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04 March 2014: When status starts to slip: living and working as a member of the shrinking, bipolar middle classes of the US and UK
By Kindred Motes, Centre for Research in Economic Sociology and Innovation Research and Publicity Associate.
In cities around the world, remaining solidly middle class has never been more difficult. In the UK, for example, families seeking to live and work in London face rising costs of living, expanding gentrification, and lower wages (when adjusted for inflation) than their contemporaries in decades past. The mounting obstacles to blue and white-collar workers are occurring alongside drastic increases in salaries for investment bankers, financial analysts, venture capitalists, and others within the City of London. In the United States, long-settled homeowners in New York City have found it difficult to afford skyrocketing property taxes resulting from rising neighbourhood costs and inflated demand within the city’s boroughs. At the same time, the feeble-yet-recovering Wall Street institutions famously deemed ‘too big to fail’ are rewarding their corporate heads with pay hikes and perks. In both New York and London, renters are even less fortunate – living in either of these international cities comes at a high price that few are able to meet. These difficulties are a correlated by-product of what many believe to be the dissolution – or at the very least, the gleaning – of the middle classes.
Conversations about income disparity within western countries have increased recently, both in the media and in the political sphere. In his ‘State of the Union’ address, US President Barack Obama announced that addressing America’s income gap is one of his administration’s priorities for the year. Mr Obama aims to combat the nation’s economic polarisation in stages, most notably by introducing higher wages for federal workers and retirement accounts backed by the federal government. In Britain, governmental response has been notably different. Mr Cameron’s government has engaged in UN discussions regarding global economic disparity, but many suggest his domestic policies tend to favour those already at the top of the income bracket.
Despite whatever positions might be attributed to those in power in Westminster or Washington, the gulf between those at opposing ends of the middle class continues to widen. A new Financial Times report classifies the resulting bipolarity of the middle class by giving it two distinctive groups: the ‘uber-middles’ and the ‘cling-ons’.
The first group, the ubers, includes wealthy financial professionals from the City of London and Wall Street. Uber-middles in the US and UK fall within the top five per cent of earners, pulling in at least £69,000 ($110,000 USD) a year. In the UK, ubers almost certainly live in London. The latter group, the cling-ons, are administrative professionals, engineers, academics, and scientists – portions of the middle class who are far more likely to have difficulty maintaining their living standards. The Financial Times illustrates the decreasing incomes of professions from 1975, 1994, and 2013 via a graph.
Throughout this period, every middle class career, aside from medical practitioners or London finance workers, decreased. The two exceptions now make up a substantial part of the uber-middles, while the remaining professions are cling-ons. Cling-ons are more likely to live outside of major cities than their uber counterparts, but a large portion of them still reside in large cities.
That may soon change. As property prices in both London and New York soar to unprecedented heights, the cling-ons will find themselves increasingly unable to maintain their living standards. To see this trend at play in the United States, one simply has to take a look at the statistics for New York City. The median household income in New York City is approximately $48,631 (£30,394). However, the mean household income is considerably higher, coming in at $75,809 (£47,380). This is especially interesting when compared with the US national statistics. The median and mean household incomes in the US are $50,140 and $69,193, respectively (£31,337/£43,245). This means that the median household income for New York City is slightly less than the national average while the mean household income is considerably more. Put another way, the middle class ‘cling-ons’ of New York City struggle to afford its higher costs of living on incomes that fall below the national average. NYC’s high mean household income illustrates the wage gap even more acutely; both the uber-middles and the mega-rich influence the mean, and it is here that their high salaries are reflected.
The disparity is equally troubling in London, where the majority of earners bring home less than £30,000 annually. Skyrocketing property-listing prices in the capital mean that most of them will never join the housing ladder. According to pricing scheme estimates, if a family were to search for a two bedroom, two-bathroom property (whether flat, condo, or home) within a three-mile radius of Westminster, it would find an average listing price of approximately £1,521,320 ($2,434,112). The average listing price for the same type of home in New York City is $2,664,040 (£1,593,706).
As these figures and statistics signify, the homogenised middle class with overall parity of income has become a relic of the past. Mr Obama and Mr Cameron have begun to recognise just how problematic the growing disparity of wealth will be for the future of the United States and Great Britain, even within their so-called middle classes. Mr Cameron’s fiscal policies, however, are doing little to lessen the divide; many of his critics claim they exacerbate it. Mr Obama’s rhetoric on the subject and his call for Washington to devote more time and attention to the problem is promising – but according to the Pew Charitable Trusts, seventy per cent of Americans currently born into the lowest rung of the economic ladder will never reach the middle. Rhetoric will not be enough to change this fact.
This dithering cannot continue if Britain and America are to flourish as democratic states that champion their citizens’ social and economic wellbeing. Leaders like Mr Obama and Mr Cameron and their policymakers should take current economic information to heart and devote time and effort into preventing further income polarisation. If the economically liberalised West is to continue prospering and remain competitive in a world that is rapidly globalising, it must ensure that all of its citizens have opportunities to prosper alongside it.