San José, CA - In December of 2015 the Pew Research Center released a report on the decline in middle-income Americans, who now make up a minority of the population, down from 60% in the 1970s. Their share of income has fallen even more, from more than 60% in the 1970s to only 43% in 2014, as upper-income households share has risen from 30% to 49% over the same period of time. The Pew report also has other important information on wealth, debt, occupation and education, which were generally not reported in the mainstream corporate media.
But the report, and to an even larger extent, mainstream corporate media articles on the report, used ‘middle-income’ to mean ‘middle class’ when the two are not the same. Middle-income, in the Pew report, was defined as households earning between two-thirds and twice the median income, or $42,000 to $126,000 a year for a household of three. Middle class refers to those who are between the working class (who have to work for others) and capitalists, who make a living from the businesses, land and financial assets that they own. The middle class would include small businesspeople and farmers, managers and supervisors, as well as high-skilled professionals such as doctors, lawyers and four-year college professors.
Most of the households that the Pew report calls middle-income are in reality working class. Only 20% of middle-income households in 2015 were made up of executives, managers, professionals such as engineers, and medical professionals who could be considered middle-class. The other 80% were more working class occupations such as clerical workers, sales workers, service workers, mechanics and others.
The Pew report also documented the growing inequality in wealth, as defined as the difference between household assets and debt. Between 1983 and 2013, the wealth of lower-income households shrank 18%. The wealth of middle-income households stayed about the same, while the wealth of upper-income households doubled. Another way to put this was that in 1983 upper-income households held 30 times the wealth of lower-income households, but by 2013 upper-income households had 70 times the wealth of lower-income households.
Lower and middle-income households also had their debts rising faster than upper income households as they tried to make up for lost income by borrowing more. Debt for upper-income households rose 90% between 1983 and 2013, while middle-income household debt went up 132%. Lower-income households had the largest increase in debt, which rose 183% or almost tripled between 1983 and 2013.
Teachers were the occupation that lost the most, -8.6, meaning that the percentage of teachers who were low income increased 8.6 percentage points more than the growth of high-income teachers. Factory workers (-6.4) and clerical (-6.2) were other occupations that lost the most ground in terms of income. Not surprisingly, executives and managers were among the occupations that gained the most (+20.4) in terms of more high-income and less low-income households.
College education also became more necessary to earn enough to be middle-income. In 1971, only 24% of middle-income households were headed by someone with some college, the vast majority (76%) had no college and 35% didn’t even graduate from high-school. But by 2015, 60% of middle-income households had at least some college, and only 9% had not graduated from high-school. Despite the rising level of education over the last 45 years, the middle-income household sector has shrunk, showing that more schooling is not the key to
reducing income inequality.
Masao Suzuki is a professor of economics at Skyline College. The Pew report is online here.