Researchers say half the world is middle class or higher

A new report suggests a majority of humans are middle class or above:

For the first time since agriculture-based civilization began 10,000 years ago, the majority of humankind is no longer poor or vulnerable to falling into poverty. By our calculations, as of this month, just over 50 percent of the world’s population, or some 3.8 billion people, live in households with enough discretionary expenditure to be considered “middle class” or “rich.” About the same number of people are living in households that are poor or vulnerable to poverty. So September 2018 marks a global tipping point. After this, for the first time ever, the poor and vulnerable will no longer be a majority in the world. Barring some unfortunate global economic setback, this marks the start of a new era of a middle-class majority.

We make these claims based on a classification of households into those in extreme poverty (households spending below $1.90 per person per day) and those in the middle class (households spending $11-110 per day per person in 2011 purchasing power parity, or PPP). Two other groups round out our classification: vulnerable households fall between those in poverty and the middle class; and those who are at the top of the distribution who are classified as “rich.”

The consequences could be interesting:

Why does it matter that a middle-class tipping point has been reached and that the middle class is the most rapidly growing segment of the global income distribution? Because the middle class drive demand in the global economy and because the middle class are far more demanding of their governments…

In most countries, there is a clear relationship between the fate of the middle class and the happiness of the population. According to the Gallup World Poll, new entrants into the middle class are noticeably happier than those stuck in poverty or in vulnerable households. Conversely, individuals in countries where the middle class is shrinking report greater degrees of personal stress. The middle class also puts pressure on governments to perform better. They look to their governments to provide affordable housing, education, and universal health care. They rely on public safety nets to help them in sickness, unemployment or old age. But they resist efforts of governments to impose taxes to pay the bills. This complicates the politics of middle-class societies, so they range from autocratic to liberal democracies. Many advanced and middle-income countries today are struggling to find a set of politics that can satisfy a broad middle-class majority.

There are multiple issues to consider here: how all of this is measured, whether the majority is relatively evenly spread across countries or is concentrated in certain areas, and what this might bring.

But, I will point to another feature of this study: it suggests relatively good news. For much of human history, larger-scale collectives – from kingdoms to empires to countries – have consisted of some elites, perhaps a limited middle class, and a larger poor and working-class population. If these figures are true, more people have access to resources and opportunities to do things.

This would fit nicely with some materials I have heard in recent years about a good amount of good news about the global system. On one hand, there are still major problems and sizable poor and vulnerable populations (the less well-off half in this study). On the other hand, global health is improving, economic conditions on the whole are improving, violence is down (in relative terms), and people around the world may be paying attention to the plight of others like never before.

Perhaps this is why even Google has ways of providing some of good news. Even if much news revolves around problems, there is plenty of good news to find.

Why Americans love suburbs #4: middle-class utopia

If race and ethnicity in the suburbs has often served to keep residents out, the more inclusive message of the American suburbs is this: it is a place where the middle-class can live a good life. Of course, there are issues with this, including numerous exclusive wealthy communities as well as a lack of affordable housing or rental units for those who are not quite middle-class. Yet, the suburban life is held up as both attainable and ideal for the American middle-class.

It wasn’t always this way. Early suburbanites had to have the resources to make it back and forth to the city. This changed with the numerous transportation inventions (railroads, streetcars, electric lines) that steadily brought the costs of traveling in and out of the city down as well as led to the development of more land outside the city. With other developments, particularly the quick spread of cars and highways and mortgages with fewer upfront barriers, the suburbs became the space for the middle-class by the 1950s.

The key to the middle-class suburban dream is its affordability. The typical logic is that the farther a family moves from the big city, the cheaper and bigger the home can be. This explanation echoes the Chicago School and the concentric rings model developed by Burgess: land is more expensive in the city center and the progressively cheaper in zones further from the city. While moving further from the city has its costs (owning and maintaining a car is not cheap, the costs of providing city services in a sprawling location can be pricey), the goal is to get a sizable home.

This middle-class paradise has drawn its share of critics due to its mass-produced nature, lack of highbrow taste and sophistication, and façade of pleasantness that supposedly hides all sorts of sordid activity. Particularly in comparison to lively urban neighborhoods, the suburban middle-class life is often portrayed as dull if not outright oppressive. My favorite response to this is in sociologist Bennett Berger’s 1960 study of a working-class California suburb:

The critic waves the prophet’s long and accusing finger and warns: ‘You may think you’re happy, you smug and prosperous striver, but I tell you that the anxieties of status mobility are too much; they impoverish you psychologically, they alienate you from your family’; and so on. And the suburbanite looks at his new house, his new car, his new freezer, his lawn and patio, and, to be sure, his good credit, and scratches his head bewildered. (103)

Almost sixty years later, this rings true: many Americans still believe their suburban home full of stuff makes for a good life.

Protecting this middle-class land can be quite a task. Suburbanites are often opposed to new development near their homes, smaller housing, apartments, or affordable housing that could possibly lower their property values and threaten the middle-class character of the community. Some of the concern with people of difference races and ethnicities involves class. As anthropologist Rachel Heiman suggests, there is plenty of class-based anxiety in the suburbs, even in better-off ones. Open conflict should be avoided even as social control is desirable. The rise of homeowner’s associations to help police the actions of neighbors through a third party is one way to keep nearby residents in line.

For a society where the vast majority of citizens say they are middle-class (recent data here and here), the suburbs are the primary geographic and social space for middle-class lives. Obtaining a suburban single-family home still signals a middle-class life.

“[American] Dream Hoarders”

A Brookings Institution scholar examines the upper-middle class and how their choices separate themselves from the middle class:

A great, short book by Richard V. Reeves of the Brookings Institution helps to flesh out why these stories provoke such rage. In Dream Hoarders, released this week, Reeves agrees that the 20 percent are not the one percent: The higher you go up the income or wealth distribution, the bigger the gains made in the past three or four decades. Still, the top quintile of earners—those making more than roughly $112,000 a year—have been big beneficiaries of the country’s growth. To make matters worse, this group of Americans engages in a variety of practices that don’t just help their families, but harm the other 80 percent of Americans…

The book traces the way that the upper-middle class has pulled away from the middle class and the poor on five dimensions: income and wealth, educational attainment, family structure, geography, and health and longevity. The top 20 percent of earners might not have seen the kinds of income gains made by the top one percent and America’s billionaires. Still, their wage and investment increases have proven sizable. They dominate the country’s top colleges, sequester themselves in wealthy neighborhoods with excellent public schools and public services, and enjoy healthy bodies and long lives. “It would be an exaggeration to say that the upper-middle class is full of gluten-avoiding, normal-BMI joggers who are only marginally more likely to smoke a cigarette than to hit their children,” Reeves writes. “But it would be just that—an exaggeration, not a fiction.”

They then pass those advantages onto their children, with parents placing a “glass floor” under their kids. They ensure they grow up in nice zip codes, provide social connections that make a difference when entering the labor force, help with internships, aid with tuition and home-buying, and schmooze with college admissions officers. All the while, they support policies and practices that protect their economic position and prevent poorer kids from climbing the income ladder: legacy admissions, the preferential tax treatment of investment income, 529 college savings plans, exclusionary zoning, occupational licensing, and restrictions on the immigration of white-collar professionals.

As a result, America is becoming a class-based society, more like fin-de-siècle England than most would care to admit, Reeves argues. Higher income kids stay up at the sticky top of the income distribution. Lower income kids stay down at the bottom. The one percent have well and truly trounced the 99 percent, but the 20 percent have done their part to immiserate the 80 percent, as well—an arguably more relevant but less recognized class distinction.

The anxiety of being upper middle class: never quite wealthy enough to have all the goods and experiences of the highest group and always striving to stay above the normal/middle people.

Four quick thoughts:

  1. There is a certain lifestyle to be had here. See, my post a few days ago about a healthy lifestyle may have had some merit…
  2. As described here, many of the efforts appear aimed at avoiding downward mobility. In other words, there is some point in income, education, and lifestyle that cannot be crossed going the wrong way. But, there must be people who have this happen through events like losing a job or a major illness. What happens to them? For the “average” upper middle class person, what really are the odds that they would fall down a rung?
  3. There is a suggestion from the author that Americans shouldn’t and/or can’t just ask the 1% to sacrifice; the top 20% need to sacrifice as well. To put it mildly, this would not go over well. Given their anxieties as well as their tendencies to pull up the bridge after crossing the moat, efforts like affordable housing or school integration or significant increases in taxes will be met with opposition. They would use the rhetoric of the middle class – “we worked hard to get here – anyone could do it” – while pushing hard to protect their own status.
  4. Is the ultimate goal of this group to become truly wealthy? Most of them won’t have that opportunity and must know it. Or, is the goal is to simply not be middle class and have some more advantages than most people? Perhaps it really is about the children: is this the group that more than any other tries to give their kids every advantage as a supposed act of sacrifice?

The middle class finding it difficult to find city housing – what to do?

Some urban neighborhoods are hot but this can lead to housing prices that limit how many middle class residents can move in:

The casualties in this war are mostly the middle class. In 2016, rents continued their years-long rise, incomes stratified further, and the average price to buy a home in major US cities rose. The strain pushed the middle class out of cities like Boston, San Francisco, Los Angeles, New York, Austin—the so-called “hot cities.” Some families move to the suburbs. Others flee for less expensive cities. But across the US, the trend holds: cities are increasingly home to high-rollers who can pay the high rents or down payments and lower income people who qualify for subsidized housing.

Macroeconomists say this a good problem to have. These cities are growing. People want to live in them. Stagnating economies in the Rust Belt might envy this kind of trouble. From the perspective of the overall wealth of cities, the middle class being pushed out doesn’t matter. But it matters on the human level, the neighborhood level. In Fort Hill, it means that a teacher at the local elementary school cannot afford to live in the neighborhood where she works. The effects on inequality, mobility, and the demographic composition of cities are very real, their causes multifold, and the solutions difficult…

“It’s very hard to get people to understand that the affordable housing crisis is not for the very poor,” says lawyer Mechele Dickerson of the University of Texas, an expert in housing and the middle class. It’s for people with good jobs who are not poor enough to qualify for subsidized housing, nor rich enough to pay the rising housing prices. “A family that makes $100,000 can’t afford to buy a house in most US cities,” Dickerson says…

The incoming administration has given experts no reason to expect it will prioritize fixing the affordability crises for the middle class. “In terms of the federal government, I see no hope,” Dickerson says. But as with immigration reform and climate change, housing affordability is something that states and cities can tackle on their own. In 2017, this trend toward decentralized power will continue—that is, if cities make retaining middle class residents a priority. That means relaxing the zoning laws to permit more housing stock to enter the market. This is the single most helpful thing the city of San Francisco could do, for example, to counter the tech money forcing prices on the limited housing stock up, says Shulman.

Four quick thoughts:

  1. This article seems to suggest that the government should do something to help middle class residents live in cities and the Trump administration may not help much. So, we do still in America subscribe to the idea that the federal government should subsidize middle class housing (whether in suburbs or cities)?
  2. I’m a little skeptical that the real problem is middle class housing rather than housing for poorer residents. Either this is a very broad definition of the middle class – which is entirely possible since most Americans consider themselves to be middle class – or cities really don’t care about poor and working class residents. I know cities want to keep middle-class residents but about people with less education and job prospects with less pay?
  3. This is an area that could really use some innovation. Big government doesn’t seem to have all the answers (what is the long-term effect of HUD?) nor does the free market (which tends to lead to residential segregation by race/ethnicity and class). What could really work well here is for a number of cities to try new ideas and see what might work.
  4. As the article notes, one of the biggest barriers is existing residents who don’t want to be near “affordable housing.” I’m not sure how you can get around this though there have been some indications that well-designed affordable housing limits some of the stigma. How do you get Americans (urban or suburban) to get past the mentality of pulling up the drawbridge after they move into their desirable neighborhood?

Middle-class incomes have biggest year to year rise – with a catch

New data suggests middle-class incomes rose in 2015:

The incomes of typical Americans rose in 2015 by 5.2 percent, the first significant boost to middle-class pay since the end of the Great Recession and the fastest increase ever recorded by the federal government, the Census Bureau reported Tuesday.

In addition, the poverty rate fell by 1.2 percentage points, the steepest decline since 1968. There were 43.1 million Americans in poverty on the year, 3.5 million fewer than in 2014…

The 5.2 percent increase was the largest, in percentage terms, ever recorded by the bureau since it began tracking median income statistics in the 1960s. Bureau officials said it was not statistically distinguishable from five other previous increases in the data, most recently the 3.7 percent jump from 1997 to 1998.

Rising incomes are generally good. But, note the catch in the third paragraph cited above: officials cannot say that the 5.2% increase is definitively higher than several previous increases. Why not? The 5.2% figure is based on a sample that has a margin of error of at least 1.5% either way. The data comes from these Census instruments:

The Current Population Survey Annual Social and Economic Supplement was conducted nationwide and collected information about income and health insurance coverage during the 2015 calendar year. The Current Population Survey, sponsored jointly by the U.S. Census Bureau and U.S. Bureau of Labor Statistics, is conducted every month and is the primary source of labor force statistics for the U.S. population; it is used to calculate the monthly unemployment rate estimates. Supplements are added in most months; the Annual Social and Economic Supplement questionnaire is designed to give annual, national estimates of income, poverty and health insurance numbers and rates.

According to the report (page 6), the margin of error for the percent change in income from 2014 to 2015 is 1.6%. Incomes may have risen even more than 5.2%! Or, they may have risen at lower rates. See the methodological document regarding the survey instruments here.

The Census has in recent years moved to more frequent reports on key demographic measures. This produces data more frequently. One of the trade-offs, however, is that these estimates are not as accurate as the dicennial census which requires a lot more resources to conduct and is more thorough.

A final note: it is good that the margin of error is hinted at in the article on rising middle-class incomes. On the other hand, it is mentioned in paragraph 12 and the headline clearly suggests that this was a record year. Statistically speaking, this may or may not be the case.

Neither presidential candidate says much about helping the poor

This has become common in recent election cycles: candidates focus on the middle class and ignore the poor.

The United States, the wealthiest nation on Earth, also abides the deepest poverty of any developed nation, but you would not know it by listening to Hillary Clinton or Donald J. Trump, the major parties’ presidential nominees.

Mrs. Clinton, speaking about her economic plans on Thursday near Detroit, underscored her credentials as an advocate for middle-class families whose fortunes have flagged. She said much less about helping the 47 millions Americans who yearn to reach the middle class.

Her Republican rival, Mr. Trump, spoke in Detroit on his economic proposals four days ago, and while their platforms are markedly different in details and emphasis, the candidates have this in common: Both promise to help Americans find jobs; neither has said much about helping people while they are not working.

So why don’t they address lower-class Americans? A few tentative guesses:

  1. More undecided voters are in the middle class.
  2. Candidates want a singular message and so they go with the largest group of Americans – a vast majority of Americans, even ones who are legitimately rich or poor, consider themselves middle class – as to not have to complicate their rhetoric.
  3. The efforts in the 1990s to limit welfare – changes to programs and public housing – were very effective in halting conversation about poverty on a national level.
  4. Candidates want to be associated with people who think they have made it on their own.
  5. Lower-class Americans don’t have as much money to give to campaigns.
  6. Even with growing inequality, Americans have settled on the idea that we are a middle-class country. Candidates want to go with what the country thinks.

Regardless of the reason, it does say a lot about the ability of Americans to even converse about being poor.

Middle class declines in the majority of US metropolitan areas

A new study from Pew shows that the middle class did not do well in many metro areas between 2000 and 2014:

The report by Pew Research Center found that the share of the middle class fell in 203 of the 229 U.S. metropolitan areas examined from 2000 to 2014, including major cities such as New York, Los Angeles and Chicago, which saw a relatively sharp drop in its middle class.

For many areas, a big culprit in the declining middle was the falloff in manufacturing jobs during that 14-year period, when factories shed about 5 million workers from their payrolls nationally…

The news was not all downcast, especially for metro areas in coastal and border regions that have benefited from the boom in technology, trade and resources…

Among the 229 metro areas, which constitute about 76% of the U.S. population in 2014, there were slightly more areas that saw a bigger increase in the share of upper-income population than lower-income adults. Still, Pew’s Kochhar did not view that as a big win for the American economy. The median incomes of the lower, middle and upper tiers all shrank between 2000 and 2014, he said.

Three quick thoughts:

  1. The continued effect of losing manufacturing jobs cannot be overstated: this has hurt numerous cities for decades. It is not easy for any large city to transition from such jobs to opportunities in new sectors.
  2. Looking at this data at the level of a metropolitan region is helpful because it hints at broad patterns within regions that are often segregated by social class and race. The phenomenon of the rich and poor living right next to each other as well as trendy and wealthy communities getting a lot of attention is not exclusive to cities; similar patterns can be found in suburban areas.
  3. Connected to the second point is that solutions to income issues could come at the level of the entire region rather than within individual communities. How might entire regions help the middle class? Why don’t more large cities and surrounding suburbs work together on these issues? (I know why they don’t but that doesn’t mean that it wouldn’t benefit many local residents.)