The Census Bureau reported last week that middle-class income is continuing to shrink, top-tier incomes are growing and those at the bottom remained about the same. It wasn’t shocking news, confirming what dozens of independent studies have shown.
What does come as a surprise is what politicians regard as middle income.
On Friday, Republican presidential nominee Mitt Romney said “middle income is $200,000 to $250,000 and less.”
That’s about where President Barack Obama has drawn the line, too. He wants to raise the income tax rate on “the wealthy” who earn more than that.
A better place to begin the discussion is at true middle income, where half earn more and half earn less. The Census Bureau puts median household income for 2011, adjusted for inflation, at $50,054. That’s down $780 in inflation-adjusted dollars from 2010.
Neither Mr. Romney nor Mr. Obama has had to live within the boundaries of that income for a very long time, if ever.
The Census Bureau’s annual report on poverty, annual income and health insurance is the most comprehensive breakdown of the financial conditions of people in the United States.
Economists were most surprised by the news in the report that poverty stayed relatively the same. In 2010, 15.1 percent of the nation’s population was in poverty, and last year it was 15 percent, with 46.2 million people at the poverty level.
Poverty is described by the Census Bureau as a family of four with income of $23,021 or less. Even though the good news was that the poverty rate had not increased, Ron Haskins, a former White House and congressional adviser on welfare issues and a senior fellow at the Brookings Institution, put the rate into perspective by saying it was “still higher than it has been in all but two years since the mid-1960s.”
Median household income was 8 percent lower than in 2007, which is designated as the year before the recession took hold. The decline from 2010 to 2011 was 1.5 percent, which was the fourth straight year of lower income for the middle class.
The high point for the dead-middle of the middle class was 1999, when median income reached $53,252.
The Census data confirmed that income inequality in the U.S. is at its greatest level since the Gilded Age of the late 19th century. The top 20 percent of taxpayers now receive 51.1 percent of the nation’s total income. The top 20 percent starts at $101,583, the Census Bureau says.
The bottom 20 percent? They got 3.2 percent of all household income in 2011.
The income share for the top 5 percent rose 4.9 percent to 22.3 percent of the whole enchilada. Income for that group starts at $186,000, according to the bureau.
The wealthiest 25 percent of taxpayers take home 73.4 percent of all household income. Everyone else splits the remaining 26.6 percent.
The income gap has widened dramatically, fueled by gains at the top and declines in the middle. The bottom has stayed about even. It’s the middle class that’s losing ground.
The loss of good-paying, middle-income jobs is largely responsible for the regional downturn, according to economists. Those jobs, mostly in the manufacturing sector, have been offshored or computerized or killed by the recession. Some have been restored, but at lower pay levels.
Consider the GM plant in Wentzville, Mo. The company is expected to add 1,200 jobs next year with a new assembly line, but the workers will be paid about $10 less per hour than the people who used to work on the line.
None of this has happened by accident. It is the product of 30 years of concerted effort to build a winner-take-more economy. Unions have been destroyed. The financial sector has become omnivorous. In the absence of a national industrial policy, the promise of globalization was not kept - too few “knowledge economy” jobs came along to replace the manufacturing jobs that were lost.
The housing and tech bubbles disguised the damage for a while, but the recession revealed that the middle class had been hollowed out. This nation cannot prosper without a vital, vibrant middle class. The first place to start rebuilding is to define it correctly. And it’s not $250,000 a year.