Another day, another survey charting the decline of the American middle class. Yesterday, the Pew Research Center weighed in with “The Lost Decade of the Middle Class,” to which they appended the kicker, “Fewer, Poorer, Gloomier.”
The median net worth of the middle-tier households (Pew defines “middle-tier” as households whose income is between two-thirds and twice the national median) declined from $152,950 in 2007 to $93,150 in 2010, reflecting the sharp loss in home value. Taking the longer view, people in the middle tier made 62 percent of all the household income in the United States in 1970, but just 45 percent in 2010. Middle tiersters didn’t lose to the lower tier, whose share of the national income also declined, from 10 percent to 9 percent. They lost it to the upper tier (who else?), whose share of national income rose from 29 percent to 46 percent.
It’s not so much the bottom but the middle that’s fallen out of the economy.
But be of good cheer. On Wednesday, the same day that Pew released its study, the Financial Times reported that the S&P 500 index, which measures the share value of America’s largest publicly traded companies, had reached its highest level in more than four years. The paradox of American corporations soaring while Americans themselves still have record numbers of homes under water and suffer from high unemployment and stagnating or reduced wages can be explained by the great decoupling of those corporations from American consumers. The S&P 500 now have about their half their revenues coming from abroad (up from less than one-third in 2002), as markets in China, India, and Brazil grow larger. What’s more, these companies’ profits are increasing in good measure because the wages and benefits they offer their workers are shrinking. That’s not just a phenomenon of the current recession; according to J.P. Morgan’s Michael Cembalest, American corporate profits have been rising at wages’ expense at least since the turn of the millennium.
How to reinvent mass prosperity in America, then? Simple. Since shareholders are gaining as workers fall behind—since shareholders are gaining because workers are falling behind—we should cease working and all become owners. Then Pew would release surveys calling the middle class bigger, richer and happier.