Arnold Kling  

Middle Class Squeezed Up

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Bruce Bartlett explains what is happening to the shrinking middle class.

In fact, the ranks of the poor have fallen along with those of the middle class.

Using the Times' characterization of any household with an income below $25,000 in 2003 as being poor, what do the data show? We see that this group fell from 33.1 percent of the population in 1980 to 29 percent in 2002. Looking at the data from the other end, we see that the percentage of those making more than $75,000 has risen from 14.9 percent of the population in 1980 to 26.1 percent in 2003.

For Discussion. Suppose that twenty-five or thirty years ago we had frozen the definition of middle-class income as the 25th through the 75th percentiles of the income distribution as of that date. Using those incomes as boundaries and adjusting for inflation, approximately what percent of the population today would be below middle class, middle class, and above middle class?

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CATEGORIES: Income Distribution

COMMENTS (4 to date)
Sam Jew writes:

I have to think that on average, a given household should increase its income over the given period of time, but I fail to see what that's supposed to prove exactly.

Lawrance George Lux writes:

The Lower Class would actually have increased, as would the the Upper Class, with the Middle Class losing about an estimated 7% to the Lower Class, and about 4% to the Upper Class. This is highly problemistic, though, due to the derivative of the percentages.

The percentages come from afixation to Households. Households have migrated from One to Two-Income, effectively halving all percentage ratios based upon Earnings. Upper Class families have returned to the concept of large families, often raising four or five children. Lower Income families have been producing less children per actual Household. Upper Class Households are forty percent more likely to be One-Income Households. These alterations skew almost all Period reporting.

A likely percentage to utilize to judge the performance of the Economy is to use only Single-Income unmarried Households with this evaluation. It is probable there are four times as many of these Households within the Lower Class than earlier. lgl

Ian writes:

Obviously, getting the data to answer that question isn't especially difficult. What I'd really like to know is this (let's see if I can explain it): Say we took the middle 50% and rather than freezing their real incomes, freeze the percentage of wealth that their income represents. If inequality gets greater then people should move out of that range. It would show the income distribution getting wider. If after our time period there were more than 50% of the people in that group then the distribution would have gotten tighter. Right? Or do I have this wrong? It doesn't feel right.

muckdog writes:

I'm not sure, but we do know that the percentage of Americans who own their own home is at record percentages. No matter where we draw the lines defining rich, poor, and middle class, I have to believe that this is a "good thing."

Despite the belief that a home is an investment, the reality is that a home is an expense, and will make record percentages of homeowners spend tons of money on maintenance, utilities, and other monthly expenses. That should keep the foundations of the economy rolling along.

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