America’s middle class has lost nearly 30% of wealth by Quentin Fottrell

“Been telling you for some time that the middle class is under serious contraction. The game is changed. The rules by which your mom and dad and grandparents played the game do not work today. I wanted to pass on this article to you and I want to help you so we created Cardone University. The new way to get educated is not a school it’s not college it’s how to get something done in the real world.” GC

The rich are getting richer and those in the middle class are getting poorer.

More American households make up the middle class than 40 years ago, yet they comprise a smaller share of overall wealth. In early 2015, there were 120.8 million adults in middle-income households versus 70.3 million in lower-income and 51 million in upper-income households, according to a new analysis of government data by the Pew Research Center, a nonprofit think tank in Washington, D.C.

However, the share of income held by middle-income families has plunged to 43% of households in 2015 versus 62% in 1971; lower-income households have remained stable (at around 9% in 2015) while the share of income held by upper-income households has surged to 49% in 2015 from 29% in 1971. (The demographic and income data were derived from the government’s nationwide and nationally representative “Current Population Survey, Annual Social and Economic Supplements” (or ASEC), which serves the basis for the U.S. Census Bureau reports on income and poverty.)

“The hollowing of the American middle class has proceeded steadily for more than four decades since 1971,” researchers Richard Fry and Rakesh Kochhar wrote. “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.” That said, the last 15 years have been particularly brutal for the middle class: In 2014, the median income of these households was 4% less than it was in 2000. What’s more, their median wealth — that is, their assets minus their debts— fell by 28% from 2001 to 2013, due in part to the housing market crisis and the Great Recession of 2008.

And this conundrum of America’s middle class — who are more in number but make up a smaller share of aggregate net income — may explain why politicians often reference “middle class Americans” in their stump speeches. In his 2015 State of the Union address, President Barack Obama spoke about how to help this hard-to-define group. “Middle-class economics means helping working families feel more secure in a world of constant change,” he said. There was no mention of working, lower or upper class people. The reason? “It’s the center, both politically and economically, that has the power to elect the president of the United States,” says Mark Hamrick, Washington, D.C., bureau chief at personal finance site

Another reason why the middle class are beloved by politicians: Many lower-income Americans may consider themselves middle class even if they’re not, Hamrick says. Americans tend to identify with the depictions of middle class life in the media and/or whether they have a college education (even if they don’t earn as much as middle-income households), he says. Some economists define the middle class as making 50% above or below the median annual income, which differs from Pew’s definition of the middle 20% of America’s income and wealth.

Pew defines middle-income households as those with an income that is two-thirds to double that of the U.S. median household income, after incomes have been adjusted for household size. For a three-person household, the middle-income range earned a minimum of $41,869 a year versus $125,609 a year for a higher-income household. Lower-income households have incomes less than two-thirds of the median.

These definitions don’t matter as much to most Americans, Hamrick says. “Many Americans appreciate that the middle class has defined our society,” he adds. “We tend to romanticize stories of economic ascension from Abraham Lincoln cutting logs and becoming a man of great dignity to the Mark Zuckerberg’s, rising to financial success from the middle class through technology and innovation.”

Originally posted on Market Watch

About The Author