Decline of the U.S. Middle Class
Comment of the Day

March 29 2016

Commentary by David Fuller

Decline of the U.S. Middle Class

Here is the opening of this interesting article from Bloomberg:

As the presidential primary season continues, much has been madeof the appeal that candidates Donald Trump and Bernie Sanders hold for the angry, disaffected working class. Everyone seems to agree that this group is in trouble, and needs serious help.

But which Americans exactly are part of the working class? There is no set definition. You can define class by wealth, but a young worker starting out on Wall Street and earning relatively little is hardly lower-class. You can define it by income, although that will be distorted by local differences in the cost of living, and by age (retirees have little income but usually more wealth). You also can define it by educational status.

But perhaps the most important definition is in people’s minds. Gallup periodically asks people to place themselves in one of five classes -- upper, upper-middle, middle, working and lower. Here are the results for the five categories:

The percentages of Americans who consider themselves working class has stayed relatively stable. But the self-identified middle class has plunged by about 10 percentage points, matched by an even larger increase in the percentage of Americans who label themselves lower class. The self-identified lower class should probably be included in the working class that gets discussed in articles about Trump and Sanders.

Why do fewer Americans identify as middle class? One obvious possibility is that the middle class has been spreading out, separating into a well-to-do upper-middle and an expanding working class. The evidence shows that something like this has been happening for decades now. Here is the U.S. Gini coefficient, a broad measure of income inequality:

David Fuller's view

Many people are concerned that the US political process is now destructive and going off the rails.  That is possible but it is not the only result that we are likely to see.  More voters are rejecting the status quo.  Whoever wins the most obvious point is that taxes will go up for the wealthy and there will be some support for the less well off. 

The sensible decision, in my opinion would be to increase fiscal spending on too often neglected infrastructure, and not just in the USA.  A positively creative decision would be to write off student loans.  It is socially destructive and bad for economies if university students without rich parents or scholarships graduate heavily in debt.  That can too easily curb their ambition and it also deters some capable students from attending university.       

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