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Despite Economic Growth, Middle-Income Americans Have Less Than They Did 40 Years Ago

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Over the past 40 years, the US economy has boomed. But what does that mean for the “American dream”? While the top 1% has had enormous gains, average US households aren’t any better off today. In fact, they’re falling further behind.

We crunched numbers from the US Bureau of Labor Statistics, adjusting them for inflation, and found that during the past 40 years, middle-income households have seen their income decrease 13 percent, and the number that really matters — discretionary income — has decreased even more, by almost 30 percent. This was true for all households, not just married households.

Hard-working US households can’t catch a break. While corporate profits grow, middle-class Americans are sliding backwards.

While pre-tax income is an interesting metric, the number that really matters for Americans’ well-being is discretionary income — the money left over after taking out income taxes and paying for necessary expenses such as food, clothing, shelter, housing, transportation and health care. We factored these expenditures into our calculation, and the data is clear: Middle income Americans are worse off than they were 40 years ago.

How can this be? While popular rhetoric looks to blame taxes for burdening the middle class, the opposite is true. According to data from the Bureau of Labor Statistics, middle-income households pay significantly less — more than 65 percent less in fact — in income taxes than they did 40 years ago. Other studies back this up. The Center on Budget and Policy Priorities and the Congressional Budget Office agree that middle-income households are paying near historic lows in terms of income taxes.

A study by the Tax Policy Center shows that a four-person family in 2015 paid 59 percent less in income taxes than the same family would have in 1955. If taxes aren’t to blame, why is the middle class falling behind?

Maybe Americans are working less? Nope, adults employed full time in the US are working an average of 47 hours a week, adding up to more hours worked per year than generations past. Any gains households have achieved are largely due to longer hours worked, not higher wages.

Over the past 40 years, the number of women working outside the home has boomed. With the increase in women’s participation in the workforce, the number of children living in households where both parents work full-time has increased roughly 50 percent since 1970. This means more day care, which is getting more expensive every year.

The American pie is growing, but it’s being gobbled up by those that already have more than enough.

Hard-working US households can’t catch a break. While corporate profits grow, providing income gains for the rich, middle-class Americans are sliding backwards. It has been decades since the middle class received a significant raise, as broad-based wage stagnation is the norm for most working Americans. Economists used to argue that productivity growth in the economy raised all boats — but the data doesn’t support these claims. Shared prosperity simply isn’t part of the US landscape anymore.

Middle-income Americans are working more than ever and spending more on necessities, but haven’t seen gains in income to compensate, leaving them with the lowest discretionary income in more than 40 years. The American pie is growing, but it’s being gobbled up by those that already have more than enough.

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Here are several charts that look at the economic condition of the American middle class over time. There may be some slightly good news re some aspects of the middle class' situation but the general trend is unmistakably striking a downward trend.

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Yet who got bailed out? Who got prosecuted into forfeiture?

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What most middle income Americans today have they didn't have 40 years ago

air conditioning

houses twice and more as large as they used to have

more and better household appliances and house/yard care implements

two (or more) newish cars in the garage with all kinds of safety and convenience features that didn't exist before

high tech medical care with all kinds of imaging, medicines, treatments,
surgeries, and therapies that didn't exist before

better school facilities and education for their children


cable tv

streaming video

cell phones for every member of the family

safer and more variety in their food

more, better, and safer roads and bridges

more and better national parks and recreational and travel opportunities

access to a wider variety of imported items at lower cost

better police protection and fire service

etc etc etc

I could go on and on.  But the point is that all of those things cost MONEY if you want to have them.

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Another thing to consider re the economy and the worth of households is the growing "wealth gap". America is looking more like a third world country, flat screen TVs and iPhones notwithstanding, than a rich developed democratic country. The gap is widening and this is not good for social stability.

Some become apoplectic at the phrase "redistribution of wealth", which to them is synonymous with communism, but what we've seen in the past few years is indeed redistribution (via "tax reform") of wealth but it has gone from the middle class and working poor to those who have the most. The economy is looking more like a game of Monopoly than an open market.

Economic inequality in the United States has been receiving a lot of attention. But it’s not merely an issue of the rich getting richer. The typical American household has been getting poorer, too.

The inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline, according to a study financed by the Russell Sage Foundation. Those are the figures for a household at the median point in the wealth distribution — the level at which there are an equal number of households whose worth is higher and lower. But during the same period, the net worth of wealthy households increased substantially.

CreditSource: Russell Sage Foundation
The Russell Sage study also examined net worth at the 95th percentile. (For households at that level, 95 percent of the population had less wealth.) It found that for this well-do-do slice of the population, household net worth increased 14 percent over the same 10 years. Other research, by economists like Edward Wolff at New York University, has shown even greater gains in wealth for the richest 1 percent of households.

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