The Erosion Of The Middle Class Continues

Economic inequality and the absolute destruction of the middle class is something that we've covered for many years (recently here), and being that central bank policies only exacerbate the issue, readers of Zero Hedge are undoubtedly well acquainted with topic. As usual, it took a while, but it does appear as though the mainstream media is finally catching up, as CBS recently published a piece on the erosion of the middle class in the United States.

While there are some families that have moved into the upper-income bracket, the fact remains that overall, middle-income households (defined in the article as families of three with a household income between $42,000-$125,000) are lower in 203 of the 229 U.S. metropolitan areas studied, and there is no bias, the change has affected everyone.

From CBS

While the middle class is losing ground across urban America, the dynamic is complex: Some families dropped into the lower-income bracket, but many others climbed up from middle class and into the upper-income bracket. Overall, the share of adults living in middle-income households fell in 203 of the 229 U.S. metropolitan areas Pew studied.

 

"It is a very, very widespread phenomenon. North, south, or west, the middle class was losing ground in almost every metropolitan area," said Rakesh Kochhar, associate director of research at Pew. "It wasn't that more populated areas or poorer communities were disproportionately affected. This was a change affecting almost every community in the country."

 

Middle class can be a confusing definition, given that almost all Americans describe themselves as part of the economic group. While it can be considered a state of mind, middle class also indicates a certain economic status, such as having a basic level of financial security. In Pew's analysis, members of the middle class are those with annual household income between two-thirds to double the nation median, or about $42,000 at the low end to $125,000 at the upper limit for a family of three.

 

By that measure, the share of Americans living in middle-income households shrank from 55 percent in 2000 to 51 percent in 2014.

Interestingly, out of the 4% that shifted out of the middle class, 3% went into the upper-income bracket, while 1% dropped down into the lower-income bracket. America's middle class is in fact being pulled apart from both sides of the spectrum.

So where did those families end up? A fair number of them climbed into the upper-income range. The share of wealthy households rose from 17 percent in 2000 to 20 percent in 2014. Poor households also rose, from 28 percent to 29 percent during the same time period.

 

"The other commonality isn't just the shrinking of the middle class, but a movement both up and down the ladder," Kochhar said. "There's a polarization. There are more in the upper tier and more in the lower, and fewer in the middle."

In addition to a shifting middle class, Americans are also making less money than they did in 2000, which is key to understand since all of the pundits continue to paint a rosy economic picture - many people simply are not living that reality.

Along with the hollowing out of the middle class, Americans are generally making less money than they did in 2000. The median income of U.S. households in 2014 was $62,482 compared with $67,673 in 2000. Earnings for all groups -- low income, middle class and upper income -- suffered during that time.

 

For instance, the upper-income group earned median annual income of $173,207 in 2014, down 7 percent from more than $186,000 in 2000. Middle-class and lower-income families saw their incomes shrink 6 percent and 10 percent, respectively.

 

Those findings may help shed light on the discontent that many Americans, regardless of income, are feeling these days. Despite improving economic metrics such as lower unemployment, many workers feel as if they're still struggling to get ahead. In a December poll, Pew found that most Americans feel the government isn't doing enough to help the middle class.

Here is where the middle class is concentrated in metropolitan areas:

Lower income...

And upper income...

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Needless to say, as the central planners continue to unleash their incompetence on the world, the wealthy will continue to accumulate wealth, the poor will continue to become poorer, and although some in the middle class do move up a bit, the fact remains that the middle class itself is being destroyed. The purchasing power of those that the U.S. consumption economy depends on so much will continue to be eroded, and ultimately the impact on the real economy will be felt, even more than it is today.