As economy takes center stage in the 2016 presidential election race, a new report Wednesday said American middle class is losing ground in metropolitan areas across the country, affecting communities from Boston to Seattle and from Dallas to Milwaukee.
The Pew Research Center said from 2000 to 2014 the share of adults living in middle-income households fell in 203 of the 229 U.S. metropolitan areas examined in a new analysis of government data.
Releasing a string of findings, the Pew said decrease in the middle-class share was often substantial, measuring 6 percentage points or more in 53 metropolitan areas, compared with a 4-point drop nationally.
Presidential candidates in the race including Republican Donald Trump and Democrats Hillary Clinton and Bernie Sanders have been pitching their ideas on lifting economic status of Americans as they seek to build their case to American voters.
But the new economic research suggests that a struggling middle class could be holding back the potential for future economic growth. 5 The national trend is clear—the middle class is losing ground as a share of the population, and its share of aggregate U.S. household income is also declining. 6 But, as the trends in Goldsboro and Midland demonstrate, similar changes in the size of the middle class could reflect very different economic circumstances and reactions at the local level, the Pew said.
According tot he report, “middle-income” Americans are defined as adults whose annual household income is two-thirds to double the national median, after incomes have been adjusted for household size. 7
In 2014, the national middle-income range was about $42,000 to $125,000 annually for a household of three. Lower-income households have incomes less than 67% of the median and upper-income households have incomes that are more than double the median.
The income it takes to be middle income varies by household size, with smaller households requiring less to support the same lifestyle as larger households. Thus, a one-person household needed only $24,000 to $72,000 to be middle income in 2014. But a five-person household had to have an income ranging from $54,000 to $161,000 to be considered middle income.
This report covers 229 of the 381 “metropolitan statistical areas” as defined by the federal government. That is the maximum number of areas that could be identified in the Census Bureau data used for the analysis and for which data are available for both 2000 and 2014 (an accompanying text box provides more detail). 1 Together, these areas accounted for 76% of the nation’s population in 2014.
“With relatively fewer Americans in the middle-income tier, the economic tiers above and below have grown in significance over time.”
The share of adults in upper-income households increased in 172 of the 229 metropolitan areas, even as the share of adults in lower-income households rose in 160 metropolitan areas from 2000 to 2014. The shifting economic fortunes of localities were not an either/or proposition: Some 108 metropolitan areas experienced growth in both the lower- and upper-income tiers.
“The possibility that a shrinking of the middle class may signal a movement into either the lower-income tier or the upper-income tier is exemplified by the experiences of Goldsboro, NC, and Midland, TX—one community buffeted by broader economic forces and the other buttressed by them.”
The report explains that in Goldsboro—an old railroad junction town and home to Seymour Johnson Air Force Base—the share of adults who are middle income fell from 60% in 2000 to 48% in 2014, or by 12 percentage points. This was one of the greatest decreases among the 229 metropolitan areas analyzed. It was also an unambiguous signal of economic loss as the share of adults in lower-income households in Goldsboro increased sharply, from 27% in 2000 to 41% in 2014.
But in Midland—an energy-based economy that benefited from the rise in oil prices from 2000 to 2014—the shrinking middle class was a sign of financial gains. The share of adults in middle-income households in Midland decreased from 53% in 2000 to 43% in 2014, the fourth-largest drop in the nation. But this was accompanied by rapid growth in the share of adults in upper-income households in Midland, which doubled from 18% in 2000 to 37% in 2014. 2
The findings reveal that among American adults overall, including those from outside the 229 areas examined in depth, the share living in middle-income households fell from 55% in 2000 to 51% in 2014. Reflecting the accumulation of changes at the metropolitan level, the nationwide share of adults in lower-income households increased from 28% to 29% and the share in upper-income households rose from 17% to 20% during the period. 3
“The widespread erosion of the middle class took place against the backdrop of a decrease in household incomes in most U.S. metropolitan areas.”
Nationwide, the median income of U.S. households in 2014 stood at 8% less than in 1999, a reminder that the economy has yet to fully recover from the effects of the Great Recession of 2007-09. The decline was pervasive, with median incomes falling in 190 of 229 metropolitan areas examined. Goldsboro ranked near the bottom with a loss of 26% in median income. Midland bucked the prevailing trend with the median income there rising 37% from 1999 to 2014, the greatest increase among the areas examined, the report said.
“The decline of the middle class is a reflection of rising income inequality in the U.S. Generally speaking, middle-class households are more prevalent in metropolitan areas where there is less of a gap between the incomes of households near the top and the bottom ends of the income distribution. Moreover, from 2000 to 2014, the middle-class share decreased more in areas with a greater increase in income inequality.”
These findings come from a new Pew Research Center analysis of the latest available 2014 American Community Survey (ACS) data from the U.S. Census Bureau in conjunction with the 2000 decennial census data. The focus of the study is on the relative size and economic well-being of the middle class in U.S. metropolitan statistical areas.
