There were nearly 700,000 fewer middle-income households since the began than during the economic crisis, according to new Census Bureau data. The economy has grown more top- and bottom-heavy in 2010 through 2012 as compared to 2007-2009, the data show.
Most of the erosion came at the bottom end of the middle-income range. At the same time, the ranks of both upper- and lower-income people swelled by hundreds of thousands, as this chart from the Washington Post illustrates:
The decline of the middle class and increasingly extreme distribution of income and wealth in America is a long-standing pattern that helped define the economic policy debate between the two presidential candidates in 2012. The new Census data shows that the steady, slow economic recovery of the past three years didn’t arrest that slide.
But middle-class shrinkage has dangerous implications for the country’s future success. A smaller middle class reduces future generations’ economic mobility — the process of moving up the economic ladder compared to one’s parents — according to research by the Center for American Progress. Furthermore, the most effective policies for spurring economic growth and broad prosperity tend to be those that focus public resources on boosting the middle class.
While the recovery’s failure to staunch the middle-class bleeding is worrisome, it should not be surprising. The strength of the middle class is closely tied to the strength of working people — states with larger and stronger unions have larger and stronger middle-class populations — and working people’s rights have been under concerted attack by conservative organizations and lawmakers in recent years. The gains from the recovery have mostly accrued to the rich, who regained their lost wealth relatively quickly even as working people saw their wages decline despite ever-rising productivity.