Money

The U.S. isn’t as “middle class” as it thinks it is

 

Trumponomics: VICE Money comments on the economics of the Trump era.

 

Even with the longstanding differences between the rich, the middle class, and the poor in the U.S., the idea of the American middle class has a profound pull on the public imagination in the states. Roughly 60 percent of Americans identify as middle class or upper-middle class, despite a wobble during the worst of the Great Recession.

But a new report out from the Pew Research Center shows that compared to some of the countries the U.S. considers peers, the wealthy nations of Western Europe, the U.S. is far less of a middle-class country.

The share of U.S adults living in middle-class households fell from 61 percent in 1991 to 59 percent in 2010, according to the Pew data. And the U.S. has a thinner middle class than any of the large economies of Western Europe. The nation with the next-skimpiest middle class after the U.S., Spain, had 64 percent of adults living in middle-class households in 2010, down from 69 percent in 1991, according to Pew.

The U.S. isn’t alone in middle-class shrinkage. Seven of the 11 countries studied in the Pew report also saw declines in the share of the middle class between 1991 and 2010, a period that coincides with the rapid rise of globalization as a force in the world economy.

Studies by Branko Milanovic and other economists show that over that period, incomes in some of the world’s poorest countries rose — as corporations shifted production to low-wage markets — and middle incomes stagnated in rich countries. That development is captured in a chart developed by Milanovic known as “the elephant.”

And for the record, shrinkage of the middle class isn’t all bad. Some of the shrinkage reflects people moving up the income ladder, for example. Nor does a shrinking middle class necessarily mean the middle class is getting poorer. In fact, according to Pew Research, after accounting for income taxes, Social Security contributions, government welfare payments and adjusting for household size and inflation, U.S. median household incomes rose 9.5 percent to $52,941 in 2010. Other countries saw faster income growth. For instance, France’s median income rose 33 percent, but it was still lower than the U.S.’s, at $41,076. And though this data from 2010 may be outdated, more-recent data suggests the shrinkage of the U.S. middle class continues.

For instance, another recent Pew report about the health of the U.S. middle class isn’t calculated strictly the same way. (It uses income before adjustment for welfare and tax payments, for example.) But the trend remains the same: a pronounced decline in the share of U.S. adults living in middle-class households.

This is important both economically and politically. Economically, the middle class is the heart of the U.S. consumption-led economy. They’re the ones who take out mortgages and buy houses and cars and appliances — all historically part of the virtuous American economic cycle.

But perhaps more importantly, a strong middle class has long been viewed by sociologists as a mark of political and civic stability. So the retreat of the middle class is likely tied to the increasing extremism of American politics, most recently evidenced by the presence of one Donald J. Trump in the White House.

M-F 7:30PM HBO