Nostalgia is just about the only thing the middle class can still afford. That's because median wealth is about 20 percent lower today, in inflation-adjusted dollars, than it was in 1984.
Yes, that's three lost decades.
Now, as you might expect, the middle class has been hit particularly hard by the Great Recession and the not-so-great recovery. It's all about stocks and houses. The middle class doesn't have much of the former, but it does have a lot of the latter. And that's bad news, because, even though the crash decimated both, real estate hasn't come back nearly as much as equities have. So the top 1 percent, who hold more of their wealth in stocks, have made up more of the ground they lost. But, as the Russell Sage Foundation points out, the slow housing recovery means that, in 2013, median households were still 36 percent poorer than they were a decade earlier.
In fact, the housing bust was big enough to erase all the gains the middle class had made the past 30 years—and then some. As you can see below, median households didn't add much wealth between 1984 and 2007. That's what happens when real wages don't increase, and the cost of a middle class lifestyle—housing, healthcare, and higher education—does. So, as Dean Baker points out, when the crisis did come, it devoured these meager gains and left the middle class with 20 percent less wealth than they had when it was "Morning in America."
But there's a big caveat here. Households don't necessarily stay in the same percentile from one year to the next, let alone for 30 straight. There's a life-cycle to it all. People start off with little, or negative, wealth when they take out loans to go to school or buy a house. Then they gradually build it up as they get bigger paychecks and pay back what they owe.
In other words, just because median households are poorer now than they were in 1984 doesn't mean that middle class families from back then have lost money since. It means that people at the middle now have lower net worths than people at the middle did then. Though, to put that in depressing perspective, it's still a heckuva lot better than households in the bottom 25 percent, whose wealth never grew during the good times, and then plunged 60 percent during the bad ones. That's because, for both the middle and working classes, real wages have been stagnant the past 30 years, and housing equity has taken a nosedive.
At this rate, it won't be long until the American Dream isn't even a memory for the middle class.
Matt O'Brien is a reporter for Wonkblog covering economic affairs. He was previously a senior associate editor at The Atlantic.