Is the Middle Class really disappearing?

Great Debates
1

It seems to have become an accepted political “fact” that the American Middle Class is disappearing. People act like this is a new thing, but I have been hearing this since the 70s. Is it actually true?

For one thing, the definition of “middle class” seems to be varied, inconsistent and politically charged. One definition would have nearly every American who isn’t a multi-millionare or on wellfare self-identifying as “middle class”. Others define it statistically as income brackets (typically 2nd and 3rd quartile) or within some number of standard deviations from the mean household income (around $45k IIRC). And still others would define it as a very specific socio-economic subculture of working professionals, middle managers, and small business owners who drive practical cars and don’t shop at Walmart with less affluent people being considered “working class” or “poor”.

This assertion is often intertwined with the easily verifyable fact that some very small percent of the population (1-10% depending on who you talk to) makes the most income and controls most of the wealth (80-99% depending on who you talk to). But does Mark Zuckerberg’s fortune or some Goldman Sach trader’s bonus really effect some family in Ohio?

And of course, a lot of people were hit hard during the financial crisis of 2008. That continues to have an effect.
But is the middle class really “disappearing”? People say we are becomming like Brazil with it’s income disparity, but I don’t see millions of people outside of New York City living in favella-style shantytowns. Is the “Middle Class” dream of going to some average state college, getting a moderate-pay job you barely tolerate as a cog in some large company, marrying some moderately attractive person, and having 2.5 kids in a 2500 sq ft split level ranch 24.3 minutes from the nearest major city beyond the reach of most Americans?

2

Huh…thought I replied to this thread. My post seems to have gotten et. :eek: Anyway, short iPad version is…no, it’s not shrinking, at least not that I’ve ever seen. The definition of what is or isn’t Middle Class has shifted some. Also, wages have flattened, when adjusted for inflation, since the 70’s, so the ‘average wage’ hasn’t really changed much in that period…which I guess is what folks who are worried about a supposed shrinking middle class are looking at. However, during that same period, the percentage that people have to spend on essentials verse non-essentials has decreased quite a bit (it was 60% in the 60’s and it’s about 40% now, at least according to the guys on United Stats of America).

-XT

3

Russ Roberts recently interviewed Richard Burkhauser (Cornell U) on his EconTalk podcast (link) and discussed this matter. Their answer is yes, by some measures, but no, by other measures that they feel more accurately describe the situation. Do note that that Roberts is very libertarian, and this sometimes colors his interpretations of things.

My link has a link to a working paper by Burkhauser on the topic. I haven’t read it.

4

I think that in political discourse the term has come to mean something like this: a level of household wealth earned from income sufficient to purchase a home, effectively educate one’s children, cover health costs, weather minor crises, see Disneyland, and retire at 65.

This has less to do with gini coefficients and other formal measures of whether there’s a middle class, and more to do with social expectations about what *should *be affordable for the middle three quintiles.

5

No, we are not like Brazil. But we are becoming a wealthy version of a 3rd world country in the sense that our political system seems to be more about the interests of the well connected. The number of lobbyists has grown dramatically just in the last decade and a half, and the politics of being openly anti-plutocrat and pro-worker is pretty much dead in the US. At least Brazil has universal health care.

Many decent paying blue collar jobs have disappeared, as well as outsourcing of white collar jobs. Of the fastest growing professions in the US many are low wage service sector jobs. There are 30 million more people in the US than in 2000 but the same number of jobs, about 130 million. Granted, can someone magically create tens of millions of good paying jobs? No. But the fact that there are fewer jobs as a % of population, and that the fastest growing job fields are low paying service sector work and there is going to be a problem. Add into that the fact that people who enter the workforce enter deeper and deeper in debt (right now it is about 24k, I’m sure it’ll be closer to 40-50k by the 2020s), or the fact that health insurance premiums can go up by 10-40% a year while wages go up by 2-3% a year and things will not last.

If you look at this chart of the fields with the most job growth from 2010-2020

http://www.bls.gov/emp/ep_table_103.htm

1.3 million of those jobs are personal care aides and home health aides, which pay 20k a year. Those 2 are far and away the fastest growing careers, with medical secretaries at a distant third with 210k jobs added at $30k a year.

Health care, real estate and tertiary education costs grow far faster than inflation. Some things decline in cost and go up in quality as time passes. Energy, furniture, clothing, electronics, food, household items. However the depreciation on those is not enough to compensate for the higher costs of real estate, health care and education. Or childcare for when both parents have to work.

I’d say the ‘middle class’ is shrinking in the sense that people do not have security or the ability to move up the ladder as much as they used to.

It is still possible, but harder. Even people who get good educations are facing unemployment, underemployment, junk insurance, high student loans, etc.

My hope is the upcoming overlap between the western OECD lower middle class and middle/upper middle class in places like Asia and Latin America where you will have billions of individuals living in households with about 20-50k a year in income. There will be a huge market for cheap cars, cheap electronics, cheap medical care, cheap everything. Hopefully that will take a lot of the edge off.

6

I’m willing to be convinced otherwise, but my general feeling is that the middle class is as healthy as its ever been. I realize that a lot of traditional middle class jobs are disappearing (I likely won’t be able to spend the next 35 years working as a librarian), but when I think of the basics of the middle class in 2012 (house, car, kids, dog, cable, game systems, iPod, computer, DVDs, etc) versus the basics during my 80s childhood (house, car, kids, dog), the idea of being middle class still feels pretty accessible and still a step up from being considered working class or poor.

7

Of course the middle class is disappearing. Middle class jobs have been getting increasingly outsourced/automated since the early 80s, and they’re not coming back.

In addition, the jobs that are increasing now, like customer service jobs in call centers, have lower wages, worse benefits, and a MUUUUUCH higher turnover rate. MUUUUCH higher.

This results in “income instability”–which means not really knowing if you’ll have a given income over the next few months and years. Along with the EXTREME increase in healthcare costs, most “middle-class” families are really just one layoff/firing or major illness away from bankruptcy/foreclosure.

So yes, combined with cell phone bills, internet access bills, the costs of electronic devices, the higher cost of gas, and other spiralling monthly/yearly costs, income instability and healthcare costs are gutting the middle class. I can link the numbers, if anyone wants.

8

The middle class as we’ve defined it over the past few decades fading, but it’s kind of my feeling that it was overly inflated anyway. Maybe instead of the whole concept of “starter house” graduating into “dream house”, people will rent longer, maybe even while raising children, and then purchase a “just right” house when they feel more financially stable (and more secure in their marriages, as well). Instead of Junior and Juniorette getting a car by virtue of turning 16, they will wait till they graduate from high school or college before purchasing one on their own. Maybe the expectation that all the kids will go to 4-year colleges, regardless of desire and ability, will fade and be replaced with hope that they at least get two years of community college.

I don’t think our definition of “poverty” is going to scale back to the barefoot-and-tar-paper-shack days of the early 20th century…not without some huge collapse of civilization. I think the basic constituents of the “American Dream” will remain with us for a long time. The luster just won’t be as blinding.

9

If the middle class isn’t dead now, this will be the bullet to its brain.

10

As long as I can afford to feed and take care of my dogs, I am happy. I can do without the electronic gizmos and you can call me … whatever. what about this : a member of the upper lower class?.

Seriously, there have always been poor and rich, and some who are less poor and some who are less rich, that is the middle class, right ?

11

You’ve been hearing about it since the 70’s because it started happening in the 70’s and it’s called The Great Divergence.

Income inequality is measured using the Gini coefficient. The Gini coefficient of the US has been steadily growing since the 1970’s.

12

Before the recession there was some truth to the idea that the Middle Class was shrinking in 1970 47% of households had income between 30-90K per year. In 2007 that percentage was down to 38%, but the reason was 9% growth in the number of households making more than 90K per year. At the same time household size was getting slightly smaller.
Income inequality is a totally different issue and Gini coefficients do not measure the size of the middle class at all.

13

“Shrinking Middle Class” doesn’t refer to the percentage of the population in the middle class–which by definition is constant. Rather, it refers to the shrinking wealth and/or income of the middle class.

This chart illustrated the phenomenon; wealth and income as a percentage of the economy has fallen for all of the middle quintiles. This NY Times article describes the effect of the years after the crash from the perspective of a theoretical “median family”, which we should all agree is by definition squarely in the middle class:

14

Are you contending that the lose of wealth due to the recession and housing crisis are permanent, and thus show a medium to long term trend instead of a current blip? Because the main reason for the loss of overall wealth in the Middle Class (which, btw, doesn’t seem to be what the OP is asking about…the statement in the OP is ‘Is the Middle Class really disappearing?’, my emphasis) are those two factors.

-XT

15

Shrinking middle class does refer to the population of the middle class, it is only constant if you use a constant definition like income quintiles. If you use a measure like amount of population living in a household within one standard deviation of the median income then it is not constant. If you use a measure of wealth loss during a recession then it becomes a tautology because wealth loss is a recession.