Discussion: (0 comments)
There are no comments available.
A public policy blog from AEI
Yes, the America middle class is disappearing. At least as defined by the above WSJ chart. 38% of US families were middle class in 1979 vs. 32% in 2014.
But where did that 7% (6.8 percentage points to be exact) go? Well, of the five income groups (poor, lower middle class, middle class, upper middle class, and rich) displayed, the bottom three got smaller, the top two bigger.
The poor shrank by 4.5 percentage points, the lower middle class by 6.8, the middle class also by 6.8% But the upper middle class got a lot bigger, expanding by 16.4 points, and the rich by 1.8 points. Oh, and here is how upper middle class is defined, using research from economist Stephen Rose of the Urban Institute:
Using Census Bureau data available through 2014, [Rose] defines the upper middle class as any household earning $100,000 to $350,000 for a family of three: at least double the U.S. median household income and about five times the poverty level. At the same time, they are quite distinct from the richest households. Instead of inheritors of dynastic wealth or the chief executives of large companies, they are likely middle-managers or professionals in business, law or medicine with bachelors and especially advanced degrees.
Smaller households can earn somewhat less to be classified as upper middle-class; larger households need to earn somewhat more.
Mr. Rose adjusts these thresholds for inflation back to 1979 and finds the population earning this much money has never been so large. One could quibble with his exact thresholds or with the adjustment that he uses for inflation. But using different measures of inflation, or using higher income thresholds for the upper-middle class, produces the same result: substantial growth among this group since the 1970s.
As the WSJ reporter Josh Zumbrun further notes in the piece, this data “undermines” the 1% vs. 99% narrative: “While it underscores the growth of American economic inequality, it undermines the idea of lower and upper middle-class voters being in the same boat. It suggests that the majority of Americans have indeed struggled but that a large minority has thrived.”
Indeed, new CBO data show that over the 1979-2013 period, before taxes-and-transfers market income rose a strong 188% for the top 1% and 63% for 81-99% vs. 18% for everyone else. (Counting taxes and transfers, incomes rose by 192% for the top 1%, 70% for the 81-99%, 41% for the 21st-80th, and 48% for the lowest quintile.)
Now about that upper middle class. Zumbrun mentions Brookings scholar Richard Reeves is writing a book that “looks at the way upper middle-class families perpetuate their status across generations, in ways that can sometimes be harmful to middle- or lower middle-class families.”
There’s a there there. In some ways, the upper-middle is pulling up the ladder behind them. As Reihan Salam noted in Slate last year, dentists use occupational licensing rules to block cheaper teeth-whiteners without expensive degrees. Then, Salam explains, there’s how “upper-middle-class NIMBY-ism pushes for strict land-use restrictions that drive working- and lower-middle-class people out of the country’s most desirable and productive cities.” And don’t forget, nearly 40% of home mortgage interest deductions are claimed by taxpayers with AGIs over $100,000. Likewise, Salam adds, “70% of the tax benefits of 529 savings plans go to households earning more than $200,000.”
There are no comments available.
1789 Massachusetts Avenue, NW, Washington, DC 20036
© 2018 American Enterprise Institute