By: Kent McDill
November 21, 2013
Middle class income is shrinking in America, and some economy experts are issuing warnings about the situation.
The U.S. Census Bureau and the Congressional Budget Office report that both the lowest and highest income brackets have added households while the middle class is losing numbers. The highest income brackets had greater growth numbers than the lowest bracket, but both extreme brackets were taking households from the middle.
The Census Bureau data, produced on a state-by-state basis, compared income from the period 2007-2009 and from 2010-2012.
In the 28 years from 1979 to 2007, there was a 275 percent growth in the income of the top 1 percent of American households. The bottom 20 percent of American households reported only an 18 percent growth in that same period.
The report did show middle class income growth in North Dakota, which has had an economic boost from the oil boom, but most other states saw the income gap widening. In Michigan, more than 65,000 households dropped from middle-class income bracket to lower-class income.
In many states, more upper-income households were added than those added to the lower-income bracket, but the middle-class income bracket continued to shrink.
The Census Bureau reports that the median household income in America for 2012 was $51,017, nearly identical to the $51,681 median household income reported in 1989, but worth about $600 less because of inflation. Economist Robert Reich has suggested defining the middle class as those making 50 percent above and below the median, which would put middle-class income at $25,500 to $76,500, a fairly broad range.
According to a Wall Street Journal/NBC News poll taken in September, a significant percentage of Americans believe they are in the middle class, including 25 percent of those who make over $100,000.
For instance, when asked "what is middle income?" 28 percent of those making $30,000 or less said middle income was less than $30,000. Likewise, 44 percent of those making between $30,000 and $40,000 defined middle income as between $30,000 and $40,000 and 48 percent of those making between $40,000 and $50,000 thought their income range defined middle class.
Almost 40 percent (39) of those with a household income of between $75,000 to $100,000 defined middle-income as between $75,000 and $100,000. While a quarter of those households with income of greater than $100,000 defined middle-class income as over $100,000, 65 percent said it fell between $50,000 and $100,000.
In describing themselves to the Census Bureau, 12 percent of Americans consider themselves "poor'', 28 percent consider themselves "working class", 42 percent consider themselves "middle class'' and 16 percent consider themselves "upper middle class."
Robert Shiller, who created the well-known Case-Shiller Home Price Index and recently won a Nobel Prize in economics, claims the nation's income inequality is "the most important problem that we are facing today."
"This growing inequality, it's not just morally wrong, it's bad economics," President Barack Obama said in a speech in July. "Because when middle-class income families have less to spend, guess what? Businesses have fewer consumers. When wealth concentrates at the very top, it can inflate unstable bubbles that threaten the economy. When the rungs on the ladder of opportunity grow farther and farther apart, it undermines the very essence of America."