The United States of America is built on the middle class, apparently. But the problem is, the middle class is rapidly disappearing.
The biggest issue when looking at why the middle class is shrinking is the gap between productivity and compensation. The typical family’s income has not increased over the past quarter-century, even though the economy has grown 83 percent. This means that our economy has become 83 percent more effective and lucrative, but the people who live in and support that economy have not be rewarded for their productivity. The workforce is pushing out twice as much product and service as they did almost 20 years ago, but as an economic class, they are still receiving less of the reward. This encourages an economy where a smaller group of people reap the benefits.
This is not new. From the end of World War II until the start of the 1970s, there was a steady correlation between the rise of productivity and the rise in wages. This supported the popular concept of a rising tide should lift all boats. This idea began to be ignored at the start of the ’70s, which means that the wealth generated since that time has failed to trickle down to the middle class, which deprives them of the financial resources they need to stay in that economic designation.
Because families are not able to gain from the growing economy, since almost half of the income in the country goes to upper-income households, the middle class is no longer the majority in the U.S.A. Most American families are now either rich, or they’re poor. It is rare to fall in between. With income inequality putting more of the aggregate income in the upper class’s pocket comes another issue of a wealth gap. Since the upper class is able to acquire more of the income, they are able to build their wealth up more, unlike the middle and lower class.
The disappearing middle class and its relation to wealth and income inequality has been a big focus of the 2016 presidential candidates, but it is hard to believe any real efforts will be made to rectify this problem. The Economic Policy Institute recommends that the way to fix the productivity gap is to implement policies that reconnect productivity and pay growth, but its hard to visualize the government doing something positive like that.