The middle class no longer dominates in the U.S.

10 Dec 2015 | Author: | No comments yet »

America’s Middle Class Is No Longer the Majority.

The number of households that are middle class is now matched by those that are either upper or lower income, according to a report released Wednesday by the Pew Research Center. The trend is so firmly established that it may well continue; Americans have experienced “a demographic shift that could signal a tipping point,” Pew researchers concluded Wednesday.

The tipping point appears to have occurred in the past couple of years of the recovery from the Great Recession as the economy has continued to reward the highly educated, well-to-do investors and those with technical skills. However, the share of income held by middle-income families has plunged to 43% of households in 2015 versus 62% in 1971; lower-income households have remained stable (at around 9% in 2015) while the share of income held by upper-income households has surged to 49% in 2015 from 29% in 1971. (The demographic and income data were derived from the government’s nationwide and nationally representative “Current Population Survey, Annual Social and Economic Supplements” (or ASEC), which serves the basis for the U.S. There were 120.8 million adults in middle-income households in early 2015, compared with 121.3 million in lower- and upper-income households combined. The report puts in sharp relief the nation’s increasing income divide — expected to be a central issue in the 2016 presidential race — and highlights how various economic and demographic forces have eroded long-held American ideals about a strong, majority middle class.

And middle-income Americans not only have shrunk as a share of the population but have fallen further behind financially, with their median income down 4 percent compared with the year 2000, Pew said. It’s the first year since the nonpartisan research entity began tracking this data around 1970 that the latter total dwarfed the middle-income figure. Pew dubbed this a possible tipping point in the long erosion of the U.S. middle class, but in reality the division of Americans’ income pie has looked roughly the same for the last five years.

Middle-income households have been the bedrock of consumer spending, and many liberals in particular view the declining middle as part of a troubling trend of skewed income gains among the nation’s richest families. And this conundrum of America’s middle class — who are more in number but make up a smaller share of aggregate net income — may explain why politicians often reference “middle class Americans” in their stump speeches.

In his 2015 State of the Union address, President Barack Obama spoke about how to help this hard-to-define group. “Middle-class economics means helping working families feel more secure in a world of constant change,” he said. In that sense, the nonpartisan group said, “the shift represents economic progress.” Pew defined middle class as households earning between two-thirds and twice the overall median income, after adjusting for household size. The reason? “It’s the center, both politically and economically, that has the power to elect the president of the United States,” says Mark Hamrick, Washington, D.C., bureau chief at personal finance site

Another reason why the middle class are beloved by politicians: Many lower-income Americans may consider themselves middle class even if they’re not, Hamrick says. Americans tend to identify with the depictions of middle class life in the media and/or whether they have a college education (even if they don’t earn as much as middle-income households), he says.

A Wall Street Journal/NBC News poll in January found that 47% of respondents considered reducing income inequality an absolute priority for the government to pursue this year, with Democrats placing far greater importance on it than Republicans. A Gallup survey this spring showed that just 51% of U.S. adults considered themselves middle or upper middle class, with 48% saying they are part of the lower or working class. An upper-middle income household with three people lived on about $126,000 to $188,000 and a highest-income household lived on more than $188,000 in 2014. Slightly more than half of Americans (about 50.1 percent) either live in a lower-class household (roughly 29 percent) or an upper-class household (about 21 percent). President Obama has dubbed his programs “middle-class economics.” Patrick Egan, a politics professor at New York University, says the Pew findings and the Gallup surveys suggest that the public may be more open to policies of redistribution. “Americans are always kind of reluctant to embrace open-class warfare,” Egan said.

At the same time, many median-income voters, particularly non-college-educated men, are at the core of billionaire Donald Trump’s support in the Republican campaign, and the sense that their once-secure middle-class standing is in danger appears to be fueling their anger at the government and at immigrant groups. For example, in August, Georgetown University’s Center on Education and the Workforce released a study showing that high-paying jobs are proliferating, but not middle-income jobs. Despite that progress, African Americans and the elderly still remain more likely than other Americans to be lower income, and less likely to be higher-income. But the middle third jobs have not yet recovered from the recession — that category is still showing 900,000 fewer jobs, compared with pre-recession levels. While the economic status of Americans with bachelor’s degrees changed little from 1971 to 2015, those who did not graduate from college fell down the income ladder.

That shift was magnified by evolving social trends, which saw marriage in decline overall, but especially for those with fewer educational credentials.

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