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The Middle-Class Has Stopped Shrinking But…

The Pew Research Center just released an interesting report on the state of the American middle-class. In 2016 (the latest data available) about 52% of American adults lived in middle-class households. This represents a turnaround in this important demographic group. Previously its size had been steadily declining since 1971 when it was over 60%.

If you believe that societies with large middle-classes tend to enjoy greater economic stability and political moderation, then this ought to come as good news. Numerous economists have argued that political and social unrest is directly related to the degree of inequality in wealth distribution. If so, a burgeoning American middle-class could signal the start of some improvement in our current highly polarized political discourse.

Unfortunately, although the middle-class appears to be stabilizing, at the same time the income disparity between the classes continues to grow. The Pew report defines middle-class as those families with median incomes of about $78K on an inflation-adjusted basis, a number which has grown 6% since their 2010 analysis. But over the same period upper-income household earnings rose by 9% while lower-income households saw only a 5% gain. This mirrors the long-term increase in income inequality that the country has been experiencing since Pew began their study in 1970.

The share of adults classified as middle-class also varies widely across geographies. Metropolitan areas with the largest middle-class concentrations (over 60%) are in the Midwest and Northeast. Rural Texas and California top the list of locations with the highest number (over 40%) of lower-income adults, while the Bay Area is unsurprisingly among those areas with the greatest number (30%) of high-income families.

In short, while the American middle-class appears not to be eroding as rapidly as it had been, the wealth gap between upper-income families and middle and lower-income families is at its highest level ever recorded through Pew’s research. This may unfortunately portend further polarization in U.S. politics until things improve.

Here’s a link to the latest Pew study:

http://www.pewresearch.org/fact-tank/2018/09/06/the-american-middle-class-is-stable-in-size-but-losing-ground-financially-to-upper-income-families/.



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