Why America’s Middle Class is Shrinking
The middle class is defined by many in part as households making between $40,000 and $120,000 a year, however, the range does depend on where you live since some places have a higher cost of living than others. From 2000 to 2013, every state in America saw their middle class shrink for alarming reasons: incomes have fallen and housing prices have risen. According to the Pew Research Center, in 2015 the amount of low-income and high-income Americans combined was greater than the amount of Americans in the middle class by over 1 million people. The Pew Research Center has been collecting this data for over 40 years and this is the first time that they have seen this happen.
As a result of the middle class declining, the nation’s economic growth has been posed with a serious challenge. Middle class households usually drive spending on basically everything from cars to houses. Lower wages and higher housing costs could potentially be devastating for our nation’s economy, specifically for the economy of states with extremely high housing costs, and may lead to decrease in economic growth.
This may seem like all bad news, but it isn’t. While the shrinking of the middle class is in part due to the low income class growing, it is more so due to the amount of high-income Americans increasing. “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” (Huffington Post). This means that since 1971 the number of high income Americans has increased by 7 percentage points, while the number of low income Americans has only increased by 4 points. In some regards, this does represent some economic progress, according to the Pew Research Center.
Margaret J. King, the director of The Center for Cultural Studies & Analysis, believes that “the main difference between poverty and middle class and between middle class and wealthy ‘is belief in, and planning for, moving up as a working assumption’” (Forbes). In other words, without planning and making arrangements to help you move up the social class ladder then you will never achieve this goal. That’s where personal finance planning and coaching comes in. With the decrease of the middle class, financial coaching towards entrepreneurship is more important than ever to ensure that you move up a social class instead of down. Economic mobility from one class to the other is accomplished through our free enterprise system. Find a profession, the professor, the books, the materials, the community and a mentor to get you from shrinking financially.