Tag Archives: Middle Class

Feeling the squeeze: Middle income families view their personal finances negatively

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Important Takeaways:

  • A majority of households with income between $30,000 and $130,000 rate their personal finances negatively, according to a new survey
  • America’s middle class is feeling the squeeze like never before, according to new data.
  • Primerica’s latest Financial Security Monitor report for the third quarter found 55% of middle-income households now rate their personal financial situation negatively, a 6-point jump from the previous survey.
  • “For the first time in a year, a majority of middle-income households are feeling negative about their personal finances,” said Glenn Williams, CEO of Primerica. “In fact, this latest report represents the highest negative rating we’ve seen since we began fielding the survey exactly four years ago.”

Read the original article by clicking here.

Middle class struggles as inflation literally robs us of our earnings

Important Takeaways:

  • ‘I don’t understand how I make $34 an hour and can’t function’ The Unseen Struggles of the Middle Class
  • Melanie paints a vivid picture of her food situation, where she has resorted to budgetary restrictions to survive.
  • She shares, “What I’ve started doing is I buy a loaf of rye bread, and I work really hard to keep that one loaf of rye bread lasting me the whole week. And I eat peanut butter, so I’ll eat peanut butter toast whenever I’m hungry.”
  • This situation has forced Melanie to rely on her mother for sustenance, ensuring her daughter does not face the same food shortages.

Read the original article by clicking here.

Powerhouse U.S. cities home to worst wage inequality

Powerhouse U.S. cities home to worst wage inequality
By Jonnelle Marte

(Reuters) – Wage inequality has soared in many of the United States’ biggest cities over the past 35 years as companies cluster in urban centers, driving big paychecks for in-demand workers, according to a report by the New York Federal Reserve

At the same time, a broad swath of Americans in the very same cities is being left behind, with wage increases for low- to middle-wage employees failing to keep pace with the dramatic gains by high-end workers.

Cities such as New York, Houston and San Francisco have moved to near the top of the rankings in recent years in terms of wage inequality, the report by economists Jaison Abel and Richard Deitz released on Monday found.

In San Francisco, inflation-adjusted wages for workers in the top 5% of wage earners grew by 120% between 1980 and 2015, while wages for the bottom 10% of earners grew by just 20%.

In New York City, wages grew by 110% for the top 5% of workers, but just 15% for the bottom 10%, according to the report.

Economic inequality has been rising across the United States as globalization and automation eliminate some middle-income jobs and highly skilled workers in technology, finance and other sectors win higher wage premiums.

The changes are making city life more challenging for lower wage workers, who are struggling to keep up with rising housing costs and other bills.

“For people in these lower paid occupations, it’s less appealing,” said Nick Bunker, an economist at Indeed Hire Lab. “There are fewer opportunities.”

UNEQUAL GROWTH

Cities with “sluggish economies” tended to have weaker wage gains for all workers, but also lower levels of inequality than larger cities, the researchers found.

This is especially true in cities where the main industries are struggling financially, like Detroit, where automation and auto plant closures have led to job losses.

While areas such as the thriving tech sector in the San Francisco-San Jose region have moved up the rankings, some cities with the most or least inequality in 1980 were still marked by extremes 35 years later.

Fairfield, Connecticut, about 50 miles northeast of New York City and home to General Electric’s headquarters from the 1970s until 2016, had the starkest wage gap between rich and poor in both 1980 and in 2015.

The disparity, however, has become more dramatic. In 1980, a Fairfield resident with earnings in the top 10% made nearly six times as much as a neighbor in the bottom 10%. By 2015, those on the high end earned nine times as much.

Bakersfield and Santa Cruz in California also had persistently high levels of inequality, the report found.

At the other end of the spectrum, cities such as Erie, Pennsylvania, Utica-Rome, New York, and Sheboygan, Wisconsin, had some of the lowest levels of inequality.

Lower wage workers have less leverage than they did in previous generations because unions are weaker now, said Josh Bivens, research director for the Economic Policy Institute. Long periods of high unemployment have also limited workers’ ability to push for better pay, he said.

“In the last 30 years, lots of those things that provided wage growth for low- and moderate-wage workers have been stripped away,” Bivens said.

Recent trends in the labor market may provide some relief,he said. Some states and cities have approved minimum wage increases in the past couple of years, while a tight labor market has also helped to create better opportunities for some low and middle wage workers.

But those improvements are likely not enough to close the gap, Bivens said.

(Reporting by Jonnelle Marte; Editing by Heather Timmons and Richard Pullin)

Middle-class Egypt adapts to survive as austerity bites

Middle-class Egypt adapts to survive as austerity bites

By Patrick Markey and Nadine Awadalla

CAIRO (Reuters) – Swapping new cars for cheaper models, cutting back on pricy supermarket shopping and giving up holidays abroad, middle-class Egyptians are finding strategies to stay afloat after a currency reform a year ago sent their living costs soaring.

Egypt floated its pound in November 2016 as part of a $12 billion International Monetary Fund loan package, and the currency lost half its value, eroding spending power and pushing inflation to record highs over 30 percent this summer.

President Abdel Fattah al-Sisi’s government has been praised by IMF and World Bank economists for reform progress and for measures to shield the poorest from the fallout. But middle-income Egyptians say it has been a year of cutbacks, cost saving and crisis management.

Presidential elections are due early next year and Sisi is expected to seek another term. But some Egyptians are finding that their new economic reality is crowding out politics as they struggle to maintain standards.

Others are digging deep and insist that despite the pain of austerity, Sisi remains the only candidate to provide stability after the years of turmoil that followed the 2011 uprising that ousted Hosni Mubarak.

Overcoming voter apathy may be a challenge if the former military commander decides to run when critics say he will face little competition after what rights groups describe as an unprecedented crackdown on opponents and dissidents.

Low turnout was a worry in 2014, when Sisi won by a landslide, as a popular figure who had overthrown president Mohamed Mursi of the Muslim Brotherhood after mass protests the previous year.

“The rise in prices changed things,” said Ayman, a Cairo bookstore owner. “We hoped for good things from President Sisi … He is a good man and I voted for him, but we are not feeling the progress, all I care about is giving my son a good life, a good home.”

Economic reforms have come at a fast pace.

The IMF deal called for broad adjustments to Egypt’s state subsidies to slash deficits as part of Sisi’s promise to revive an economy hit hard by unrest, protests and militant attacks in the last six years.

Backed by the IMF and the World Bank, Sisi’s government says the overhaul will lead to long-term growth and the return of foreign investment. Officials have adopted programs to provide the poor and vulnerable with cash and other protections.

Still, fuel costs have doubled with two increases in subsidized prices. Electricity prices are up and a new tax helped push inflation to more than 30 percent in July. That has now eased to 25 percent and is expected to fall further soon. But it has been a crushing struggle for some.

Hisham Azz al Arab, chairman of Egypt’s largest private bank CIB, said those on middle and upper incomes were the most affected by the economic reforms, but it would take time for their impact to balance out for those families.

“We saw that clearly in their behavior of spending, it started to change,” he told CNBC. “For the middle and upper class it is a matter of time before income and productivity start to catch up to pre-reform levels.”

A 2016 World Bank survey found the middle class represented around 10 percent of the country’s population of about 90 million just before the Arab Spring protests. Middle-class activists were among the leaders of the 2011 uprising.

CUTBACKS, BARGAINS

For professionals like Karim, a Cairo small business owner, it was a stark adjustment. Monthly food bills went from 1,200 pounds ($67) to 3,200 pounds ($179). That meant for the first time bargain-hunting for food, giving up luxury goods, and using the car less to cut back on fuel spending.

It also meant paying employees more to keep them, while at the same time making sacrifices to keep his children in school.

“The middle class has only two options, fall into the lower class, which is hard for them to do, or get more enterprising,” he said. “Everyone is trying to show they are still in the middle class, people want to tell themselves that.”

For others, maintaining a middle-class lifestyle has meant dipping into savings and giving up restaurants or even turning to relatives for help with the cost of family holidays.

“It’s extinct,” said Islam Askar, a contracting company owner, of the country’s middle class. “There isn’t a household in Egypt that hasn’t been hit by the decrease in the pound and the rise in the prices.”

Economists say middle-class erosion had been reflected in figures for car sales, the weakness in some consumer stocks and in outbound tourism.

For some, like Mahmoud Al-Abadaly, hunting for bargains among the crash-damaged vehicles at a second-hand car shop, politics comes second to cash considerations. A car normally worth 300,000 pounds ($17,000) can be fixed up and had for half that price, he said.

“When a car has been in an accident, its price drops,” he said. “Everyone is trying to do this now because they need to save.”

But Egypt’s inflation outlook is already improving a year after the float, falling to 26 percent in November. Finance Minister Amr el-Garhy said that would fall to around 14 percent by August next year.

What impact a year of austerity will have on Sisi’s popularity is unclear. He has yet to announce his intentions, though supporters have already started a petition campaign for him to run for a second term. For his hardcore backers, it is time to rally behind him despite hard times.

“I will be for Sisi again for the presidency even with inflation, rising prices and the poor state of the economy,” said Ali Abou Al-Saoud, a sales representative.

But some of the president’s high-profile backers have turned against him, partly over the economy.

Turnout may be key for credibility, analysts say, as the government rebrands Egypt as a more stable bet for foreign investment after years of unrest. In 2014, turnout was about 47 percent, less than Sisi had called for.

At the time, Sisi was idolized by many, although his support base has since slipped, critics say. However, protests are now restricted by law and secular activists have been rounded up. Other Egyptians say political fatigue has set in.

“There is still a strong sense of wanting to maintain and enjoy the relative security,” said Ziad Bahaa Eldin, a deputy former prime minister who now works as an economist. “People are suffering from inflation but they want stability.”

(Reporting by Patrick Markey; editing by Giles Elgood)

Long-awaited U.S. Republican legislation calls for deep tax cuts

A congressional aide places a placard on a podium for the House Republican's legislation to overhaul the tax code on Capitol Hill.

By David Morgan and Amanda Becker

WASHINGTON (Reuters) – President Donald Trump’s drive for the deep tax cuts that he promised as a candidate reached a major milestone on Thursday, with his fellow Republicans in the House of Representatives unveiling long-awaited legislation to overhaul the tax code.

The bill called for slashing the corporate tax rate to 20 percent from 35 percent and cutting tax rates on individuals and families by consolidating the current number of tax brackets to four from seven: 12 percent, 25 percent, 35 percent and 39.6 percent, which is now the top rate and would be retained.

Largely in line with expectations for the tax-cut plan they have been developing behind closed doors for weeks, the House tax-writing Ways and Means Committee proposed roughly doubling the standard deduction for individuals and families.

It also called for preserving the home mortgage interest deduction for existing mortgages and for newly purchased homes up to $500,000, as well as continuing the deduction for state and local property taxes, capped at $10,000. It would retain the tax benefits of popular retirement savings programs including 401(k) and IRA.

The bill is the starting gun for a frantic race toward what Trump and Republicans in the House and Senate hope will be their first major legislative victory since he took office in January: the enactment this year of a package of deep tax cuts.

“This is the beginning of the end of this horrible tax code,” House Ways and Means Committee Chairman Brady told reporters on Thursday as he entered a meeting with Republican lawmakers ahead of the bill’s release.

The bill would create a new family tax credit, double exemptions for estate taxes on inherited assets and repeal the estate tax over six years, while also allowing small businesses to write off loan interest, according to the document.

The bill would cap the maximum tax rate on small businesses and other non-corporate enterprises at 25 percent, down from the present maximum rate on “pass-through” income of 39.6 percent. It would also set standards for distinguishing between individual wage income and actual pass-through business income to prevent tax-avoidance abuse of the new, lower tax level.

It would create a new 10-percent tax on U.S. companies’ high-profit foreign subsidiaries, calculated on a global basis, in a move to prevent companies from moving profits overseas, the Wall Street Journal reported.

Foreign businesses operating in the United States would face a tax of up to 20 percent on payments they make overseas from their American operations, the Journal added.

 

MARKET REACTION

U.S. equities have rallied in 2017 to a series of record highs, partly on expectations of deep corporate tax cuts. They were down slightly on Thursday as initial details of the Republican plan emerged. Housing stocks fell; bank stocks initially fell but then cut their losses.

Investors cautioned the tax plan was preliminary and it was too soon to gauge the effect on specific industries and asset classes. Long-dated bond yields and the U.S. dollar were down.

“This was what the market has been waiting for,” said Sean Simko, head of fixed-income management at Sei Investments Co in Pennsylvania. “It’s pretty much what the market has heard and priced in for. We are also waiting for the Fed chair nominee announcement and the payrolls number (Friday). Until then, the markets are going to be pretty contained.”

Congress has not succeeded with comprehensive tax changes since 1986, when Republican Ronald Reagan was in the White House and Democrats controlled the House. Bipartisan cooperation led to the passage of that plan, but Republicans have frozen Democrats out of the process of developing this legislation and passed a budget plan that would enable them to pass it with no Democratic votes.

Independent analysts have said that, based on an outline of the plan previously made public, corporations and the wealthiest Americans would benefit the most, and the federal deficit would be greatly expanded over the next decade because of a loss of tax revenue.

Trump said at the White House this week that he wanted Congress to pass the tax overhaul by the U.S. Thanksgiving holiday on Nov. 23.

Trump, House Republican leaders and Republican members of Brady’s panel will then meet at the White House on Thursday afternoon. Trump is also meeting separately with Republican senators, who must also unite to pass the tax plan.

“We’re going to get it done,” added House Republican leader Kevin McCarthy.

Brady himself predicts the initial legislation will change next week, when his panel is due to begin preparing it for an eventual House vote.

While Republicans control the White House and both chambers of Congress, intra-party differences have prevented them from passing major legislation sought by Trump, as exemplified by the collapse of their effort to dismantle the Obamacare law. Any failure to pass tax cuts legislation would call into question Republicans’ basic ability to deliver on promises.

The bill must also pass the Senate, where Republicans hold a slimmer 52-48 majority and earlier this year failed to garner enough votes to pass a major healthcare overhaul. Senate Republican leaders have said they aim to finish their work on taxes by year-end.

Democrats have criticized the proposed tax cuts as a giveaway to corporations and the wealthy that would harm workers and middle-class Americans.

 

 

(Reporting by Amanda Becker and David Morgan; Additional reporting by Richard Leong, Susan Heavey and Susan Cornwell; Writing by Will Dunham; Editing by Lisa Von Ahn and Nick Zieminski)

 

Middle Class American Families are No Longer the Majority

The Pew Research Center released a new analysis on Wednesday, reporting that low-income and high-income Americans combined now outnumber the Middle class. The report also said that Middle class Americans are “falling behind financially.”

According to CNBC, the report states that at the beginning of 2015, 120.8 million adults lived in middle-income homes while 121.3 million Americans lived in lower and upper income households. The study classifies middle class Americans as adults earning two-thirds to double the national median which is approximately somewhere between $42,000 and $126,000 a year for a three-person family.

The shift of the economic classes has been developing over the past few decades. According to the Huffington Post, the report states that low income American citizens have increased from 25% to 29% since 1971. Within that same time period, the upper class has risen from 14% to 21%. Meanwhile, the middle class has decreased from 61% to around 50%.

The Pew Research Center’s analysis also claimed that middle income Americans were making less money. The average income of middle class households fell by 4% between 2000 and 2014 and median wealth fell by 28% between 2001 and 2013.

This shift “could signal a tipping point,” according to the report.

More Americans are now starting to make more money and join the upper class, which the study notes as “economic progress.” However, the study warns that the upper class can make more money at a faster pace than the middle and lower classes, which can widen the gap between the different classes.

The Imminent Judgment of God (Pt. 2)

John Shorey made the point that the middle class is disappearing in this country and we now have the very rich and those who are working two jobs at Walmart and McDonalds to make ends meet! John continued to read from Racing Towards Judgment, “God will judge this nation with economic disasters. Critical money problems will strike large and small cities alike.”

Then, David Wilkerson addresses the current issues of our day (in Racing Towards Judgment) that are in our news headlines with chilling accuracy; “There will be violence everywhere. Unheard of violence. Unbelievable violence. Unnecessary violence. Uncontrollable violence. The violence seething beneath the surface for years will explode.” They are saying today, this week, that crime is rising and even death. There is unrest in America, and when all this poverty hits and there is no food, it’s going to explode like crazy! If 50 million people suddenly did not receive their food stamp allocations, we will be seeing violence erupting in virtually every city in America. Continue reading →