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^{Wealth & Poverty Review} The Missing Middle

_{Alex Lykken
August 22, 2012
Poverty}

This is great.The Pew Research Center released thirty years of income data this week, confirming, what else, worsening income inequality:

[M]iddle-income Americans have seen their median net worth remain roughly flat over the past quarter-century, at $93,150 in 2010, compared to $91,056 in 1983 (in 2011 constant dollars.)

Upper income families, by contrast, have seen their median net worth grow over the same period by 87%, to $574,788 from $307,134.

Yikes. That sounds bad. Amusingly, though, much of it was due to middle class earners becoming upper income earners:

The study shows that as the number of middle-class Americans fell (from 61 percent of the population to 51 percent of the population), the percentage of Americans who are upper income surged from 14 percent of the population to 20 percent.

Who says mobility is dead? Individuals move between income brackets all the time. We talk about classes and quintiles as though they were static groups of people, huddled together, moving through the economy simultaneously. They aren’t, of course. The size and makeup of classes change every year, usually for the better. A Census Bureau survey found, between 1979 and 2006, a 13% drop in middle-income households, a 1% drop in lower-income households, and a 15% rise in the upper class. The upper class grew. Another study followed a group of earners starting out in the bottom 20 percent. In 15 years, 95% were no longer at the bottom, and many had made it to the top quintile. Things change over time.

We should have the IRS tell us where our incomes rank, percentage-wise, every year. Just for reference. Maybe a little box on our tax returns with our percentage in it. Maybe we’d worry less about the class system when we see how easily we move through it.