The American Middle Class – 1990’s thru 2019, The Shift

A Storied History of the American Middle Class- Part 2

“The middle-class is the heart and backbone of this country”: an idea that has been a central position for many a presidential candidate, and for a long time it was a true statement. The middle class became the bedrock that sustained the country in times of volatility, ensuring continued success with better-paying jobs and a steady-stream of happy consumers. This strong declaration of the importance of the middle-class was even used during the 2016 election, although the upper-class had taken over an almost 50% share of the United States’ aggregate income as of 2014.

The middle class has been slowly changing for years. There was a steady decline beginning from 1971 to 2015, where the middle-class began at a 61% share and ended at a 50% share. The changing middle class could simply reflect the change in times, including changes in economic and demographic trends that might change the composition of the middle-income population.

Background and Introduction:

The stock market crash in 1929 caused the Great Depression, and thereafter the United States experienced the longest and most severe economic downturn the Western World had seen since industrialization. By 1935, the unemployment rate was at a staggering 20%. Franklin D. Roosevelt created the Works Progress Administration (WPA) by executive order on May 6, 1935 as part of his New Deal to get the country out of trouble. The WPA developed public works infrastructure projects to build hospitals, sewer lines, highways and more, employing 3.3 million Americans by 1938. The Great Depression ended in 1939, just as events were beginning to point a more complicated future internationally.

Part II: The American Middle Class – 1990’s through current, The Shift

In the early 1990’s, the United States saw another recession as a result of a 1989 savings and loans crisis. This is an important event to note first because it is the most significant bank collapse since the Great Depression, and second because it will soon be followed by another significant financial crisis.

The collapse caused more than one thousand savings and loans institutions to fail, which ultimately cost taxpayers $132 billion. In addition, in 1990 the GDP decreased by 3.6% and unemployment increased until it peaked at 7.8% in June 1992 (https://www.thebalance.com/what-is-average-income-in-usa-family-household-history-3306189).

Remember the dot com boom in 1997? There was a bust afterward. There was a record high optimism in the middle-income bracket where 57% felt they had dynamic upward mobility. That optimism did not last long, however, because public opinion has been decreasing since the late 1990’s.

Wages slowly stagnated, year after year, and labor’s ability to fight back against unfair work practices was continually weakened. Although there was some income growth for all income tiers from 1970 to 2014, the upper-income households more than doubled the wealth gap and by 2013 made seven times as much as middle-income families (http://www.pewsocialtrends.org/2015/12/09/the-american-middle-class-is-losing-ground/).

A study done by the New York Times using census data from 1990 and 2000 found that income for middle-class earners declined between those ten years, and it seems that the gap between the rich and poor increased during that decade as well. Andrew A. Beveridge, professor of sociology at Queens College and involved in the analysis, found that the average income of the wealthiest fifth of the D.C. populous grew to 24 times the average of the bottom fifth (https://www.nytimes.com/2001/08/31/nyregion/in-90-s-economy-middle-class-stayed-put-analysis-suggests.html).

The Pew Research Center found the same degradation of the American middle-income population, but for the years between 2000 and 2010. The group decreased in size, wealth and confidence in a healthy financial future. One of the most powerful Western superpowers since WWII was struggling for the first time with an aggregate decline in mean family income—in all income brackets (http://www.pewsocialtrends.org/2012/08/22/the-lost-decade-of-the-middle-class/).

The median wealth of a middle income family was $161,050 in 2007, which was a 68% gain from the median wealth in 1983, or $95,879. However, the Great Recession unfolded, unleashing the housing market collapse along with destroying any economic gains middle-income wealth made, dropping the median back down to nearly $98,000.

In contrast, during the same time—1983 to 2007—the upper-income families more than doubled their wealth. Even after the Great Recession, they managed to maintain double what they had accumulated in 1983. The middle-income earners, however faced detrimental effects due to the Great Recession. There were extensive job losses, and now in the global environment faced outsourcing and the pressure to keep up with new skills and technologies for the same pay. In 2009, when home prices collapsed and employees lost most of their bargaining power, the middle-class lost most of the clout that it once had as the “heart of America.”

Recently, the gap between the middle and upper class has become greater, and income disparity between classes is widening in general. The disparity between classes has been steadily getting larger: from around 3 times the difference in the amount of wealth held by the upper-income in versus middle-income in 1983 as compared to 7 times more wealth held by the upper-income bracket in 2013 (http://www.pewsocialtrends.org/2018/09/06/are-you-in-the-american-middle-class-2/).

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