America’s ‘forgotten middle’ class faces much worse health and wealth in retirement

LOS ANGELES — As recently as just two decades ago, lower-middle-class Americans were still able to carve out a decent living for themselves, including a comfortable retirement. Now, however, new research finds the modern lower-middle class is facing a much harder time in retirement. Scientists at the University of Southern California and Columbia University say today’s “forgotten middle” face poorer health, worse economic outcomes, lower homeownership rates, and increased disability as they grow older.

On the other hand, upper-middle-class Americans have actually experienced the opposite. Generally speaking, this demographic has seen both its life expectancy and wealth improve.

Making matters worse for those with less wealth, policymakers continue to consistently overlook this “forgotten” lower-middle group of Americans who don’t qualify for most assistance programs — if any at all.

By combining data from the Health and Retirement Survey with a microsimulation called the Future Elderly Model, researchers were able to estimate future life expectancy and disability rates among groups of individuals in their 50s at various points in time between 1994 and 2018. To start, the study authors grouped individuals according to their economic status: upper, upper-middle, lower-middle, and lower. Their eventual findings revealed that healthy life expectancy at age 60 has increased by 1.5 to two years among higher economic groups, yet remained quite stagnant or decreased for the lower classes. A similar pattern emerged when researchers assessed the number of future life years without disability.

Researchers explain the health status at age 50 among the upper and lower-middle classes has declined over the past two decades, but health is deteriorating much faster for the poorer classes. More specifically, this refers to higher rates of hypertension, diabetes, and heart disease.

“Our findings suggest that today’s lower-middle class will spend a larger proportion of their older life with poor health,” says Jack Chapel, the study’s lead author and a Ph.D. candidate in economics at the USC Dornsife College of Letters, Arts and Sciences, in a media release. “For example, an average 60-year-old woman in the lower-middle in 2018 will reach age 84. We project that almost 40% of her remaining years will be lived with a disability – an increase since 1994.”

According to researchers, today’s policymakers are continuing to focus on assistance for the most disadvantaged Americans. While that isn’t necessarily a bad thing, this approach neglects those just one step up on the income ladder. The study calls this demographic the “forgotten middle,” as they are largely overlooked since they don’t qualify for supports like Medicaid, housing vouchers, or food stamps, yet still lack enough resources to cover the increasing costs of healthcare, housing, and living nowadays.

The combined value of financial and housing wealth and other resources, including income, health insurance benefits, and quality-adjusted life years after age 60 increased by 13 percent among the upper-middle group between cohorts. However, those in the lower-middle group in 2018 were just barely better off (3% growth) in comparison to their earlier counterparts.

What’s driving this growing gap between classes?

Researchers point to robust growth in private income and housing wealth for the upper-middle classes. Meanwhile, stagnation in both of those categories appeared among the lower-middle group, including a noted drop off in homeownership in middle age. For example, in 1994, the lower-middle class trailed the upper-middle group in homeownership by 10 percentage points. By 2018 that gap had tripled.

“Our study projects lower-middle Americans will spend a longer proportion of remaining life with significant healthcare needs, but with no more economic resources to attend to those needs than similar cohorts had 20 years earlier,” explains Dana Goldman, dean and C. Erwin and Ione L. Piper chair of the USC Sol Price School of Public Policy and the co-director of the USC Schaeffer Center.

Study authors explain this ripple effect (an overburdened healthcare system, reduced productivity, and strained family caregivers) should concern all Americans regardless of their income bracket.

“The public conversation about inequality tends to focus on the challenges faced by only the most vulnerable populations,” concludes Bryan Tysinger, director of health policy simulation at the USC Schaeffer Center and research assistant professor at the USC Price School. “But our models found that there has been an important divergence in the middle of the economic distribution.”

As far as what the country can do to reverse this trend, the research team acknowledges the improvement of health insurance coverage rates for the study’s lower-middle class after the implementation of key parts of the Affordable Care Act in 2014 as an example of an effective strategy. Still, it’s important to note that policy change did not end up offsetting the losses in employer-sponsored health insurance that disproportionately impacted lower-middle-class Americans.

The study is published in the journal Health Affairs.