Posts Tagged ‘middle-class’

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Everyone’s seen the screaming headlines: the middle-class is back!

The statistic backing up those headlines is median household income (as reported by the Census Bureau), which in 2016 was $59,039.

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After years of decline, following the crash of 2000-01 and then again in 2007-08, real median household income (in 2016 dollars) has finally surpassed its previous high—of $58,665 in 1999.

But that’s not the whole story.

First, consider the fact that it took real incomes more than a decade and a half to recover from the collapse. The “good news” is not much consolation for people who endured almost two decades of zero growth in what they took home: their incomes, pensions, and wealth are permanently damaged and likely won’t be repaired within their lifetimes.

Second, the Census Bureau data show that the bulk of the gains in real income in 2016 was explained by one factor: higher employment. In other words, hours worked rose but wages did not. The members of American median households are working harder at more jobs to finally get an increase in incomes.

mean-median

Finally, consider what is measured in those headline numbers. The median, as folks might remember from a statistics course (or just a teacher’s explanation of how they grade), is the “middle” value: half above, and half below. But we can also calculate the mean (or “average” value) and compare the two. As is clear from the chart, while both the median and mean values (the green and red lines in the chart, measured on the left, respectively) have reached all-time highs, the gap between them—the “skew” in the distribution—has also grown over time. In fact, the ratio of the mean and median incomes (the blue line, measured on the right) has increased—from 1.23 in 1980 to 1.41 in 2016.

This is a clear indication that, while median household incomes in the United States have finally recovered from the crises of recent years, the middle-class itself is falling further and further behind those at the top.

Wouldn’t it be useful if those income statistics were reported in the headlines!

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Yesterday, I discussed new findings concerning the fact that, while the United States is getting richer every year, American workers are not.

That same problem is showing up in American cities, which since 1970 have experienced a “hollowing-out” of the middle-class.

The graphic above shows the change in income distribution in 20 major U.S. cities between 1970 and 2015. In 1970, each of these cities exhibits a near-symmetrical, bell-shaped income distribution—a high concentration of households in the middle, with narrow tails of low and high-income households on either end. By 2015, the distributions have grown more polarized: fewer middle-income households, and more households in the low-income and/or high-income extremes.

1970 2015

Chicago is a good example of what has taken place in urban areas across the country. It boasted a thriving manufacturing sector in 1970. As illustrated in the map on the left above, incomes were lowest in the city center, growing higher radially outward toward the city’s borders. And while Chicago was largely successful in transitioning away from manufacturing to a service-based economy by 2015, that transition created a heavy concentration of wealth in the business/financial district and marked decline in most of the surrounding areas (as indicated in the map on the right).

To listen to the champions of American capitalism, cities represent the solution to growing inequality and the decline of the middle-class associated with the “old” manufacturing economy. But, as it turns out, urban centers are characterized by the same kind of grotesque inequalities and hollowing-out of the middle-class as the rest of the country.

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