Study: Middle-class families are no longer in the majority in U.S.

WASHINGTON — The nation’s middle class, long a pillar of the U.S. economy and foundation of the American dream, has shrunk to the point where it no longer constitutes the majority of the adult population, according to a new major study.

The Pew Research Center report released Wednesday put in sharp relief the nation’s increasing income divide, which is certain to be a central issue in the 2016 presidential race. It also highlights how various economic and demographic forces have eroded long-held ideals about maintaining a strong, majority middle class.

Many analysts and policymakers regard the shift as worrisome for economic and social stability. Middle-income households have been the bedrock of consumer spending, and many liberals in particular view the declining middle as part of a troubling trend of skewed income gains among the nation’s richest families.

Median-income voters, particularly non-college-educated men, are also at the core of billionaire Donald Trump’s surprising surge in the Republican presidential campaign. His supporters’ sense that their once-secure middle-class standing is in danger of slipping appears to be fueling much of the anger against the government and immigrant groups.

The tipping point for the middle class occurred over the past couple of years of the recovery from the Great Recession as the economy continued to reward highly educated workers, well-to-do investors and those with technical skills.

Rapid growth of upper-income households, coupled with an increase in less-educated, low earners, has driven the decline of the middle-income population to a hair below 50 percent of the total this year, Pew found. In 1971, the middle class accounted for 61 percent of the population, and it has been declining steadily since.

The Pew research found that the shares of upper-income and lower-income households grew in recent years as the middle shrank — with the higher-income tier growing more. In that sense, the nonpartisan group said, “the shift represents economic progress.”

Pew defined middle class as households earning between two-thirds and twice the overall median income, after adjusting for household size. A family of three, for example, would be considered middle income if its total annual income ranged from about $42,000 to $126,000. Pew analyzed data from the Census Bureau and the Labor Department, as well as the Federal Reserve.

Most Americans have traditionally identified themselves as middle class, even those at the top and bottom, reflecting a kind of cultural heritage tied to the American dream of self-reliance. But the Great Recession and subsequent slow recovery have shaken that image.

A Gallup survey this spring showed that just 51 percent of U.S. adults considered themselves middle or upper middle class, with 48 percent saying they are part of the lower or working class. As recently as 2008, 63 percent of those polled by Gallup said they were middle class.

This change in self-identification — and the reality of the shift documented by Pew — carries political ramifications as the state of the middle class continues to be a major focus of the economic debate in the presidential campaigns, with candidates, in time-honored fashion, invoking the middle class in their speeches and policy statements. President Barack Obama has dubbed his programs “middle-class economics.”

Patrick Egan, a politics professor at New York University, says the Pew findings and the Gallup surveys suggest that the public may be more open to policies of redistribution.

“Americans are always kind of reluctant to embrace open-class warfare,” Egan said. But “if more Americans are under the idea of placing themselves at the bottom, you’ll see politicians follow,” he said.

Although the median incomes of upper, lower and middle tiers have all lost ground since 2000, primarily because of the Great Recession from late 2007 to mid-2009, upper-income households saw the smallest decline through 2014, the Pew study found.

Seen over a longer period, from 1971 to 2014, the median income of all upper-income households increased 47 percent to $174,625. The median income for the middle tier rose 34 percent to $73,392, and for the lower income group, it was up 28 percent to $24,074. The median marks the halfway point.

Elizbeth Espinoza and her husband, Carlos Arceo, both 38, fall squarely in the middle class, according to Pew. The Downey, Calif., couple, who have two children, ages 4 and 6, gross about $110,000 between them, not counting benefits, such as health care insurance. By Pew’s definition, a household of four is in the middle tier if total income is between $48,347 and $145,041.

But Espinoza, who works as a student programming coordinator at the University of California-Los Angeles Labor Center, sees her family as barely straddling the middle class. The reason: high living costs, including $850 a month for child care and hefty student loan payments.

“I’m on the border of middle class and I feel this way because I feel like being part of the middle class means being comfortable financially, and I think we struggle with that,” Espinoza said. “When you look at that expense-to-income ratio, it’s just a lot more difficult to have that comfortableness.”