What Has Happened To The Middle Class

Essay by PaperNerd ContributorCollege, Undergraduate September 2001

download word file, 5 pages 4.0

Downloaded 25 times

WHAT HAS HAPPENED TO THE MIDDLE CLASS This question has probably stumbled into every economist's mind one time or the other and the answer is very simple, but hard to enforce. To answer the question we need to compare the living standards of people during the middle 1900's to the people now.

Since 1970 American incomes have become strikingly less equal. Living standards of the poor and lower middle-class Americans have fallen while those of affluent Americans have continued to improve. The 1947-73 graph of income distribution looks like a "picket fence" otherwise meaning that the growth rate of each family was very stable and similar. In fact the range was from 2.4-3.0%. There were no high's and low's, everyone was affected the same. On the other hand, the 1973-92 graph transforms from a picket fence to a staircase, representing the dramatic reduction of productivity growth and the unequal sharing (Who Killed the Middle Class).

The rich saw their income growth rate rocket while the poor saw their's plummet and some of middle-class moved up to the rich and others moved down to the poor. In 1995, the annual earnings of the 10th, 50th, and 90th percentiles were $12,920, $31,497 and $70,314 (Erp 1995) Most of the families consist at being at the 90th and 10th percentiles and fewer and fewer families remain at the middle (The Truth About Income Inequality). It's not only that the 10th percentile has such a low income than the 90th, but also that their income has fallen throughout the years. In 1979, they made about $498 a week and in !995 they made only $475 per week.

Why and how has the economy changed to bring upon this inequality and what can the government do to protect the average "Joe" from further demise.