US Middle Class Now Shrinking Nationwide, Report Says

While Some Americans Get Poorer, Others Get Richer

White House press secretary standing in front of sign about middle class taxes
White House Speaks to the Press About Middle Class Taxes. Alex Wong / Getty Images

Once believed to be limited to chronically depressed areas like Appalachia and the Northeast Rust Belt, the American middle class seems to be shrinking from sea to shining sea.

That is the unsettling result of a May 2016 study by the nonpartisan Pew Research Center showing that since 2000, the middle class has been “losing ground” in 203 of 229 U.S. metropolitan areas from Boston to Seattle and from Dallas to Milwaukee.

To put that into perspective, about 3 of every 4 Americans live in those 229 metropolitan areas, according to the Pew report.

For purposes of its study, Pew defined middle-income as an annual income of about $42,000 to $125,000 for a family of three, adjusted for the cost of living in the specific metropolitan areas.

Can you think of a single politician in your lifetime who has not promised to “protect the middle class?” Probably not, but it appears that none of those promises have been kept, as Pew researchers aging projected that the middle class may soon cease to be the economic majority in the U.S.

“The changes at the metropolitan level, the subject of this in-depth look at the American middle class, demonstrate that the national trend is the result of widespread declines in localities all around the country,” stated the report.

But We’re Not All Getting Poorer

While it might be easy to assume that the continued shrinkage of the middle class is a consequence of Americans getting poorer in general, not so quick.

The Pew researchers say that is not the case.  

In fact, the income pendulum seems to be swinging both ways, as the report shows while some Americans are falling from middle to lower class, others are rising from the middle into upper-income brackets.

According to the report, while 160 metropolitan areas experienced an increase in the number of households falling from middle- to lower-class incomes, 172 areas saw an increase in the number of upper-income households.

Overall, “the share of adults in the upper-income tier increased from 17% in 2000 to 20% in 2014, a gain of 2 percentage points,” noted the report. “Meanwhile, the share of adults in the lower-income tier increased from 28% to 29%, an increase of 1 percentage point.”

So while some move up and some move down the income ladder, the middle class just fades away.

Why? Pew cites economists who attribute the trend to the overall loss of well-paying factory and manufacturing jobs in metro areas combined with a simultaneous rise in the number of high-paying positions open only to college graduates.

In 2004, a study done by the U.S. Census Bureau showed that getting a college degree more than doubled an individual’s annual income. A similar study in 1999 showed that a college master's degree is worth $1.3 million more in lifetime earnings than a high school diploma.

How the Income Pendulum Swings: Goldsboro, NC, and Midland, TX

To illustrate the extremes of the swinging pendulum of income distribution in metro areas, Pew cited the experiences of Goldsboro, North Carolina, and Midland, Texas – “one community buffeted by broader economic forces and the other buttressed by them.”

Goldsboro, North Carolina – ​a long time a railroad junction and home to Seymour Johnson Air Force Base -- saw its share of middle income adults fall from 60% in 2000 to 48% in 2014 – a drop of 12 percentage points.

This represented one of the largest decreases among the 229 metropolitan areas analyzed by Pew. Worse yet, Goldsboro’s share of lower-income households increased drastically, from 27% to 41% over the same 14 year period.

But in Midland, Texas, where the energy-based economy prospered from booming oil prices, the shrinking middle class signaled personal income happiness. From 2000 to 2014, the nearly 300,000 residents of the Midland-Odessa metro area saw their share of middle-income households drop from 53% to 43% -- the fourth largest decrease in the nation. Unlike in Greensboro, however, the big drop in middle-income households was accompanied by rapid growth in its share of upper-income households, which more than doubled from 18% in 2000 to 37% in 2014.

A Lasting Impact of the Great Recession?

The Great Recession of 2007-2009 resulted in lower household incomes in most U.S. metropolitan areas.

While the U.S. economy has been recovering since 2009, the nationwide median income of U.S. households in 2014 remained 8% less than in 1999, “a reminder that the economy has yet to fully recover from the effects of the Great Recession,” according to the Pew report.

In fact, Pew found that median household incomes had fallen in 190 of the 229 metropolitan areas it examined. In Goldsboro, NC, for example, the area’s median income fell by 26% from 1999 to 2014. Meanwhile, in the oil-soaked Midland, TX area, median incomes grew 37% over the same period, the largest increase among the 229 areas examined by Pew.

Despite the effects of the different economic circumstances as those found in Goldsboro and Midland, “The national trend is clear—the middle class is losing ground as a share of the population, and its share of aggregate U.S. household income is also declining,” the report said.