Don't Bury the Middle Class

Americans are worried; they feel insecure about their socioeconomic status and the future of the country. But the middle class is far from dead.

Inequality continues to push Americans apart. The incomes of the top ten percent of adults are almost nine times greater than those of the bottom ten percent in the latest data. The top ten percent were just five times richer than the bottom ten percent in the late 1970s – the heyday of American opportunity and equality. The explosion of incomes for the top 1 percent have grabbed the headlines, but the poor are poorer now too. The threshold between the bottom ten percent and the rest is now 24% below where it was in 1977.

The growing economic gap has altered society. Income now predicts many things better than it did thirty years ago, including where people live, who they vote for, whether they are in good health or ill, and even how happy they feel. To put it another way, money is not only less equally distributed but also more consequential.

Pundits have begun to speak of the eclipse, passing, or outright disappearance of America’s middle class. They exaggerate. More Americans are in the middle of the income distribution than at the extremes, just as in the 1970s. The attached figure quantifies the change. It shows the complete distribution of incomes in the most recent data (2010 incomes, reported in March 2011 data) and in a typical late-seventies year (1977). Current data look as though something pressed down on the middle of the 1977 income distribution, reducing it and popping up both the poor and rich ends. The middle is still more prominent than the ends, but noticeably smaller. A majority, 56%, of adults live in families that made between $36,000 and $108,000 in 2010. In the late 1970s, a super-majority, 69%, had incomes in that range (after correcting for inflation since then).

Americans’ current economic worries might be obvious. They were not without concerns in the late 1970s. Unemployment had reached 9.0% in May 1975 and was over 7% for much of 1977. Inflation continued to undermine economic performance into the early 1980s. Yet today’s attitudes reveal more worry.
Overall economic dissatisfaction is only slightly higher now; 27 percent of adults reported being “not at all” satisfied with their financial situation in the most recent data, up from 21 percent in the late 1970s. Job security looms larger now, though. Only 54% of workers feel they could not lose their job now; 71% felt secure in the late 1970s.

Middle-income Americans trust neither their economic nor their political leadership anymore. In 2010 44% said they had “hardly any” confidence in either bankers, CEOs of big companies, or both; another 44% said they had hardly any confidence in Congress. In the late 1970s only 24% had hardly any confidence in economic leadership and only 20% had hardly any confidence in Congress.

Few middle-income Americans are ideological. Many (38%) say they are “middle-of-the-road” or “moderate” rather than liberal (15%) or conservative (22%), and 34% were “independent,” neither Republican nor Democrat. Similarly, in the late 1970s 41% were moderate and 36% independent. This broad, moderate middle has been decisive in every presidential election since 1968. In 2008 they went for Obama (57%) over McCain (39%); in 2004 they went for Bush (53%) over Kerry (45%).

In short, economic trends are shrinking the American middle class, but it is still much larger than either the very wealthy or the poor. Its standard of living resembles that of the bigger middle class of the 1970s. What is different now is how middle-income people feel. They worry more about job loss and have lost confidence in institutions. If past patterns hold in the 2012 elections, the political party that addresses their worries more convincingly will win.

Read more in this debate: Martin Klepper, Roger Pilon.


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