Sunday extra: More families are struggling as the economic divide widens

More families are struggling as the economic divide widens

Published: Sunday, Feb. 8 2009 12:00 a.m. MST

Bertha and Ron Torrez walk their dogs. The couple has begun to feel the economic pinch.

Mike Terry, Deseret News

Miranda Uribe, 10, is not going to be on a baseball team this year. It isn't in the family budget. And her little sister Emma turned 8 yesterday without the party fanfare that usually accompanies birthdays.

The economy has forced a rethinking of how the family spends money, says their mom, Tillie Uribe, a grade-school teacher and single parent who has always considered herself distinctly middle class. When her husband died last year, she and her four daughters — the "giggle of girls" also includes Analisa, 11, and Eva, 4 — had to make some adjustments. The economic crisis has made things worse.

Theirs is the story of the middle class for the past few decades, not just now in an economy pocked by rising unemployment, failing businesses, plummeting home values, more bankruptcies and fewer retirement dollars. The rich have been getting richer. The poor became a tad less poor. And the middle class has gone, well, nowhere.

Uribe divides life into "still-do" and "can't do" and "scaled down": Tae kwon do, church activities and grief-support group are in. Ice skating, baseball, birthday parties and restaurants are out. They reduced cable TV to the most basic package, eat fewer fresh fruits and vegetables and wear warmer clothes so they can turn the furnace down. Haircuts and family outings happen less often, and dinner is a "whole lot of chicken and hamburger when I can find it on sale," Tillie Uribe says.

She can't escape her housing costs or the several hundred dollars a month she pays for the family's medications. Her teacher's salary is not likely to go up anytime soon, she says. "We're hanging in, but we're slowly losing ground."

For more than three decades now, the middle class has not fared well, at least compared to the groups that book-end it, says University of Utah economist and finance professor Scott Schaefer. The country's been heading toward "haves" and "have-nots" for some time, and those in the shrinking middle know it. So do public officials. Vice President Joe Biden recently announced he's making the middle class and its advancement a priority.

In a survey released last April by the Pew Research Center, middle-class respondents said they believe they have stopped making economic progress. The numbers say they're right. They believe they're doing better than their parents. Also true. But it's getting harder to maintain a middle-class standard of living, they say. And the numbers, again, agree.

Men who work full-time now make on average $800 less than their dads did at the same age, says Elizabeth Warren, a law professor at Harvard Law School and a noted authority on economic trends. Her comments came in a 2007 lecture at the University of California at Berkeley that is widely available online. Her lecture compared inflation-adjusted data from 1970 to that in 2005.

Family income rose solely because women entered the work force, usually of necessity. Savings dropped from 11 percent of take-home pay then to nothing now. Credit-card debt totaled 15 percent of annual income for the median family in 2005, compared with 1.4 percent in 1970.

Warren's examination of federal data shows debt is not being driven by people living the high life. A family of four spend 32 percent less on clothes, 18 percent less on food, 52 percent less on appliances, 24 percent less per car, she says. But housing costs 76 percent more, and lower interest rates don't make it up. The cost of employer-sponsored health insurance rose 74 percent.

Two-earner households have two cars and now pay child care. Finally, tax rates have gone up 25 percent, because the second wage raises the bracket.

It boils down to this: A middle-class family in 1970 made about $32,000 a year, compared with 2005's $73,000. But that 1970s family spent half its income on big expenses it couldn't cut. Now, the average family spends three-fourths of its income on basics. And if a disability or other catastrophe hits one parent, what happens to the rest of the family?

The growing gap

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