Gen Z Challenges the Definition of Middle Class; Here's What They Have to say
As the American economy keeps evolving with some major shifts along the way, the definition of what constitutes a middle-class income has come under increased scrutiny, particularly from the perspective of Generation Z. Long gone are the days when the coveted six-figure salary was seen as the ticket to a comfortable, middle-class life. Although an income of $74,000 has long served as a reference point to decide someone's middle-class status, the benchmark is now being challenged by the younger generation.
Freddie Smith, a realtor based in Orlando, Florida, took to TikTok to voice the concerns of Gen Z regarding the $74,000 threshold. According to Smith, this figure is significantly higher than the average income of most Gen Z individuals, who are earning something between $40,000 and $60,000 annually. Smith breaks down the monthly expenses, including taxes, insurance, rent, utilities, groceries, phone bills, and car payments. Even with a prudent approach to living expenses, the average Gen Zer is left with a measly disposable income each month.
The narrative becomes even more challenging when considering major life milestones, such as purchasing a home. Smith points out that saving up for a down payment on a house, which can easily reach $30,000, becomes a daunting task when the leftover income is minimal. Even to be considered eligible for a $400,000 loan, an individual would need an annual income of $120,000. This amount once used to be $70,000 and has shifted significantly in a matter of years.
For those who haven't entered the housing market in recent years, the idea of a home costing nearly half a million dollars might be shocking, but the median U.S. home price in November 2023 was $387,600, according to the National Association of Realtors. This represents the median for existing homes, and does not even factor in new constructions. In comparison, the median home price in 2010 was $173,000, signifying a staggering increase in just 15 years.
The housing market dynamics have been further complicated by the impact of COVID-19. While housing costs have surged, interest rates have experienced a significant decline. However, in recent years, both home costs and interest rates have either remained stable or gone up, eliminating the concept of "entry-level" home prices.
On top of all this, the relatively slower growth in average income has only added to the struggles of the younger workforce. According to Census data, the average income in 2010 was $49,000, and by 2023, it had risen to $68,000, failing to match the rapid pace at which home prices have soared.
The evidence of the growing cost of living is apparent in various aspects of daily life. Even the modest 2-3% annual rise in "cost of living" stipulated in employment contracts, do not align with the steep rise in the actual cost of living. Recent government calculations on average family grocery bills, which surged during and after the pandemic, serve as a disheartening reminder of the economic challenges faced by many.
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