The Incredibly Shrinking Middle Class

115941837This just in…….news you already knew. The Middle Class is shrinking. But no, it hasn’t gone away and won’t any time soon. The middle class still is a large part of the U.S. but it’s slowly “melting” like some of the icebergs in the Antarctic, and the trend is not a good one.

The Pew Research Center does a terrific job of measuring these trends. Their recent report, America’s Shrinking Middle Class: A Close Look at Changes Within Metropolitan Areas looks at these changes across the U.S. and in key MSAs as well.

The definition of “middle class” is pretty broad and is based on the size of a household. For example, the middle class income range in the study was about $34,000-$102,000 annually for a two-person household and $42,000- $125,000 annually for a household of three–Clearly a very broad range. Obviously the nature of the business climate, key employers, population growth of a specific area make the trends different in each MSA.

ST_2016.05.12_middle-class-geo-01But the overall macro trend is clear. There were more people moving into both the upper and lower classes but fewer remaining in the middle. In an earlier study from last December Pew noted that the share of American adults in middle-income households declined from 61% in 1971 to 50% in 2014. The latest data looks at the middle class across all the major MSAs and as you might expect given the decline of the middle class there was a shift to both upper and lower class as shown in the graph.

The real question is whether this is a trend that will continue or whether this will stabilize. We are nowhere near the point societally where there are merely “haves” (upper class) and “have nots (“lower class”). In fact, the “have some” (middle class) is still roughly half the population but many of those in the middle class are fearing that they are losing ground. As the report indicates “The current and future status of the American middle class continues to be a central issue in the 2016 presidential campaign. Moreover, new economic research suggests that a struggling middle class could be holding back the potential for future economic growth”.

Interesting stuff.

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