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Sunday, December 17, 2017

By Don Lee, Tribune Washington Bureau (TNS)

WASHINGTON — The nation’s middle class, long a pillar of the U.S. economy and foundation of the American dream, has shrunk to the point where it no longer constitutes the majority of the adult population, according to a new major study.

The Pew Research Center report released Wednesday put in sharp relief the nation’s increasing income divide, which is certain to be a central issue in the 2016 presidential race. It also highlights how various economic and demographic forces have eroded long-held ideals about maintaining a strong, majority middle class.

Many analysts and policymakers regard the shift as worrisome for economic and social stability. Middle-income households have been the bedrock of consumer spending, and many liberals in particular view the declining middle as part of a troubling trend of skewed income gains among the nation’s richest families.

Median-income voters, particularly non-college-educated men, are also at the core of billionaire Donald Trump’s surprising surge in the Republican presidential campaign. His supporters’ sense that their once-secure middle-class standing is in danger of slipping appears to be fueling much of the anger against the government and immigrant groups.

The tipping point for the middle class occurred over the past couple of years of the recovery from the Great Recession as the economy continued to reward highly educated workers, well-to-do investors and those with technical skills.

Rapid growth of upper-income households, coupled with an increase in less-educated, low earners, has driven the decline of the middle-income population to a hair below 50 percent of the total this year, Pew found. In 1971, the middle class accounted for 61 percent of the population, and it has been declining steadily since.

The Pew research found that the shares of upper-income and lower-income households grew in recent years as the middle shrank — with the higher-income tier growing more. In that sense, the nonpartisan group said, “the shift represents economic progress.”

Pew defined middle class as households earning between two-thirds and twice the overall median income, after adjusting for household size. A family of three, for example, would be considered middle income if its total annual income ranged from about $42,000 to $126,000. Pew analyzed data from the Census Bureau and the Labor Department, as well as the Federal Reserve.

Most Americans have traditionally identified themselves as middle class, even those at the top and bottom, reflecting a kind of cultural heritage tied to the American dream of self-reliance. But the Great Recession and subsequent slow recovery have shaken that image.

A Gallup survey this spring showed that just 51 percent of U.S. adults considered themselves middle or upper middle class, with 48 percent saying they are part of the lower or working class. As recently as 2008, 63 percent of those polled by Gallup said they were middle class.

This change in self-identification — and the reality of the shift documented by Pew — carries political ramifications as the state of the middle class continues to be a major focus of the economic debate in the presidential campaigns, with candidates, in time-honored fashion, invoking the middle class in their speeches and policy statements. President Barack Obama has dubbed his programs “middle-class economics.”

Although the median incomes of upper, lower and middle tiers have all lost ground since 2000, primarily because of the Great Recession in late 2007 to mid-2009, upper-income households saw the smallest decline through 2014, the Pew study found.

Seen over a longer period, from 1971 to 2014, the median income of all upper-income households increased 47 percent to $174,625. The median income for the middle tier rose 34 percent to $73,392, and for the lower income group, it was up 28 percent to $24,074. The median marks the halfway point.

Pew’s findings add to strong evidence that the middle class has been thinned partly by a decline in manufacturing due to competition from imports as well as a broader polarization of jobs that has favored the most educated and technically skilled workers.

The Pew study did not address economic mobility — an issue that many economists believe is more important than the change in income distribution. But research on income mobility across generations has found the U.S. as a whole lags other Western countries.

The declining middle also reflects demographic shifts, such as the arrival of more low-skilled immigrants, which can be seen in the overall slippage of Latinos in the income ladder since 1971. By race, black adults made the biggest strides in income status from 1971 to 2015, although they are significantly less likely to be middle income compared with adults overall.

At the same time, the increase of women in the workforce since the early 1970s has tended to boost household incomes, as has higher college education enrollment. And of course, strong gains from stocks and high-tech ventures have fueled incomes for some.

As of this year, 9 percent of Americans are in what Pew called the highest-income category — up from 4 percent in 1971 and 5 percent in 1991. A household with three people had to have an income of more than $188,000 last year to be in this highest bracket.

In contrast, the share of American adults in the very lowest income category — a three-person household making less than $31,000 — rose to 20 percent of the U.S. adult population this year, from 16 percent in 1971.

“The distribution of adults by income is thinning in the middle and bulking up at the edges,” Pew said.

(Times staff writer Samantha Masunaga in Los Angeles contributed to this story.)

©2015 Tribune Co. Distributed by Tribune Content Agency, LLC.

Photo: Republican presidential candidate Donald Trump takes the stage at a campaign rally in Waterville Valley, New Hampshire December 1, 2015. REUTERS/Brian Snyder