Washington: In cities across America, the middle class is hollowing out.
A widening wealth gap is moving more households into either higher- or lower-income groups in major metro areas, with fewer remaining in the middle, according to a report released on Wednesday by the Pew Research Centre.
In nearly one-quarter of metro areas, middle-class adults no longer make up a majority, the Pew analysis found. That’s up from fewer than 10 per cent of metro areas in 2000.
That sharp shift reflects a broader erosion that occurred from 2000 through 2014. Over that time, the middle class shrank in nine of every 10 metro areas, Pew found.
The squeezing of the middle class has animated this year’s presidential campaign, lifting the insurgent candidacies of Donald Trump and Bernie Sanders. Many experts warn that widening income inequality may slow economic growth and make social mobility more difficult. Research has found that compared with children in more economically mixed communities, children raised in predominantly lower-income neighbourhoods are less likely to reach the middle class.
Pew defines the middle class as households with incomes between two-thirds of the median and twice the median, adjusted for household size and the local cost of living. The median is midway between richest and poorest. It can better capture broad trends than an average, which can be distorted by heavy concentrations at the top or bottom of the income scale.
By Pew’s definition, a three-person household was middle class in 2014 if its annual income fell between $42,000 and $125,000 (Dh154,259 and Dh459,106).
Middle-class adults now make up less than half the population in cities such as New York, Los Angeles, Boston and Houston.
“The shrinking of the American middle class is a pervasive phenomenon,” said Rakesh Kochhar, associate research director for Pew and the lead author of the report. “It has increased the polarisation in incomes.”
The report documents several other key trends:
— Income for the typical household fell in 190 of the 229 metro areas studied, further evidence of the decline in US living standards since 1999. Median incomes fell even in wealthier cities such as San Francisco, Seattle and Denver.
— Income inequality is lifting some Americans closer to the top even as people in the middle fall further. Median incomes fell 8 per cent nationwide from 1999 to 2014. Yet the share of adults in upper-income homes rose to 20 per cent from 17 per cent. Middle-income households declined to 51 per cent from 55 per cent.
— The hollowing out of the middle class has occurred even as the income needed to meet Pew’s definition of the middle has declined. A three-person household had to earn $45,115 in 1999 to qualify as middle-class. Now, that figure is just $41,641.
Wendell Nolen, 52, has experienced the slide from middle-class status first-hand. Eight years ago, he was earning $28 an hour as a factory worker for Detroit’s American Axle and Manufacturing Holdings, assembling axles for pickup trucks and SUVs.
But early in 2008, things unravelled. After a three-month strike, Nolen took a buyout rather than a pay cut. Less than a year later, the plant was closed and American Axle shipped much of its work to Mexico.
Now, Nolen makes $17 an hour in the shipping department of a Detroit steel fabricator, about 40 per cent less than he made at the axle plant.
“America is losing jobs because of the free trade stuff,” Nolen argued. “They’re selling America out.”
Many of the income changes in the past 15 years have been much more dramatic at the local level than nationally. There are now 79 metro areas in which the proportion of adults in upper-income households equals or exceeds the national average of 20 per cent. That’s more than double the 37 cities in which that was true in 2000.
And the proportion of adults in lower-income households meets or exceeds the national average of 29 per cent in 103 areas, up from 92 in 2000.
The report studied 229 of the largest US metro areas, which constituted 76 per cent of the US population.
Overall, cities with the largest middle classes are more likely to be in the Midwest. Those with the biggest low-income populations are more often in the Southwest, particularly near the Mexico border. Metro areas with the highest proportions of upper-income households are more likely to be found in the Northeast or along the West Coast.
Even many of the cities with substantial middle-class populations are still under stress, according to Pew’s research. For example, Wausau, Wisconsin, and Youngstown-Warren, Ohio, are among the cities with the largest proportions of adults in middle-class homes, at 67.2 per cent and 60.2 per cent, respectively.
Yet median incomes have fallen sharply in both cities. They fell 8.5 per cent in Wausau and 12.9 per cent in Youngstown, Pew found.
In addition, both cities now have larger proportions of lower-income residents and smaller proportions of upper-income households. That suggests that their middle classes have been bolstered by downward mobility: Some richer households fell into the middle, and middle-income earners fell into lower brackets.
In some cases, many former middle-class residents have moved up. In others, they’ve fallen lower.
Middle-class adults now constitute less than half of Boston’s adult population, down from 56 per cent in 2000. Nearly the entire change reflects an increase in upper-income earners. The lower-income proportion was little changed.
In Atlanta, the reverse is true: Middle-income adults have fallen to just over half the total from 56 per cent. High-earners dropped about 1 percentage point to 22.6 per cent. Yet lower-income adults, jumped 7 points to 27 per cent.
