United Way: 40% Of U.S. Households Can't Afford Middle-Class Basics

United Way: 40% Of U.S. Households Can't Afford Middle-Class Basics

President Trump has routinely boasted that the economy is booming under his leadership. He cites the decreasing official unemployment rate, rising corporate profits, and a soaring stock market.

However, for a growing number of Americans, the financial picture is not so bright. According to the United Way (via an exclusive given to Axios), more than 40 percent of U.S. households are unable to afford fundamental needs. The organization reached its conclusion after analyzing expenses such as housing, child care, food, transportation, and healthcare. The poor are not the only ones suffering. Even many of those whose incomes are above the official poverty line are having a hard time keeping up with the cost of living.

“The American Dream is rapidly becoming the American Illusion, as the U.S. … now has the lowest rate of social mobility of any of the rich countries,” the United Nations wrote, noting that the top 1 percent of U.S. earners make 81 times more money than people in the bottom 50 percent. That is dramatically worse than in 1981, when the top 1 percent earned 27 times more than the bottom half of the population.

The United Way found that in 2016, there were 34.7 million households lacking the necessary income to cover basic necessities. That did not include the 16.1 million households below the poverty line. The organization described the lower-middle-class group, which is getting bigger every year, as “the economically forgotten.”

The United Way report used the acronym ALICE, meaning “Asset-Limited, Income-Constrained, Employed” in referring to the two-thirds of all households that earn less than $20 an hour ($40,000 per year for full-time workers). The study found that 49 percent of the populations of California, Hawaii and New Mexico were either living in poverty or qualified as ALICE households in 2016. Those states topped the list, but others were not far behind.

“ALICE is your child-care worker, your parent on Social Security, the cashier at your supermarket, the gas attendant, the salesperson at your big box store, your waitress, a home health aide, an office clerk,” the United Way explains on its website. “ALICE cannot always pay the bills, has little or nothing in savings, and is forced to make tough choices such as deciding between quality child care or paying the rent. One unexpected car repair or medical bill can push these financially strapped families over the edge.”

Advocates for the poor blame income inequality, the gap between the haves and have-nots that continues to grow. From 2007 to 2016, the average income of the poorest fifth rose 12.1 percent while that of the top 5 percent went up by 30.6 percent. The disparity is even more extreme in some other countries. For instance, in China, the top 1 percent have more wealth than the all of those in the bottom two-thirds combined. According to the CIA World Fact Book, Finland has the least severe income inequality. The United States ranks 40th.

The disparity lessened following the Great Depression of the 1930s. It was not until the 1970s that the rich began increasing their share of the nation's wealth. Since then, the situation has gotten more dire. A recent investigation by the United Nations concluded that “extreme poverty” is on the rise. The U.N.'s Philip Alston spent 15 days in Alabama, California, Puerto Rico, West Virginia and Washington, D.C. He reported high homeless rates and inadequate sanitation services, and determined that women and non-whites are most at risk of falling below the poverty line.

There was a time when politicians, business leaders and other elites understood the importance of ensuring a decent quality of life for all people. They knew that only those whose basic needs were being met could fully participate in society, and boost the economy by purchasing goods and services. Welfare programs were designed to repair the damage caused by unfettered capitalism, which tends to concentrate wealth in the hands of those at the top. Without Social Security, food aid, housing assistance, health care and other programs, the wage gap would be much greater and the nation's economic growth would be stunted.

However, the so-called “safety net” is becoming increasingly tattered. Lawmakers are rolling back economic-assistance programs, inflation-adjusted wages are declining and housing costs are rising. Due to tougher requirements for qualifying for welfare, the number of people getting government checks dropped from 4.6 million in 1996 to 1.1 million last year. The 25 percent child poverty rate in the United States is worse than that in any other developed country.

The tax bill that Congress recently passed is likely to widen the income gap. While the legislation reduces taxes for many middle-income and rich Americans, the cuts for the non-wealthy expire after a few years. Corporations and rich individuals will continue to enjoy lower tax rates.

Though some politicians are passionate advocates for a fairer economy, there is little hope on the horizon for those who struggle to thrive in the richest nation on Earth.