Pew: Middle class really is eroding

The rich get richer, the poor get poorer … but what happens to the middle class? It depends, according to a new study this week from Pew. In some metropolitan areas, the middle class move into the richer category, while in others it declines into the poorer. However, Pew’s research makes it clear that the middle class is narrowing:

The American middle class is losing ground in metropolitan areas across the country, affecting communities from Boston to Seattle and from Dallas to Milwaukee. From 2000 to 2014 the share of adults living in middle-income households fell in 203 of the 229 U.S. metropolitan areas examined in a new Pew Research Center analysis of government data. The decrease in the middle-class share was often substantial, measuring 6 percentage points or more in 53 metropolitan areas, compared with a 4-point drop nationally.

The shrinking of the middle class at the national level, to the point where it may no longer be the economic majority in the U.S., was documented in an earlier analysis by the Pew Research Center. The changes at the metropolitan level, the subject of this in-depth look at the American middle class, demonstrate that the national trend is the result of widespread declines in localities all around the country.

The direction of the erosion nearly evenly splits the metropolitan statistical areas Pew studied. The middle class dropped in 203 of 229 metropolitan areas, while the percentage of lower-income households increased in 160 — and the percentage of upper-income households increased in 172 others. In 108 metropolises, those trends overlapped in having both increase.

What about across the US as a whole? The trend seems murkier when Pew frames it on the national level rather than by metropolitan areas. Middle income households still remain a majority overall in the US, but the percentage has dropped from 55% in 2000 to 51% in 2014. Lower-income households ticked up a percentage point from 28% to 29%, but upper-income households went up from 17% to 20% in the same 14-year period. That would suggest that the economic shift has been to the positive, and that the middle class may be more moving up than moving down.

However, that too is a bit deceptive — because as Pew points out, those percentiles are based on median household incomes. And median incomes have been moving downward over that fifteen-year period:

The widespread erosion of the middle class took place against the backdrop of a decrease in household incomes in most U.S. metropolitan areas. Nationwide, the median income of U.S. households in 2014 stood at 8% less than in 1999, a reminder that the economy has yet to fully recover from the effects of the Great Recession of 2007-09. The decline was pervasive, with median incomes falling in 190 of 229 metropolitan areas examined. Goldsboro ranked near the bottom with a loss of 26% in median income. Midland bucked the prevailing trend with the median income there rising 37% from 1999 to 2014, the greatest increase among the areas examined. 4

In other words, households may have moved from the middle- to upper-income tier simply by staying put or perhaps increasing income only a modest amount. Those households that dropped into the lower-income tier from the middle lost even more income than the median dropped, outpacing the economic downturn and losing even more ground than these comparisons suggest.

Some of these issues relate to local economies, some to the national stagnation that has followed the Great Recession. But this study makes a good data point to explain the political environment of this cycle and the anger that has fueled it. Perhaps nothing might explain it better than the fact that the greater DC area ranks third among the percentage of metropolitan areas with the highest percentage of upper-income households (32%), behind Midland, Texas and the Bridgeport, Connecticut region. The rich get richer … and the powerful, too.