Income Distribution & the Middle Class

Income Distribution & the Middle Class

How big is the middle class, and how is it defined? ”The Pew Research Center defines the high end of the US middle class as those earning two-thirds to twice the median household income, which was $60,336 in 2017, meaning middle-class Americans were earning about $40,425 to $120,672”  This group represents about 50% of the families in the U.S. “

“A new survey by Northwestern Mutual found that 70 percent of Americans consider themselves middle class. However, a 2015 report from Pew Research Center shows that the middle class has been shrinking over the past four decades and now makes up only 50 percent of the United States’ total population. One reason for this discrepancy might be the fact that wages have been largely flat while costs have gone up, so, in many places, even those making a six-figure income feel like they’re struggling to get by.

Of the survey participants who labeled themselves as middle class, 50 percent earn between $50,000 and $125,000 annually. Although these Americans consider themselves in the middle, the actual dollar amounts needed to qualify as middle class are slightly lower. Pew Research Center defines the range as adults whose annual household income is two-thirds to double the national median, which was $55,775 as of 2016. This would lower the range to $40 to $110,000 That equates to singles making between $24,000 and $72,000 annually are middle class.”

While the top 10% of income families have enough discretionary income to have limited participation in Capitalism, it is the top 1% (the Capitalist Group) that controls wealth. The majority of middle-class families struggle to provide just one annual vacation. We can expect them to little or no participation as owners of capital. Fully 37% of families have incomes below the definition of the middle class, and another 12% have incomes below the poverty level.

Currently, the middle class is the engine that drives our economy. Has this group been benefiting from the economic prosperity of the past 20 years? While GDP has increased from $9.6 trillion to $21.3 trillion (a 120% increase), average wages have only increased by about 10%. Where did all that additional GDP go?