Middle Class Shrinks to ALL-TIME LOW

George Washington's picture

The Washington Post notes in an article entitled “Census: Middle class shrinks to an all-time low“:

The vise on the middle class tightened last year, driving down its share of the income pie as the number of Americans in poverty leveled off and the most affluent households saw their portion grow, new census data released Wednesday showed.




For many economists, the most troubling statistics were those on income inequality underscoring the middle-class squeeze.

The 60 percent of households earning between roughly $20,000 and $101,000 collectively earned 46.6 of all income, a 1.5 percent drop. In 1990, they shared over 50 percent of income.

The Post also notes that inequality has actually risen post-recession:

“What’s disconcerting is that inequality is going up post-recession, and it’s happening because the top is starting to pull away again,” [Jane Waldfogel, a professor at Columbia University’s School of Social Work] said.

Bloomberg reports that income inequality has grown to the highest level since 1967:

The U.S. Census Bureau figures released yesterday underscored the struggles of American families in a sputtering economic recovery. The report also showed the income gap between rich and poor people grew to the widest in more than 40 years in 2011 as the poverty rate remained at almost a two-decade high.

In reality, inequality in America is the worst its been since 1917. Indeed, as we noted last year:

Inequality among Americas is worse than in Egypt, Tunisia or Yemen. As NPR notes, inequality is higher in the U.S. than in many banana republics in Latin America. And social mobility is lower in America than in most European countries (and see this, this and this).

It’s only gotten worse since then …

The Weekly Standard points out that unemployment is also worse than during the recession:

According to figures released by the Bureau of Labor Statistics (BLS), only 58.3 percent of Americans over the age of 16 are currently employed. That’s the lowest percentage in the past year—so things are getting worse, not better. But things haven’t just gotten worse over the past 12 months; they’ve also gotten worse since the recession ostensibly ended and the recovery ostensibly began.


In fact, for an amazing 38 consecutive months, the percentage of Americans who are employed has been lower than the percentage who were employed during the recession. According to the BLS, the low-water mark for employment during the recession was 59.4 percent, while the high-water mark for employment during the “recovery” has been 59.3 percent. That’s right:  When it comes to the percentage of Americans who are employed, every month of the “recovery” has been worse than any month of the recession.

The economy cannot recover unless inequality is reduced, there is a healthy middle class and people have jobs.

We’re going in the wrong direction.

Postscript: This is not a partisan issue. The radical left and extreme right are .

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HangSorosHigh's picture

"Bloomberg reports that income inequality has grown to the highest level since 1967:"

What, you mean inequality was this high even back in those sainted 1960s that Krugman et al stroke off to?

semperfi's picture

Happened on Obama's watch.  And 2 years after Obama is out of office, it will still be his fault.  Still Obama's fault 4 years after as well.....

EscapingProgress's picture

I have a printer. I have paper. I have ink. 0.01% here I come!

Parrotile's picture

There's laws (cough, cough . . ) about doing that sort of thing you know.

Something to do with counterfeiting (a.k.a. currency debasement)  I seem to remember . . . .

Mind you, if you've got "the right connections" it seems quite OK and the Markets are very keen on it . . . . . . . .

Bob's picture

The 60 percent of households earning between roughly $20,000 and $101,000 collectively earned 46.6 of all income, a 1.5 percent drop. In 1990, they shared over 50 percent of income.

Math check here?  Just eyeballing it, looks like about a 7% drop to me.  All/aggregate income sure as hell didn't drop. 

Clever Name's picture

A more important math check. Since when is a household making 20k 'middle class'?

dexter_morgan's picture



"The Post also notes that inequality has actually risen post-recession:"

Post what recession? Can't be the one we are still in.

You Didn't Build That's picture

Banker Bonuses look to be pretty strong again this year...maybe they will break another record high.....fourth year in a row.

UserZero's picture


When someone churns out some honest numbers based on income per earner, let's revisit. In the meantime, this is just more class-baiting.


Dinero3030's picture

You can't have a strong middle class without growth, and you can't have growth with bad infrastructure - not happenin. We need new trains, trainlines, new ways of moving stuff around, lots of aquaducts, and water pipes, and steam turbines harnessing heat underneath cities, etc. Redistributing income would take the edge off for those suffering the most, maybe, but that's it. There has to be a plan for spending any money they grab.

topspinslicer's picture

I've been doing stretching excercises but it doesn't seem to help as much as standing on top of my 1964 and older pile of coins

kaiserhoff's picture

So George, if you are a libertarian, why aren't you on the fraudulent birth certificate story like stink on a monkey?

Since when are "high crimes and misdemeanors" by a sitting president "off-limits."

Every talking head and pundit should have his/her/its balls in a vise over this.

Pejorative Requiem's picture

Soooooo.......... by your definition inequality is a wide gap between the highest earners and the lowest earners, either in earnings or in the quantity of people at the ends of the spectrum. And by extrapolation we can assume that equality would exist if all people had roughly the same earnings. You show your true colors again, comrade George. Loved Putin in the Goose Suit.

George Washington's picture

Nice attempt at creating a false partisan dichotomy where none exists.


As I pointed out in December:

Conservatives hate big unfettered government and liberals hate big unchecked corporations, so both hate legislation which encourages the federal government to reward big corporations at the expense of small businesses.


As an example, both liberals and conservatives are angry that the feds are propping up the giant banks – while letting small banks fail by the hundreds – even though that is horrible for the economy and Main Street.


The Dodd-Frank financial legislation … enshrines big government propping up the big banks … more ore less permanently.


Many liberals and conservatives look at the government’s approach to the financial crisis as socialism for the rich and free market capitalism for the little guy. No wonder both liberals and conservatives hate it.


And it’s not just the big banks. Americans are angry that the federal government under both Bush and Obama have handed giant defense contractors like Blackwater and Halliburton no-bid contracts. They are mad that – instead of cracking down on BP – the government has acted like BP’s p.r. spokesman-in-chief and sugar daddy.

They are peeved that companies like Monsanto are able to sell genetically modified foods without any disclosure, and that small farmers are getting sued when Monsanto crops drift onto their fields.


They are mad that Obama promised “change” – i.e. standing up to Wall Street and the other powers-that-be – but is just delivering more of the same.


They are furious that there is no separation between government and a handful of favored giant corporations. In other words, Americans are angry that we’ve gone from capitalism to oligarchy.


So if both liberals and conservatives hate something, it doesn’t necessarily mean it’s a compromise. It may mean that they feel disenfranchised from a government that is of the powerful and for the powerful.


In other words, while many conservatives are against raising taxes on the wealthy, they are overwhelmingly for stopping the use of the power of the state to increase inequality. See this, this and this.

Pejorative Requiem's picture

Sorry George, you can't divest yourself of your own political leanings by claiming both the left and the righ disagree with you. By your own words shall yee be judged. Your recommendations for action, where they can be found, show that your leanings are nowhere near the center, and your objective is not the betterment of the American system of self govenrance, it's the elimination of it.

Henry Hub's picture

So I guess your idea of "bettering the American system of self governance" is to have an extremely wealthy oligarch class that can buy elections, politicians and government to further their own interests, wealth and power. Sound like a real ticket to democracy, freedom and well being for all. NOT

Pejorative Requiem's picture

My idea of bettering our own system of governance allows for rich, who will alays exist, and for poor, who will walways exist, and for the ability for the poor to climb the social ladder to the rich oligarchy clas, an ability that is almost eclucively American. And if you want to search for a system where the wealthy "can buy elections, politicians and government to further their own interests, wealth and power", look no further than the Soviet Union or to China or the any number of fledling theocracies. In such cases the rich "dachau" owners, the powerfull and the wealthy, are politicians and government officials. The best functioning of the US system saw the largest transition of poor people to wealthy people in human history.

Henry Hub's picture

Actually the belief in upward mobility in America, although true at one time when we were a more egalitarian society, is now for the most part simply a myth. Americans enjoy less economic mobility than their peers in Canada and much of Western Europe.


Pejorative Requiem's picture

This article's theme has been pushed by the Times for more than a decade. Would you take me seriously if I sent you a link from the National Review? Examples of American upward mobility abound. To facilitate that, we need less pressure on equalization and more creation of zeitgeist for individual accomplishment. Otherwise, you'll be agruing against the rich all your life: Reid, Pelozzi, Obama, The Kennedy's, University elites, Labor Union bosses, Kerry, Soros, Buffet, Gates, Gore, Hollywood elites....... the new rich, highly motivated to put down the common man's chance at filling his full potential. They use regulation, unconstitutional mandates and an unprecedented aliance with the media of the age to accomplish their enslavement of the poor.

Henry Hub's picture

***Reid, Pelozzi, Obama, The Kennedy's, University elites, Labor Union bosses, Kerry, Soros, Buffet, Gates, Gore, Hollywood elites***

What a rag tag assortment of "liberals" you have there, and they are "...highly motivated to put down the common man's chance at filling his full potential." Give me a break!!

I would look more to the multinational corporation that have shipped first the blue collar jobs and then more and more the middle class jobs over seas. I would look to 17 trillion bailout of Wall Street. I would look to the vast amounts of money spent on the military security complex and the wars that are totally unfunded (all borrowed from the Chinese). Look at the potential looting of Social Security & Medicare. Look at Obamacare, the handout to the Insurance Industry that have falsely been called socialism.

These are the things that are putting down the common man's chance at filling his full potential.

AAA21's picture

Georgie is missing a key reason why the middle class is disappearing: The FED and their continual efforts at interest rate manipulation and money printing serve to destroy the middle class in many ways.  Encouraging overindebtedness is just one of them.  As David Stockman and others have pointed out, the only reason so many industrial jobs were exported out of the US was because the Fed provided an unending stream of dollars that could be given to the Chinese in exchange for goods - a Gold Standard (or some other hard money approach) would have made this impossible!!  Beyond all that money printing goes mostly to line the pockets of the elite 0.01% and debases everyone elses wealth.   READ MARC FABER'S ANALYSIS:




Rainman's picture

The insiders have the game all worked out. Here's another example. The SEC imposes a $ 5M wristslap fine on the NYSE  for " software issues " that allowed its best customers to front run information before the general public....for YEARS ! The fine is about 1% of NYSE/Euronext revenues the prior year. Crime pays !



sgt_doom's picture

Thanks for another great post, GW.

If there's one thing, and only one thing, we believe it is important for the infantilized and arithmetically-challenged population of America to grasp it is this:

When the fools claim that what is left of the American "economy" is a consumer-based economy --- they are wrong, wrong, wrong and wrong!

The oft-cited figure of 70% consumption activity of the economy (although an old figure, we'll go with that) never explains what it has to do with the majority of the economy.

The vast majority of that 70% number derives from the top 20% of the population --- that is, the consumption is now based on about only 20%, thanks to the super-concentration of wealth in America today.

And a goodly portion of that 70% comes from goods and services sold by the top 5 banksters in America, who make up the majority of America's GDP --- see how it's simple arithmetic, and see how it so easily flows together?

It's really not that difficult, is it? 

Thank you.

AAA21's picture

The problem I have with Georgie's analysis is that he seems to imply that forced income redistribution is the solution, or maybe having the Government hire all the unemployed to dig holes and fill them up again will do the trick!! Ending the Fed (or at least its monetary manipulations) will do the most to save the middle class long-term.

kito's picture

the real middle class disappeared decades ago............replaced by increasing numbers of government workers thanks to growing credit/debt...................now that credit/debt has gone terminal..................so has that middle class....................................

q99x2's picture

Banksters going to wipe them out and when they get hungry they are going to turn their neighborhoods into Iraqi wasteland. Anyhow that is their plan according to many many analysts. It is also backed by the laws Obama and congress are signing onto.

If anything this election vote for the strongest runner up against every incumbent politician that signed bills like NDAA, SOPA and so on. And any that can vote against Chuck Schumer.

cabtrom's picture

B O O H O Obama!

kaiserhoff's picture

Great avatar.  Why does it remind me of Twisted Sister?

kaiserhoff's picture

Headline in the local paper:



Somehow, I never doubted it.

Spastica Rex's picture

I was middle class for the first 43 years of my life. Now I'm not. I actually don't miss the materialism and constant striving. There are different ways to live.

falak pema's picture

A loaf of bread, a glass of wine and thou besides me...the last of course is optional, but it greatly helps! 

Metalredneck's picture

Amen, Rex.  I have all but dropped out of the "economy."  I refuse to buy anything I can't get second-hand, unless I have to eat it, wipe my ass with it, or put it in my fuel tank.  And I do the last one very begrudgingly.

Ying-Yang's picture

Whole Foods CEO: Here’s Why We Pay Our Employees More Than We Have To:

Good article on topic - http://finance.yahoo.com/blogs/daily-ticker/whole-foods-ceo-why-pay-employees-more-131203168.html

Ungaro's picture

We’re going in the wrong direction.

If you are going in the wrong direction, I hope you are going slowly. Alas, Dr BS Bernanke has both feet on the accelerator.

George Washington's picture

Ben and Tim behind the wheel:


falak pema's picture

more likely you and I, in reality.

Ben and Tim will be sipping cocktails in Cayman land.

In fact they are not people who love going out with a bang if they can help it. They would rather walk away with the lolly like H. Paulson and company.

LMAOLORI's picture



More Evidence of Failure of Obama’s Policies: Census Data Shows Median Incomes Fall, Income Disparity Rises

Matt Stoller pointed out that income disparity, which is associated strongly with negative social indicators (crime rates, poor health outcomes) as well as lower growth, rose faster under Obama than Bush.

Read more at http://www.nakedcapitalism.com/2012/09/more-evidence-of-failure-of-obamas-policies-census-data-shows-median-incomes-fall-income-disparity-rises.html#4EubLyhTb7kW3zSp.99

My favorite comment

Yves Smith says: September 12, 2012 at 8:55 pm

Spare me.

Obama had enormous latitude when he took office. The Democrats controlled both houses, the banks were actually cowed, and the country was desperate for new measures. He had an opportunity to change direction and he refused to take it. He threw his lot in with the banks.

AnAnonymous's picture

Policies can hardly make it up for a loss of inputs.

diogeneslaertius's picture

that rumbling in your belly is just a conspiracy theory, as is the false left/right paradigm constructed as a political straight jacket for you, and the fact that everyone on the planet is now Chinese

 ignore the empirical data my friends and bask in the glory of QE3 unicorn sparkles

Ying-Yang's picture

In 1914, a business executive named Henry Ford did a startling thing:

He announced that he was going to more than double the wages he was paying his employees, from $2.34 to $5 a day--the equivalent of $120 a day in today's money.

Great article - http://www.businessinsider.com/henry-ford-salary-increase-2012-8

Tijuana Donkey Show's picture

Business Insider! Yikes. Remember Henry Ford also funded the Nazi's, and was the only American listed in Mein Kemf. But, I will give him the props in using his old sawdust with Kingston to make BBQ birquettes, so I can get my grill on. Maybe I'll grill some pork for Mr Ford.......

sgt_doom's picture

Yup, and the Wall Street Journal announced it would cause the end of America --- only took about 100 years (just kidding about that end phrase).