US' shrinking middle class

Median income, household net worth fell over 10 years: Report

The Straits Times, 24 Aug 2012

WASHINGTON - The US middle class has shrunk drastically in the last decade as Americans' net worth plunged, wages declined and standards of living slipped, according to a report.

Middle-income earners, long seen as the solid centre of the country, are pessimistic and place the blame squarely on US lawmakers, banks and big business, the findings by the Pew Research Centre, released on Wednesday, showed.

"There's been a very steady, long-term shrinkage" in the number of people in the middle class, said Mr Paul Taylor, executive vice-president for the non-partisan research group. "There's also less money in the middle."

Since 2001, median household income has fallen from US$72,956 (S$91,000) to US$69,487 in 2010, the report said. The median household net worth, which is the value of assets minus debt, dropped from US$129,582 to US$93,150 over the same 10-year period, according to Pew, which analysed US data along with its own survey of nearly 1,300 adults.

The centre's snapshot comes in the midst of a close presidential campaign that has become in part a referendum on whether President Barack Obama's policies have helped Americans as the nation struggles to recover from deep economic woes. Republican rival Mitt Romney has based his campaign on his pledge to build jobs and boost the economy.

Pew's survey found more of the middle class support Mr Obama's policies than Mr Romney's. More than half of those polled said Mr Obama's policies would help the middle class in a second term, while 39 per cent say they would not.

Forty-two per cent said Mr Romney would benefit middle-income Americans if elected, while 40 per cent say his policies would not help, the survey showed.

Still, researchers said they found that "neither candidate has sealed the deal with them, but that President Obama is in somewhat better shape than his Republican challenger, Mitt Romney".

The shifting middle class over the last decade is just part of a longer trend, Pew researchers said. About half of US adults fell into the middle class last year compared with 61 per cent in 1971, as more Americans moved into either upper- or lower-income groups, the centre said.

"Any way you slice it, every group in this society has over the long haul experienced rising prosperity," Mr Taylor said in a conference call. "But over the last decade, they have not."

Pew's analysis is based on data from the Census Bureau as well as the Federal Reserve Bank.

For its report, Pew defined middle class as households with incomes from US$39,000 to US$118,000, a range that is between two-thirds and double the national median.

Meanwhile, US Congress Budget analysts said current plans designed to slash the Budget deficit after Jan 1 will plunge the country into recession and push up joblessness.

The Congressional Budget Office (CBO) said the poison-pill political deal on the Budget last year - sharp cuts to spending and tax increases that will hit household finances - will cause the economy to shrink by 0.5 per cent next year.

It would also likely send the unemployment rate to 9.1 per cent by the second half of next year, from the current already high 8.3 per cent, the CBO said.

The plan would succeed in cutting US$500 billion from the Budget deficit, forecast at US$1.1 trillion for this fiscal year.

REUTERS, AGENCE FRANCE-PRESSE