Report Finds Middle Class Smaller Than in 2000

A recent report by the Pew Charitable Trust has found that the middle class has definitely gotten smaller since 2000. But, with the economy on the rebound, should it not be growing again?

A recent report by the Pew Charitable Trust has found that the middle class has definitely gotten smaller since 2000. But, with the economy on the rebound, should it not be growing again?

As reported by the Huffington Post, the Pew reports shows that the percentages of households fitting the middle-class have definitively shrunk over the past 15 years. Middle-class households are those that earn between 67 and 200 percent of a state’s median income. According to the report, every state in the US experienced a drop in numbers for those households falling within this definition.

Perhaps not surprisingly, median incomes fell in most states during this same time-period. Several states were much harder hit by these declines than others. Nevada, New Mexico, North Dakota, Ohio, and Wisconsin were the leaders in middle-class downsizing, while Alaska, Idaho, Hawaii, and Wyoming shrank the least.

Many analysts find the decline in size of the American middle-class anything but surprising. US households that once would have been middle-class have seen their wages change very little since 2000. However, those in the upper-class have consistently seen increases in their overall salaries, even during the recession following the burst of the housing bubble in 2007.

Meanwhile, expenses have continued to grow. Childcare, tuition, and medical expenses have consistently grown over the same period. Similarly, housing has once again begun to rise. While most in the financial sector see this news as a positive sign for the economy as a whole, it has meant more middle-class individuals are struggling to find affordable housing once again.

The study found that in many states, middle-class families pay at least 30 percent of their total income for housing, with many paying much more. Thirty percent of income is a widely accepted standard for affordability, so the growing number of families exceeding this number is troubling.  So many years after the collapse of the housing market and the ensuing recession, many are wondering why the middle-class continues to shrink.

A number of economists have noted the troubling new occurrence of shrinking unemployment that does not couple to rising salaries. Salaries have always moved inversely to unemployment figures in the past, and many are unsure why this recovery period has been different.