By Marisol Bello and Paul Overberg, USA TODAY – October 26, 2011
Updated 3h ago
Victoria Froelicher’s income is considered middle-class by the Census, but she is underwater on her house, supports her elderly mother and has a daughter in college. She’s living hand to mouth and barely making it, she says.
For Reno car salesman Tim Ticknor, the squeeze on his middle-class existence gradually has turned into a chokehold.
In 2005, he was making more than $90,000 a year selling used cars to people who had moved to the Southwest for its booming economy. It was an income that allowed him to rent a townhouse with his wife and daughter in a gated community.
Over the next six years, as the economy slowed, so did his income. First, it dropped to $70,000, then after a time it fell to $30,000.
By Scott Sady, for USA TODAY
The car dealership where Ticknor last worked, making $90,000 a year, is bankrupt, and he is hustling as a day laborer for a temp agency.
Today, the car dealership where Ticknor last worked is bankrupt, and he is hustling as a day laborer for a temp agency. He and his family had to move into his mother-in-law’s mobile home because they couldn’t afford to pay rent.
The top fifth of households collected half of U.S. income in 2010.
Share of U.S. household income, 2010:
Note: Percentages do not add to 100 due to rounding
Sources: Census Bureau, American Community Survey
Ticknor’s story reflects how, across the nation, the middle class’ share of the nation’s income is shrinking. Reno, which has among the highest rates of unemployment and foreclosures in the United States, is a stark example: The share of income in the metro area that was collected by the middle class fell from 49.8% in 2006 to 45.8% in 2010, the year after the 18-month recession ended.
A USA TODAY analysis of Census data found the Reno area was among 150 nationwide where the share of income going to the middle class — generally made up of households that make $20,700 to $99,900 a year — shrank from 2006 to 2010. Metro areas where the middle class’ share of income dropped outnumbered those where it grew by more than 2-to-1.
“The lower share of income is a way of saying income inequality is growing in the middle,” says Paul Taylor, executive vice president of the Pew Research Center, who has studied the shift. “The vast middle has less of the pie than it had before.”
Income is shifting to the top tier of households, especially those in the top 5%, Taylor says. The top 5% earn more than $181,000 annually.
In 2010, the top one-fifth of U.S. households collected 50.3% of all the nation’s income, up from 49.9% in 2006. The lowest-earning one-fifth of households collected just 3.3% of the nation’s income, down from 3.4% in 2006.
That leaves the three-fifths of households in between — a common definition of a broad middle class. It collected 46.3% of the income last year, down from 46.7% in 2006.
Analysts call it the middle-class squeeze.
The data are the latest signs of a trend that dates to the 1970s, says Heidi Shierholz, an economist with the Economic Policy Institute. Back then, 53% of the nation’s income went to the middle class.
She says that during the 2000s, households in the middle class began losing ground because their incomes were not growing. The recent recession made it worse as employers cut work hours, furloughed workers, froze salaries or imposed layoffs. At the same time, the value of family assets, such as homes, went down.
“Families are taking substantial losses,” Shierholz says. “The really scary thing is, there’s no relief in sight.”
A ‘humbling’ experience
In Reno, a metropolitan area of 425,000 people, unemployment jumped from 4% in 2006 to 14% last year. Adjusted for inflation, the median income dropped 10% in the same period, to $50,699.
Rows of for-sale signs in every neighborhood and empty storefronts tell the story of a city whose middle class has been hit hard.
Ticknor, 45, says he is one of those casualties.
Six years ago, he was a car salesman, earning close to a six-figure salary that allowed him to afford a two-story condo in a private community. He drove an off-white Dodge Charger with heated leather seats. And his baby girl, Ashlee, “never wanted for anything.”
As the recession took hold, fewer people bought cars, and Ticknor felt it in his wallet.
At first, he and his wife cut back on restaurants and movies. As their financial squeeze got tighter, Ticknor and his family moved out of the townhouse in 2008 because they couldn’t afford the $1,200 monthly rent. They lived with a relative for a while and last year moved into an $800-a-month duplex.
Then this year, after the car dealership he worked for went bankrupt and he lost his job, they had to leave that apartment and move into his mother-in-law’s single-wide trailer.
Along the way, they have sold off their possessions. Today, the sports car is gone; so is much of their furniture. They sold their Apple computer recently for $150.
Ticknor checks in every day at 5:30 a.m. with a temp agency. “You hope they have a job for you,” he says. He has worked for minimum wage as a receptionist, cashier and manual laborer.
“The biggest word is humbling,” he says. “It does a mental thing on you. I used to make big money. I was like a big shot. …You take it for granted.”
In Reno’s downtown, bookstore owner Christine Kelly, 49, sees firsthand what the loss of income has meant for the middle class. She says sales are down at least 25% compared with what they were before the recession.
“Those are numbers we’ll probably never see again,” she says.
She moved her store, Sundance Books and Music, downtown this year because the strip mall where they had been was largely empty.
“There were no other businesses around us,” she says. She hasn’t given raises in several years, but she has been able to keep all eight of her employees, some of whom have been with her for more than a decade. It’s a source of pride for her, but it’s meant her own income has gone down. She says she spends less, and when she does buy something she pays cash.
If the economy picked up, the first thing she’d do is give raises.
“And buy myself a new a pair of jeans,” she says.
Middle-income jobs fall
New Bern, N.C., couldn’t be more different from the gambling hub and neon lights of Reno.
Yet like Reno, New Bern — a community tucked into the Neuse River in the center of the state’s coastline — saw one of the biggest shifts in the middle class’ share of income during the recession of any area with a population of more than 20,000.
The middle class in New Bern collected 51.6% of the income in 2006. In 2010, the share went down to 43.9 %.
Those investments have suffered because of the volatile stock market, and many of those retirees have had to go back to work, he says.
At the same time, the area’s job base, made up in part of manufacturing and trucking, has also been hurt, he says. Large companies such as Hatteras Yachts, which makes luxury boats, and BSH Home Appliances, which makes high-end appliances, have cut hundreds of jobs.
The number of manufacturing jobs in Craven County, where New Bern is located, fell 36% from 2007 to 2010, says James Kleckley, director of the Bureau of Business Research at East Carolina University. By comparison, manufacturing jobs in the state fell by 20% during that time.
“You look at those jobs and most are middle-class jobs,” Kleckley says.
Stacy Kendall, 46, found a roommate after she lost her job at a senior citizens center last year. Even though she found another job six months later, she says, the expense of paying for an apartment was too much to keep up with.
So now she shares a house with a mom and her two daughters.
“A lot more people are sharing homes,” she says.
She started a support group last year for the unemployed and underemployed. One of those who attends is Russ Whittaker, 49.
He says he, his wife and three children were comfortably middle class. They moved to New Bern in 2005 from Cape Cod, Mass. Their old house sold at a profit, allowing them to pay cash for their $300,000 house. Without the expense of a mortgage, his wife could retire as a teacher; they paid off their car loans and sent their children to private school.
Then last year, Whittaker lost his $46,100-a-year job working as a researcher for the First Church of Christ, Scientist.
“We were looking pretty good,” he says. “I had a nice Northern salary in a Southern economy, and without it, it’s been hard.”
Now, instead of one job, he works five part-time jobs, earning anywhere from a minimum wage of $7.25 to $10 an hour. His wife is working again, too, providing day care for children and working in their church.
Together, they earn about $1,800 a month, Whittaker says.
Their children are still in private school, for now, with help from his father, savings and financial aid from the school.
But the Whittakers have changed their habits. They now shop at the dollar store, where they can buy a name-brand loaf of bread for one-half or one-third of its price at a supermarket.
They used to pay for their children, ages 8, 11 and 14, to take gymnastics classes. Now the children take part in free activities, such as basketball, volleyball and baseball leagues.
They’ve cut their cable service to only basic channels.
“We are getting by, and we have everything we need,” he says. “But it’s not what we had before. We’ve gotten a crash course in the difference between wants and needs.”
‘Juggling everything I can’
Even in communities that have not seen massive income shifts, the middle class is feeling the squeeze.
In Napa, Calif., known for its fertile valleys, wineries and luxury tourism, Victoria Froelicher frets. The divorced mom has a career as a creative-services supervisor for an agricultural company, making $80,000 a year.
That puts her squarely in the middle class in Napa, where middle-class households earn $26,000 to $121,000.
But Froelicher, 53, finds it more and more difficult to make ends meet. She says she owes about 30% more on her home than it is worth, she has to pay to put her daughter through college, and she cares for her elderly mother.
She pays $2,300 a month on a three-bedroom house she bought in 2007 for $420,000, but is now worth about $285,000.
She also pays $400 a month on a loan she and her daughter took out to help pay for the $17,000-a-year college tuition and room and board.
To bring more money in, she cut her 401(k) contribution from 8% to 1%.
“I’m juggling everything I can,” Froelicher says. “I don’t feel I am middle-class. I feel I am lower-middle-class and teetering on poor. If I lost my job, I could see how I could end up homeless.”
Froelicher is like a majority of Americans who say they haven’t moved forward or have fallen backward in the past five years, says Paul Taylor of Pew Research.
A Pew study of the middle class in 2008 found 56% of Americans felt they either fell behind or haven’t progressed, the most downbeat short-term assessment of personal progress in nearly half a century of polling by the center.
In Napa, the median income has gone from $72,136 in 2006 to $64,401 in 2010 when adjusted for inflation. Median housing values have plummeted from $657,300 in 2006 to $424,100 in 2010.
Froelicher rattles off a list of how she makes do: no smartphones, flat screens or Netflix subscriptions. She brings leftovers for lunch, shops at consignment stores when she needs something and refinanced her used-car loan from 4.35% to 2.99%.
“Food costs so much more, and medical, dental and glasses, and everyday expenses,” she says.
She’s learning to do house repairs herself, using how-to instructions on the Internet. And the molar she cracked that needs a new crown? She says she’s flossing and keeping the tooth clean until January when her dental benefits from work kick in again. She used the maximum coverage allowed this year for a root canal.
Froelicher says she always thought by the time she reached her 50s she would be living a comfortable middle-class life and have enough savings for retirement.
“But instead, it seems I have less and less all the time,” she says. “There is no safety net or security in my life.”
Contributing: Barbara Hansen in McLean, Va., and Jeff DeLong at the Reno Gazette Journal
… N-o-o kidding?! If the Marxist-liberals continue to have their way in Washington, D.C. and Annapolis, there will be no middle-class left to over-tax. We will all be p-o-o-r and the United States will become another third-world country. …