The middle class is shrinking. The irony is that most Americans see themselves as middle class. In a 2015 Pew survey, just 10% of Americans said they were lower class and only 1% believed they were upper class! The shrinking of the middle class has almost gone unnoticed. Yet, not only is the middle class shrinking, but income inequality is rising as well.
Nevertheless, as Deseret News reports, one state bucks that trend: Utah.
What Makes Utah Different?
According to a new report from the Utah Foundation, Utah’s middle class is 54% of the state’s population, compared to 47% for the United States. The closest states are Wyoming and Idaho, where the middle class is 52% of the population.
Utah’s economy is strong. This isn’t a formula for a strong middle class: the United States has grown even as its middle class has shrunk. Some of the most unequal states in America are also the poorest, such as West Virginia and New Mexico. However, it;s also true that growing economies such as California and New York also have highly unequal societies where the middle class is less than 50% of the population.
Utah has invested in education to ensure that its young people are not left behind during the great transformation of the economy. Post-high school possibilities for educational attainment are great, from obtaining a four-year college degree to alternatives such as skills certification.
However, Utah is battling a housing crisis. The median homeowner has a net worth of $255,000 compared to $6,300 for the median renter. 73% of renters have been priced out of the state’s median-priced homes-for-rent, compared to 63% the year prior. This is due to low housing inventory, supply chain disruption, population growth and inflation.
Nevertheless, the state is working to increase opportunities for entry-level homeownership through the building of smaller single-family homes, and other smaller housing types such as townhouses.
Thanks to remote work, more and more Utahns are moving to rural Utah, buying or building homes, renovating them with Full Coverage Painting & Flooring and other solutions, and inspiring a recovery of rural Utah’s economy.
How Much Has the Middle Class Shrunk?
Unlike Utah, the middle class in America is shrinking. According to the Pew Research Center’s 2020 Trends in US Income and Inequality report, the middle class has shrunk from 62% of the population in 1970, to 43% in 2018. Most of the nation’s aggregate income, or wealth, is going to upper-income families, with the share going to middle- and lower-income households falling.
Source: Pew Research Center
Why is This a Problem?
On the face of it, this is a good thing. The number of adults in the upper-income bracket has risen from 14% to 20%. However, the share of people in the lower income bracket has risen from 25% to 29%. Although the shift has been marginally toward the upper-income tier, we have more lower-income people than at any point in the last 5 decades.
In addition, the upper classes have grown their incomes at a faster rate than the middle class. Between 1970 and 2018, the median middle-class income rose 49% from $58,100 to $86,600. Meanwhile, the upper class increased their income by 64%, from $126,100 in 1970 to $207,400 in 2018. Households in the lower-income bracket saw their incomes rise 43% from $20,000 in 1970 to $28,700 in 2018. The result is that, at the national level, the middle class have a smaller share of the pie.
Income inequality is the defining characteristic of our time. Since the 1980s, the middle class has not experienced an increase in real wages, and has fallen behind in cumulative income growth, as this chart from the Brookings Institute shows.
Source: Brooking Institute
The country needs to look at states like Utah to solve its middle class crisis.