A new report by the Pew Research Center demonstrates just how far the middle class has fallen. “After more than four decades of serving as the nation’s economic majority,” the authors observe, “the American middle class is now matched in number by those in the economic tiers above and below it.”
Early this year “120.8 million adults were in were in middle-income households” — with middle-income being defined as an income of $42,000 to $126,000 per year for a three-person household — and “121.3 million in lower- and upper-income households combined.”
The middle class now makes up slightly under 50% of the adult population, as opposed to 61% in 1971.
This is just one measure of how polarized the economy has become, with upper tiers soaring while the middle is gutted and the bottom expands. “The distribution of adults by income,” the authors observe, “is thinning in the middle and bulking up at the edges.”
Most of the “bulking up” in terms of income growth is taking place in the upper echelon: As data from the Economic Policy Institute shows, between 1979 and 2014, the top 0.1% has seen wage growth of 324.4%, as opposed to the meager 16.7% increase for the bottom 90%.
The “wealth gap” — with wealth being defined by Pew as “assets minus debts” — between the middle and upper class is even more profound.
The report notes that “only upper-income families realized notable gains in wealth from 1983 to 2013,” while “wealth holdings of lower-income and middle-income families are virtually unchanged, and these families fell further behind upper-income families in the past three decades.”
The authors argue that there doesn’t seem to be a single event, or a single decade, that caused the decline; rather, the process has been a slow “hollowing out” of the middle class, a general trend resulting from many contributing factors.
“Overall,” the authors conclude, “Americans are less well-to-do now than at the start of the 21st century. For all income tiers, median incomes in 2014 were lower than in 2000.” The combination of several economic downturns and, of course, the Great Recession merely accelerated the trend that began sometime in the late 1970s and has continued since.
The purpose of the report was not to ascertain the why of the collapse of the middle class, but one can come to reasonable conclusions based on data already available.
As we have seen, income growth has been heavily concentrated at the top of the income scale while wages have remained largely stagnant; the federal minimum wage, adjusted for inflation, is lower today than it was in 1968.
The above reflects, among other things, the decline of unions, both in terms of membership and political clout, which has almost directly mirrored the decline of the middle class, suggesting some relationship between the two. When unions are strong, wages tend to be higher and benefits tend to be better.
Trade deals like NAFTA and CAFTA have played a major role in increasing the power of corporations over nation-states while simultaneously weakening the bargaining power of the working class and shipping jobs overseas. The Trans-Pacific Partnership will, if history is any guide, accelerate these trends.
All the while, the pay of CEOs continues to soar: Between 1978 and 2013, CEO pay increased by 937%. Today, top CEOs make 300 times more than typical workers. This is undoubtedly an outcome of growing corporate political clout that was hastened by Citizens United.
The decline of the middle class is, of course, part of the larger problem of growing inequality and economic polarization that the IMF concedes is not only harmful socially, but economically, as well.