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The Middle Class Is Richer, But If You Had Not Noticed, You're Not Alone Lombardi Letter 2017-09-28 12:15:03 Middle class recession American middle class thriving U.S. Census Bureau average household income The American middle class appears to be doing better than ever. But the statistics conceal the rising levels of inequality, the real threat to the economy. Analysis & Predictions,News

The Middle Class Is Richer, But If You Had Not Noticed, You’re Not Alone

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Middle Class Is Richer Ricardo Daros

Good News and Bad News: Middle Class Is Bigger But So Is Inequality

You wouldn’t know it from the events in Charlottesville. You would not guess it from the dozens of suburban shopping malls and department stores, once symbols of prosperity, shutting down. But it seems that the American middle class is alive and thriving. It sounds odd. But then again, this is a conclusion that emerges from that rather cold and unidimensional tool known as statistics.

The U.S. Census Bureau suggests that the U.S. middle class has actually become richer. Apparently, average income in 2016 grew at unprecedented levels. It was the fastest in the country’s history. The Census Bureau went so far as to suggest that the poverty rate in the U.S. has also dropped. (Source: “U.S. middle-class incomes reached highest-ever level in 2016, Census Bureau says,” The Washington Post, September 12, 2017.)


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Average annual household income increased in 2016 to $59,039, up 3.2% from the previous year. The poverty rate, meanwhile, dropped to 12.7%. That means it’s back to pre-2008 subprime market crash levels. Yet, there’s something odd about this data that appears to clash with reality. After all, there’s isn’t a day that goes by that another bankruptcy is announced. Even more significant is the level of tension between classes in the U.S. In many ways, any observer would sooner believe the middle class is disappearing than the opposite.

There is a perfectly good reason for this. The middle class has grown in terms of the income levels defined as “middle-class” today. But relatively speaking, they’re worse than 50 years ago. You see, the concept of “class” has as much to do with a set of statistics as it has with aspects of well-being that go beyond the numbers. And here’s the crux of the problem.

The census shows a larger middle class, but the members of that idea balanced between poor and rich feel poorer. They must confront persistently higher income inequality. The 20% richest Americans control or own over half of household income. There are also racial disparities, as the median income of African-American households is substantially less than whites or Asians. (Source: “‘Wages and Wives’ Are a Big Reason the Rich Are Getting Richer’,” Business Insider, July 27, 2017.)

The persistence of very high inequalities in income is the heart of the problem. The middle class might be getting richer compared to previous years—but not necessarily in relative terms—but if others are getting far richer than you, then there is a growing risk of social breakdown. Moreover, financial matters, as in private finance, from interest-rate maneuvers to debt, have affected real changes in the current economic and social structure. The rise of financial activity itself, the risk inherent in its distortions and even just the inflow of credit creates a problem for the economy. It makes the so-called richer middle class more vulnerable to financial crises, perpetuating the resulting recession.

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