The American middle-class is shrinking and income inequality is growing. The percentage of adults who are economically insecure has increased by more than 50% since the early 1980s. Even as more people have access to technology, it’s harder for many Americans to earn a middle-class income.
In this series, we’ll explore the factors driving change in the American middle class, from new tech and changing job markets to increasing costs of a college education and rising student loan debt.
Why is the American middle-class shrinking?
The American middle class is shrinking because many sectors of the economy are experiencing significant structural change. The rise of technology, the decline in manufacturing and the changing nature of jobs are combining to make it harder for many people to find work that pays a middle-class income.
In some cases, new industries are replacing existing ones. For example, the rise of online retailing has eliminated many jobs in traditional department stores and supermarkets. Similarly, the dramatic increase in delivery services like Amazon Prime and Uber has reduced the need for workers in the transportation and logistics industries. Technology has also had a profound effect on the workforce.
Automation and artificial intelligence are eliminating many jobs across industries, including trucking, health care, accounting, law enforcement and transportation. At the same time, the ability to apply computer and digital skills are growing more important for achieving higher incomes. This can be seen in the rise of occupations like data science and computer programming, which have seen significant salary growth.
New jobs for old skills
Automation and artificial intelligence are changing the types of work people can do, forcing many workers to develop new skills. This can be seen in the growth of occupations that combine technical skills with analytical and critical thinking. Examples include healthcare managers, engineers, financial managers, marketing managers and sales professionals.
Other occupations are more service-oriented, like those in education, childcare, elder care and management. The need for people with new skills is also evident in the increasing demand for people with postsecondary education. The growing cost of higher education is contributing to this trend, as is the rise of online education.
Higher education costs
Many Americans are uncertain about how much postsecondary education will cost them, and some are turning to alternative routes like online programs or apprenticeships. The rising cost of education is one of the factors driving the decline in the middle class. The cost of a college education has increased by more than 40% since the early 1980s, and tuition has risen much faster than inflation.
This has contributed to the decline in the ratio of income to cost, making it harder for many to afford a four-year degree. At the same same time, the growing number of students taking on larger student loan debts has made it more difficult for many to pursue a college education without financing some of the cost through loans.
Rising student loan debt
Student loan debt has increased substantially over the past decade. In 2007, the average borrower had $27,400 in federal student debt. By 2017, that had risen to $37,172. At the same time, the U.S. economy has grown significantly, so the number of jobs with decent salaries has declined.
For many, the choice has been between accepting a lower-paying job with a large amount of student loan debt or opting for a job that doesn’t pay enough to cover basic living expenses. The U.S. government is partly responsible for the rise in student debt because the amount of money it loans to students is tied to the price of tuition.
This makes it more difficult for students to afford college without borrowing, as tuition rises faster than income. In addition, the government considers student debt to be a form of credit and, as such, has special interest protections that reduce the rate at which it is discharged in bankruptcy.
Changing culture and work habits
Changes in the way people live and work are also contributing to the decline in the American middle class. The increasing cost of living and the decline in full-time employment has pushed up the number of people living in poverty. At the same time, fewer people are eligible for government assistance programs like food stamps, which makes it harder for them to afford basic expenses.
Other cultural changes that have contributed to the decline in the middle class include the decline in marriage rates and the growth of single-parent households. This has increased the number of people who do not have a financial safety net in the event of unemployment or illness.
Reduced access to pension benefits
The decline in the American middle class is particularly concerning because it is happening at a time when older Americans are much less likely to have access to a pension. In the past, many workers in the public sector were guaranteed access to a pension, but this is now rare.
This reduces the financial safety net that would protect an older person from poverty in the event of job loss or illness. The decline in the middle class has also increased the risk of social isolation because people with low incomes are less likely to be able to participate in social activities outside their immediate networks.
Ponzi schemes, fraud and corruption
The decline in the American middle class has also been influenced by economic and social forces operating at a more cultural level. These include the growth of Ponzi schemes, fraud and corruption among business elites, politicians, sports stars and other celebrities.
The focus on media coverage of these people has diverted attention from the middle class, which has been marginalized by other cultural changes like the growth of online media and smartphones that have eroded the importance of television.
This has contributed to the sense of insecurity experienced by many middle-class Americans, which in turn has strengthened support for the Trump administration and Republicans in Congress. The focus on perceived threats from immigrants, refugees and minorities, as well as from China and Russia, has also contributed to this trend.