In my lifetime, there has been a major shift in middle-income families, sometimes referred to as the “middle-class squeeze.” Some households have been squeezed as technological growth and globalization have created new high-paying “knowledge class” occupations, especially technology-related jobs. As I mentioned in a recent post about growing up in the middle- and upper-middle-class community in the 1970s and 1980s, I’ve seen these changes play out over the past few decades.
What does it mean, how did it happen, and why is it important?
Based on 2022 The percentage of families classified as “middle income” has fallen from 61 percent in 1971, according to the Pew Research Center. up to 50 percent in 2021 lower income households in 2021 accounted for 29 percent of families, compared to 25 percent in 1971. Higher-income households also increased, from 14 percent to 21 percent in 2021.
Pew defines each income level as follows:
“Middle-income” adults in 2021 are those whose annual household income in 2020 was two-thirds or twice the national median income in 2020 when income was adjusted for household size, or about $52,000 to $156,000 per year in 2020. out of three. “Lower income” adults have a household income of less than $52,000 and “higher income” adults have a household income of more than $156,000.
Note that these three categories should not be understood as ‘poor’, ‘average’ and ‘rich’. The lowest income group includes those living in poverty, but the national median income is not a marker of poverty. Also, earning $156,000 is not a measure of being “rich.”
During that time, all three groups experienced an increase in income, even when adjusted for inflation, but the top group saw the biggest increase: 69 percent compared to 50 percent. average and 45 percent lower groups.
Because there are fewer middle-income households, this group accounts for a smaller share of total U.S. income, from 62 percent of total income to 42 percent of total income in 2021. Higher-income households declined from 29 percent of total income in 2021. 1971 to 50 percent of total income in 2021.
How did that happen:
After World War II, the United States experienced an economic boom that improved the quality of life for many Americans. Huge state investments in science, technology, and later higher education were mainly motivated by the Cold War. Sociologist Jack Metzgar describes the boom period from 1947 to 1973 as the “glorious thirties.” He notes:
It was a year of great economic growth, during which GDP [gross domestic product] until 1973-1974 the oil shock averaged more than 4 percent a year, while unemployment averaged less than 5 percent and inflation hovered around 2 percent.
We haven’t seen anything like the Glorious Thirty numbers since the early 1970s, averaging … just under 2 percent for the first eighteen years of the twenty-first century (pp. 28-29).
Metzgar also describes a 65 percent reduction in poverty during this period (p. 29). 1945-1979 income growth by quintile was relatively even, with an increase of about 2.5 percent for all income groups. On the contrary, in 1979-2007 income was the same in all groups except the highest quintile (p. 30).
But the Glorious Thirty may be a one-off economic anomaly (p. 70). As you can see in the Bureau of Labor Statistics chart below, wages have kept pace with worker productivity since the early 1980s. Metzgar notes that:
If compensation had caught up with productivity growth, non-manufacturing and maintenance workers would share about $2 trillion more annually than in 2018, or about $21,000 a year (p. 69).
This chart helps you understand some of the changes in income distribution described in the Pew Research Center report. Metzgar explains:
During the Glorious Thirty, the top 10 percent of taxpayers received about a third of all gross… income… Today, the top 10 percent receive about half of all pre-tax income, while the 90 percent receive the other half (p. 68). ).
What does this mean:
In the 1970s and 1980s, my hometown and the community I live in now had a median income, meaning that middle-income people could afford homes there. Increasingly, these communities are only available to people with incomes that the Pew report defines as “high income.” Although public school teachers could afford to live in the community, the cost is now substantially lower. Recently, the manager of our local recreation center announced that he was moving out of state because he couldn’t afford to go home within a reasonable commute.
Another local example is the core of my community shopping area. When I first moved here in 1993, downtown was a row of mid-1950s modern shops with small, independently owned boutiques, a Baskin-Robbins ice cream parlor, a local bookstore, a deli and other small restaurants, and a few beauty salons. It wasn’t unusual to walk in and say hello to the owner, or walk down the sidewalk and see one of your neighbors out for an evening stroll.
The building was purchased by a billionaire local developer who raised the rent to the point where the current principals had no hope of affording a new lease. The bookstore used to hold fundraisers to stay in business, but they were one of the first to close about ten years ago (which was especially heartbreaking for me because I attended some of my first author book signings there and then did my own). first book signing).
Today, the old mall is gone, replaced by a luxury “lifestyle mall” with high-end stores like Chanel, Sephora, Lululemon, and other places where you can buy $100 t-shirts. The clientele has also changed. Gone are the long-time neighbors taking evening walks; they have been replaced by much younger people wearing designer clothes, apparently hoping to ‘be seen’. It’s not a place I like to go anymore, but it definitely draws more people and I think brings in more money than its predecessor. It’s also no longer the deli sandwich dinner and Baskin Robbins dessert crowd that we might associate with a more middle-income clientele.
As fewer families can be classified as middle-income groups and more in the higher income category, people are being priced out of neighborhoods that their parents and grandparents could once afford. Perhaps most importantly, more and more families fall into the lower income category, which is equal to or below the national median income.
These are often people in jobs that require skills, training and, most importantly, essential jobs: childcare, home health care and other domestic workers, retail, personal care workers, emergency medical technicians, veterinary and dental assistants, public safety officers, substance abuse counselors and tax preparers. If you look at the Bureau of Labor Statistics’ list of median earnings by education, you’ll see that dozens of important jobs are below the median. These are people who often struggle to find affordable housing close to work, resulting in long commutes with all the associated personal and environmental costs.
Has your community experienced economic change in the last few decades? Look for images from decades ago and see if you can find them.
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