Will Middle Class America Ever See A Real Raise Again?

Middle Class Income Remains Stagnant

"Think of the American economy as a large apartment block," Harvard economist Larry Katz told the Financial Times in a recent story highlighting wage stagnation. "A century ago – even 30 years ago – it was the object of envy. But in the last generation its character has changed. The penthouses at the top keep getting larger and larger. The apartments in the middle are feeling more and more squeezed and the basement has flooded. To round it off, the elevator is no longer working. That broken elevator is what gets people down the most."

VIDEO: David Muir hears from homeowners struggling to make mortgage payments.

A recent study by the global management consulting firm Hay Group found that planned salary increases for 2011 are at 3 percent for clerical, supervisory, middle management and executive positions. The 3 percent increase is below the 4.5 percent to 5 percent increases common during the beginning of the decade, and the steady 4 percent from 2005 to 2008.

"The past three years have seen the lowest base salary increases that most employees have ever experienced," the study said.

Lerner said increased productivity and declining wages have conspired to slowly strangle America's middle class. In addition, fewer than a tenth of American private sector workers now belong to a union.

"What we see with workers increasingly is people are working two, three, and literally four jobs just to try to make ends meet," he said. "The foreclosure rate is out of control and now we find the people who are losing their homes are not people trapped in sub-prime loans, they are people who had regular mortgages. People are not able to pay for college. What is critical here is that the way people have made ends meet is by going deeper and deeper into debt."

VIDEO: David Muir gets answers from a vice president of one of the biggest banks.

For Law, who cares for elderly and disabled people, the 13 years she spent without a pay raise defined her family's life. She made about $12,000 a year. An SEIU member for last three years, she recently saw her first pay increase in a long time – a 3 percent hike. Her husband, Ricky, a former supervisor at a foundry, earned about $20,000 until a disability prevented him from working eight years ago.

"You finagle your grocery bill," Law said. "You rob Peter to pay Paul. There are many times I have a grocery list and I'm thinking the electric bill went up $25. So you kind of skim on the grocery list and find things that are cheaper. You repeat meals quite often in order to take that $25 and put it on the electric."

VIDEO: Frustrated viewers wonder why they still struggle against bailed-out banks.
Your Questions for the Big Banks

Middle Class Struggles While Upper Class Grows

Many of her neighbors found themselves in similar straits, Law said.

"In my community you started seeing extended families come back together, with grandparents living in the home again with the kids and grandkids, taking care of the grandchildren," she said. "Had it not been for my mother, my children wouldn't have received a very good Christmas for several years. There wouldn't have been an Easter basket sitting in the kitchen."

Law, whose two grown sons are unemployed, said she expects younger generations to be worse off.

"Working people have been left without a voice," she said.

VIDEO: The Middle Class Wants More from Banks

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