American Middle Class No Longer Most Affluent in the World


NEW YORK (MainStreet) — The old political ploy of asking, "Are you better off today than four years ago?" can now be definitively answered: no. The American middle class is slipping from its former glory as the richest in the world.

Research compiled by the Luxembourg Income Study (LIS) over the past 35 years and interpreted by the New York Times reveals that America's lower- and middle-income population has stagnated – replaced by Canada as the most affluent.

According to 2010 data and adjusted for inflation, the U.S. median per capita income of $18,700 has risen 20% since 1980, but is virtually unchanged since 2000. Meanwhile, between 2000 and 2010, median income rose by some 14% in the Netherlands -- and 20% in both Britain and Canada.

However, based on per capita gross domestic product, the U.S. still leads the global economy as the wealthiest advanced country, but a broad majority of Americans don't see these income gains which enrich mostly high-earning households, according to the study.

LIS, located in Luxembourg, acquires datasets with income, wealth, employment and demographic data from a large number of countries, offering cross-national comparisons.

The report says additional surveys, conducted by government agencies for more recent periods, indicate that since 2010 income in Canada has risen faster than in the U.S. and is now quite likely higher. Several European countries have also seen higher income growth over the same period.

"The idea that the median American has so much more income than the middle class in all other parts of the world is not true these days," Harvard economist Lawrence Katz told the Times. "In 1960, we were massively richer than anyone else. In 1980, we were richer. In the 1990s, we were still richer."

But since 2000, that is no longer the case, he says.

Katherine Stone, a professor of law at UCLA has studied the diminishing middle class and the changes in employment opportunities over the past several decades. She notes that job tenure declined between 1983 and 2010 for employees over the age of 35, and particularly among men over 45 years old. For the past 25 years, temporary jobs have grown faster than full-time employment. The decline in manufacturing jobs and the rise of technology has contributed to a scarcity of middle-class jobs, Stone says.

"I really want people to see that this isn't just a small change, or that it's going to reverse," said Stone. "The reality today is not long-term attachment, but short-term, episodic employment and other relationships to the job market, be it part-time work or as an independent contractor or an entrepreneur. This is a dramatic change in our working lives, but the government and employers haven't responded to it."

--Written by Hal M. Bundrick for MainStreet

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