More than half of the nation's working-age families with children earn $60,000 or less a year, according to a new report from the Hamilton Project that provides a snapshot of America's "struggling lower-middle class."
Out of those more than 20 million families, about 40 percent have annual incomes at or below $40,000 and a shocking 15 percent, or 5.6 million families, earn between $1 to $20,000 a year, the report showed. The majority of today's families, 76 percent, have annual incomes at $100,000 or less, while "fewer than 3 percent of families earn more than $260,000," according to the report.
The report found that 49 percent of working-age families with children have incomes below 250 percent of the 2012 federal poverty level, or $58,208 for a two-parent family with two children.
About 30 percent of families live between that 250 percent threshold and the official poverty line, which stood at $23,283 in 2012 for a two-parent family with two kids. As such, these families are considered to be the "struggling lower-middle class," the report reads, because their "proximity to the poverty line means that any unanticipated downturns in income could push them into poverty."
While most households living below the poverty line are led by single parents, the Hamilton Project's new report showed that struggling lower-middle class families are almost equally headed by single parents and married couples. Nearly half of the adults in struggling lower-middle class families have attended some college, compared to 33 percent of parents in families living below the poverty line.
Despite these different characteristics, many struggling lower-middle class households grapple with the same challenges families who are living in poverty face, including food insecurity and a reliance on government programs to help supplement their income, the report noted.
Although these struggling lower-middle class families live above the federal poverty level, experts say most households aren't able to live modestly and economically secure earning annual salaries of $60,000 or less. A report published in September by Wider Opportunities for Women (WOW), for example, shows dual-income households with two children really require about $72,000 to cover basic necessities. And in Chicago, the annual budget for families with two parents and two children is more than $73,000, according to the Economic Policy Institute's 2013 budget calculator.
The report also pointed out that workers in the struggling lower-middle class have seen their wages remain stagnant in recent decades. Meanwhile, the nation's income inequality has been growing since the Great Recession.
Within the past three years, households in the top 5 percent saw their earnings increase by 5.2 percent, while incomes dropped for households in the bottom four-fifths, recent U.S. Census data analyzed by the Center for American Progress showed. And last year, the top 10 percent of American earners raked in more than half of all the nation's income, a record amount. The Center For American Progress noted that the share of low-income households has increased since 2007 due, in part, to the rise in low-wage and part-time jobs.
Meanwhile, nearly one-third of struggling lower-middle class families rely on at least one public assistance program in order to make ends meet.
Families with low to moderate incomes often turn to programs like the Earned Income Tax Credit (EITC) and Medicaid. But as a family's earnings increase, the transfer program benefits begin to phase out, "which reduces the return to work and makes it difficult for these families to work their way firmly into a better economic life," the report noted.
"The phase-out of these programs at near-poverty levels of income leads to high marginal tax rates on low- to moderate-income families" which "make the after-tax return to additional earnings quite low." Overall, struggling lower-middle class families typically face the highest marginal tax rates, which is imposed on an additional amount of income or earnings, compared to other groups, the report reads.
The Supplemental Nutrition Assistance Program (SNAP) is also a big support for struggling lower-middle class households, as 21 percent, or 2.4 million families, depend on the program for food aid. About 1.7 million children lived in struggling lower-middle class homes considered to be food insecure in 2012, the report found.