The Middle Class Busts a Button

The Star-tribune ran an article recently on a Pew Research finding that the middle class is shrinking; it now accounts for barely half of the US population. That’s a ten percent drop from a similar poll conducted forty years ago. It sounds bad.

But wait a minute! The same study revealed that 20 percent of Americans are now in the upper class. Yet only 14 percent fell into that category 40 years ago. So where did the missing ten percent of the middle class go? More than half of them got richer!

Therefore, the use of the word “squeezed” in the headline is misleading. It might better have read Middle Class Leaps Forward, or Middle Class Busts a Button. In any case, such studies are based on a rather arbitrary statistical determination of where one class stops and the next one starts. The same Pew study also revealed that approximately the same percentage of whites, blacks, and Latinos considered themselves to be “middle class,” even though the data exposes significant differences in the financial well-being of these groups.

Some of the more interesting findings of the Pew study are to be found in the back pages that don’t show up in the newspaper reports. For example, the median family income for all income levels rose significantly in the last 40 years. I also find it interesting that those segments of the population that are moving ahead the most slowly, blacks and Latinos, are the most optimistic about America’s economic future, with 78% and 67% respectively seeing better things ahead, while those who are doing best, the whites, are far more glum about their prospects (48%).

No less surprising is the fact that the young, who have been hit hard by unemployment, tuition debt, and a real estate nightmare, are the most optimistic segment of the population; meanwhile, the old, whose welfare has improved more than any other segment in recent years, are the most discouraged about the future of the economy. Are we measuring the economy here, or are we measuring hormones, or eschatology?

The standard wisdom to be drawn from the headlines is that the rich are getting richer while the poor are getting poor. Maybe. Yet one of the big mysteries raised by the statistics is this: Why can’t the rich hold on to their money? It would surprise many to learn that 60% of those who were in the top quintile forty years have watched their offspring drop out of that category, while the same percentage of individuals in the bottom quintile (60%) watched their children climb out of that category into what might be called the lower middle class. Yes, things are always changing. Things are always in flux.

All this niggling about numbers seems to carry a hidden message about “our society” and it isn’t a happy one. But the real story of what’s going on has less to do with quintiles and classes than with technology. As one economist put it:

Much of the technological change in recent decades has been skill-based; it impacts skilled and unskilled workers differently. For example, the computer revolution has increased the productivity of skilled workers, but blown unskilled ones out of the water. Skilled, computer-literate applicants job hop to ever-increasing salaries. Former clerks and assembly-line workers, now displaced by computers and robots, pound the pavements unable to replace their former wages. In almost every market and occupation, those workers with the education and skills to adapt and take advantage of new technologies have prospered relative to those who cannot.

One of the most encouraging pieces of data comes not from the Pew study, but from a recent article in the Atlantic, which showed that Millennials have significantly less interest in buying cars and houses than their parents did. This may be simply because they can’t afford to do so. But perhaps it also reflects a more mature understanding of how much those things actually cost. Many young people nowadays can get along just fine with a smartphone, a bicycle, and a flat uptown.

So perhaps the revolution has finally begun.