The American Dream Is Now Officially Unaffordable

| + More Articles
  • Like on Facebook
  • Share on Google+
  • Share on LinkedIn
Source: John Grieshop/Getty Images

John Grieshop/Getty Images

It looks like the inevitable has finally caught up with us: the American Dream is no longer affordable. We’ve heard about the possibility for years, and according to a new study put together by USA Today, a six-figure income is what it really takes to put all the pieces together. In fact, the exact figure is $130,357, which they arrived at by calculating the cost of a family’s essential expenses, some extras, and taxes/savings. Now, this is what they found was needed for the average family of four — two adults and two children.

If $130,000 seems like a lot, that’s because it is. Even with two adults working full-time, that can be a number out of reach for most people. According to the U.S. Census Bureau, median household income between 2008 and 2012 was $53,046 per year, less than half of what the USA Today study calls for. While the economy has been picking up steam as of late, it’s still not the same situation that led to prosperous years for the middle class during the 1990s.

The biggest issue — and the factor that is putting the ‘American dream’ out of reach for the vast majority of people — is that they simply do not have the financial power they did before. The cost of living has been skyrocketing over the past ten or fifteen years. Just about every standard purchase, whether it be for a home or for a gallon of gasoline, has seen prices jump dramatically. Food prices are also through the roof, along with healthcare costs and transportation.

The other side of the coin is that wages and compensation have flat-lined. As everything else has gone up in price, wages really haven’t budged, leading to erosion of purchasing power. Ever wonder why so many retail stores and restaurants closed over the past five years? It’s because those in their target demographic, the middle class, simply don’t have the money to go there anymore. The Economic Policy Institute looked deeper into the issue, and found that flat wages and job losses have been the major barriers to economic prosperity for many in the middle class.

“This lost decade for wages comes on the heels of decades of inadequate wage growth. For virtually the entire period since 1979 (with the one exception being the strong wage growth of the late 1990s), wage growth for most workers has been weak. The median worker saw an increase of just 5.0 percent between 1979 and 2012, despite productivity growth of 74.5 percent — while the 20th percentile worker saw wage erosion of 0.4 percent and the 80th percentile worker saw wage growth of just 17.5 percent,” the EPI says.

Eroding wages and increasing costs — this is the intersection that is causing the middle class to disappear. Most of the middle and lower classes in the U.S. have been sold on the idea of the ‘American dream,’ and have worked hard to attain it. Putting it out of reach, all the while expecting people to continue buying into the ‘meritocracy,’ is going to eventually come back to bite you.

More Articles About:

To contact the reporter on this story: staff.writers@wallstcheatsheet.com To contact the editor responsible for this story: editors@wallstcheatsheet.com

Yahoo Finance, Harvard Business Review, Market Watch, The Wall St. Journal, Financial Times, CNN Money, Fox Business