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Rebuilding the Middle Class: A Blueprint for the Future

AARP CEO A. Barry Rand offers a plan for financial security

On Jan. 15, 2013, AARP CEO A. Barry Rand delivered the following speech at the National Press Club in Washington, D.C.

The prosperity of the middle class has been the basis for the American way of life for the past 60 years.  But today, that prosperity is eluding many individuals and their families for reasons beyond their control.

The decline of the middle class threatens our ability to fund health and retirement programs, to maintain a safety net for the most vulnerable and to invest in our future.  It threatens the hopes and dreams of generations of Americans, both for themselves and for their children.

A declining middle class makes upward mobility and a better life — including a more secure retirement — “the impossible” American Dream.

Good morning, everyone, and welcome to AARP’s “Agenda for the Middle Class — 2013.”

AARP works to make life better for all.  We have been fighting for the middle class for decades because these issues are important to our members, people 50-plus and their families.  In August of 2011, AARP’s Public Policy Institute launched a yearlong study of the well-being of America’s middle class — with a focus on prospects for a financially secure retirement.

Today, we will share what we’ve learned from that study and the policy implications going forward — specifically, these three aspects:

  1. How the decline of the middle class over the last 30 years has affected real people;
  2. How future generations of retirees — the 20-, 30-, 40- and 50-year-olds of today — will be affected if we don’t turn this around;
  3. And, what we need to do as a nation to restore prosperity to the middle class and keep the American Dream alive.

Over the past generation, more and more of the middle class have fallen off the cliff into economic insecurity and even poverty — pulled down by a lack of job opportunities, rising health care costs, inadequate savings, declining home values, a lack of consumer protections and stagnant wages that have not kept pace with the costs of meeting basic needs.

The Great Recession and the ongoing financial crisis have only tightened the squeeze on middle-class families and have cast a shadow on the “future retirement” prospects of today’s workers.

This is taking a serious toll on middle-class families. They have never felt more insecure.

As one woman in Milwaukee told us, “I feel like I’m just one big crisis away from utter devastation.”

And, she is not alone.  According to our new “Middle-Class Tracking Index,” the percentage of those in the middle class who were secure dropped from 26 percent to 16 percent from 2004 to 2010.  And the numbers were even lower for African American and Hispanic middle-income families — only 10 and 11 percent, respectively.

So, how do middle-class families cope?  They typically do three things:

  1. At least one — and often both wage earners — work longer and delay their retirement.  And, many who have already retired end up going back to work — if they can find a job.
  2. They drastically reduce their standard of living, and rely more on government programs to help them make ends meet.  Or,
  3. They take on more debt — borrowing against their homes and 401(k)s, running up credit card balances, taking out loans and borrowing from family members.  

As a result, the median debt of middle-class families has increased nearly 300 percent over the last decade.

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