Squeezing The Middle Class: Income Trajectories From 1967 to 2016
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The share of population in middle class decreased by 3% while upper middle class increased by 4% btw 2002-2016.
Cited In CBS Q&A“…A recentBrookings studyfinds the share of working- and middle-class families falling from about 80% of families in the late 1960s to 50% today, with the entire loss coming from families with rising incomes….”
Stephen Rose, "Squeezing The Middle Class: Income Trajectories From 1967 to 2016," Brookings Institution, August 2020, https://www.brookings.edu/wp-content/uploads/2020/08/Squeezing-the-middle-class_Report.pdf
In 1981 68% of the population was middle (50%) or upper middle (18%). In 2002 the same 68% of population was in the two groups but the middle middle -11% (39%) and upper middle was +11 (18% to 29%) in 2016 the share of the two ground was up to 69% of population with the middle-middle being 36% of population and upper middle 33% of population.
“..Figure 1 shows the rise in median family incomes from the first to last year (inflation- and sizeadjusted to reflect a family of three) over the two periods. The later period has higher income levels but much lower growth rates. Between 1967 and 1981, median family income rose by 27%, more than three times as much as the 8% growth experienced in the period between 2002 and 2016. It is interesting to note that in the last period, the steep recession of 2008 and slow recovery did not lead to declining real median incomes for prime-age adults. here is however a good deal of variation between individuals and families. While some will see a big jump in income, others may see a fall. Figure 2 shows the proportion of each cohort experiencing losses or gains in income. Three times as many people in the later 15-year period experienced a large loss, defined as a drop of more than 25%, compared to the earlier period (12% v. 4%). Overall, the share of people losing ground (a loss of income of at least 5%) doubled from 15% to 30% in the last period. Many fewer experienced a large gain (33% v. 53%)…Next, I show the size of the five income classes (as defined above) at the beginning and end of the two periods, i.e. 1967 and 1981; 2002 and 2016. As Figure 3 shows, the higher income classes expanded significantly during the first period. Between 1967 and 1981, the upper middle class tripled in size (from 6% to 18%) and the MMC grew by 3 percentage points (from 47% to 50%). Offsetting these gains were a corresponding shrinkage of the lower middle class (LMC) from 31% to 20% and the poor/near-poor (PNP) from 16% to 11%....The analyses presented here confirm the broadly accepted picture of rising income inequality and slowing income growth for middle-class Americans. But a few additional points are worth drawing out. First, while the benefits of economic growth have not accrued equally, they have not gone solely to the top 1%. The upper middle class has grown. Second, the main reason for the shrinking of the middle class (defined in absolute terms) is the increase in the number of people with higher incomes. Third, while there has been some narrowing of racial income gaps, and an improvement in the position of Black people in particular, they remain wide. Fourth, education matters more than ever in terms of securing a place in a high or even middle income bracket. Fifth, there has been a significant increase in the number of Americans experiencing downward mobility. Sixth, the growth of median incomes for working-age adults over a fifteen year period has declined sharply.The advantage of using longitudinal data is that it tracks the actual economic trajectory of individuals over time. It may therefore provide a better guide to how Americans, especially those in the middle class, experience their own economic position and progress. People are likely to use their own economic history as a benchmark for their progress, as well as an assessment of how well other people are doing. The big winners in recent decades have been those in the mainly college-educated upper middle class. Slower income growth for of the rest of the population, combined with a heightened risk of losing economic ground over time, may help explain the current discontent of many in the American middle class….”
New Brookings from Rose, following up on his previous research (attached) looks at the evolution of the middle class (in absolute terms) using longitudinal data to follow individual’ trajectories over time shows the primary driver of the “hollowing out” of the middle class has been the increase in the number of people with higher incomes. He does not that there has been “a significant increase in the number of Americans experiencing downward mobility” 30% which is 2x the rate of the previous period (that is an income lost of at least 5%) share of population that is poor or near poor went from 11% in 1981 to 13% in 2016. Note he does say due to immigration there are more Hispanic respondents which might account for that, though he doesn’t carve that out
Ed Comment:(what a phony title!) it looks like a massive upward shift for native-born, with whites benefiting proportionally more than blacks, and with the growth of Hispanics reducing the gains 3 or 4 points. Add my note on volatility. Of the whites and blacks (excluding Hispanics), nearly half of those below the middle (21 of 46% percentage points) in the first period advanced to the middle class by the last period. 33 of 49 (i.e. two-thirds) in the middle had advanced to above the middle. That’s a tremendous amount of upward mobility. 7% of whites are in poverty. Unless they get a substantial amount of income from their relatives, that is probably a good estimate of the share of people who are poor because they can’t work. About a quarter of blacks and Hispanics are poor.…This and the other paper you sent on no increase in the volatility of earnings seem to contradict a paper I quoted in my chapter (below) and also a new book I read about: Ok Boom let’s talk how my generation got left behind, by jill Filipovic. Could you please make a comparison to the paper below. Buy a copy of the book, which seems to quote a lot of data although I suspect some/much of it is BS. And make a comparison to her claims as well. I could imagine challenger her to a debate. No surprise, a recent study finds US incomes are more widely dispersed among 25-year-olds than they were in the past and that median 25-year-old incomes have drifted downward. The study also finds lifetime incomes grow similarly across the income spectrum as they have historically and concludes that the wider dispersion of 25-year-old incomes is the chief driver of lifetime income inequality (Guvenen et al., 2017). PS this says earning mobility is more volatile. Of course that would be the case because they have defined volatility as: +/- zero growth. As earning slows down (i.e. get closer to zero growth ) the same volatility of earnings within a cohort will increase the number with incomes less than their parents. So the 2 parts don’t need to be at odds. Brooking is just slick and unscientific (i.e. liberal lies). Once we saturate the population with education, growth should slow down.