Middle-Class Shrunk MORE than Pew Claims

Earlier this year James Kwak wrote: "Supposedly President Obama is making middle-class economics one of the key themes of his final two years in office. I don’t really know what this is supposed to mean in a country where people making ten times the median household income call themselves middle-class and there are tens of millions of people in poverty."

According to the St. Louis Federal Reserve, real weekly median earnings are currently $377 a week — or $19,604 a year. This is down from 36 years ago when it was $408 a week — or $21,216 a year. "Median" means, half earned more and half earned less — and currently the real "middle" is $377 a week — or $19,604 a year for full-time male workers over 16 years old.

A new report by Pew Research defines middle-class as "about $42,000 to $126,000 annually in 2014 dollars for a household of three. Under this definition, the middle class made up 50% of the U.S. adult population in 2015, down from 61% in 1971."

Not so. Pew uses a very liberal definition of  "middle-class" (only 5% of all wage earners make $126,000 a year or more) — and Pew's definition of "middle-class" is also too widely defined, because a household of three could be many things: three unrelated adults who all have jobs, or a married couple with one child where only the husband works, or a trust fund baby supporting two friends, or three retirees relying on nothing but Social Security — and many other various combinations of what household income could consist of.

So instead, let's look at the actual Social Security wage data for earnings reported on W-4 forms for payroll taxes for people who work — which shows that 50% of wage earners make $28,500 a year — and a dual-household income would equal about what Sentier Research reports as the median household income of $56,670 a year.

It should also be noted that Pew defines "middle-class households of three" with incomes up to $126,000 annually — but as a wage, that puts a wage earner in the top 5% of all wage earners — and as a "household income", is over DOUBLE what the "median household" actually is.

Pew reports (paraphrased):

For more than 40 years the American middle-class held majority status in the U.S. population. No more. The middle-class is now matched in number by those in the economic tiers above and below it. In early 2015, 120.8 million adults were in middle-income households, compared with 121.3 million in lower- and upper-income households combined, a demographic shift that could signal a tipping point. In 1971, Pew said, the middle class represented 61 percent of the population; today it represents 50 percent. Where did those 11 percentage points go?

If by using Pew's definition for what might be considered middle-class, (but using Social Security data), out of 155,772,341 wage earners in the work force, there are 41,386,660 earning between $40,000 and $125,000 a year — which is 26.5% — not 50% as Pew says. And again, let's be real: $125,000 is much more than a "middle-class" income in most parts of the country, even for a household of three.

And if by using the New York Times' definition for what might be considered middle-class (those earning more that $35,000 a year, but less than $100,000), then according to Social Security data for wage earners, then 34.5% earn a middle-class wage.

58.5 percent earn $35,000 or less (50% earn $28,500 or less — the "median" wage for all wage earners.)
34.5 percent earn between $35,000 and $100,000
6.9 percent earn $100,000 or more

In actuality, based on wage data from Social Security, only 20% earn a "middle-class" wage — even if you doubled that to account for a dual-income household for a "median household income", then still, only 40% would live in a "middle-class" household (still less than what Pew says is 50%).

Pew also says: "The good news is that nearly twice as many moved up (7 percent) as moved down (4 percent)." So that wouldn't be true either because Pew is saying $126,000 a year is "middle-class" — so it's probably just the opposite: 7 moved down and 4 moved up, like the animation I created below shows — and gives you a better visual of the real American middle-class squeeze.

The image above shows how the U.S. economy has transitioned from a high-wage manufacturing union economy (since offshoring) to a low-wage service and retail non-union economy. The higher wage jobs have grown (as did the number of millionaires and billionaires), but proportionately, the number of lower paying jobs have far out-numbered those on the opposite side of the income scale (not to mention, a greater number of people dropping out of the labor force altogether).

Pew also says: "Since 1971 the most upward-traveling migrants out of the middle-class were the elderly, followed by married people with no kids at home and African-Americans." This could make since, as the elderly will be drawing on traditional pensions in conjunction to their Social Security when retiring; but most traditional pensions are disappearing and will be mostly gone when the last of the baby boomers die off. And married people without children usually represent a dual-income household.

Pew also says: "The most downward-traveling were people who didn't go to college, followed by high-school dropouts and people who put in some time at a four-year college or received a two-year associate's degree." This makes sense too, as people with college degrees are now taking jobs that don't require college degrees and are displacing high school grads and dropouts.

A definition of "middle-class" in the 1950s used to be when a father (with only a high school education) went to work at the assembly line in the auto plant and earned enough money to pay a mortgage on a modest house and car payment by only working 40 hours a week while supporting his stay-at-home wife who was raising two kids. (Now look at Detroit.)

Now most are stuck in the two-income trap, as Senator Elizabeth Warren explains in her book: The Two-Income Trap: Why Middle-Class Parents are Going Broke

What's of most concern to Americans is NOT "terrorism" or ISIS. According to Gallop polls, it's the economy — and why Senator Bernie Sanders resents the mainstream media for trying to distract us from the the issues with their micro-reporting about terrorism 24/7. They actually accuse Sanders of completely ignoring the problem of ISIS, which is entirely untrue — he has spoken in-depth many times on the subject, on many occasions, in different venues.)

The Census Bureau just released its latest update to the American Community Survey, publishing a trove of recent data on everything from education levels to economic indicators for the United States in 3,142 counties. The new numbers offer evidence of the lasting effects of the Great Recession and the ongoing financial stagnation faced by most Americans: In counties across the country, poverty rates are up and incomes are down, while rents are rising and home ownership is dropping. (The links below are from the recent maps from Census.Gov)

• Home Ownership Rate: 2010-2014 [PDF]
• Change in Home Ownership Rate: 2005-2009 to 2010-2014 [PDF]
• Median Monthly Gross Rent: 2010-2014 [PDF]
• Change in Real Median Monthly Gross Rent: 2005-2009 to 2010-2014 [PDF]
• Median Household Income: 2010-2014 [PDF]
• Change in Real Median Household Income: 2005-2009 to 2010-2014 [PDF]
• Percentage of Population in Poverty: 2010-2014 [PDF]
• Change in Percentage of Population in Poverty: 2005-2009 to 2010-2014 [PDF]

* Despite workers doing more, their wages haven't kept up in proportion, because most the gains for the past 40 years have went to the top 1% — but mostly to the top 0.01%

My Related Posts:

• Hillary Clinton thinks $250,000 a year is "Middle-Class"
• Rich still getting Richer as Poor getting Poorer
• Money can't buy Class

* NOTE: The use of a "median" wage is a far better measure than using the "average" wage (like the Department of Labor likes to use) — because the average wages of 3 people could be one millionaire and two minimum wage earners, which can greatly skew the average and make it appear as though most of us are earning a lot more than we really are.