Pew study sees a shrinking middle class in major US cities

By: | Published: May 12, 2016 3:46 PM

In cities across America, the middle class is hollowing out. A widening wealth gap is moving more households into either higher or lower-income groups in major metro areas, with fewer remaining in the middle, according to a report released Wednesday by the Pew Research Center.

In cities across America, the middle class is hollowing out. A widening wealth gap is moving more households into either higher or lower-income groups in major metro areas, with fewer remaining in the middle, according to a report released Wednesday by the Pew Research Center.

In nearly one-quarter of metro areas, middle-class adults no longer make up a majority, the Pew analysis found. That’s up from fewer than 10 percent of metro areas in 2000.

Pew defines the middle class as households with incomes between two-thirds of median income and twice the median, adjusted for household size and the local cost of living. The median is midway between richest and poorest. By Pew’s definition, a three-person household was middle class in 2014 if its annual income fell between $42,000 and 125,000.

Middle class adults now make up less than half the population in such cities as New York, Los Angeles, Boston and Houston.

That sharp shift reflects a broader erosion that occurred from 2000 through 2014. Over that time, the middle class shrank in nine out of every 10 metro areas, Pew found.

”The shrinking of the American middle class is a pervasive phenomenon,” said Rakesh Kochhar, associate research director for Pew and the lead author of the report. ”It has increased the polarization in incomes.”

The squeezing of the middle class has animated this year’s presidential campaign, lifting the insurgent candidacies of Donald Trump and Bernie Sanders. Many experts warn that widening income inequality may slow economic growth and make social mobility more difficult. Academic research has found that compared with children in more economically mixed communities, children raised in predominantly lower-income neighborhoods are less likely to move into the middle class.

Wendell Nolen, 52, has experienced the slide from middle-class status first-hand. Eight years ago, he was earning $28 an hour as a factory worker for Detroit’s American Axle and Manufacturing Holdings, assembling axles for pickup trucks and SUVs.

But early in 2008, the good life unraveled. After a three-month strike, Nolen took a buyout rather than a pay cut. Less than a year later, the plant was closed and American Axle shipped much of its work to Mexico.

Now Nolen makes $17 an hour in the shipping department of a Detroit steel fabricator, about 40 percent less than he made at the axle plant.

”America is losing jobs because of the free trade stuff,” Nolen said. ”They’re selling America out.”

Nationally, the proportion of middle class adults shrank to 51 percent in 2014 from 55 percent in 2000, Pew found. Upper-income adults now constitute 20 percent of the population, up from 17 percent. The lower-income share has risen to 29 percent from 28 percent.

Yet the changes have been much more dramatic at the local level. There are now 79 metro areas in which the proportion upper-income households equals or exceeds the national average of 20 percent. That’s more than double the 37 cities in which that was true in 2000.

The trend hasn’t been quite as pronounced in the other direction: In 103 metro areas, 29 percent or more of adults now live in poor households, up from 92 in 2000.

The report studied 229 of the largest U.S. metro areas, which constituted 76 percent of the U.S. population.

Overall, cities with the largest middle classes are more likely to be in the Midwest. Those with the biggest low-income populations are more often in the Southwest, particularly near the Mexico border. Metro areas with the highest proportions of upper-income households are more likely to be found in the Northeast or along the West Coast.

In some cases, many former middle-class residents have moved up. In others, they have fallen lower.

Middle-class adults now constitute just 48.6 percent of the adult population in Boston, down from nearly 56 percent in 2000. At the same time, upper-income earners have jumped to 29.6 percent from 22.7 percent. The lower-income population has barely risen, to 21.7 percent from 21.4.

In Atlanta, the middle-income population has fallen to 50.5 percent of the total, barely a majority, from 56 percent in 2000. And the proportion of lower-income adults has ballooned to 27 percent from 20 percent. But there are fewer higher-earners in Atlanta, too: Just 22.6 percent of adults live in higher-income households, down from 23.9 percent.

The nationally figures underscore a broad divide in the nation: More people moved up than down in 119 communities, Pew found, while the reverse was true in 110.

The cities with the largest proportion of middle-class adults still rely disproportionately on manufacturing to fuel their economies. Just over two-thirds of the adults in Wausau, Wisconsin, are middle class, the highest proportion in the nation. The Elkhart-Goshen, Indiana, metro area, with 61.4 percent of its adults in the middle class, and Youngstown-Warren, Ohio, with 60.2 percent, are also in the top 10.

Yet job losses in manufacturing have caused some of the sharpest drops in middle class households in many cities. They include Southern towns that have lost furniture and textile companies, such as Hickory-Lenoir, North Carolina, as well as Rust Belt cities such as Fort Wayne, Indiana and Detroit.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition