Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Insanity

The Incredibly Shrinking Middle Class, Shrinks Some More

The middle class appears to be an endangered species in America’s cities, the Pew Research Center found. The percentage of adults living in households defined as middle class; those making $42,000 to $125,000 a year, fell in 203 of the 229 US metropolitan areas the Center surveyed.

Pew reported that the middle class shrank significantly in nine out of 10 of the American cities it studied in May 11, 2016 press release. The Center’s disturbing findings are a follow up to an earlier study in which Pew’s researchers concluded: “The shrinking of the middle class at the national level, to the point where it may no longer be the economic majority in the U.S.”

Some of the highlights of the study included:

  • The percentage of middle class households fell by 6% or more in 53 of the metropolitan areas surveyed.


  • The percentage of middle class households fell by 4% nationally in the United States.


  • The percentage of households defined as lower class (families making less than $42,000 a year) increased in 160 of the cities Pew surveyed.


  • The percentage of households defined as upper class; those making more than $125,000 a year, increased in 172 of the urban regions Pew examined.


  • The percentage of middle-class households has shrunk dramatically in some areas since 2000. In 2000, around 60% of the households in Goldsboro, North Carolina were defined as middle class, in 2014, 48% of the families in the same city were middle class.


  • The lower class has grown dramatically in some areas. In 2000 27% of the population in Goldsboro, was defined as lower class, by 2014; 41% of that city’s people were living in homes categorized as lower class.


  • The median income of US households in 2014 was 8% lower than it was in 1999.


  • The percentage of all Americans living in middle class households fell from 55% in 2000 to 41% in 2014.


  • The middle class is no longer a majority in several of America’s largest cities including New York, Los Angeles, San Francisco, Boston and Houston.


  • Only 47% of Los Angeles residents lived in middle class households in 2014.


  • Only 49% of the adults in Boston and Houston lived in middle class households in 2014.


  • Only 48% of the adults in the New York City region and the San Francisco bay area were living in middle class families in 2014.


  • The percentage of manufacturing jobs in the United States fell by 29% between 2000 and 2014. During the same period private sector employment in the country increased by 5%.


  • Job loss was worse in some areas. The region around Hickory, North Carolina, lost 51% of its manufacturing jobs between 2000 and 2014.


  • Middle class households lost ground financially in 222 of the 229 metropolitan areas Pew surveyed.


  • The middle class is making less money than it did in the 20th Century; in 1999 the average middle class household made around $77,898 a year. By 2014 that number had dropped to $72,919. That means the average American family is making $5,000 less than it was at the turn at turn of the century.


  • The middle class was hit harder in some areas than others. In Sheboygan, Wisconsin, the average middle class income fell from $80,281 in 1999 to $66,179 in 2014. That means the average family in that city saw its income fall by $14,102 or 17% a year over the past two decades.


  • Upper-class families are not doing as well as they were back then either. Pew found that in 1999 the average upper class family made $186,424 a year. In 2014 the average upper class family’s income had dropped to $173,207 a year. That means the average upper-class family’s spending power has dropped by $13,217 a year over the past two decades. Even when you add the rate of inflation that’s a big hit.


  • The lower class was hit hardest of all. The average lower class household made $26,373 a year in 1999 and $23,811 a year in 2014.


  • This means that the average lower class family makes less than the federal poverty level for a family of four. According to the federal poverty guidelines; a family of four that makes less than $24,300 a year is considered poor, and eligible for Medicaid.


  • The industrial areas of the Midwest known as the rustbelt were the hardest hit. The average incomes in at least Midwestern cities; Janesville, Wisconsin, Eau Claire, Wisconsin, and Elkhart Indiana fell by 10% between 1999 and 2014.


  • America’s middle class is heavily dependent upon manufacturing. Pew found that the 10 metropolitan areas with the greatest losses in economic status were heavily dependent upon manufacturing jobs. These included Springfield, Ohio, Hickory and Rocky Mount, North Carolina and Detroit.


  • Disturbingly; the number of manufacturing jobs is shrinking even as America’s industrial output rises to new highs. Figures from the Federal Reserve’s Industrial Production and Capacity Report; indicate that US production of durable goods hit a record high in 2015. That indicates factories are producing more than ever; but manufacturing employment is declining as machines take the place of workers.


  • America lost around five million manufacturing jobs between 2000 and 2015.


Pew’s numbers prove that the middle class is shrinking; and Americans are poorer than they were at the turn of the 21st Century. Wage stagnation is real and getting worse as job loss accelerates. Economic insecurity is growing and it is becoming one of the central facts of American life.

This report should serve as a warning about the dangers from technological unemployment. The situation is getting worse, and the middle class is shrinking. As it shrinks income inequality will grow; and social and political unrest will get worse.

Our leaders need to start taking real action about this and now. If not we’re going to see more and more demagogues; such as Donald Trump, capitalizing on the fear and anger generated by the shrinking middle class and the accompanying loss of social and economic status.