Wednesday, December 16, 2015

Here's How Much the U.S. Middle Class Has Changed in 45 Years (BusinessWeek)

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They're now outnumbered by the richest and poorest

U.S. Middle Class No Longer the Majority

In the age of rising income inequality, the task of preserving America’s middle class has been taken on by politicians across the ideological spectrum. A new report from Pew Research Center shows just how much the economic fortunes of this group have changed since the 1970s. 

In every decade since then, the percentage of adults living in middle-income households has fallen, according to Pew, which is based in Washington. The share now stands at 50 percent, compared with 61 percent in 1971.

This matters because  the "state of the American middle class is at the heart of the economic platforms of many presidential candidates ahead of the 2016 election," Pew researchers Rakesh Kochhar and Richard Fry wrote in their report. Meanwhile "a flurry of new research points to the potential of a larger middle class to provide the economic boost sought by many advanced economies."

Pew defines a middle-class household as one having income that is two-thirds to double that of the overall median household income. A family of three, for instance, would need to have a minimum income of $41,869 to qualify as middle-income.

Here’s more data on how America’s middle class has morphed over the last few decades: 

They're no longer the majority

Being a member of the middle-class has long been treated as an American badge of honor. However middle-income households have lost their majority status in the U.S, with the size of their counterparts on opposite ends of the income spectrum overtaking them in number.

Some 120.8 million adult Americans lived in middle-class households this year, according to Pew. That’s slightly less than the combined number of upper-income adults (51 million) and those at the lower tier (70.3 million).

Their income gains are smaller

While households across the spectrum have seen higher earnings over the past several decades, upper-income households have seen their pay rise the most.

The median income of those families was $174,625 in 2014, up 47 percent since 1970, Pew data show. That compares with a 34 percent gain for the middle class and a 28 percent increase for the poorest households.

Households of all income levels got hit hard during the recession, resulting in earnings declines between 2000 and 2014.

Blacks are least likely to be middle-income

Blacks are less likely to be part of the middle class than any other racial or ethnic group, the Pew report finds. Some 45 percent of black adults were in the middle-income tier, down 1 percentage point from 1971.

One positive note is that blacks are the only major racial group to see a decline over that time frame in their share of adults who are low-income, which is down to 43 percent from 48 percent. Still, that percentage is the highest of the ethnic groups, alongside Hispanics.

White Americans are the only racial group where a majority is in the middle class, though their share fell to 52 percent this year from 63 percent in 1971.

Their piece of the pie is shrinking

The middle class holds 43 percent of U.S. aggregate income, the smallest share in Pew’s data back to 1970.


Almost half of aggregate earnings in the U.S. is now commanded by the wealthiest families, who are "are on the verge of holding more in total income than all other households combined," Kochhar and Fry wrote. "This shift is partly because upper-income households constitute a rising share of the population and partly because their incomes are increasing more rapidly than those of other tiers."








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