Whither the Middle Class'? A Dynamic View
AbstractResearch using cross-sectional survey 'snapshots' of household income taken over the past quarter century reveals a growing inequality in the distribution of annual money income of households in the United States (Thurow, 1987; Levy, 1987; Levy and Michel, 1991; Michel, 1991; Karoly, 1990; Center on Budget and Policy Priorities, 1990; Easterlin, MacDonald and Macunovich, 1990), prompting some to argue that the U.S. middle class is disappearing (Phillips, 1990; Bradbury, 1986). Aggregate data from the National Accounts and from wealth surveys (Wolff, 1989; Eargle, 1991) reinforce this conclusion by showing a growing share of income from capital, a falling share for earnings, and a slightly increasing concentration of wealth among upper-income groups. Also well-documented is greater inequality in the size distribution of earnings and wages in the late 1980s as compared to one or two decades before (GottschaLk and Danziger, 1989; Burtless, 1989; Blackbum et al., this volume). Despite the consistency of these results, their almost universal reliance on data drawn from cross-sectional snapshots leaves unanswered many important questions regarding the nature of the changes taking place in the distribution of income and wealth. Most importantly, cross-sectional snapshots provide information only on net changes in economic position and thus reveal little about the extent and nature of movement into and out of the middle class.. Are increasing numbers of families 'falling from grace', as Katherine Newman (1988) puts it? If so, who are they and what events are linked to their income losses? Or is mobility into the middle class declining? And, if so, does this affect in particular young families? What avenues for upward mobility are disappearing? These are the types of questions we seek to address for adults crossing either the lower or the upper boundary of the middle class. A second set of issues we address involves linkages between changes in income and changes in wealth. We analyze trends in the transitions of prime age (25-54 years old) adults into and out of the middle class using 22 years of data from the Panel Study of Income Dynamics. We begin by reviewing the methodology and measurement procedures that we employ to define the middle class and transitions into and out of middle-class status. Next we present our basic findings which, in fact, show a persistent 'withering' of the middle class since about 1980. We then search for clues as to who moved into and out of the middle-income groups and the source of such changes. Because notions of 'class' are usually based on measures of wealth as well as income, we also investigate longitudinal changes in the wealth distribution in the 1980s for these same individuals. Our findings on wealth reinforce those based on income. The paper concludes with a brief discussion of the policy implications of our findings.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_56.
Date of creation: Jul 1991
Date of revision:
Contact details of provider:
Web page: http://www.levyinstitute.org
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rebecca M. Blank, 1991.
"Why Were Poverty Rates So High in the 1980s?,"
NBER Working Papers
3878, National Bureau of Economic Research, Inc.
- Easterlin, Richard A & Macdonald, Christine & Macunovich, Diane J, 1990. "How Have American Baby Boomers Fared? Earnings and Economic Well-Being of Young Adults, 1964-1987," Journal of Population Economics, Springer, vol. 3(4), pages 277-90, December.
- Susan E. Mayer & Christopher Jencks, 1989. "Poverty and the Distribution of Material Hardship," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 88-114.
- Laurence Kranich & Matteo Cervellati & Joan Esteban, 2006.
"The Social Contract with Endogenous Sentiments,"
06-06, University at Albany, SUNY, Department of Economics.
- Matteo Cervellati & Joan Esteban & Laurence Kranich, 2007. "The Social Contract with Endogenous Sentiments," UFAE and IAE Working Papers 702.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Matteo Cervellati & Joan Esteban & Laurence Kranich, 2007. "The Social Contract with Endogenous Sentiments," Working Papers 311, Barcelona Graduate School of Economics.
- Cervellati, Matteo & Esteban, Joan & Kranich, Laurence, 2006. "The Social Contract with Endogenous Sentiments," IZA Discussion Papers 2312, Institute for the Study of Labor (IZA).
- Joan Esteban & Laurence Kranich, 2003. "The Social Contracts with Endogenous Sentiments," Working Papers 71, Barcelona Graduate School of Economics.
- Esteban, Joan & Ray, Debraj, 1999. "Conflict and Distribution," Journal of Economic Theory, Elsevier, vol. 87(2), pages 379-415, August.
- Berube, Charles & Morissette, Rene, 1996. "Longitudinal Aspects of Earnings Inequality in Canada," Analytical Studies Branch Research Paper Series 1996094e, Statistics Canada, Analytical Studies Branch.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-Celeste Edwards).
If references are entirely missing, you can add them using this form.