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The reflection of national economy on the state of middle class households

In early 2015, 120. While the share of U.

The American middle class is stable in size, but losing ground financially to upper-income families

Meanwhile, the far edges of the income spectrum have shown the most growth. At the same time, the shares of adults in the lower-middle or upper-middle income tiers were nearly unchanged. Are you in the American middle class? Find out with our income calculator.

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Our new calculator allows you to see which group you fit in, first compared with all American adults, and then compared with other adults similar to you in education, age, race or ethnicity, and marital status. The state of the American middle class is at the heart of the economic platforms of many presidential candidates ahead of the 2016 election. Policymakers are engaged in debates about the need to raise the floor on wages and on how best to curb rising income inequality.

The groups making notable progress include older Americans, married couples and blacks. Despite this progress, older Americans and blacks remain more likely to be lower income and less likely to be upper income than adults overall.

Those Americans without a college degree stand out as experiencing a substantial loss in economic status. In addition to changes in the size and economic standing of the American middle class, its demographic profile has changed significantly in recent decades. For example, the aging of the country, the growing racial and ethnic diversity, the decline in marriage rates and the overall rise in educational attainment are all reflected in the changing composition of the middle class.

Who is middle income? The income it takes to be middle income varies by household size, with smaller households requiring less to support the same lifestyle as larger households. Middle income or middle class?

  • Although 2014 incomes are generally higher than in 1970, all households experienced a lengthy period of decline in the 21st century thanks to the 2001 recession and the Great Recession of 2007-09;
  • So that could be improving the quality of low-wage jobs, creating more opportunities to move to a higher-income job, or shoring up and protecting jobs in the middle-income range;
  • Thus, the closer look at the shift out of the middle reveals that a deeper polarization is underway in the American economy.

This is especially true among economists who typically define the middle class in terms of income or consumption. But being middle class can connote more than income, be it a college education, white-collar work, economic security, owning a home, or having certain social and political values.

The interplay among these many factors is examined in studies by Hout 2007 and Savage et al. This report uses household income to group people. The middle class shrinks The hollowing of the American middle class has proceeded steadily for more than four decades. Since 1971, each decade has ended with a smaller share of adults living in middle-income households than at the beginning of the decade, and no single decade stands out as having triggered or hastened the decline in the middle.

Notably, the 7 percentage point increase in the share at the top is nearly double the 4 percentage point increase at the bottom. The rising share of adults in the lower- and upper-income tiers is at the farthest points of the income distribution, distant from the vicinity of the middle.

The growth at the top is similarly skewed. Thus, the closer look at the shift out of the middle reveals that a deeper polarization is underway in the American economy. The middle class falls further behind upper-income households financially The gaps in income and wealth between middle- and upper-income households widened substantially in the past three to four decades.

As noted, one result is that the share of U.

The American Middle Class Is Losing Ground

Trends in income Households in all income tiers experienced gains in income from 1970 to 2014. But the gains for middle- and lower-income households lagged behind the gains for upper-income households.

Although 2014 incomes are generally higher than in 1970, all households experienced a lengthy period of decline in the 21st century thanks to the 2001 recession and the Great Recession of 2007-09.

Trends in wealth The Great Recession of 2007-09, which caused the latest downturn in incomes, had an even greater impact on the wealth assets minus debts of families. The losses were so large that only upper-income families realized notable gains in wealth over the span of 30 years from 1983 to 2013 the period for which data on wealth are available.

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But the economic downturn eliminated that gain almost entirely. The disparate trends in the wealth of middle-income and upper-income families are due to the fact that housing assumes a greater role in the portfolios of middle-income families. The crash in the housing market that preceded the Great Recession was more severe and of longer duration than the turmoil in the stock market.

Thus, the portfolios of upper-income families performed better than the portfolios of middle-income families from 2007 to 2013. When all is said and done, upper-income families, which had three times as much wealth as middle-income families in 1983, had seven times as much in 2013. Demographic winners and losers As the middle has hollowed, some demographic groups have been more likely to advance up the income tiers winners while others were more likely to retreat down the economic ladder losers.

The difference — 3 percentage points — is the net gain for American adults. By the same measure, the net gain in economic status varied across demographic groups. This age group was the only one that had a smaller share in the lower-income tier in 2015 than in 1971.

  • The median is not affected by extreme highs and lows in reported incomes;
  • Lower-income households have incomes less than two-thirds of the median, and upper-income households have incomes that are more than double the median.

Not coincidentally, the poverty rate among people 65 and older fell from 24. Among the various demographic groups examined, adults with no more than a high school diploma lost the most ground economically.

Why America’s Middle Class is Vanishing

Winners also include married adults, especially couples where both work. On the flip side, being unmarried is associated with an economic loss. This coincides with a period in which marriage overall is on the decline but is increasingly linked to higher educational attainment.

Gains for women edged out gains for men, a reflection of their streaming into the labor force in greater numbers in the past four decades, their educational attainment rising faster than among men, and the narrowing of the gender wage gap.

Although blacks advanced in income status, they are still more likely to be lower income and less likely to be upper income than whites or adults overall. Considered separately, both U. Road map to the report This report divides households into three income tiers — lower income, middle income and upper income — depending on how their income compares with overall median household income.

The analysis focuses on changes in the size and demographic composition of the three income tiers and on trends in their economic wellbeing. Unless otherwise noted, incomes are adjusted for household size and scaled to reflect a household size of three. Households that are in the lower- middle- or upper-income tier in one year are compared with households that are in one of those tiers in another year.

The analysis does not follow the same households over time, and some households that were middle income in one year, say, may have moved to a different tier in a later year. The demographic composition of each income tier may also have changed from one year to the next. The next section of the report describes the size of the U.

The lower- and upper-income tiers are also subdivided into two tiers each for a closer examination of the dispersion of the adult population: The report then turns to a demographic analysis of the three main income tiers.

First, the report examines how changes in the size of lower- middle- and upper-income tiers have played out differently across demographic groups.

The key demographic breaks include age, marital status, gender, race and ethnicity, nativity, education, occupation and industry. Next, the report briefly examines the demographic composition of the middle-income population and how it compares with the population of adults overall and adults in lower- and upper-income tiers.

The final two sections of the report focus on the economic wellbeing of middle-income households, including how it has changed over time and how it compares with the wellbeing of lower- and upper-income households. The first of these two sections examines trends in household income and the second focuses on family wealth, assets and debts.

Lower-income households have incomes less than two-thirds of the median, and upper-income households have incomes that are more than double the median. Adults are placed into income tiers based on their household income in the calendar year previous to the survey year.

Thus, the income data in the report refer to the 1970-2014 period, and the demographic data from the same survey refer to the 1971-2015 period. Whites, blacks and Asians include only the single-race, non-Hispanic component of those groups. Hispanics are of any race.

Asians include Pacific Islanders. Adults with a high school education are those who have obtained a high school diploma or its equivalent, the reflection of national economy on the state of middle class households as a General Educational Development GED certificate.

The difference between the two population estimates is not statistically significant. In the survey, respondents provide household income data for the previous calendar year.

Thus, income data in the report refer to the 1970-2014 period and the demographic data from the same survey refer to the 1971-2015 period. The median income splits the income distribution into two halves — half the households earn less than the median and half the households earn more. The median is not affected by extreme highs and lows in reported incomes.

  • The project is directed by U;
  • Indeed, the increase in the share of adults who are upper income was greater than the increase in the share who are lower income over that period, a sign of economic progress overall;
  • But the economic downturn eliminated that gain almost entirely;
  • The paper takes a deep dive into exploring the middle class in Illinois, including the relatively wide variation in the way that the middle class is defined, Habans said;
  • Our interactive calculator lets you find out which group you are in based on your income, your household size, where you live and the cost of living in your area;
  • A metropolitan area consists of at least one urbanized area with a population of 50,000 or more people, plus neighboring areas that are socially and economically integrated with the core.

It is also not affected by changes in the top codes assigned to income values in the public use versions of the source data, the Current Population Survey. Although often the same, the two are slightly different units of analysis as explained in Methodology.

Wealth is not adjusted for family size.