some sort of crucial mistake along the way, if they should have sought out more lucrative and less personally rewarding careers, moved to a bigger or smaller city, invested less of their money in real estate or more. She sees neighbors buying a third car and remodeling their kitchens and worries what it will be like for her children growing up among kids who have everything, when they're struggling each week just to pay their bills.

"I'm scared," she tells me, her voice cracking. "I'm scared we'll never be able to retire. I'm scared we won't be covered for health care. I'm scared we won't be able to send our kids to college. We've never had much, but before, I always felt like we were doing our time. We were working our way toward a more comfortable future. That doesn't seem true anymore. At this point, I see no way out at all."

In the past few decades, this country has seen a dramatic economic polarization between educated professionals, dividing them into the very few very rich, and the many like Diana and Byron whose financial lives are chronically unstable and insecure. We're discovering that college or even graduate school is no longer enough. Having a full-time job is no longer enough. You can do everything you're supposed to do to "make it" in America and still wind up scrambling and scared.

The financial insecurity that's come to haunt so many educated professional middle class lives provides a powerful wake-up call about the extent of compromised choices in America today. It's pushing us away from many of the lower-paying public service professions that are essential to a well-functioning society like teaching, social work, and careers in the nonprofit sector, it's making us question whether we can afford to have families, and it's increasing the number of economic crises -- like bankruptcies and home foreclosures -- striking the middle-class population. Such insecurity obliterates the standard fallback that if only every worker had access to an education and a job they too could achieve the American dream. And it speaks to a shift that runs far deeper than just our financial state.

The economics

Why this dramatic change? The economics are simple and well documented. We're earning less and having to pay for more. Earnings for college graduates have remained stagnant for the past five years, but the costs of housing, health care and education have all risen faster than inflation. The share of family income devoted to "fixed costs" like housing, child care, health insurance, and taxes has climbed from 53 percent to 75 percent in the past two decades. Though a college degree still earns you a bigger paycheck than a high school one, the price of a four-year education has grown increasingly dear. Between 2000 and 2004, tuition rose 32 percent at four-year public colleges and 21 percent at private colleges, requiring the majority of students to take out loans to fund their educations.

Once we hit the workforce, those rising numbers do an about-face. Real earnings for those with four-year college degrees have flattened out since 2003, not even rising to keep pace with inflation.

Graduates quickly discover that many careers requiring a high level of education don't come with equally high-level salaries. Even the money we do make tends to arrive under tenuous circumstances, with middle class incomes subject to the dramatic peaks and dives economists refer to as income volatility. A typical annual drop has gone from 25 percent to as high as 40 percent. That means a couple like Byron and Diana, earning $75,000, could dip to just $45,000. In a single year. To add discomfort to discomfort, long-term unemployment is also booming, and the long-term unemployed are older, better educated, and more likely to be professionals than the general unemployed population.

When it comes to supporting a family, those numbers start climbing once again. Raising one child through age 18 costs a middle-income family roughly $237,000. Child care alone runs, on average, between $3,803 and $13,480 a year per child, with accredited care facilities charging as much as $5,000 more per child than their nonaccredited counterparts. And despite the surge in dual-income households since the 1970s, there has been no accompanying double-up on discretionary income. Once we cover all the major fixed-cost expenses, we're now relying on two incomes to support a lifestyle that used to require one.

"(Not) Keeping Up with Our Parents" by Nan Mooney (Beacon, 2008). Read more about the book and her work at Nan Mooney.com.

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