For first time in decades, American middle class no longer the richest middle class in the world

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Once the juggernaut of the American economy and the envy of the world, the middle class has finally lost its position as the richest in the world, according to a new report.

The New York Times, citing an analysis of survey data going back 35, reports that the middle class in the United States has fallen behind Canada’s middle class. While economic growth in the U.S. is equal to or stronger than growth in other countries, those gains have gone almost exclusively to the wealthiest Americans. America’s middle class is still wealthier than corresponding demographics in Europe, but the gap has narrowed significantly in the last 10 years. Meanwhile, the poor in the U.S. are significantly worse off than their counterparts in Europe and Canada—a total reversal from 35 years ago.

Median income in the U.S., about $74,000 after taxes for a family of four, rose by 20% between 1980 and 2000 but has since remain mostly unchanged, according to theTimes analysis. Median income in Canada, in contrast, rose by 20% between 2000 and 2010 alone.

“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,” Lawrence Katz, a Harvard economist not associated with the study, told the Times. “In 1960, we were massively richer than anyone else. In 1980, we were richer. In the 1990s, we were still richer.”

The analysis blames the struggles of the middle class on stagnating education attainment, higher executive pay, lower minimum wage and weaker unions, among other factors.

Income Inequality: American Middle Class Falls Behind - TIME

 

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The struggles of the poor in the United States are even starker than those of the middle class. A family at the 20th percentile of the income distribution in this country makes significantly less money than a similar family in Canada, Sweden, Norway, Finland or the Netherlands. Thirty-five years ago, the reverse was true.

The findings are striking because the most commonly cited economic statistics — such as per capita gross domestic product — continue to show that the United States has maintained its lead as the world’s richest large country. But those numbers are averages, which do not capture the distribution of income. With a big share of recent income gains in this country flowing to a relatively small slice of high-earning households, most Americans are not keeping pace with their counterparts around the world.

Janet Gornick, the director of LIS, noted that inequality in so-called market incomes — which does not count taxes or government benefits — “is high but not off the charts in the United States.” Yet the American rich pay lower taxes than the rich in many other places, and the United States does not redistribute as much income to the poor as other countries do. As a result, inequality in disposable income is sharply higher in the United States than elsewhere.

Even with a large welfare state in Sweden, per capita G.D.P. there has grown more quickly than in the United States over almost any extended recent period — a decade, 20 years, 30 years. Sharp increases in the number of college graduates in Sweden, allowing for the growth of high-skill jobs, has played an important role.

http://www.nytimes.com/2014/04/23/u...-is-no-longer-the-worlds-richest.html?hp&_r=0

 

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More broadly, the poor in the United States have trailed their counterparts in at least a few other countries since the early 1980s. With slow income growth since then, the American poor now clearly trail the poor in several other rich countries. At the 20th percentile — where someone is making less than four-fifths of the population — income in both the Netherlands and Canada was 15 percent higher than income in the United States in 2010.

By contrast, Americans at the 95th percentile of the distribution — with $58,600 in after-tax per capita income, not including capital gains — still make 20 percent more than their counterparts in Canada, 26 percent more than those in Britain and 50 percent more than those in the Netherlands. For these well-off families, the United States still has easily the world’s most prosperous major economy.

http://www.nytimes.com/2014/04/23/u...-is-no-longer-the-worlds-richest.html?hp&_r=0