The Decline of the Middle Class

http://economix.blogs.nytimes.com/2012/07/23/a-closer-look-at-middle-class-decline/?hp

For the first time since the Great Depression, middle-class families have been losing ground for more than a decade. They, and the poor, have struggled particularly badly since the financial crisis led to a global recession in 2008. The idea that living standards inevitably improve from one generation to the next is under threat. Many of the bedrock assumptions of American culture — about work, progress, fairness and optimism — are being shaken. Arguably no question is more central to the country’s global standing than whether the economy will perform better in the future than it has in the recent past.

Since median inflation-adjusted family income peaked in 2000 at $64,232, it has fallen roughly 6 percent. You won’t find another 12-year period with an income decline since the aftermath of the Depression.

This unhappy phenomenon has two major sources. First, economic growth in this country has been relatively slow in recent years, which means the total bounty that the American economy produces, to be shared by all of its citizens, has not been growing very rapidly. Even before the financial crisis began in 2008, economic growth in the decade that started in 2001 was on pace to be slower than growth in any decade since World War II.

Then of course came a deep recession that caused the economy to shrink.

In addition to the slow growth in overall size of the pie, the share that has been going to anyone but the richest Americans has been declining. The top-earning 1 percent of households now bring home about 20 percent of total income, up from less than 10 percent 40 years ago. The top-earning 1/10,000th of households — each earning at least $7.8 million a year, many of them working in finance — bring home almost 5 percent of income, up from 1 percent 40 years ago.

In the simplest terms, the relatively meager gains the American economy has produced in recent years have largely flowed to a small segment of the most affluent households, leaving middle-class and poor households with slow-growing living standards.

Why has economic growth slowed and income inequality soared? We invite readers to make their own case or simply to raise questions and possibilities. To do so, you can post a comment below or send an e-mail to agenda@nytimes.com.