Meet the “new middle class” — spending more, earning less, target market for payday loans


Here’s all you need to know about the fragile state of the American middle class. An online payday-type lender named Elevate Credit sees the middle class as its target market.

“Decades–long macroeconomic trends and the recent financial crisis have resulted in a growing ‘New Middle Class’ with little to no savings, urgent credit needs and limited options,” the firm says on its website.

The new middle class. Lining up to borrow money at triple-digit interest rates.

You probably think of payday lenders as unsavory places where Americans without checking accounts must go to cash a check, or where folks without credit cards rob Peter to pay Paul so they can pay the electric bill.  Well, if Elevate is to be believed, triple-digit rate loans aren’t just for the poor anymore.

As part of my Restless Project, I argue often with anyone who will listen that the American economy is seriously broken — and the middle class has a lot more in common with the poor than the rich.  Folks who don’t realize this aren’t paying attention, and they’re destined to be surprised when they find themselves shopping for payday loans someday.

How did this happen?  Easy. Monthly expenditures are up for families, while incomes are flat. More money is going out, while more money isn’t coming in.  Each time costs edge up while income doesn’t, people are closer to the “don’t even have one month’s of emergency savings” category.

The new middle class is the restless class. They might live in a nice-enough house, and even have some nice clothes. But they are one illness or one layoff away from a very uncertain future.

The Pew Charitable Trusts recently broke down the “more money is going out” data is a report blandly titled “Household Expenditures and Income: Balancing family finances in today’s economy.” There’s nothing bland about its content. From 1996-2014, a typical American family spent about 25 percent more on housing, food and other basics.    During the 1996-2014 time frame, the biggest expenditure jumps came in housing, which grew from $12,300 annually to $17,000 annually, and health, which jumped from $1,119 to $2,560.

But incomes didn’t keep pace with rising costs.  As a result, “slack” — or money left over at the end of the month — is disappearing from the family budget.  On average, Americans spent 71 percent of income on the basics in 1996, and in 2014, it was 75 percent, and headed the wrong way.

The recession really exacerbated the problem.

“From 2004 to 2008, median household income grew by only 1.5 percent, while median expenditures increased by about 11 percent,” Pew said. “By 2014, median income had fallen by 13 percent from 2004 levels, while expenditures had increased by nearly 14 percent. This change in the expenditure-to-income ratio in the years following the financial crisis is a clear indication of why and how households feel financially strained.”

Do your own math.  The typical household – using “median ” data — saw its spending grow from $29,400 in 1996 to $36,800 in 2014, or roughly $3,000 a month.  Using “average” numbers, spending grew from from $43,200 to $54,800 during that span, or about $4,500 a month.

How does your family compare?  Recently, I asked readers to share their monthly budgets with me — asking how some families live on less than $60,000 annually — and these figures are in line with what I heard from you.  Here’s a typical budget from Texan Matt DeMargel

Rent: $1,350
Healthcare: $588
Utilities: $400
Child care: $600
Food: $800
Car insurance and gas: $300
TOTAL: $4,038

(Note, the DeMargel family was lucky enough to pay nothing for child tuition or student loans.)

Even that modest budget requires a roughly $60,000 salary, before taxes. Remember, these are real expenditures, so they must be paid with after-tax, actually-hit-your-checking-account dollars.

Of course, people at the lowest economic rungs struggled the most.  Households in the lower third spend 40 percent of their income on housing, while renters in that third spent nearly half of their income on housing, as of 2014.  That’s a flat-out terrifying way to live — renting, and giving half your paycheck to a landlord.

But it’s important to note that struggles and anxiety are continuing to reach deeper into that “new” middle class.

Back in 2004, the typical household in the lower third had a little less than $1,500 left over every year after accounting for annual outlays – so-called “slack” in the budget. Just 10 years later, slack for this group had fallen to negative $2,300, a $3,800 decline. These households may have had to use savings, get help from family and friends, or use credit to meet regular annual household expenditures.  Those without credit cards turned to products like payday loans.

Slack has all but disappeared from the “middle third” folks as well, however.  The typical household in the middle third saw its slack drop from $17,000 in 2004 to $6,000 in 2014.  In other words, the “leftover” line on the monthly budget fell from about $1,500 to $500 for America who are solidly middle class, approaching upper middle class. That’s $500 to deal with every emergency car repair, unexpected health issue, or Heaven forbid, a vacation.

No, living without slack is nothing like standing on bread lines. But it is frightening enough to keep you up at night. And it should help you realize that the “new” middle class, the restless class, has a lot more in common with the poor than the rich in America.

‘A billion useless people’ — the end of work (and pay) is coming, but no one seems very concerned


A billion useless people.  No, maybe that’s generous.  Billions, thanks to robots and artificial intelligence.  The “rise of the useless class.”  The end of work.  And with it, the end of pay.  There are the things that the world’s biggest thinkers are thinking about right now.

It’s frightening how little everyone else is thinking about it.

I recently wrote a piece for about “micro-generation” gaps.  It describes the Tower of Babel at work that results from the rapid change of in communications apps and software.  Keeping up with the latest SnapChat, Venmo, and Bumble is driving us insane. Forget about 60-somethings struggling to talk with 20-somethings.  Today, 25 year olds can’t communicate with 22 year olds. It’s a problem.  But nothing like THE problem

Reporting that story, I came across some research I found pretty stunning.

Most Americans tell researchers (in this case, Pew) they believe robots will be doing most of the work within 50 years.   But they also think only other people are going to “useless” in the future. Fully 18 percent say their own jobs will exist, in current form, 50 years from now.

Also in the Pew research: only 13% are concerned that they won’t be able to keep up with the technical skills needed to stay competitive in their jobs, and only 11% are concerned that their employer might use machines or computer programs to replace human workers.

Finally, only 6 percent said their current job will “definitely not” exist. The right answer is closer to 100 percent.

That’s frightening head-in-the-sand stuff right there.

I *had* called Aaron Smith, who conducted Pew’s research, to ask him if workers were concerned about keeping up with the latest apps, like Venmo or Slack.  No, was the answer. They have other things on their mind.

“People are much more worried about their employer managing their company better – both near-term and long-term, than they are growing automation,” said Smith.

We know that many Americans have trouble getting to the end of the month, so thoughts about the future are probably far from their minds.   That’s terribly short-sighted, and the quickest route to ending up with a billion useless people on the planet.

We need leaders to do some of this long-term planning for us, but that’s not happening either.  Smith expressed diplomatically something I have said angrily in the past:

“There are certainly a lot of really smart people out there would say this is the No. 1 challenge facing future of our economy, as ‘AI’ and robotics become advanced.  And there are  a lot of very smart people who would say our politics, and economics and our education system are not treating this with severity or intensity it needs to be treated with.”

It’s great that the student loan crisis is getting the attention it finally deserves because the Bernie Sanders’ “free college” idea has stirred so much discussion. I’m all for educating people without saddling them with decades of debt, but I’m afraid it might be too late for college.  Investment guru Bill Gross wrote in a recent research note about this issue that the old economics notions about simply re-training workers won’t work in the 21st Century. In the past, workers had time — perhaps a generation or two — to adjust to technological revolutions.  Horse-carriage coachmen has decades to learn a new skill. That’s not going to happen this time.

And college?

“Four years of college for everyone might better prepare them to be a contestant on Jeopardy, but I doubt it’ll create more growth,” he said.  And as researcher Yuval Noah Harari, he of the “useless billions” notion points out, most of what people learn in college is useless by the time they are 40 or 50. 

So, what to do? Mamas, don’t let your babies grow up to be doctors. Or pilots. Or….just about anything.

I had a remarkable conversation recently at a conference I attended. I was at a table of parent-aged adults, and I brought up how sad it was that landed-on-the-Hudson hero pilot Sully Sullenberger regularly tells people he wouldn’t want his own children to become a pilot today.  Once an honored and lucrative profession, it’s now a oppressive, high-pressure job that is no longer a sure route to a good life.  And I asked those there. What do you dream for your children?

Lawyer? Doctor? Pilot? Professor? Nope. Nope. Nope.Nope.

A software engineer, perhaps.  Perhaps.  But coding is anywhere near as robot-proof a profession as folks would lead you to believe.

And that’s my point.  Most of us do work that can be automated.  (Journalists, certainly). The answer to that Pew survey above should have been close to 100 percent. Virtually none of our jobs will exist  in the future as they do today.  Everyone has a stake in dealing with this problem.  The time to talk about it is now. The time to fix it is now.  The time to empathize with our fellow humans who have lost their professions is now, because we will all be there soon.

I promise you, no one is going to build a wall to keep out the robots. College, walls…these are yesterday’s solutions.  The future is coming, and it’s coming fast.  Get your heads out of the sand.

Mark Zuckerberg is the world’s front-page editor now. That’s the real problem.


Mark Zuckerberg never set out to be the world’s editor in chief, but here we are.  And sorry Mark, you are a terrible front page editor.

Hearings in Congress today dug into the weeds of why Americans feel like social media is letting them down — it was a ready-made tool for Russian election interference; it’s now silencing some voices based on vague criteria, and so on.  But these aren’t aren’t THE problem. They are just symptoms.

Two thirds of Americans get their news from social media today. Most from their Facebook wall. That’s s a very, very small window through which to see the world.  Worse yet, most of them don’t know how social media really works.  Pew just released a study showing a majority have no idea how stories are selected for Facebook’s news feed. And don’t believe they have any influence over what appears there.

That’s THE problem.

Fairly recently, a consumer reading a newspaper who didn’t like what was on the front page could do something simple, but now seems revolutionary — she could turn the page.  Over and over.  And within 10 minutes or so, she’d be exposed to hundreds of stories, neatly organized in sections.  If she were really smart, she might do this with three or four papers. More to the point, she had a pretty good understanding of why those headlines and those stories appeared in those sections.

Today, we scroll.  A supercomputer designed to hack our attention span optimizes that “front page” for “engagement,” with the goal of hypnotizing you into sticking around. There’s no sections, no priorities. Only click-bait.  And whatever Facebook has decided is important to the hypnotics that month (Live video! Puppies!) If a good story doesn’t click with the first few folks who see it, it’s dismissed into the long tail of Internet oblivion, destined to be a tree that’s fallen silently in an empty forest. This story, I’d think, will be a good candidate for that scrap heap.

I don’t begrudge that (ok, of course I do. Facebook’s algorithm changes have killed my website in recent months).  But I found this piece of Pew’s most recent survey the most troubling: Facebook offers token tools for adjusting what’s on users’ front pagea, but even these are rarely used. Fully two-thirds of users have never even tried to influence the content on their news feed. Of course, the older users get, the less likely they’ve taken an active step to change their feed, such unfollowing groups or asking that certain friends be prioritized. (Please choose “see more” of me.)

In other words, news consumption in America is dangerously passive.  And Mark Z is the most powerful front page editor in history.

This is not what Facebook set out to do; I genuinely think many at the company are horrified by this state of affairs.  I am one who believes it is an existential threat to the company — it’s very far from the Mark’s core expertise. And users will eventually revolt. In a separate Pew survey, researchers found that 42% of users had taken some kind of Facebook break recently. And 26% said they had deleted the app from their phone. Those numbers seem awfully high to me, but you get the point.  People sort of hate Facebook now for what it’s done to their lives.  That’s not a great business model.

And it’s getting worse. As Facebook works frantically to save itself, and to diffuse the bomb it’s been turned into, news feed is often shrunken. Puppy photos are back on top; interesting news stories (like this one!) are out.  Users see an even smaller selection of “follows” when they look.  You might have 500 friends, but only 25 of them appear in your feed, urban legends and empirical evidence tells us.

Why are we really here? Since the beginning of time, Facebook has refused to offer an unfiltered option that would simply list every post from every friend.  When a software maker invented a third-party app to make such a raw feed, Facebook forced it to shut down. Users would be overwhelmed by so many posts, the firm believes.  News feed must be edited.  And so, here we are.

Yes, in some ways, we did this to ourselves.  Nothing stops Americans from visiting on their own, instead of relying on the news feed (or Google News) for their headlines. Heaven forbid, we could actually subscribe to a newspaper, too.  But, as I began this piece, here we are.  The world’s most efficient tool for connecting human beings, one of the Internet’s original killer app, has killed our curiosity.  We’re devolving into digital-made tribes, only listening to the 25 or so people who make the front page of our lives.

As the saying goes, you made this mess, Mark. You have to clean it up.

Are you living below the ALICE line? 43% of Americans can’t cover the basics


Two-thirds of all jobs in the country are low-paying at less than $20 an hour or $40,000 a year
About 43% of households, or about 51 million, don’t earn enough to cover the basics.
Asset Limited, Income Constrained, Employed, or ALICE, is a worrisome group for America

What’s the minimum amount of money you need in America to get by? How many Americans are earning that? Are Americans doing well, or poorly, or somewhere in between? It’s hard to measure these things, but incredibly important to try. What is your monthly nut, the minimum you need to earn to pay your basic bills, and how does your income compare to that? I’ve taken several cracks at this with The Restless Project. The United Way has now done an admirable job with its new ALICE project — a study of a group the organization has identified as “Asset Limited, Income Constrained, Employed.”

Here’s is the organization’s answer: 43% of households, or about 51 million, don’t earn enough to cover the basics.

But isn’t the economy doing better? Yes and no. The unemployment rate is low, but wages are low, too. New jobs don’t help if they are minimum-wage jobs. Another harsh data point from the study: two-thirds of all jobs in the country are low-paying at less than $20 an hour or $40,000 a year, if full time. That’s far less than the $59,000 needed to cover the basics in Ada County, Idaho. Live in a place like Portland ($73,000) or Seattle ($85,000) and that $20-an-hour job looks even worse.

To perform its calculations, United Way added up local expenses for housing, child care, food, transportation, health care, technology, taxes, and miscellaneous and came up with county-level minimum budgets for these basics. In Ada County, $30-an-hour wages are needed to support that budget.

Some states are worse off than others. California, Florida, and Texas have the largest number of ALICE households in the country, the organization says. In California, 49% of residents are below the ALICE line. In Florida, 44%, and Texas, 43%.

While North Dakota’s mix of low housing costs and good-paying jobs made it the most prosperous state for residents, no state is really spared. In all 50 states, at least 32% of residents are below the ALICE line.

“Despite seemingly positive economic signs, the ALICE data shows that financial hardship is still a pervasive problem,” said Project Director Stephanie Hoopes, Ph.D., who leads the data analysis.

I’ve long argued that terms like poverty and middle-class muddy the waters in discussions like this. Folks who earn $20 an hour have a lot more in common with folks below them on the economic ladder than folks in what I have started to call the “Lucky” class — people who by virtue of family, connections, or an outsized wage don’t suffer from housing cost anxiety. You shouldn’t have to be lucky to know your kids can go to college and you can afford a decent home. The American Dream is dead if luck is the only path out of that kind of anxiety.

How does your monthly nut budget compare to the ALICE Project results? Tell me in comments or write to me privately.