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Dec 11 2015

The Dying American Middle Class

The American middle class is dying, literally and figuratively, from income inequality. There are now more people living in poverty and getting richer than there are those in with middle incomes.

The Middle Class Is No Longer America’s Economic Majority
Lydia O’Connor, Huffington Post

There are now more low-income and high-income Americans combined than there are people in the middle class, a study released Wednesday found.

According to a Pew Research Center report, there were 120.8 million adults living in middle-income households and 121.3 million in lower- and upper-income households combined in early 2015, marking the first time in the center’s four decades of tracking this data that the size of the latter groups has transcended that of the first.

The study defines middle income as adults earning two-thirds to double the national median, which translates today to somewhere between $42,000 and $126,000 a year for a three-person household.

Since 1971, the percentage of adults living in the low income bracket has increased from 25 percent to 29 percent, and the percentage of adults living in the highest income bracket has shot up from 14 percent to 21 percent. The middle class, meanwhile, has shrunk from 61 percent to about 50.

That’s not entirely bad news. The shrinking of the middle class is due more to the rising number of high-income Americans, which increased 7 percentage points, than it is to the increasing number of low-income Americans, which increased by just 4 points.

Income inequality is also the cause for the decline in life expectancy for middle class, particularly white Americans.

Inequality is now killing middle America
Joseph Stiglitz, The Guardian

This week, Angus Deaton will receive the Nobel Memorial Prize in Economics “for his analysis of consumption, poverty, and welfare.” Deservedly so. Indeed, soon after the award was announced in October, Deaton published some startling work with Ann Case in the Proceedings of the National Academy of Sciences – research that is at least as newsworthy as the Nobel ceremony.

Analysing a vast amount of data about health and deaths among Americans, Case and Deaton showed declining life expectancy and health for middle-aged white Americans, especially those with a high school education or less. Among the causes were suicide, drugs, and alcoholism.

America prides itself on being one of the world’s most prosperous countries, and can boast that in every recent year except one (2009) per capita GDP has increased. And a sign of prosperity is supposed to be good health and longevity. But, while the US spends more money per capita on medical care than almost any other country (and more as a percentage of GDP), it is far from topping the world in life expectancy. France, for example, spends less than 12% of its GDP on medical care, compared to 17% in the US. Yet Americans can expect to live three full years less than the French. [..]

The international Commission on the Measurement of Economic Performance and Social Progress, which I co-chaired and on which Deaton served, had earlier emphasised that GDP often is not a good measure of a society’s wellbeing. These new data on white Americans’ declining health status confirms this conclusion. The world’s quintessential middle-class society is on the way to becoming its first former middle-class society.