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Planning & Economy

The Middle Class is Shrinking – Anybody Left?

October 11th, 2019

Coining a phrase is always fun, isn’t? It depends on author and the conveyance of emotion, urgency, or bias. Take the following:

“Seven reasons to worry about the American middle class”*

“The American Middle Class Is Losing Ground – No longer the majority and falling behind financially.”**

Depending on which article you read we are either doomed – “the middle class has reached a tipping point”**, meaning middle income Americans represent less than half of the population of the U.S. Implying that is bad for America. Or, the richer are getting richer at everybody else’s expense.

But, is it bad that the middle-class is declining? The U.S. Census Bureau defines middle income Americans as adults whose annual household income is two-thirds to double the national median: $42,000 (household of 1) to $126,000 for a household of three.

Households in all income segments made ground in the period from 1970 to 2014 but gains for households defined as middle-income lagged behind the gains for upper-income households. So are the richer getting richer at the expense of all others?

Could there possibly be another explanation?

Find financial consulting and Personal financial planners near me - Middle Class Income Graph IMG“Yes, the US middle class is shrinking, but it’s because Americans are moving up.”***

Moving up, Yep:

Lower income households are going down

Higher income households are going up

And, more middle-class households are graduating to affluent.

Is America great or what? Throw in a little capitalism, mix it with economic freedom and innovation add a dose of ambition, stir, and voilà – We as a nation, do better. Magic…. Anybody want to stay behind?

Our portfolios are exhibiting slightly higher levels of cash than in the recent past.

Carlos Dominguez – CERTIFIED FINANCIAL PLANNER™, Portfolio Manager, RJFS

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Sources:

*https://www.brookings.edu/blog/social-mobility-memos/2018/06/05/seven-reasons-to-worry-about-the-american-middle-class/

**https://www.pewsocialtrends.org/2015/12/09/the-american-middle-class-is-losing-ground/

***https://www.aei.org/carpe-diem/yes-the-us-middle-class-is-shrinking-but-its-because-americans-are-moving-up-and-no-americans-are-not-struggling-to-afford-a-home/

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