Is the middle class really worse off?
This post is the vein of using using economic inequality and the possible re-emergence of class consciousness and/or class resentment to explain this election’s anti-establishment politics.
Executive Summary: Family income didn’t change all that much, but from the 60th percentile all the way down, ALL gains in household net worth since 1992 were given up between 2007 and 2013.
I’m not the only one trumpeting the theory, that the “middle class consensus” is on its way out because the middle class itself is. But is that really true? After 10 entire minutes of google-searching, I couldn’t find what I wanted, so what the heck, lets make some graphs. The data comes from the Federal Reserve’s Survey of Consumer Finances, done every 3 years. Last done in 2013, so we’re due to get an update this year, but I couldn’t wait.
I made 2 charts, one tracking family income and one tracking household net worth. Format is %-change-vs-base-year-1992. The blue lines are the “middle class” (here, meaning 20-80 %ile of income), lighter blue being lower-middle and darker blue being upper-middle.
Remark: The income graph shows the rising tide lifting all boats during the Clinton years, and the entire middle class taking a 10-15% ish step back from the peak in the early 2000’s. Definitely not as dire as I was expecting.
Remark: The net worth graph shows much more drastic changes, due in large part to house prices, but also stocks etc. The 60-80% group (upper-middle class) got slammed the hardest in the financial crisis. But the group from 60%ile down gave up ALL of their post-1992 gains! The 20-40 %ile (lower-middle class) in particular had only tiny gains to start with, so they got it the worst. The top 20%, meanwhile, experienced the most gain, and the top 10% had the most gain AND also managed to escape the fall.
We should keep talking about the response to the recent financial crisis. It is something that I would expect to resonate across the entire middle class. Talk about lost income attributed to free trade will need data from somewhere else. If it is real, it doesn’t make a spectacular mark on this data, although it’s not clear to what degree we are seeing unemployment.
https://philebersole.wordpress.com/2016/03/25/qualitative-easing-and-the-obama-recovery/ – In particular, the Bloomberg article referenced by Phil has some great graphs showing trends for the middle class worldwide.
Net Worth vs Age vs Year (from same Survey of Consumer Finances as above):