FROLITICKS

Over the last few years, numerous studies have come out which confirm beyond a doubt that the incomes of those in the American middle class have slowly but surely shrunk.  The most recent one just released by Stephen Rose of George Washington University, Urban Institute, highlights this fact by looking at income trajectories from 1967 to 2016.  In his study he concludes, and I quote from his main findings:

• “ The median income growth experienced by prime-age Americans over a fifteen-year period has been cut by almost two thirds, from 27% to 8%.
• The proportion experiencing a large income loss has more than tripled, from 4% to 12%.
• The upper middle class has expanded significantly, while the “middle” middle class (MMC) has shrunk from 50% to 36%.
• Income growth at the top of the distribution has been almost twice as fast as in the middle (48% at the 95th percentile, compared to 26% at the median).
• Upward mobility out of poverty has declined, from 43% to 35%.
• Downward mobility from the MMC has doubled, from 5% to 11%.
• The proportion of Black Americans in the upper middle class has increased significantly, from just 1% to 14%. But large race gaps remain: 39% of whites are in the upper middle class or higher.
• More education has become more closely associated with a higher income; 59% of those with a BA+ are in the upper middle class or higher, up from 37%. ” ^1.

Meanwhile, several other studies have shown that during the last few decades, the rich have been getting richer.  One such study in December 2014 by the Pew Research Center found that the wealth gap between the country’s top earners and the rest of America had stretched to its widest point in at least three decades.  The same report also noted that the Great Recession of 2008-09 had destroyed a significant amount of middle-income and lower-income families’ wealth, and the economic ‘recovery’ has yet to be felt for them.  According to a 2019 working paper on wealth inequality by University of California at Berkeley economist Gabriel Zucman, the 400 richest Americans — the top 0.00025 percent of the population —tripled their share of the nation’s wealth since the early 1980s.  Zucman also found that U.S. wealth concentration seems to have returned to levels last seen during the Roaring Twenties.  Those 400 Americans now own more of the country’s riches than the 150 million adults in the bottom 60 percent of the wealth distribution. ^2.

Once again, initial indications are that the middle class is being particularly hurt by the novel coronavirus pandemic, such that some refer to the current economy as the depression of minivans.  There is little doubt that there are two economies at this time: that of wall street and that of main street.  Gabriel Zucman writes that the wealthy use their money to buy political power, and they use some of that power to protect their money.  On the other hand, middle-class families tend to use their wealth to save for rainy-day expenses or to draw down on for retirement.  With the pandemic and ensuing high levels of unemployment in key sectors, the middle class is having to draw down on their savings just to survive.  Under the Trump administration which believes that wall street depicts the current state of the economy, wealthy Americans continue to thrive, including the Trump family.

^1. Squeezing the Middle Class: Income Trajectories From 1967 to 2016: Stephen Rose, Economic Studies at Brookings, August 2020

^2. Wealth concentration returning to ‘levels last seen during the Roaring Twenties,’ according to new research: Christopher Ingraham, Washington Post, February 8, 2019