The Strategist

Mainstay of the US economy faltered

05/12/2016 - 15:14

According to Pew Research Center, share of the middle class has been reduced in the vast majority of US cities. Experts claim that the stratification is growing as proportion of highly prosperous and low-income citizens is growing in most cities and agglomerations.

Yesterday, Pew Research Center has published a study on the income distribution among the US population in large cities and agglomerations. The dynamics of income has been analyzed in 229 cities across the country. The experts have recorded sustained reduction of middle class, which is traditionally considered the economy’s mainstay. 

US researchers include in the middle-class adults with annual income per household (family) ranged from two-thirds to two average annual income per household in view of its size. For example, the average annual income of a single person in the United States was $ 42 thousand in 2014; that of a family of three - $ 125 thousand. If the annual income of a three-members family is below $ 83.8 thousand (two-thirds of the $ 125 thousand), then they are related to the low-income class. If a single person's annual income exceeds $ 84 thousand, he is referred to the well-off class. The amounts are indicated before tax, since the US tax rates vary considerably, depending not only on the amount of income and state of residence, but also on the marital status and the type of activity (a salaried employee, a state employee, a small or medium-sized business owner and so on). 

Basing on state statistics data from 2000 to 2014, the analysts concluded that proportion of adult citizens with average income fell in 203 out of 229 major US cities including suburbs. Often, the reduction of the middle class share was faster than the national average. The proportion of middle-class has decreased by 6% in the 53 cities, while the national average proportion of such people has decreased over the same period by 4%. As share of people related to the middle class decreases, the proportion of both rich and poor is growing, which means surging stratification. In 160 cities out of 229, share of low-income people has grown, and 172 cities showed that number of their well-off citizens has moved up.

Experts analyzed what cities and regions showed increased proportion of high net worth individuals; the same was done with the low-income case. Some of particularly illustrative cases has been explained. Take, for example, the town of Goldsboro (North Carolina), where there is an old railway junction. By a decline in the city’s economic activity from 2000 to 2014, share of the middle class fell from 60% to 48%. Quite enough of citizens became much poorer - their the proportion rose from 27% in 2000 to 41% in 2014. 

The proportion of rich or poor can grow in different cities of the same state, depending on the economy and business. For example, in the oil town of Midland (Texas), proportion of the rich increased significantly and amounted to 37% in 2014. At the time, the proportion of poor was 47% in the Texas city of Laredo, whose economy depends on agriculture and border trade with Mexico. High concentration of affluent citizens also noted in the metropolitan area of Washington-Arlington-Alexandria (32%), high-tech California region of San Jose-Sunnyvale-Santa Clara (31%), a region with a high concentration of prestigious universities and well-developed services and tourism - Boston–Cambridge–Newton (30%).

Pew Research experts noted the general trend of decline in US revenues in recent years - in 2014, the average annual income (adjusted for inflation) was at 8% lower than in 1999. Pew Research believes this is a reminder that the country's economy has not fully recovered from the "Great Recession of 2007-2009."


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