Real Income Of Upper Middle-Class Americans Is Growing Strongly

Income growth is highly uneven between poor, middle and rich Americans. Technological advances and increases in productivity have not helped the working and poor sections of the population. Instead much of the wealth created have largely gone to the upper middle-class and the top 1% of the society due to state policies, laws and tax structures that are favorable to this group of the US population.

According to an article in The Brookings Institution, the average real household incomes of upper middle-class Americans has grown strongly in the past few decades as shown in the chart below:

US Average Real Household Income 1967-2013

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US Average Real Household Income 167-2013

Source: The dangerous separation of the American upper middle class, The Brookings Institution

Meanwhile millions of working and poor Americans live a had-to-mouth existence. From an 2014 article in CNN 2014:

About one-third of American households live “hand-to-mouth,” meaning that they spend all their paychecks. But what surprised the study authors is that 66% of these families are middle class, with amedian income of $41,000. While they don’t have liquid assets, such as savings accounts or mutual fund holdings, they do have homes and retirement accounts, with a median net worth of $41,000.

“We don’t expect them to be living paycheck to paycheck,” said Greg Kaplan, study co-author and assistant professor of economics at Princeton University.

Poor hand-to-mouth households, by contrast, typically have incomes of $21,000 and no assets. Families that don’t live paycheck to paycheck have incomes of $51,000 and assets of $116,000.

Those living paycheck to paycheck have a tougher time weathering income shocks, such as illnesses or bouts of unemployment. The study found that they have to cut back their spending far more than those with a reserve they can tap more readily.

Click to enlarge


Source: The New American Dream, Middle class & living paycheck to paycheck, CNN

A few years ago I posted the following cartoon on the gap between rich and poor countries. The guy sitting on the top can be considered as representing the top 1% and the upper middle-class and the rest of the population is the thin guy in the bottom.



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