Middle class is shrinking, says a new financial analysis
A CNN Money analysis finds the middle class, both in New Jersey and across the nation, is getting smaller.
Statistics show the middle class in the Garden State, from 2000 to 2013, dropped from 48.8 to 44.8 percent of the population. There are many different definitions of "middle class" but for New Jersey it's somewhere between $50,000 and $90, 000 a year.
So why is this happening?
"While net worth in this country is at an all-time high because of a very healthy stock market, net worth is not evenly distributed and many families have little or no stock market investments and are struggling just to get by," said Pat O'Keefe, director of Economic Research at CohnReznick.
O'Keefe said another issue involves salaries, which aren't increasing much.
"Their take home pay adjusted for inflation has been basically flat since the recession ended, so those who are working day in and day out are in a highly competitive workplace and not gaining much by way of increased earnings," O'Keefe said.
He said even though inflation has remained low for years, it is creeping higher.
"Day in and day out even a low rate of inflation diminishes the purchasing power of our income, which means over time the impact of inflation has been to cause us to have actually less money to spend in real terms, because the dollars that we're being paid with are worth less," he said.
According to O'Keefe, this slows down the state economy, because many people can't afford to spent a lot on goods and services.
Joe Seneca, a professor at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, agrees that stagnant salaries have contributed to the problem. He also said in recent years "a lot of the re-employment after the Great Recession has been in lower paying positions."
The result, he said is "it's a stressing time for many, many households in New Jersey to just keep up."