Opinion

The shrinking middle

JINOY JOSE P | Updated on March 09, 2018 Published on December 16, 2015

bl17_dollar.jpg

Good news for gymmers!

I’m sorry, this is not about your flabby, disobedient middle; I’m talking about the middle class in the US. And this ain’t good news.

Oh, what’s wrong with it?

Last week, inequality observers across the globe was surprised to see a report from the Pew Research Center which found that for the first time since the 1970s “middle income” people have become a minority in the US, the world’s largest economy.

But shouldn’t this group be the biggest, demographically speaking?

Not any longer. Scanning government data, the study has found that this class is losing the edge of being the nation’s economic majority after over four decades.

How?

The class is being shrunk from both ends. From below, the growing group of poor is encroaching, while an enriched group squeezes it from above. As a result, the American middle class, says the study, is now matched by those in the economic tiers above and below it. In 2015, 121.8 million adults were in middle-income households, against 121.3 million in lower- and upper-income households combined.

Frankly, how do you define ‘middle-income’ here?

The survey has taken adults whose annual household income is two-thirds to double the national median. That’s about $42,000 to $126,000 annually in 2014 dollars for a household of three. Under this definition, the middle class made up 50 per cent of the US adult population in 2015, down from 61 per cent in 1971.

That’s quite a shift.

Yes, something that signals a “tipping point”, according Pew Research Center. For one, this means some economic progress, as some sections of the middle class is growing, entering the top echelons, but what’s more alarming is the growing poor, who most often has no influence on policymaking.

Now, I’m ready for some more numbers

Thank you. From 1971 to 2015, aggregate household income in the US has substantially shifted from middle-income to upper-income households, driven by the growing size of the upper-income tier and more rapid gains in income at the top. Over 49 per cent of US aggregate income went to upper-income households in 2014, up from 29 per cent in 1970. The share accruing to middle-income households was 43 per cent in 2014, from 62 per cent in 1970.

Obviously, the ‘middle’ is hit.

Exactly. Middle-income Americans have fallen further behind. In 2014, the study says, the median income of these households was 4 per cent less than in 2000. Moreover, thanks to the housing crisis and the mega meltdown of 2007-09, their median wealth (assets minus debts) fell 28 per cent from 2001 to 2013.

Paul Mason, a Guardian columnist, for instance, says that the rising insecurity among the lower classes offer fertile grounds for the likes of Donald Trump, the Republican Presidential candidate. This trend in a way endorses the concerns raised by economists such as Thomas Piketty, who wanted policy changes to tackle rising income inequality.

Is there a larger story in this?

Yes. Experts say this can be taken as a sample of what’s happening across most developing and developed countries. India has the world’s third-highest number of billionaires (97) but an alarmingly poor lower class.

Evidently, who will influence policies is not a billion dollar question. And the discontent of the lower strata may transform into social protests soon. Remember those ‘Occupy’ rallies?

A weekly column that helps you ask the right questions

Published on December 16, 2015
This article is closed for comments.
Please Email the Editor