Is Life Getting Better (or Worse) for the Middle Class?

Brendan Smialowski/AFP/Getty Images

Brendan Smialowski/AFP/Getty Images

Guess what, Americans? Odds are, you’re probably not a part of the middle class anymore. And if you are, you’re probably falling further and further behind, relatively speaking, every year.

“After more than four decades of serving as the nation’s economic majority, the American middle class is now matched in number by those in the economic tiers above and below it,” says a recent briefing from Pew Research Center, which dug into government data to arrive at their conclusions. “In early 2015, 120.8 million adults were in middle-income households, compared with 121.3 million in lower- and upper-income households combined, a demographic shift that could signal a tipping point.”

The silver lining? It may not be all that bad.

“In at least one sense, the shift represents economic progress: While the share of U.S. adults living in both upper- and lower-income households rose alongside the declining share in the middle from 1971 to 2015, the share in the upper-income tier grew more.”

Interesting. The bad news?

“Middle-income Americans have fallen further behind financially in the new century. In 2014, the median income of these households was 4% less than in 2000. Moreover, because of the housing market crisis and the Great Recession of 2007-09, their median wealth (assets minus debts) fell by 28% from 2001 to 2013.”

The real ugly bit comes at the absolute lower-end of the economic spectrum, where 20% of Americans currently find themselves. That’s up from 16% in the early 1970s. Nine percent are among the highest tier, which is up from 4% roughly 45 years ago. The real finding here? That America is becoming increasingly polarized – and a lot of people are getting caught in the middle of an economic rip tide.

The big question, of course, is why, and how, is this happening? The crux of the issue is inequality, which is finally being addressed and acknowledged by those with actual influence. Of course, it’s unclear if there’s an actual solution to it, or if there are policies that can be enacted to help rebuild the middle class.

Unfortunately the polarization in government has stopped almost anything from happening. There are any number of people to blame, but as long as no action is taken, the middle class will continue to shrink. And some places are in more trouble than others.

Here’s a graph from Pew that gives us a visual on the shrinking middle class:

ST_2015-12-09_middle-class-03

And another, which looks at income growth:

ST_2015-12-09_middle-class-04

These graphs demonstrate the issue, and don’t leave much room for optimism. And truthfully, with the world on the brink of mass automation, coupled with the aforementioned political environment, there’s a lot to worry about. Jobs are going to be come even more scarce, and the continued targeting of social programs and safety nets could lead to significant struggles for the remaining middle class. Not to mention those who have already been pulled down a rung.

But still, we can’t completely ignore the positives from Pew’s report, those being that there are a good number of households that are making headway up the economic ladder. And, as the report noted, the share of people improving their standing are outnumbering those headed in the opposite direction. So, that’s some good news.

Even so, what we’re seeing is the whittling away of the middle class that has traditionally made up the backbone of the American economy. These are the people who make up the majority of the population, driving production and economic growth, embattled in large-scale free market Darwinism to out-compete each other for raises, promotions, etc.

The question is: what happens when this core demographic disappears, or becomes too small? Nobody really knows, and given the drastic changes that the American economy has seen over the past generation or two – and the even bigger changes it’s going to experience over the upcoming generations – it’s hard to really have any idea what’s going to happen.

When it comes to this Pew report, you can look at it from a couple of different perspectives. You can be emboldened by the fact that middle class Americans are finding ways into the upper tier, or you can be dismayed at how many people are slipping behind. It’s a tale with two potential narratives.

Follow Sam on Facebook and Twitter @SliceOfGinger

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