Middle Class

I wanted to add an observation about intergenerational income/class mobility to Matt's last post. Conventional wisdom has it that most adults with incomes below the poverty line grew up as children in families with below-poverty incomes. In fact, most adults living in poverty grew up in above-poverty working and middle class families. Here's a quick synthesis of some of the research:

• Children who grew up in low-income households (say, the bottom quintile) are more likely to have low-incomes as adults.
• Yet, most low-income adults did not grow up in low-income households.
• This is because most children grow up in higher-income households (say, the top four quintiles) and a substantial share of these children will end up with low-incomes as adults (with the risk of ending up low-income declining as the income of one's parents increases).
• As an example, based on the Mazumer's recent analysis of the NLSY, slightly more adults in the bottom quintile grew up in households with incomes in the middle and fourth quintile (33.9%) than in the bottom quintile (33.5%). Similarly, based on Hertz's analysis of the PSID: 41.5% in bottom quintile as children remained there as adults, while 39.5% in second and middle quintile as children dropped to the bottom quintile as adults).
• Most low-income adults did not grow up in single-parent or non-working households. As Ludwig and Mayer explain: "most poor adults grow up as nonpoor children in the type of “pro-social” households that policymakers are pushing to attain. Moreover, little good evidence supports the idea that such parental behaviors as marriage, work, and religious adherence have strong causal effects on children's long-term economic success."
• But, in general, the "apple doesn't fall from the tree." While a majority of low-income children don't end up as low-income adults, they're not equally disbursed among the rest of the income distribution.
• Workers in other wealthy nations, with lower levels of inequality and more egalitarian policies, have greater levels of upward mobility than workers in the United States.

The big implication for me of this research is that policies and programs targeted narrowly on children living in poverty wouldn't do that much by themselves to reduce inequality or overall poverty levels, and will end up excluding the bulk of children who end up in poverty as adults. What's needed are more universal programs, and, even more importantly, a focus on the economic policies and institutions that largely determine our current levels of poverty and inequality.

Michael Lind's piece in Salon today expands on his "neoliberals AND 60's liberals suck" theory and suggests that Sen. Obama should pursue a New Deal-esque program that targets the middle class.

Bill Clinton to the contrary, the public clearly does not think that "the era of big government is over." Nor does the public show any interest in the laundry lists of teeny-weeny tax credits for this and that that neoliberals love to propose, to appear compassionate without spending real money. The public wants the middle-class welfare state to be rounded out by a few major additions -- chiefly, healthcare and childcare -- and the public also wants the government to grow the economy by investing in public works and favoring companies that locate their production facilities inside the U.S. There, in a sentence, is a program for a neo-Rooseveltian party that could effect an epochal realignment in American politics.

There are two ways to be for the middle class- to expand it and to make it more prosperous. They aren't mutually exclusive, and both are causes worth fighting for, but Lind does not clarify which one is his. His visceral disdain for "McGovernite" liberalism (a bit of sleight-of-hand- he's in part talking about programs that originated in New Deal-coalition administrations) and opposition to programs for immigrants and African-Americans suggests that he has reinforcing the middle class primarily in mind.

But Lind ought to remember that the New Deal succeeded in both shoring up the middle class and expanding it. Poverty rates dropped like a stone under the New Deal coalition's program. Many folks were left out, but the New Deal programs, as well as many War on Poverty programs, integrated millions of folks into mainstream life. That Lind doesn't recognize either of these facts is troubling.

So while he's right that safety net programs and neoliberal incentives cannot move the country forward on their own, his focus is far too limited. The New Dealers Lind promotes had some common ground with the college-educated, upper middle class liberals he wants to marginalize, and it'd be a shame if an Obama administration didn't recognize that.

Social insurance “consists in protecting wage-earning families which have developed standards of living from losing them, and in helping wage-earning families without standards to gain them.”

--Social Insurance: A Program of Social Reform (1910), Henry Roger Seager

I've been digging Matt's series of posts on the safety net and John's last one on whether a frame like "expand the middle class" is really all that different from one along the lines of "reduce poverty." I'm hoping to do some longer posts over the next few weeks on these matters. As a starting point, I think it's important for us to put to rest the distinction between welfare and social insurance. Conventional wisdom has it that programs like Social Security, Medicare and Unemployment Insurance are categorically different than programs like TANF, food stamps, and Medicaid. A common way of expressing this difference is that the first set of programs are “social insurance” and the second set are “means-tested public assistance” or, more pejoratively, “welfare.”

This distinction is both artificial and ill-conceived. Means-tested programs like TANF and food stamps should be thought of as a necessary part of America’s system of social insurance rather than as “welfare” programs that exist outside of, and have little in common with, that system. Like Social Security and other social insurance programs, means-tested public assistance programs protect Americans against various risks that can reduce their economic security. This essential similarity of purpose is more important that some of the design differences that exist among programs serving an income-security purpose.

In True Security: Rethinking American Social Insurance, Michael Graetz and Jerry Mashaw define social insurance as a set of programs and institutions that “cover common risks to income security across the life cycle of individuals” (45). In this conception, social insurance is defined by its core purpose—moderating the risks of income loss or inadequacy—and not by its funding mechanism or other design features. The Graetz/Mashaw project is best understood, not as a sweeping reconceptualization of social insurance, but as an attempt to develop a conception of social insurance that is more conceptually coherent and useful, and perhaps even more historically grounded, than the current conventional conception of social insurance in the United States.

In their view, the argument that social insurance programs cannot be means-tested is an “ahistorical” one that reflects a political strategy to distinguish Social Security and other programs from unpopular “welfare” programs like AFDC.

As a matter of history, protection against current low income because of defined personal or family circumstances, irrespective of past contributions or earnings, has long been a cornerstone of American social insurance arrangements. The original Social Security Act was a compromise between those who thought social insurance should be structured primarily as a protection against low income and those who saw it primarily as a protection against loss of prior economic status and wanted social insurance closely tied to workforce attachment. (62)

While the strategy of distinguishing social insurance from “welfare” may have been politically beneficial at times, Graetz and Mashaw view it as a “serious mistake.”

This artificial and ahistorical division of the social welfare world between contributory and non-contributory schemes strands crucial poverty reduction programs in political backwaters. It creates confusion in both public discourse and public perception whenever progressive benefit and contribution formulas for social insurance are proposed and discussed. This political separation poses political dangers for ‘contributory’ schemes as well. It highlights ‘individual equity’ or bank-account considerations in social insurance arrangements—represented recently by the ubiquitous calculations of each individual’s ‘money’s worth’ from Social Security—while submerging the social adequacy commitment that should be the fundamental norm in the design and defense of social insurance.

This doesn’t mean that public assistance programs are solely social insurance, or even that all public assistance programs are social insurance. While Graetz and Mashaw believe social insurance is not limited to Social Security and Medicare, their conception of social insurance as a protection against income insecurity is “considerably narrower than all the public activities that might be said to support American family income.” As an example, they note that education programs are not social insurance, since they don’t provide insurance against “a current loss of economic well-being.” Instead, such programs are more appropriately viewed as an investment in future economic opportunity. (58)

This distinction isn’t completely clear-cut. Education obtained in one’s youth, after all, does enhance income security over the life cycle. But Graetz and Mashaw argue that such a narrowing of the definition is necessary for pragmatic reasons.

If the definition is too broad, ‘insurance’ becomes a useless metaphor.... Important ideas about good program design—identifiable risks, moral hazard, adverse selection, and so forth—lose their salience. If the criminal justice system qualifies as “social insurance” (protection against loss of income or assets through theft, embezzlement, and the like), the concept fails to define a distinctive area of public policy. (57)

Social insurance also is distinct from other types of insurance, including insurance provided in markets where there is considerable government involvement or regulation. The adjective “social” is important in making this distinction. Social insurance is different from other forms of insurance because it is a “social rather than an individual (or group) contract” and is made for “the purpose of collective provision, subsidy, or regulation.”

In part II, I'll discuss a specific case—why that quintessential "welfare" program, TANF, is best thought of in social-insurance terms.

Last week’s flurry of activity around revising the federal poverty measure has provided an opportunity to revisit the perennial progressive policy debate of “You Just Want to Talk about the Middle Class” vs. “You Just Want to Talk about the Poor.”

This is a debate that always has struck me as one based upon an overly strict distinction between the “middle class” and the “poor.” After all, to a large degree anti-poverty policies aim to connect people to the resources and opportunities traditionally available to middle-class individuals while also preventing middle-class individuals from falling into poverty due to uncontrollable risks. If the point of an anti-poverty agenda is to help people move towards and maintain a traditional middle-class standard of well-being, why not say so?

To me at least, it seems that policies aiming to address poverty and those that aim to expand the middle class overlap significantly and differ mostly in terms of emphasis. The main advantage of speaking in middle-class terms is that it is more aspirational and better fits with American values regarding upward mobility. Being able to cast progressive social policies in a more positive light free of the baggage that unfairly accompanies poverty seems, at least to me, a useful way of broadening the debate and better building a constituency for progressive policies.

Perhaps it is my temperament, but I would rather argue in positive rather than negative terms. Earlier this year, I had a chance to write a family basic budget study for North Carolina. Even though the focus of the study was on low-income families and many of the policy recommendations were taken directly from the anti-poverty playbook, it was not framed as a poverty report. Rather, the report focused on ideas of upward progress. The media and public reception was extremely positive, and I have had the opportunity to speak with many groups that historically have shown little interest in poverty. Granted the reception may have owed a good deal to the report’s timing, but the point is that the more forward-looking message helped in some way to broaden the conversation.

This doesn’t mean that I am unaware of the fact that policies purporting to help the “middle-class” may penalize low-income families or result in an upward redistribution of income. Yet is the problem that the policies are targeted to the “middle-class” or that they are targeted to the rich who are described as being middle-class? The definition of the American middle class is famously fuzzy with many affluent individuals self-identifying as members of the middle class. Perhaps instead of trying to draw a bright line between the poor and the middle class, progressives would be better served by more clearly marking the boundary between the middle-class and the affluent. The result might be the infusion of a more realistic perspective into policy debates.

This month's Harvard Magazine has an excellent cover story on inequality. In this excerpt, Nancy Krieger asks the right question:

.... Research indicates that high inequality reverberates through societies on multiple levels, correlating with, if not causing, more crime, less happiness, poorer mental and physical health, less racial harmony, and less civic and political participation. Tax policy and social-welfare programs, then, take on importance far beyond determining how much income people hold onto. The level of inequality we allow represents our answer to “a very important question,” says Nancy Krieger, professor of society, human development, and health at HSPH: “What kind of society do we want to live in?”

The story also includes two evocative metaphors to describe inequality:

To describe the distribution of income inequality in the United States, Allison professor of economics Lawrence F. Katz likes to use the analogy of an apartment building. “Over the last 25 years,” he says, “the penthouse has gotten really, really nice. All sorts of new gadgets have been put in. The units just below the penthouse have also improved a lot. The units in the middle have stayed about the same. The basement apartment used to be OK, but now it’s gotten infested with cockroaches and it’s been flooding.”

The argument that none of this matters as long as the overall economy is growing—that a rising tide lifts all boats, as President John F. Kennedy famously said—is the subject of vigorous academic review, with mixed results, but it may not be the most important question. Picture a buoyant luxury cruise ship surrounded by dilapidated dinghies, full of holes and on the verge of sinking. The fact that the tide has lifted them does not mean they are doing well.

Both of these metaphors arguably need some more tweaking to accurately get at the nature of current-day inequality. With the apartment building, the problem isn't so much that the basement apartment has become less habitable in an absolute sense, it's that the tenant in that apartment has to work a lot harder to maintain it in the same condition. And she or he still doesn't have a parking spot in back, even though they've been on the waiting list forever, and the penthouse owners now have 3 Hummer-size spots in an underground garage with a valet.

Michael Kazin and Julian Zelizer, argue in today's WaPo that "the party faithful agree on the basic outlines of a new social contract" for a post-industrial society:

....

The new agenda focuses on protecting middle-class families from the insecurities of the global economy. In their primary campaigns, both Barack Obama and Hillary Clinton advocated proposals to help citizens whose economic welfare has been threatened by the rising costs of health care and education, the slide in the housing and stock markets, the challenges of retirement, and global warming.

Obama speaks of strengthening families by putting "the rungs back on that ladder to the middle class," giving "every family the chance that so many of our parents and grandparents had." He calls for a tax credit to offset the Social Security tax and expanding the earned-income tax credit and the Family and Medical Leave Act. Obama also favors two big programs that no Democrat before him could realize: a national health plan that would cut costs and cover every citizen; and a sizable tuition grant to college students who sign up for national service.

The emphasis on protecting middle-class families reflects a major historical shift. During the 1930s and '40s, liberals struggled to create a vibrant middle class out of the industrial wage-earners who had immigrated to the United States and rural people of all races who lacked electricity and jobs. New Deal programs focused on workingmen and depressed regions. The National Labor Relations Act legitimized unions and boosted the purchasing power of the working class. The Rural Electrification Administration and the Tennessee Valley Authority enabled Southern communities to participate fully in the modern manufacturing economy. Social Security gave support to the elderly, lessening the burden on their children. The GI Bill gave a generation the ability to purchase a home and get a college education.

In the 1960s, Democrats turned to expanding the middle class. John F. Kennedy and LBJ sought to increase the number of Americans who could enjoy the economic and social benefits of a booming economy. The rights revolution made it possible for African Americans, Latinos and women from all backgrounds to compete for most of the same jobs as white men. Medicare and Medicaid provided new health benefits for the elderly and the poor.

Now, Democrats are grappling with insecurities faced by entire families, that institution conservatives always claim to represent. The past three decades have produced growing economic inequality and a shrinking middle class. Younger Americans no longer expect to enjoy as good a life as their parents did. Wage-earners fear for the future of their jobs and incomes. No family is secure.

....

Kazin, a historian at Georgetown, wrote a great history of the language of populism, The Populist Persuasion, back in the 1990s. His nuanced conclusion in that book is worth revisiting:

.... [Populism's] assertion of resentments based on class and status may be a barrier to constructing a new type of universalism—what the eco-anarchist Murray Bookchin calls "the ability to voice broadly human concerns." .... Yet the desire to transcend populism is also shortsighted. It ignores the very persistence of the language, rooted in the gap between American ideals and those institutions and authorities whose performance betrays them. That continuity occurs for a good reason. At the core of the populist tradition is an insight of great democratic and moral significance. No major problem can be seriously addressed, much less nudged on a path toward solution, unless what an antebellum politician called the "productive and burden-bearing classes"—Americans of all races who work for a living, knit neighborhoods together, and cherish what the nation is supposed to stand for—participate in the task ....

To move any closer toward redistributing wealth and revitalizing mass democracy, intellectuals have to take part in social movements that knit such people together. Without silencing the spirited voices of gender and racial community that emerged from the 1960s, we have to help chisel away the hardened self-righteousness that has grown up around such identities. Otherwise we risk spending the future as spectators to the endless competition between spindoctors and copywriters, captives to anyone who seems to make the old rhetoric sing again, if only for one acceptance speech or third-second spot. Such passivity is a cultural disease, and some form of populism is needed to cure it.

When a new breed of inclusive grassroots movements does arise, intellectuals should contribute their time, their money, and their passion for justice. They should work to stress the harmonious, hopeful, and pragmatic aspects of populist language and to disparage the meaner ones—without forgetting that evangelical zeal cannot be expunged from our culture. Like the American dream itself, populism lives too deeply in the fears and expectations of American citizens to be trivialized or replaced. We should not speak solely within its terms, but, without it, we are lost.

I especially like this point from Todd's post:

... for my money, the brouhaha is not over the white working class but over the working class. Parts of the Democratic Party have been searching for ways for decades to not have to deal with class, and have typically combined some outreach to the wealthy on the basis of their wealth, and other groups on the basis of their identity. Subtract these groups, and you're left with the WWC, which, yes, happens to be white, but its exclusion from the foregoing electoral schema is primarily on the basis of its class. So appealing to working class folks of any race on the basis of their class gets lost.

I'd add that when the media portrays blacks in class terms, they're generally portrayed as poor rather than working class. Similarly, when most liberal advocacy groups (other than unions) think of blacks and Latinos (or women, particularly lone mothers, for that matter) in class terms, they tend to think of them as "poor people" or as "recipients" of various public programs. For the media and many liberal groups, it seems like the working class is the white (and male) working class.

As an example, take a look at the website of the well-intended domestic anti-poverty campaign Half in Ten. Of the various images used on the site, there is only one of a white man and only one of someone in obvious work clothes. And guess what, they're the same image—a white guy in a hard hat, the archetypical image of the working class. By contrast, the one image of a black man shows him protesting (both images are reproduced side-by-side below). Where did they get these images? A Nixon '68 campaign ad? (Similarly and surprisingly, given the source, stereotypical, there are two images of white women, one holding a child (mommy!), the other, an elderly woman in a wheelchair (the really old mommy who you never call, you never write!)).

One of the reasons I find the popular conflation of the working class and white working class very odd is that blacks and Latinos are more likely than whites to identify as working class. As the chart at the top of this post shows, a majority of blacks and Mexican-Americans identify themselves as working class when asked to select among four classes. While whites are more likely to identify themselves as middle class than working class, blacks are almost twice as likely to id as working class than as middle class, and Mexican-Americans are more than twice as likely to do so.

Any successful bottom-up campaign for economic justice will need to resonate with, and bring together, working class Americans of all races. One of the few national figures I can think of who has called explicitly for such a coalition is Senator Jim Webb. As Elizabeth Drew notes in the current issue of NYRB:

in his writings, as well as in his new book, Webb has argued that a combination of blacks and the Scots-Irish working class could form an electoral majority. He argues that they have similar grievances: lack of adequate education and health care, job training and job opportunities; and that both have been put upon or neglected by the elites. To him, the basic issue is more one of class than of race.

The new Pew Research report on the middle class is full of fascinating survey and statistical information. Some things from the survey that caught my eye on a quick review:

• The percentage of people saying they are worse off now than they were five years ago is now at 31 percent, the highest level recorded in polling by Pew and Gallup over the last 44 years. Similarly, the share saying that are better off now than five years ago is at a low point, 41 percent.
• The percentage of people saying who agree with the statement "it is the responsibility of the government to take care of people who can't take care of themselves" is now back down to its lowest level (57 percent) since 1994. That's a 12 percentage point drop over the last year.
• More than two-thirds (68 percent) of people in the middle class agree with the statement: "Today it's really true that the rich get richer while the poor get poorer."
• Slightly more Americans think the rich are rich because they "know the right people or were born into it" (46 percent) than because of "hard work, ambition, or education" (42 percent). Almost half (47 percent) of those describing themselves as middle class, and slightly more than half (53 percent) of those describing themselves as lower class say that the rich are rich because they know the right people or were born into it.

They also do a neat statistical portrait of the middle (income) class that looks at changes in the size of the middle class between 1970 and now. The middle class—defined by Pew as households with incomes between 75% of 150% of median, about $45K to $89K for a family of three—is smaller now (35 percent of all adults) than it was in 1970 (40 percent). In a trend that doesn't bode well for the future, the biggest declines in the middle class (and increases in the lower class) are among 18-29 year olds and 30-44 year olds.

Not a bad idea from Martin Luther King, III:

I therefore call upon all our presidential candidates to take a vow that, within the first 100 days in office as commander in chief, he or she will appoint a cabinet-level officer whose responsibility will be to make a measurable impact on eradicating poverty and allow more Americans to move up into our middle class.

A poverty cabinet member is necessary today more than ever. Our next president will be taking over a government that faces virtually the exact same poverty rate my father found so appalling back in 1968.

At TAPPED, Dana Goldstein notes that Hillary Clinton will endorse this idea today in Memphis.

I have a modest suggestion, however, let's call it a cabinet post for "expanding and maintaining the American middle class" or "economic fairness" or something along those lines. This effort will be doomed to failure if it is framed in a way that suggests a rehash of LBJ's War on Poverty, and if it is similarly limited from the get-go to social services and related means-tested programs. Any successful effort to reduce poverty and build the middle class in 21st century America needs to be as big and fundamental as the New Deal, and it needs to speak to the 80 percent of Americans who now rate the condition of the economy as bad.

In an earlier post, I noted some recent polling on where most Americans would draw the poverty line, and the amount of income needed to be "middle class." In that same vein, in a recent Monkey Cage post, political scientist John Sides discusses a survey he recently conducted that asks the following question:

How much income do you think the average American household earns in a year? If you do not know, you can just give your best guess.

According to Sides, "the median answer was $40,000. The actual median [income] is $48,000. On average, people’s estimates are fairly accurate."

TAP's Dana Goldstein asks a very good question:

... I got to thinking about an economic message that, despite being common sens[e], probably isn't what most swing voters are wanting to hear: How about renting? .... what's tying so many Americans to depressed labor markets such as Ohio and Michigan is ownership of homes with little value, since many people are anxious to leave areas with bad job prospects. Last year, I wrote about research showing that high home-ownership rates correlate with high unemployment, and that unless you are planning on staying in one job and one home for more than five years, you are more likely to end up financially ahead after renting than after buying.

But concludes pessimistically:

... I'd be pretty shocked if any presidential candidate starting talking about the virtues of renting. "Rent" is a word that reminds people of cities, and living paycheck to paycheck, and being young (and of a Broadway musical about AIDS!). It just doesn't say, "I'm the candidate of the middle class."

As Goldstein argues renting lacks the emotional and political resonance of homeownership and is unlikely to feature prominently in the upcoming election. That said, there are some political openings to promote a more balanced assessment of the risks and rewards of homeownership vs. renting.

The most important opportunity right now is the foreclosure crisis. Based on media accounts, the only option to the administration's voluntarist approach involves some sort of large-scale bailout program that would refinance mortgages. But if renting is often a better deal than owning, why not give families in foreclosure the option to stay in their homes by renting them?

A proposal developed by CEPR's Dean Baker would do precisely that. Under Baker's plan, homeowners facing foreclosure could opt to rent their homes at the going rate (which would initially be determined by an independent appraiser, and adjusted annually based on an index of local rental costs).

Baker sometimes calls his plan "own-to-rent", but it's really a rent or own plan, one that would effectively give owners a choice between refinancing at more reasonable rates and continuing to rent their current home. Most lenders would prefer not to be in rental business. This would give homeowners who want to refinance leverage they don't currently have to work out a reasonable deal with their lenders.

In most cases, however, renting would be the better deal for moderate and low-income homeowners. As Baker details in a new paper on one of the proposals to use public funds to subsidize refinancing, many homeowners who refinance would end up losing two times over: they would pay considerably more each month than if they rented the same home, and won't end up with any equity when the sell their home.

There really isn't any new research in this just-released paper that I wrote with Rebecca Ray, Liz Chimienti, and John Schmitt, but it provides what I hope is a useful synthesis of bunch of original CEPR research on job quality, labor standards, economic well-being, and public work supports. It also represents an attempt to talk about "those struggling to join the middle class" in way that is roughly consistent with the more encompassing progressive narrative about the economy that I mentioned in a previous post.

Here's a very brief synopsis:

• Economic growth over the last few decades has not resulted in more good jobs as a share of all jobs.
• About 48 million Americans in working families—one out of every five—are "missing the middle." Despite work, these families lack sufficient income to gain a toehold in the middle class.
• The federal poverty line is a poor indicator of basic economic security. Almost half of economically insecure families have income above the poverty line.
• Public work supports play a substantial and unheralded role in promoting economic security and opportunity for working families. Nevertheless, if better designed, they could more play a more consistent and effective role in helping families move into the middle class.
• America's social contract— the set of public and private structures designed to promote economic security and opportunity—must be updated so that more workers can move into the middle class.

Over the next few days, I'll be posting in more detail about some of the findings.

Robert Reich in today's NYT:

“The biggest rift in American society used to be between the poor and the middle class and the Republicans exploited that brilliantly,” Mr. Reich said. “Now the words ‘middle class’ have become shorthand for the working poor, the working class and the middle class. Whether you make $16,000 a year or $66,000 a year, your job is more precarious, you have no pension.”

I'm not sure that we're quite to the place where "middle class" has become shorthand for "the working poor, the working class and the middle class", but it's where we should be. Most people with low and moderate incomes think of themselves as either middle class or working class, and those very few who don't aspire to be in one of those categories.

In an important new report, Demos and the Institute for Assets and Social Policy develop a "middle class security index" to measure the economic stability of working-age families in the American middle class. Families were considered middle-class if they had household incomes that put them in roughly the 26th to 80th income percentiles, about $40,000 to $120,000 for a family of four.

The index looks at how middle class families are faring in five areas: assets, education, income, and healthcare. For each area, the authors set an "optimal threshold for overall financial health ... and a vulnerability threshold." Families that scored above the optimal threshold in three or more areas were considered "securely in the middle class"; families that scored below the vulnerability threshold in three or more areas were considered to be at "high risk for slipping out of the middle class."

Among the findings:

• Only 31 percent of families who would be considered middle-class by income are financially secure.
• One in four middle-class families match the profile for being at high risk of slipping out of the middle class altogether.
• More than half of middle-class families have no net financial assets whatsoever.
• Middle-class families have median debt of $3,500 and at least half of them have no assets.
• Only 13 percent of middle-class families are secure in their asset levels-meaning that they have enough to cover most of their living expenses for nine months should their regular income cease; 79 percent are "at risk" in this category, meaning they could not cover the majority of their expenses for even three months. Another 9 percent are "borderline."
• Twenty-one percent of middle-class families have less than $100 per week ($5,000 per year) remaining after meeting essential living expenses. These families are living from paycheck to paycheck with very little margin of security.

The report is one of the more innovative attempts I've seen in recent years to measure economic security, and the index has a broad range of potential uses. My one quibble is using multiples of the federal poverty line to define the middle class. The actual dollar range and income percentiles they end up with seem about right, but I'd favor deriving these boundaries from some other metric.

The conclusion of Elizabeth Warren's testimony at today's Senate Finance Committee hearing Economic Issues for America's Working Families:

America was once a world of three economic groups that shaded each unto the other—a bottom, a middle, and a top—and economic security was the birthright of all those who could make it to the middle. Today the lines dividing Americans are changing. No longer is the division on economic security between the poor and everyone else. The division is between those who are prospering and those who are struggling, and much of the middle class is now on the struggling side.

The economy has changed, and middle class families are struggling to change with it. Laws like social security, Medicare, FHA, consumer product safety, fair credit reporting and a host of other statutes were designed to help middle class Americans cope with the risks in the economy of the mid-Twentieth Century. With a strong safety net to back them up, Americans innovated at a rate unparalleled in world history. Today’s families face new costs and new risks, and they need help so that they too can achieve security and prosperity for themselves and a stronger, healthier economy for everyone.