A thriving middle class is a key component of a strong economy and there are growing indications that America’s middle class is shrinking. A recent look at how the median wealth of American families compares with that of other countries shows that we rank 19th on that measure when compared with other developed countries. Census data also show that Nebraska’s middle class is shrinking. In 1999, middle income families represented about 54% of all households and by 2012 that number had shrunk to about 48% of households.
A variety of economic changes — ranging from tax policies to middle wage jobs being replaced by lower paying ones — have contributed to shrinking the middle class. In the same way that many changes have helped create the situation we are in, it will take a multitude of solutions to ensure that our country has a thriving middle class in the future .
Part of the solution is helping lower and middle income families build savings. Saving for things like emergencies, retirement and higher education helps put families on more secure footing. Emergency savings can help families weather unexpected financial challenges like a car repair or a job loss and saving for retirement and higher education can help ensure that both parents and children are prepared for the future.
As a county, we already recognize the importance of savings by providing incentives — in the form of tax deductions — for contributions to things like retirement and educational savings accounts. The challenge is that wealthier individuals are the ones more likely to be able to take advantage of these incentives, leaving many lower and middle income families behind. Data from Nebraska’s college savings plan included in our college savings issue brief found that almost half of all contributions to savings plans were made by families with incomes over $100K, even though those households make up less than 20% of the population.
Research has even found an association between family assets — which often come in the form of savings accounts — and the educational success of children. All families need to save for emergencies and the future and we need to do a better job of ensuring that our savings incentives are accessible to all families who need them and not just those on the higher end of the income spectrum.