The Dwindling Middle Class

By GREGORY N. HEIRES
The middle class is dwindling as the polarization between the rich and the poor in the United States deepens.

Middle-income Americans used to outnumber lower- and upper-income Americans four decades ago. But that’s no longer true.

Battered by stagnate wages and the loss of wealth, the middle class isn’t the economic majority anymore. Millions have fallen out of the middle class as the American Dream has become less attainable.

Losing Ground

“The hallowing of the American middle class has proceeded steadily for more than four decades,” says a 2015 study by the Pew Research Center, “The American Middle Class is Losing Ground.”

“Since 1971, each decade has ended with a smaller share of adults living in middle-income households than at the beginning of the decade, and no single decade stands out has having triggered or hastened the decline in the middle.”

The share of middle class constituted 61 percent of the adult households in 1971. That year, 80 million families were middle-income, compared with the total of 51.6 million families in the other tiers.

Today, the 120.8 million people in middle-income families make up 49.9 percent of the country’s adult population of 242.1 million as the rich and poor together (121.3 million people) have become the majority, the 73-page Pew report says.

As the middle class declined, the share of the adult population in the upper-income tier households increased from 14 percent in 1971 to 21 percent in 2015. The share of the lower-income tier increased from 25 percent to 29 percent during the same period.

The Pew report classifies a three-member family with an income range of $42,000 to $126,000 a year in 2014 dollars as middle-income.

Upper-income households lived on more than $188,000 a year, and the lowest-income families lived on $31,000 or less.

The Wealth Divide

Today, the wealth gap between middle-income households and upper-income households has reached a record high, according to the Pew report.

In 1983, upper-income families owned three times the wealth as middle-income families. That disparity climbed to seven by 2013.

The Great Recession of 2007-09 wiped out virtually 30 years of the wealth gains of middle-income families.

The median wealth of middle-income families climbed from $95,879 in 1983 to $151,050 in 2007, an increase of 68 percent. That sum dropped to $98,000 in 2010.

The median wealth of upper-income families rose from $323,402 to $729,980 from 1983 to 2007. They took a big hit in the Great Recession, but their median wealth nevertheless stood at $650,074 in 2013.

SIDEBAR

Income Status Varies Among Demographic Groups
The changes in income status from 1971 to 2015, according to the Pew report “The American Middle Class is Losing Ground,” has varied among demographic groups:

• People 65 years and older were the only age group with a smaller percentage in the lower-income households in 2015 (36 percent) than in 1971 (54 percent).

Seniors were the only age group whose share in the middle-income tier grew during that period. And their share in the upper-income group grew more than that of other age groups.

Social Security has insulated seniors from being victims of the growing polarization in recent decades. Social Security provides more than 55 percent of the income of the typical senior.

• Married couples have also fared fairy well. Marriage is linked to higher education, which is tied to higher income.

• Unmarried men became more likely to live in lower-income households and slightly less likely to be in the upper tier. More than half of single mothers with a child live in the lower-income tier.

• Black adults achieved the largest increase in income status from 1971 to 2015. Their share living in lower-income households declined from 48 percent to 43 percent during that period, and the percentage in the upper tier rose from 5 percent to 12 percent.
Despite the gains, blacks are still significantly less likely to make it into the middle-income and upper-income tiers. (Between 2007 and 2013, the median wealth of households headed by college-educated blacks fell by 60 percent, according to the Federal Reserve Bank of St. Louis.)

• The share of Latino adults in lower-income families has increased to 34 percent from 1971 to 43 percent in 2015. The Pew report attributes the rise to immigration, as foreign-born Latinos earn less than U.S.-born Latinos. The share of immigrants among Latino families rose from 29 percent in 1970 to 49 percent in 2015.

• The past four decades have been a disaster for young adults, ages 18 to 29, as their share among lower-income households increased to 32 percent in 2015 from 22 percent in 1971.

• College-educated adults are much more likely than others to be in the upper-income tier, yet the share of adults with at least a bachelor’s degree in the middle-income group fell from 56 percent in 1971 to 47 percent in 2015.

• High-skilled occupations (executives, managers, professional specialty jobs, such as engineers, and medical professionals) have experienced larger increases in income status. Job categories and workers experiencing losses include teachers, retail clericals, real estate agents, mechanics, laborers, as well as communications, business services and transportation.

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