Sunday, July 23, 2006

The incredible shrinking middle class

Class warfare. Certainly a hot topic in the left blogosphere. Whether it be the plight of the minimum wage worker or the cuts to health insurance, income and wage disparity or any of the other issues we talk about here, it is an issue of much importance.

Sadly, there has been little reporting in this area outside of our own lives, anecdotal experiences and stories, and a few studies released with little fanfare. In fact, this was a discussion that I was having with the missus earlier today with respect to the "hot job market" and declining wages, raises and standard of living for many in the "middle class".

And, ironically enough, today's NY Times and LA Times are reporting on the ever-shrinking middle class in large cities.

Earlier in the week, I did a diary that highlighted a recent Brookings Institution study with respect to lower income families having to pay more for everyday services and necessary items. Sadly, it got lost in all of the "I am...." diaries, but the findings in these two articles compliments the sad and unfortunate reality that the Brookings study found.

Wayne State University demographers recently conducted a study with respect to the middle class, the disparity between the wealthy and the lower income class as well as the shifting economic demographics in a number of large cities around the country. And the Brookings Institution released a report late last month which looked at the shrinking middle class over the thirty year period covering 1970 - 2000. The Wayne State University study was incorporated into or at least formed the basis of part of the Brookings report and was not released in a separate report.

The results are sobering.

Above is a graph from the Brookings study indicating the percentage decrease in the middle class within the 100 largest metropolitan areas, as compared to 1970. Now, it is tough to find a complete "apples-to-apples" comparison, but Brookings generally has done a good job in their research.

From the NY Times article:

[s]ociologists and many economists believe that there can be non-economic consequences for cities that lose a lot of middle-income residents. The disappearance of middle-income neighborhoods can limit opportunities for upward mobility, the authors of the Brookings study said. It becomes harder for lower-income homeowners to move up the property ladder, buy into safer neighborhoods, send their children to better schools and even make the kinds of personal contacts that can be a route to better jobs. The Brookings study, which defined moderate-income families as those with incomes between 80 and 120 percent of the median for each area, found that the percentage of middle-income neighborhoods in the 100 largest metropolitan areas had dropped to 41 percent from 58 percent between 1970 and 2000. Only 23 percent of central city neighborhoods in 12 large metropolitan areas were middle income, down from 45 percent in 1970.

Meanwhile, New York University researchers reported last month that the number of apartments affordable to households making 80 percent of the median household income in New York City dropped by a fifth (over 200,000 households) between 2002 and 2005.

The article also discusses the potential for this demographic shift to not have much of an economic impact in the short term if labor and services is still available. However, that seems to be pretty shortsighted to me. Rightfully so, as the article continues with the warnings above, as well as the observation that such a reduction in the middle class only creates a larger "haves vs. have nots" situation when it comes to public vs. private schooling, options for shopping or other services.

Not surprisingly, this is confirmed by the other Brookings study released this week which I referenced above.

From the LA Times article:

Demographers at Wayne State University in Detroit recently found Greater Los Angeles to be the most economically segregated region in the country. The study found only about 28% of its neighborhoods to be middle-class or mixedincome, compared with more than half of those in Nashville, Pittsburgh, Seattle and Portland, Ore.

More than two-thirds of L.A.-area residents live in neighborhoods that are solidly rich or poor, according to the analysis, which is based on 2000 census data. That share has been steadily growing for three decades, said one of the study's authors, George Galster, a professor of urban affairs at Wayne State.

"The situation in L.A. is certainly at the extreme of American cities," Galster said, adding that every one of the 100 metropolitan regions he looked at has grown more economically segregated over the last 30 years.

While the LA Times article was more slanted towards the fact that LA topped the list of "most economic disparity" and some of the things that LA is trying/should try to do in order to reverse this trend, there were a few insightful comments with respect to the overall impact of the shrinking middle class:

More broadly, Berube maintained, the shrinking of mixed or middle-income neighborhoods limits the ability of low-income residents to move up economically without leaving the region. It can even contribute to civic instability.

"People in the middle are an important social glue for a city," he said. "To some extent, they serve to mediate the interests of low-income versus high-income, to help forge compromise."

As far as the numbers go, the Brookings study indicated the following:

Analysis of 1970 to 2000 decennial census data for families and neighborhoods in the 100 largest metropolitan areas, and in the cities and suburbs of 12 selected metropolitan areas, finds that:

  • Middle-income neighborhoods as a proportion of all metropolitan neighborhoods declined from 58 percent in 1970 to 41 percent in 2000. This dramatic decline far outpaced the corresponding drop in the proportion of metropolitan families earning middle incomes, from 28 percent in 1970 to 22 percent in 2000.

  • Between 1970 and 2000, lower-income families became more likely to live in lower-income neighborhoods, and higher-income families in higher-income neighborhoods. Only 37 percent of lower-income families lived in middle-income neighborhoods in 2000, down from 55 percent in 1970.

  • The proportion of neighborhoods that were middle-income shrank faster than the proportion of families that were middle-income in each of 12 large metropolitan areas examined. Among the 12 metro areas, Los Angeles-Long Beach, Baltimore, and Philadelphia experienced much more dramatic declines in middle-income neighborhoods than San Antonio and Louisville.

  • Only 23 percent of central-city neighborhoods in the 12 large metropolitan areas had a middle-income profile in 2000, down from 45 percent in 1970. A majority of families (52 percent) and neighborhoods (60 percent) in these cities had low or very low incomes relative to their metropolitan area median in 2000.

  • A much larger proportion--44 percent--of suburban neighborhoods in the 12 metropolitan areas had a middle-income profile in 2000. Yet this proportion fell over the 30-year period, too, from 64 percent in 1970, accompanying a smaller decline in suburban middle-income families. Suburban middle-income neighborhoods were replaced in roughly equal measure by low-income and very high-income neighborhoods.

The hard numbers are there. The stories are out there. The population is feeling the squeeze. The gap has gotten wider - no matter how you slice the numbers. Wages. Income. Ability to afford healthcare. Ability to afford food, medicine, gasoline. Ability to get a good affordable education. And if this trend doesn't reverse itself soon, than what does that say for our country's future?


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