There’s less middle in the middle class as income inequality grows, Pew analysis finds

The middle class has taken center stage in this election cycle, and it turns out there are increasingly fewer Americans who qualify. A new Pew analysis finds their ranks have shrunk since 2000 and that in at least 160 metro areas there’s been a rise in both lower and upper class families. Hari Sreenivasan talks to Marketplace’s Kai Ryssdal for more on why the middle class is shrinking.

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  • HARI SREENIVASAN:

    We have spent much time this year talking about the travails of the middle class. Now a new analysis shows how it's shrinking in most U.S. metro areas.

    From Boston to Goldsboro, North Carolina, to Midland, Texas, to Seattle, there are fewer adults living in middle class households across the country than there were in 2000. The analysis by the Pew Research Center found that in 160 metro areas, there was an increase of lower-income households. And 172 metro areas saw a rise in upper-income households.

    This year, we're teaming up with American Public Media's Marketplace and PBS' "Frontline" on how economic forces are affecting Americans. It's called How the Deck Is Stacked.

    And the host of Marketplace, Kai Ryssdal, joins us again.

    Kai, just so we're all on the same page, who is really middle class vs. who thinks they're middle class?

    KAI RYSSDAL, Host & Senior Editor, Marketplace: So, for the purposes of this study, Hari, it goes like this.

    Anybody making from two-thirds to twice the median income in this country. So, it's $47,000 to about $125,000, if you want to run the numbers.

  • HARI SREENIVASAN:

    So, those are the folks that are actually in the middle class. But we kind of feel like there are a lot of people in the middle class, a lot of people who would want to self-identify as a member of the middle class. I'm the average Joe.

  • KAI RYSSDAL:

    Right, that's what we are in this country. Right? We are aspirational. We want inclusive prosperity.

    If you stop seven people — 10 people on the street, probably seven of them would say I am the middle class. And that's why this study matters, right, because what happens in this economy is that the middle class drives it. The middle class are the consumers. Right? Their upper ends are the investors. The lower end are getting by. The middle class are the consumers in this economy.

    And so what this study really says is, this is bad news for the future of economic growth in this country, and that's why it matters.

  • HARI SREENIVASAN:

    As we pointed out, there were some places where the middle class got smaller because people got richer and there were other places where the middle class got smaller because people got poorer. A couple of those different locations, examples?

  • KAI RYSSDAL:

    Yes.

    So, there are some really good ones in this study. So, if you look at Goldsboro, North Carolina, right, it used to be a railroad junction. It used to have a big Air Force base by it. It is an old-economy town. It is a town that is seeing the economy go away from it.

    And right in that town, you see more people sliding from the middle class to the lower class. They're having a tougher time getting by. If you look at a place like Midland, Texas, which the Pew Research folks polled out, Midland, Texas, is an energy economy.

    The energy economy in the last 15 years in this country has been doing really well, and so people there are moving from the middle class to the upper class. It's not a zero-sum game, but this economy is changing, and that's what's driving this entire study and the fate of the middle class.

  • HARI SREENIVASAN:

    Now, we have heard of the middle class declining in rural areas. Is there a difference when we see that this as such a big deal in metro cities as well?

  • KAI RYSSDAL:

    Well, the root of this study is income inequality, right?

    And we have known about it for a long time in the rural areas. It is now coming to these things called metropolitan statistical areas, these big centers of population, some big, some less big, where the bulk of the population in this country lives.

    Wages have been stagnant in this economy for decades now, right, which means incomes and household wealth are stagnant, which means there is more income inequality. And when you have income inequality, you have more going to the low end, you have more going to the high end, and those drivers of prosperity in America are getting, as you said in the beginning, hollowed out.

  • HARI SREENIVASAN:

    How does this square with the people you have been talking in the series you're working on as you report this?

  • KAI RYSSDAL:

    Well, here's the thing.

    I'm going out in the field next week to talk to a couple that we first met in a coffee shop about six months ago here in downtown Los Angeles. They're both teachers. One of them has a master's degree. They are literally the epitome of the American middle class. Right? You think, if they can't make it on a teacher's salary, then something is up.

    Here's the deal. We were sitting there chatting over a cup of coffee and a piece of pie. And the husband said to me: "We have given up. We're done. We know we're never going to own a house. We're never going to grow beyond the middle class. We're buried in student debt. We don't really know if we're going to be able to afford to send our child to school."

    And they have given up, and that tells what you is at root in this study.

  • HARI SREENIVASAN:

    All right, Marketplace's Kai Ryssdal, thanks so much.

  • KAI RYSSDAL:

    You bet.

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