InFocus featuring Elise Rapoza (Middle Class Study)

From the 22 News Plus Studio, this is 22 News In Focus with Patrick Barry. Hello, everyone, and welcome to this edition of In Focus. I'm your host, Patrick Barry. We're here in the 22 News Plus Studios. If you're like me, you're a middle-class person, but if you're also like me, you've probably been reading a lot of news over the last number of years how the middle class is slowly disappearing. Well, I'm very happy and excited today because joining me from across the desk from Commonwealth Beacon Mass Inc polling is Elise Raposa. You have recently put together follow-up data from a report that's been going on for quite a number of years about, which really just studies the middle class. Elise, thank you so much for joining me. I can't wait to have this conversation. This is one I've been really looking forward to, so thank you for giving me some of your time. Give me a little bit of background about the report, its history, and where it is today. Well, thank you for having me. It's my pleasure to be here. I work in an organization called the Massachusetts Institute for New Commonwealth, otherwise known as Mass Inc, and we're coming on our 30th anniversary. And Mass Inc was founded with the condition of the middle class as part of its founding mission. And going back to the 90s, they've been researching how the middle class is doing, and now that we're coming on our 30th anniversary, we thought it was time to revisit that question. And it couldn't be better timing, given exactly what you said about this underlying sentiment that seems to be in the zeitgeist that the middle class is really struggling right now. So am I wrong, big picture, am I wrong that the middle class is struggling? So- And we'll get into the data, but- It really depends how you measure it. And so you can't say the middle class is shrinking if you define the middle class as the middle of the 50th percentile. It's always there. So we had to really think hard about how to define the middle class because so many people felt as though the middle class is shrinking. And I guess if you want to jump to the punchline, it has shrunk a little bit since the pandemic. It actually grew leading into the pandemic and during it, when there was a lot of kind of government support to help people through the pandemic. But now with the record inflation, we saw coming out of it, the wages just haven't kept up to the degree they would need to in order for the middle class to stay the size that it was previously. So when you're measuring the middle class, is it the income levels on the top and the bottom are kind of compressing? So we looked at the minimum income needed to be middle class. We did not define an upper class because it was just so kind of, I don't know, it'd be hard to come up with an objective way to see what the cutoff is between middle class and upper class. But we felt as though to be middle class, you need to at least be able to cover your basic needs and have enough to invest in yourself and your future. And so paying for things like college, saving for retirement and having a little bit of money left over at the end of the day to enjoy yourself. That makes perfect sense. You know, the American dream of the white picket, owning a house in the white picket fence, is that still part of the American dream? Owning a home and property? So actually the original definition of the American dream goes back to the Great Depression when James Cheslow Adams defined it as a social order in which each man and each woman is able to attain the highest state stature of which they are innately capable, which I think is pretty cool. Even uses the word shall, which means not only will you have the opportunity to achieve your highest potential, but you almost have a civic obligation to. And so that's kind of how we're thinking about it in terms of people being able to unlock their untapped potential through higher education. That's part of our definition or whatever business ownership, however you want to get there. Kind of during, I would say the 50s and 60s is when the American dream kind of took on a more consumerist bent. And I do, what we do see is that people who own a home do better in retirement. And they have, like it's, if you don't have, if you own your own home, you're kind of locked in at that mortgage level, but it does make it easier to retire. It gives you more stability. You're not at the whims of a landlord, but it's not in our definition that you have to own a home. It's just, we kind of base it on actual patterns of how people live their lives. And we do see that like the cost of housing decreases with age because there are so many homeowners in the middle class. Oh, interesting. All right. We're coming up on our first break, but when we come back, Elisa's been kind enough to share a number of slides of data points. I love data because it speaks volumes, whether you want to believe it or not. The data is the data, as I always say. So stay with us. We're back in just a moment. This is 22 News In Focus with Patrick Barry. Hello everyone. And welcome back to this edition of In Focus. I'm your host, Patrick Barry. Sitting across the desk from me is Elise Raposo. She's a senior research associate with Massync Policy Center. So thank you, Elise, for joining me today. We're talking about what's perceived as the shrinking middle class, but you bring up a very interesting point. Middle class is the, it's the middle. So if it's divided into thirds, it can never shrink. Just the parameters, correct me if I'm wrong, the parameters of measurement are what change. So we avoided that problem of having the middle class always be the middle 50% by building a budget of what does it take to live a middle class lifestyle, which involves a ton of data and a lot of computation, because we did it for 20 years, all 50 states, 16 different household types, because every household has different budgets, just to see what it actually takes to make it in today's society. Okay. And we're going to get into some of the slides now. And please, folks, bear with me. There's a lot of data here, but you know me, I love the data, as I mentioned. So, Elise, I'm going to kind of toss it over to you. Walk me through all this. Right. So this is, like I said, the household types without children. So you have one adult and two adults, otherwise known as your dinks, not your dual income, no kids, although there might be some that are just one income. And this is like how much you would need to earn in order to live a middle class lifestyle in Massachusetts by age group. Okay, so if I'm looking at this, so the 26 to 34-year-olds, the column on the far left, if you're just a single person, you or I, in that age group, you would need $82,000, an income of $82,000 to live a middle class lifestyle. And this is 2024, so it's gotten even more expensive. It's even gotten even more expensive. But a couple, two people, would need a combined income of $118,000. And so you get a savings, because you're sharing, presumably, your housing expenses. Maybe you share a car. There are ways that you can save money by living with someone else. So you don't need exactly twice the two-person income. And so we find it's actually easier in Massachusetts to attain a middle class lifestyle if you have someone who's also earning some money and that you're sharing expenses with. So, and it's funny, because I go, if I go back in time, I'm a lot older than you, but I think of middle class was you had a house, you had two cars, you had a handful of kids. But there are ways to be in the middle class with some thoughtful money management. Like you said, one-car family versus a two-car family. It's also important to recognize that it's really hard for singles that are living alone. Actually, one of the best things we found, I found really fascinating, is that the share of adults over age 26, so we define an adult as being 26, that's when you get cut off from your parents' health insurance. I know that one. It has actually gone up. So it's like 8% of households nowadays. It's a family with their adult child who's over age 26 living at home with them. And so there are ways people are adapting to the cost of living going up by living in non-traditional household formations. Okay, that makes sense. All right, back to the data we got. Okay, so this one was sinks, dual-income, no kids, or sinks, single-income, no kids. The next slide. Come on, computer. There we go. This changes it up. This is with kids. Yeah, correct. And so we're making some assumptions here. Not everyone's gonna go through these life phases, but we have one adult with two kids, two adults with two kids, both people working, and two adults and two kids with just one person working. And we're assuming that people between 26 and 34, their kids are both in childcare. You have one infant and one toddler in childcare. 35 to 44, your expenses go down because you're finally eligible for a public education. But then once you get to 45 to 54, your expenses go back up because you're being asked to pay for at least half of your children's college expenses, we're assuming here. So note to you folks out there, between 35 and 44, save a ton of money because 10 years later, you got college on the way. And so we're seeing that you have to make, in the six figures these days, if you want to live a middle-class lifestyle, six figures used to be something that you would be really excited to make. And now it seems like it's just the minimum to not have to rely on like outside help. Exactly. And this is, and again, the red bar is a single person, two kids, the other bars are with two adults and kids. All right, let's go to the next slide. So this is, you were talking about earlier, how do you measure the middle-class based on expenses? Yep, so this is all the expenses we assume a household has to pay for if you're two adults and two kids. So you've got your housing, your utilities, taxes is a huge one. And are these annual expenses? Yes, this is 2024 by age group. So we've got 26 to 34 on the left and 45 to 54 on the right. Unfortunately, we don't have federal and state unbundled. Obviously, federal takes up a much larger percentage than the state does. Massachusetts, even though people like to call it Texas, it's actually kind of like in the middle of states when it comes to effective tax rate. Transportation's way up there. And then the big, big one for households right now is childcare. If you're sending two kids through childcare at the same time, it is $46,000 a year. It's crazy. If you skip a couple of columns and look at the higher education, it's more expensive for childcare than it is for- Although we're assuming here that the house parents are asking their kids to pick up half the tab. Oh, okay. So if the parents are willing to- But even you double that, it's still less than childcare. Yeah, exactly. Wow. So are there any, you know, lately in the news that, you know, groceries are going up, utilities are going up, you know, and this data is from 2024, but groceries going up, utilities going up, that's not- So the utilities, unfortunately, the way the data reported are bundled with housing. So I'm not- We don't know. We don't know through this study. And a lot of those large increases in utilities, excuse me, have been more recent. And this is just 2024 data, which is the latest data we had from the federal government at the time we were doing this. All right, let's go to the next one. So this is getting real nerdy. But- That is okay. Okay. Everyone talks about, I think people now know the word inflation. It's been in the news a lot, right? And the way we measure inflation is the consumer price index. And the consumer price index is dollar weighted. So every dollar that's spent in the economy is weighted the same amount. But for, that means households that spend more money, aka rich households, their spending patterns are better reflected than like your average middle-class household just because they spend more. And the pieces of the budget that make up the largest component of a middle-class household's budget, whether that be healthcare, housing, higher education, childcare, have increased faster than inflation. As a result, the overall cost of a middle-class lifestyle in Massachusetts and the U.S. on average has increased faster than inflation. And this really like meant a lot to me when I saw this because I don't know if you were like listening to the news back a few years, just a couple of years ago, and everyone's saying, oh, we're starting to get inflation under control. Why are people still complaining? Like why, like what's the issue? And it's because that headline inflation measure isn't a good measure for average households and what their pain is. Okay, so the measure of inflation doesn't really relate to boots on the ground families? Yep. The way families are currently living. Correct. Wow, so and this chart here really points that out. Yeah. And I mean- And they kind of track each other through the pandemic. Then when we had that record inflation and the housing market went crazy coming out of the pandemic and the fact that housing takes up such a large piece of your check every month, since 2020, the cost of living has increased faster than what people think it has. Looking at this chart, I don't know if you can answer the question, what happened in 2012 where Massachusetts and the US average dipped below the CPU? Do you know? That is, I think that relates to the housing market. Out of the 2008 crash? Cause yeah, exactly. So the housing market crashed and then in 2028, you start to see a dip and that's kind of like around when the housing market kind of like bottomed up and then it out and then it has been increasing since then. Wow. All right. We are up on our next commercial break. Stay with us. Plenty more data to go through. We're back in just a minute. This is 22 News In Focus with Patrick Berry. Hello everyone and welcome back. Elise Raposa from the, she's a senior research associate with the Massink Polling Center is joining me today. We're talking about the- Massink Policy Center. Policy Center. We do have a polling group. I know, I always confuse the two. Policy Center, I apologize. And we're talking about where the middle class stands today. When we went to break, we were looking at this particular set of information. The next slide really breaks down the different data points, if I understand correctly, that make up these slides, this data. Correct. So as I was saying before, see here on this slide how childcare, housing, transportation, higher education have all really kind of make, those pieces make up the largest chunks of your budget and they have increased substantially. You really see it with housing and childcare. Right. Whereas the last three, the household supplies, clothing and media communications basically remaining flat. And those are all kind of like your consumer goods, things you buy on Amazon or whatever. Those have remained kind of stable. And so it kind of brings the average down. But really what matters is the things that kind of take up those large chunks of your budget. Gotcha. And I think kind of what the end result is, is that in 2020, during the pandemic, you could live a middle class lifestyle as a single adult. You made $65,000. Nowadays, it's gonna cost you $91,000. That's a 40% jump, which is 18% percentage points faster than the consumer price index. And this chart is the one adult middle class. This next chart is two adults, two kids. So it shows you we're number three and number two in the country. Yeah. We're one of the top three most expensive states in the country to achieve that middle class lifestyle. All right. Next up, Massachusetts ranks across, kind of talking about this previous slide, right? Well, sort of. So the previous slide shows that we're the most expensive, but we also make some of the highest wages. And so you can take that into account. You can see what percentage of the population makes enough to actually achieve that middle class lifestyle. And for households, whether you have two adults, where they're both working, we're like in the top 10, we're doing pretty good. It's when you kind of have, when you're trying to raise children by yourself, or you're just a single adult that Massachusetts doesn't do as well. And you can kind of make sense when you think about the math of needing that additional income, well, it's even better if you have two incomes, right? Gotcha. And it's where we really, Massachusetts is kind of really falling behind is those single adults with children. Massachusetts ranks 43rd out of 50, with only 9% of households of that type able to achieve a middle class lifestyle. Right. Yeah. It really is. All right. Next one, share of households with incomes above the middle class threshold. Yep. So this is showing it by age group. It's kind of funky in this chart shows, well, the good news, sorry, let me take a step back, is that for two adults go same, we do pretty good, like over like around half, if not of adults make at least the amount of money of households, I should say, make the amount of money needed to attain that middle class lifestyle. But as you can see, it's much lower for one adult. Strangely, it shows it decreasing with age, we think that's compositional effects. So if you, the households that are kind of making a lot younger might go on to, for example, start a family and then they shift in categories. Oh, right, right, right. So there's different ways that people can drop in and out of being classified within these households and that might be driving some of what's causing that decreasing with age. How long did it take to gather all this data and then compile it into a format that's usable? It was a massive project, but I used Compute.R, which is a statistical program. I'm getting a little bit into the weeds here to kind of streamline and automate the process so in the future it'll go faster. Oh, that's good. All right, back to the data. Okay, so this one we just talked about. Let's shift gears a little bit. And so here we have the households with children that are able to use a middle-class lifestyle. You can see, again, when you have two earners, you're really doing a lot better. But people, as you can see, the childcare phase, everyone's hurting. It's only, it's like less than a quarter of households that are able to make ends meet and still have money left over to enjoy themselves. And there are fewer households with just one earner that are able to achieve this lifestyle. So people just made the decision that they're willing to sacrifice on lifestyle in order to have just one person working, or the other person might not be able to work for various reasons, but yeah. And again, you really see those single parents struggling. So how many, is there a percentage of households that, maybe the data, maybe I've missed the data, but what percentage of, I don't even know the question, what percentage of households, I guess, have enough pay to live in the middle class? Yeah, so that's kind of what we're looking at, by household type. Unfortunately, I don't have a number for every, across the entire population, because then I'd have to know everybody's living situations. Which is impossible. It'd be like, so it would be like the combinatorics would get crazy at the number of different kinds of household budgets we'd have to try to account for, but these are the most common household types we look at. Okay, that makes sense. So with that one, we covered, okay, occupations. This is an important one. Yeah, if your kids are going to college, they might want to look at these slides. And then you look at the middle ones, the financial managers, computers, and lawyers. Luckily, I've got a lawyer in the family. So these are the, it just so happens that the wage for one person to live alone is roughly equal to the wage that you would need if two people are raising two kids, how much each person would need to make in that family. So we kind of use that as the benchmark of defining a middle class wage. And nurses are up there, they're number two. We got general and operations manager at number one in terms of the most common. So like the blue bar is how common they are, and then the purple bar is how well they pay. And these are the most common occupations in the state that actually pay enough to kind of make ends meet according to this middle class benchmark. We got some management analysts, financial managers, computer information system managers, medical scientists, health and human services managers, awful lot of managers. IT and software developers. I do worry how many of these occupations are vulnerable to IT. I mean, sorry, AI, yeah. That's a very good point, a very good point. Elyse, you have been kind enough to dive in. There's so much more data. We just touched on some of the high points, but I can't thank you enough for giving me some of your time, going through the data that you have collected and analyzed and put together in an easily digestible format. Thanks for coming in today. I really do appreciate the conversation. Thank you. This is 22 News In Focus with Patrick Barry.