THE SHRINKING MIDDLE CLASS

The Shrinking Middle Class

The Shrinking Middle Class

Introduction

The middle class is the most vital segment of a society. It is the engine that promotes economic and cultural growth. In Europe, the middle class is shrinking because of the tsunami of inflation. The poor and the middle class shop at cheaper places because of the high inflation rate. But due to inflation caused by the greed of merchants, mill owners, middlemen and inept leadership, customers are forced to do just “window shopping” of foodstuffs. Usually at the entrance of most town marts, there are large signs that display the control rates for foodstuff, but none of the vendors sell their commodities at these so-called 'controlled' prices. The economic disparity in society is increasing: the poor are getting poorer and the rich are getting richer. Unless policy makers pay attention to stabilizing and expanding the middle class by taking measures to curb inflation and promote growth in energy and manufacturing sectors. (Grusky, 2007 25)

What hold all together?

The public debate on the middle class focuses on prime-age adults: those who are old enough to be independent of their parents, but too young to be candidates for retirement.

There is no standard definition for the term "middle class," even among researchers who attempt to measure "class" by measuring household income. Some studies adjust incomes for household size, while others do not. Some analyses use after-tax income to chart economic fortunes, but most use pretax money income. And some researchers define affluence in terms of an absolute dollar figure, while others measure it relative to a distribution. (Gilbert, 2007, 34)

Two measures have been developed in economic status, one of which adjusts a household's income for household size. Both measures are based on after-tax household income, and both set the boundaries of middle income between the 20th and 90th percentage of the sample. Since food stamps are arguably equivalent to cash, we include their dollar value as a component of household income.

Both of our measures reveal similar economic pictures. And when our PSID data are compared with the Census Bureau's Current Population Survey, both indicate similar declines in the proportion of middle-income households. Our PSID analysis also reveals the story behind the overall census numbers. Using the household-size adjusted income index, we found that smaller households helped to increase the proportion of prime-aged adults in the middle class during most of the 1970s, but failed to prevent a dramatic decline in the size of the middle class in the 1980s. (Gilbert, 2007, 34)

Seventy-five percent of 25-to-55-year-olds were middle income in the early 1970s. This share fell in the mid-1970s, and again reached 75 percent in the late 1970s. Then it plummeted to 65 percent in 1983, and it had recovered only slightly (to 67 percent) in 1985-86. (Wells, 2009) The income-to-needs index shows even steeper declines. Only about 65 percent of prime-aged adults in 1985 were middle class according to this measure. A growing number of upper-income households drew people out of the middle ...