The American middle class gets poorer while the rich get richer

NEW YORK (CNNMoney)
When Debbie Bruister buys a gallon of milk at her local Kroger supermarket, she pays $3.69, up 70 cents from what she paid last year. Getting to the store costs more, too. Gas in Corinth, Miss., her hometown, costs $3.51 a gallon now, compared to less than three bucks in 2012. That really hurts, considering her husband's 112-mile daily round-trip commute to his job as a pharmacist.

Bruister, a mother of four, received a $1,160 raise this school year at her job as an eighth-grade computer teacher. The extra cash -- about $97 a month, before taxes and other deductions -- isn't enough for her and her husband to keep up with their rising costs, especially after the elimination of the payroll tax break. Its loss shrunk their paychecks by more than $270 a month. "If you look at how much prices are going up, you get in the hole really quick," Bruister said. "It's a constant squeeze."

In the wake of the Great Recession, millions of middle-class people are being pinched by stagnating incomes and the increased cost of living. America's median household income has dropped by more than $4,000 since 2000, after adjusting for inflation, and the typical trappings of middle-class life are slipping out of financial reach for many families.

Families with young kids are struggling to afford childcare and save for the ever-climbing costs of college. Those nearing retirement are scrambling to sock away funds so they don't have to work forever. A weak labor market means that employed Americans aren't getting the pay raises they need to keep up -- especially with big-ticket items such as health care eating away at their paychecks.

Economists say it boils down to two core problems: jobs and wages. The traditional "middle-class job" is disappearing.

Mid-wage occupations such as office managers and truck drivers accounted for 60% of the job losses during the recession, but only 22% of the gains during the recovery, according to a National Employment Law Project analysis of Labor Department data. Low-wage positions, on the other hand, soared 58%.

There's one more big squeeze hitting households: health care. Since 2002, insurance premiums have increased 97%, rising three times as fast as wages, according to Kaiser Family Foundation/Health Research & Educational Trust. In Mississippi, Bruister now has an $1,800 deductible, compared to $500 a few years ago. When she goes to the doctor, the bill typically tops $100 -- so she tries to avoid going. "Health care for me has turned into more of a luxury item," said Bruister, 52. "I go every year for the checkups my insurance pays, but after that you just tough out the other illnesses."

Economists say they don't expect much improvement for the middle class any time soon. The recession is officially over, but the recovery is fragile, and its gains aren't evenly spread. Between 1993 and 2011, the top 1% of America's earners saw their income soar by 58%, while everyone else only got a 6% bump. That's making it even harder for most households to get ahead. "The middle class was always synonymous with economic security and stability," Draut said. "Now it's synonymous with economic anxiety."