We are the richest country in the world, if you count overall GDP, but, unless you’ve been living in a bunker or you’re a happy part of the 1%, you’ve likely noticed that that wealth hasn’t trickled down to the shrinking middle class.
Many would have us believe this is an international trend, that near world-wide austerity programs have set back the middle class everywhere. While that might be true, we now have proof that the middle class are suffering far worse in the United States than in the rest of the developed world.
None of this passage from Motley Fool should surprise most of our readers:
A study from the Pew Research Center in December showed that middle-class Americans are no longer in the majority. Whereas in 1971 middle class Americans totaled 80 million, and lower- and upper-income classes combined equated to 51.6 million, the 2015 data looks far different. As of last year, 120.8 million adults were in the middle class, but this figure now takes a back seat to the 121.3 million combined lower- and upper-income households. Aggregate wealth for middle-class households is also shrinking according to Pew’s research, from 62% of all wealth in 1970 to just 43% as of 2014.
That’s only part of the picture. Not only is the American middle class shrinking, we are getting poorer. Here’s an eye popping chart from Credit Suisse:
It might not surprise most people to know that we’re behind the Scandinavian countries (although not as far behind Sweden as we’d imagine) and many European countries, but our middle class is poorer than Mexico’s? Really? Well, as it turns out, they really benefitted from the North American Free Trade Agreement (NAFTA).
Motley Fool blames a few factors. First, they blame the housing bubble that burst in 2008. Many Americans still haven’t recovered. They also blame the fact that credit is easy and cheap to get in the U.S., as compared to many other countries. In other words, Americans have a lot of debt. The third and fourth reasons, though, are ones that Bernie Sanders built his campaign around: stagnant wage growth and the related income gap between the wealthy and the middle class.
According to data from the U.S. Census Bureau, median household income has actually dropped by roughly $5,000 since 1999 to a median of $51,017 as of 2012. Pew Research pointed out that in spite of nominal wage growth of 727% between 1964 and 2014, in constant 2014 dollars (meaning when taking inflation into account) real wage growth has totaled just 7.8% over 50 years. College tuition, medical care, and even fuel costs have risen at a faster pace, thus diminishing the buying power of the middle class.
Fourth, there’s quite an income gap between the richest Americans and the middle class in the United States. According to CNN, the U.S. has 42% of the world’s millionaires, and basically half (49%) of all people with $50 million or more in assets. These super rich Americans certainly skew the results.
Motley Fool didn’t offer any solutions, but on this Labor Day, it seems one solution is obvious. Our nation had a thriving middle class when unions were strong. 50 years ago, almost a third of Americans belonged to a union. Today, only about one in 10 do. Coincidence? Not at all.
If this trend isn’t reversed soon, we will no longer have a middle class and that’s frightening.
Featured image via Wikipedia.