Middle Class 20 Percent Poorer in Just 20 Years

Source: Thinkstock

Source: Thinkstock

If you’re one of the millions of those in the middle class who can’t shake the feeling that you’re somehow getting left behind, you’re not alone. We’ve been hearing ad nauseum from both sides of the political spectrum that the economy is seeing a tremendous recovery thanks to the policies of the current democratic White House or that things are crumbling beneath our feet, never to be rebuilt. Of course, that depends on what media sources you choose to digest, but it certainly is a mixed bag. Another common narrative is that the middle class is dying, rapidly growing levels of inequality are polarizing America to the point where the country will be unrecognizable from an economic standpoint in a number of years.

That one actually has some merit to it, although it might be a bit hyperbolic.

But the fact that rampant inequality has taken America hostage is not an idea that is lost on the majority of U.S. citizens. As the economy has seen recovery over the past six years following the devastating financial crisis and subsequent recession, most people have had to sit back and watch almost all of the spoils go to the top few percent. For the rich, stock prices have gone up and executive compensation continues to skyrocket, all giving a nice feeling of confidence in the future of the American economy.

But for everybody else, a still-suffering housing market, stagnating wages, and rising debts are still heavy burdens on the middle and lower classes.

In fact, according to The Washington Post, the middle class is no better off than it was twenty years ago. Somehow, actually, it’s 20 percent poorer.

Source: Russell Sage Foundation

Source: Russell Sage Foundation

That’s right, somehow and somewhere in the past thirty years, after all the Reaganomics, trickle-down theories, and two Bush-family presidencies, the core of the American economy has lost economic power. While this will naturally lead to pundits on either side of the political spectrum to scream at each other whilst digging into the numbers to find someone to blame, it doesn’t actually help.

Now, The Washington Post does note perhaps the most important caveat of these findings: that these things tend to be cyclical, and that levels of wealth go up and down over time. What we may be looking at is a snapshot in time, where many people may have taken out loans for school or to buy a home, which will then be payed back over time.

The chart above, taken from The Russell Sage Foundation, which put together the study indicating the middle class is poorer than it was three decades ago, shows the drops in wealth over time being discussed. It’s easy to point out when the recession hit in the late 2000s and to a much lesser degree during 2001 when growth slowed. But one only needs to look at the median to get a glimpse of the strife of the average American.

Fabian Pfeffer, Sheldon Danziger, and Robert Schoeni, the study’s authors, all take note that everyone took a big hit during the recession, and as a result, inequality has grown by leaps and bounds.

“Wealth losses,” the study says, “were not distributed equally. While large absolute amounts of wealth were destroyed at the top of the wealth distribution, households at the bottom of the wealth distribution lost the largest share of their total wealth. As a result, wealth inequality increased significantly from 2003 to 2013; by some metrics inequality roughly doubled.”

The authors don’t leave on a very optimistic note either, writing, “the American economy has experienced rising income and wealth inequality for several decades, and there is little evidence these trends are likely to reverse in the near term.”

Source: Pew Research

The ever-increasing levels of inequality largely flew under the radar up until the most recent recession and didn’t really enter the mainstream as a narrative until protests like Occupy Wall Street started discussing the ’1 percent.’ While that movement has since fizzled out, it was successful in alerting many middle and low class Americans about the growing issue, many of whom were either not aware or not privy to the serious issues inequality arises.

Most Americans wouldn’t think anything was wrong until they could not longer have a pizza delivered or until they couldn’t watch the NFL on Sundays. As long as there’s enough to keep people placated, they usually won’t make much of a fuss. But finding out that a huge percentage of the population has lost one-fifth of their wealth over the past three decades, while many suspected that it had probably grown, may be enough to shake some people out of their cocoons, and force them to pay attention to some of the major economic issues of the day.

Essentially, the American economy — or any economy, for that matter — depends heavily on a balancing act between the rich and the poor, and by providing opportunities for the less-fortunate to climb out of poverty using the tools provided to improve their standing, namely education and training. But as the cards become more heavily stacked against the poor, their prospects become more and more grim, at which point unrest can take hold.

Many people may be fairly shocked to learn that while they suspected their assets and wealth had appreciated over the past few decades, they instead find themselves lagging further behind than before. This can have long-standing effects as those caught on the bottom will grow to resent the individuals prospering.

The chart above from Pew Research shows the overall creep of the wealthiest classes into overall wealth distribution, meaning that the problem is still growing, and as the authors of The Russell Sage Foundation study note, it doesn’t look like it will stop any time soon.

Now members of the middle class can pin a percentage on how deeply the past three decades of economic cycles have eroded their wealth.

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