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A crowd of people are caught in a rain storm. Most people are holding umbrellas, which keeps them dry. There is one central figure with more expensive clothing and a briefcase. This figure seems surprised by the rain and has no umbrella. Mary Kirkpatrick for Vox

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America’s upper middle-class gets a reality check

The economy’s winners feel like losers.

Emily Stewart covered business and economics for Vox and wrote the newsletter The Big Squeeze, examining the ways ordinary people are being squeezed under capitalism. Before joining Vox, she worked for TheStreet.

The American economy is, in many ways, predicated on winners and losers. We’re told the story that a level of inequality is necessary for growth. The discomfort of some workers — largely at the bottom echelons of the economy — is part of the deal we’re supposed to strike for the comfort of everyone else. Except that people higher up on the economic ladder have increasingly been feeling that discomfort, too.

Part of what’s at play is the ever-increasing costs of housing and college and child care, which have caused upper-middle-class Americans to experience more of a crunch for years. Other issues are more recent, like inflation, which everybody hates.

What this amounts to is people who aren’t used to financial insecurity feeling uneasier than they’re accustomed to. The bottom hasn’t fallen out for them, but the ground is less solid in a way it hasn’t been in the past.

America’s semi-rich are feeling semi-bad, and they do not like it.

From inflation to the banks, higher-income people feel like there’s no reprieve

Historically speaking, higher-income families have consistently felt more confident about the economy than lower-income families, explained Joanne Hsu, who runs consumer surveys for the University of Michigan’s Institute for Social Research. That’s changed. “About a year ago, there started to be a convergence of sentiment by income,” she said. “We’re at very low levels of sentiment, and unlike most periods over the last 75, 80 years, higher-income and lower-income folks have similar levels of sentiment.”

During clear points of decline, like when the economy is sliding into a recession, there’s usually convergence, because everyone’s feeling pain at the same time. That convergence has typically been brief — high-income people start to bounce back quickly.

The current moment is different. The country is not in a recession, nor is it imminently heading into one, but consumers, at the top and the bottom, say everything sucks.

For Americans in the higher and, say, higher-ish income brackets, it’s like they can’t catch a break. First it was inflation; then it was everything else.

“As families started to adjust their lives to this new world of inflation, higher-income folks were also being hit by a volatile stock market,” Hsu said. “That’s something that doesn’t really affect people at the bottom income distribution; they’re not really exposed to stock markets directly.”

According to Gallup, 84 percent of Americans making over $100,000 own stocks, compared to 29 percent of Americans making under $40,000. Per the so-called “wealth effect,” consumers feel better about their spending and finances when the stock market is doing well and their portfolios are up, even if it’s only on paper.

As stock market turmoil eased up, bank failures took the economy by surprise, when Silicon Valley Bank and others went under. That put wealthier consumers on edge about the health of the banking system overall, especially when the banks in trouble were ones they and/or their employers were customers of.

“It’s really been kind of a barrage of negative financial and economic developments that are hitting higher-income people more than usual,” Hsu said. “And all this is happening in spite of the fact that we have historically strong labor markets.”

Sarah, a 29-year-old mechanical engineer in Atlanta whose last name is being withheld to protect her privacy, has been laid off twice in the past three years. “I was told over and over again, ‘There will always be manufacturing jobs, they will always need engineers,’” she said.

Despite having consistent health care coverage through work, including her current job, illness has left her with medical debt. She makes well above the median income for the city, but she still feels like she can’t keep up — her rent has gone from $900 to $1,400 over the past five years, nearly doubling. “My salary has not doubled at all,” she said.

Angelle Haney Gullett, 49, who works at an entertainment company, said that the economy doesn’t feel as destabilizing as it did during the 2008-2009 financial crisis, though she’s definitely taken a hit. “The rising cost of everything is taking more of a bite,” she said. “I picked up groceries this morning, and it was probably 50 percent higher than what we were paying during the height of the pandemic.”

She and her husband have more or less given up on the idea of being able to buy a home in the city where they live. “We’d like to buy the last house, the house we grow old in, and there’s no doing that in Los Angeles,” she said. “I feel like I’m going to be priced out of the market until we die.”

The job market seems scary, even if it is not

The strong labor market has not been enough to bolster confidence among higher-income Americans, though there’s no one clear answer as to why.

One explanation Hsu offered up is that the labor market is always good for that group. The unemployment rate for college-educated workers in May was 2.1 percent. Beyond a relatively brief blip during the pandemic, the unemployment rate for them has been under 3 percent since late 2014. (For comparison, the current unemployment rate for those with less than a high school diploma is 5.7 percent, and the overall unemployment rate is 3.7 percent.)

“People at higher incomes have always had less labor market risk than at the bottom, not just by income but by education,” Hsu said. “For them, having a strong labor market is pretty normal.”

Layoffs at big-name tech and media companies have been disconcerting, as people whose jobs have generally been super-secure, like software engineers, are no longer in as strong a position. A supposed “white-collar recession” is not really a thing, at this moment or in recent history, despite some of the headlines.

The current bout of layoffs certainly makes people anxious, however, and is detrimental to those impacted.

Taylor, a 41-year-old software engineer in North Carolina whose last name is being withheld to protect his privacy, saw layoffs at his company in December. He’s a former recruiter and feels there’s not necessarily “any guarantee” that he’ll still have a job tomorrow (which is why he’s secretly listed as “open to work” on LinkedIn).

“Today’s work environment is no longer one where good performance promises a good career path,” he said. The company might decide people need to go for whatever reason — say, profits — and that’s that. Still, he feels like his field is pretty stable. “It’s probably not quite as in demand as it used to be, but it’s still more in demand than many other professions,” he said.

The Federal Reserve’s interest rate hikes in the battle against inflation pose a risk to the broader labor market, which workers across the income spectrum could get swept up in. There is also the AI of it all, the growing fear that the robots are coming to take jobs — including jobs that haven’t traditionally been negatively impacted by automation.

“For white-collar knowledge workers, this is an unusual time. They’re facing a lot more insecurity about what’s going to take place with their jobs than they probably ever did,” said Daron Acemoglu, an institute professor of economics at MIT and the co-author of the recently released Power and Progress: Our 1000-Year Struggle Over Technology & Prosperity.

The wealthier are still ahead — but by a little less

Lower earners have been the winners, relative to where they were pre-pandemic, in a labor market that’s forced employers to woo employees. They’ve seen notable gains in their wages even after accounting for inflation, and have been able to hop from bad jobs to better ones.

“The labor markets have been really tight, especially for those workers in service jobs, in low-wage positions. There’s a high demand for that, and the supply wasn’t there,” said Selcuk Eren, senior labor markets economist at the Conference Board, a business research group. He noted that people who work fully in person — which many with lower-wage jobs do — say they generally feel more job security than people who are fully remote and hybrid. (They’re still less satisfied overall.)

The heat coming off the jobs market has turned some traditionally low-paying jobs into middle-class jobs and led to what’s called wage compression, meaning pay has gone up faster for lower-income people than it has for higher-income people and squished the wage gap.

“For a lot of folks, they are better off, or at least certainly not worse off than they were a few years ago, at the lower end. There’s a lot of good data that shows that inequality has flattened out over the last several years, and part of that is because of gains in income at the bottom,” said Steven Brown, the director of economic mobility policy at the Washington Center for Equitable Growth.

This scenario, where the poorer have inched closer to the richer, can cause unease among the richer. They are accustomed to things being quite a bit better for them than for their blue-collar, lower-educated counterparts, and that is coming into doubt.

In America’s unequal society, people near the top experience a level of economic segregation that is beneficial to them, and also precarious. They fear losing grasp of what they view as limited but necessary resources unavailable to the broader population, which is why they shell out money on private education and extracurriculars to, as philosopher Matthew Stewart describes it, “optimize” their children. It’s also why they try to keep lower-income people and people of color out of their neighborhoods in the name of preserving housing value.

The landscape for some of these higher-income people is now shifting. Higher prices are making it harder for them to be able to buy their way into getting a better deal as consumers and separating themselves out from the rest of the economy, whether that means paying to have a better seat on a flight or opting for concierge health care. Skyrocketing child care costs mean they may not be able to pay for their kids to have the best of the best. Americans are souring on the value of a college education and increasingly wondering if the degree they’ve paid for to preserve their social status or launch themselves into a higher one is worth the cost.

Sam Deutsch, a 27-year-old recent Harvard Business School graduate, says the job market for his class is worse than it was a year ago, when everything was hot, hot, hot. He feels lucky enough to have landed a job in October, but many of his classmates haven’t — at least not the ones they thought they were in line for when they signed up to get their MBAs at Harvard. “Part of what they’re selling is this idea that you’ll have this stamp on your resume and you’re not really going to be in a position where you’re ending up with no real job prospects,” he said.

It’s an especially stark contrast when he considers his brother, a chef with no formal kitchen training, who quit his job without a backup plan a couple of months ago and quickly landed a new gig making 50 percent more. In the Harvard social bubble, it can feel like a recession, because everybody’s saying it’s hard to find a job and companies aren’t hiring. “When you talk to people like my brother who’s completely outside of that bubble, you realize the full picture is a lot more complicated than that,” he said. “A lot of MBA graduates can find jobs, it’s just not necessarily their first choice.”

Things are still better for the upper middle class, just not as much as historically has been the case. People are averse to loss, including of their positioning relative to others. “People perceive the advancement of marginalized groups as loss of their own status,” said Kate Bahn, an economist and research director at the Urban Institute.

Inflation is probably the largest contributor to this. Inflation makes everyone angry, whatever their weekly paycheck, and higher-income workers likely haven’t gotten much of a wage increase while also seeing big cost-of-living increases.

“White-collar industries are used to the economy being good for us, and maybe it isn’t right now, and maybe it’s not going to be going forward,” Matt Darling, employment policy fellow at the Niskanen Center, a center-right think tank, said in an interview earlier this year. “There’s a lot of stress about that.”

Precarity in the economy isn’t new. Some people’s awareness of it might be.

The acute pain those who are well off are feeling right now is familiar to lower-income people — prices have always been too high for their wages; finding a place to live has always been hard.

“It’s a tale as old as time: What happens with more marginalized people in our economy is so often the canary in the coal mine for what we end up seeing when a crisis hits the broader population,” said Rakeen Mabud, chief economist and managing director of policy and research at Groundwork Collaborative, a progressive think tank.

“Upper-middle-class people are finally understanding that it behooves them to care about things that they thought only affected Black and brown folks,” said Jhumpa Bhattacharya, president and co-founder of the Maven Collaborative, an economic justice organization. “They are finally understanding that the US is not a meritocracy where everyone is able to pull themselves up by their bootstraps.”

She pointed to some of the perks at major tech companies put in place in recent years, such as subsidized child care and generous paid leave, which could, in reality, be public goods. “We’ve left it up to private companies,” she said. “Now, we’re seeing a rollback.” Elon Musk, for example, slashed parental leave at Twitter, and many other companies are also considering cutting parental leave and child care subsidies amid economic uncertainty.

“We’ve been sold this narrative that we should just care about ourselves,” Bhattacharya said. “That was always a lie, but upper-middle-class folks were able to buy into that more.”

You can drown in 10 inches of water or 10 feet of water. Economic struggles are bad for those impacted, regardless of income level. They can also have trickle-down effects to those below them on the ladder. If people feel apprehensive enough about the economy that they roll back their spending — they don’t take a vacation, they stop going to the restaurant down the street — that drags down the overall economy and hurts the workers at the hotel they didn’t go to or the restaurant they skipped.

“Sentiment impacts outcomes, so if people think there’s a recession, then they’re going to start spending less,” Bahn said.

Higher-income and more highly educated people moving to more affordable areas of the country can push up housing prices and living costs for the people who were already there, Brown, of the Washington Center for Equitable Growth, noted. “This consumption-based moving makes these cities great places for the well-off to be in and much worse for people who don’t have resources,” he said. “The folks who are well-off, they get to move and be mobile and adapt to circumstances around them, while they end up making things worse for the less well-off.”

And if AI really does wind up taking more white-collar jobs, white-collar workers may end up taking jobs from others. “When we look at previous automation technologies, what we find is that the more educated, skilled groups are sometimes able to shift to other occupations once they are impacted,” said Acemoglu. “It does not completely spare them, but it dulls the negative effects and also transfers some of the negative effects to other groups.”

There’s no one trick to fix the economy, or to change the way people feel about it. To a certain extent, if the economy is “good” but everyone says it’s terrible, the numbers don’t really matter.

The newfound insecurity felt by people who have previously been insulated from economic risk impacts the way the economy is covered — media workers are often in these higher-income, higher-educated social circles and locations, and they reflect what they’re seeing to their audience. It hopefully also impacts the way everyone thinks about the nature of the economy generally. There are always elements of it that are insecure, just not for everyone all the time. And there are policy choices we can make to fight that — we just don’t.

“There’s a reason that people are expressing that they are feeling precarity,” Mabud said. “A historic recovery is not good enough. There’s a lot more to do.”


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