If you’re like many Americans, you consider yourself middle class. Your personal assessment may be correct. But the actual number of middle-class families is on a steady decline, and unfortunately it’s not because people are making more money and moving up.
According to 24/7 Wall St., while the incomes of the wealthiest Americans continue to rise, the average income of middle-class families fell by 4.3 percent between 2009 and 2013. In California, the situation is much worse, with middle-class families experiencing a 7 percent drop in income during the same period.
Joe Valenti, director of asset building at the Center for American Progress, said a vibrant middle class is essential to economic growth because middle-income families spend big money on goods and services.
“An additional dollar in the hands of a middle-income earner is going to drive a lot more spending than an additional dollar in the hands of someone in that top quintile,” Valenti said. While households in the top quintile are able to spend enormous sums of money, “at some point there’s only so much that an individual can spend, even on all different kinds of luxury goods.”
24/7 Wall St. compiled a ranking of the 10 states where middle-class incomes are faring the worst.
In all 10 of the states on this list, the share of total income earned by the bottom 80 percent of households fell between 2009 and 2013 and was redistributed to the highest quintile. The top 20 percent of U.S. households held more than 51 percent of total income in 2013, up 1.14 percentage points from 2009. Even among top earners, income was not evenly distributed. Over that five-year period, the top 5 percent of households accounted for nearly 75 percent of income gains in the top 20 percent of earners.
- California. 6.9 percent reduction in middle income.
- Vermont. 5.9 percent.
- Maine. 5.8 percent.
- Rhode Island. 6 percent.
- Washington. 5 percent.
- Louisiana. 4.9 percent.
- Idaho. 4.7 percent.
- Oregon. 4.6 percent.
- Indiana. 4.4 percent.
- Massachusetts. 4.4 percent.
It’s happened before, but differently. The middle class decreased in the final decades of the 20th century, The New York Times reports. But in that period, unlike now, people were moving up, not down.
How is the middle class faring in your state? Share your comments below or on our Facebook page.
What should you do if you experience a job loss or decline in income? Watch this video for steps to limit the fallout.