In today’s New York Times, a story reports the decline of middle class consumption:
“As politicians and pundits in Washington continue to spar over whether economic inequality is in fact deepening, in corporate America there really is no debate at all. The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away.”

“The top 5 percent of earners accounted for almost 40 percent of personal consumption expenditures in 2012, up from 27 percent in 1992. Largely driven by this increase, consumption among the top 20 percent grew to more than 60 percent over the same period”  The bottom 80 percent accounted for just 39 percent in 2012, down from 47% in 1992.

The impact on the economy is noticeable.  Upscale products and services are booming Stores that serve the middle class are not. “Sears and J. C. Penney, retailers whose wares are aimed squarely at middle-class Americans, are both in dire straits. Last month, Sears said it would shutter its flagship store on State Street in downtown Chicago, and J. C. Penney announced the closings of 33 stores and 2,000 layoffs.”

The article gives some examples  of the impact of income inequality in terms of restaurants:

“Foot traffic at midtier, casual dining properties like Red Lobster and Olive Garden has dropped in every quarter but one since 2005, according to John Glass, a restaurant industry analyst at Morgan Stanley. With diners paying an average tab of $16.50 a person at Olive Garden, Mr. Glass said, “The customers are middle class. They’re not rich. They’re not poor.” With income growth stagnant and prices for necessities like health care and education on the rise, he said, “They are cutting back.” On the other hand, at the Capital Grille, an upscale Darden chain where the average check per person is about $71, spending is up by an average of 5 percent annually over the last three years.”

Read article: Click Here

From Poverty In America’s living wage calculator:
“The original calculator was modeled after the Economic Policy Institute’s metropolitan living wage tool. Users should know there are many researchers contributing tools and resources to the movement to achieve living wages. Diana Pearce at the University of Washington, Seattle is an important contributor to the living wage movement. Her work provides an alternative calculator.”

“Our tool is designed to provide a minimum estimate of the cost of living for low wage families. The estimates do not reflect a middle class standard of living. The realism of the estimates depend on the type of community under study. Metropolitan counties are typically locations of high cost. In such cases, the calculator is likely to underestimate costs such as housing and child care. Consider the results a minimum cost threshold that serves as a benchmark, but only that. Users can substitute local data when available to generate more nuanced estimates. Adjustments to account for local conditions will provide greater realism and potentially increase the accuracy of the tool. As developed, the tool is meant to provide one perspective on the cost of living in America.”

“The living wage shown is the hourly rate that an individual must earn to support their family, if they are the sole provider and are working full-time (2080 hours per year). The state minimum wage is the same for all individuals, regardless of how many dependents they may have. The poverty rate is typically quoted as gross annual income. We have converted it to an hourly wage for the sake of comparison. Wages that are less than the living wage are shown in red.”
Living Wage Calculator Click Here
 

A new study looks at Washington state.  It provides estimates for various family configurations and provides this analysis.

Read the report:Click Here

The report does not state how it came up with these figures. Nor does it take into account regional differences.

The chart would have been better if the taxes were shown on a monthly basis, so that it addes to the gross income needed monthly.

The taxes seem high for this group, especially for federal income tax. Federal income tax might be deducted, but this income group should get refunds, and some might get the EITC. But they would still have to pay social security tax and medicare. Washington has a sales tax but no income tax, so figuring out that might be tricky.

While there might be some ways to cut spending–single people might opt for co-housing, for example–still, it takes quite a bit to cover basic living costs. Looking at the hourly wage, it seems clear that the $9 minimum wage in Washington is not going to be sufficient.

At the national level, the minimum wage has not kept up the rising living costs over time.  It is time for a major adjustment.