Who or what is the middle class?

The paradox behind the data
Despite these added burdens, there’s a paradox that doesn’t show up in the numbers. Though middle-class life in America isn’t what it used to be, in many ways it’s much better.

Health care may be more expensive, but modern medicine can do much more: Americans are living longer and healthier lives. Our houses, on average, are bigger (over 2,300 square feet, up 40 percent since 1980) with more cars in the driveway. Those cars are safer, last longer and  are loaded with technology and features once available exclusively to the wealthiest buyers of luxury cars — from antilock brakes to GPS navigation systems.

Modern conveniences that were unimaginable a generation ago, from wireless phones to the Internet to hundreds of channels of home entertainment, are available to most Americans. The modern global supply chain brings a cornucopia of basic, affordable products — from year-round fruit shipped from both hemispheres to cheap textiles made in low-wage, developing countries.

“A middle class person today lives better than the wealthiest individual who lived 100 years ago,” said Mark Zandi, chief economist with Moody’s Economy.com.

Americans also have more to spend. Census data show that the  median income has risen steadily, with temporary setbacks, over the past 60 years as "the real reward for an hour of work has more than tripled," according to a February speech by Federal Reserve Chairman Ben Bernanke. In 1947, median family income, in 2004 dollars, stood at just $22,500, according to the Census. By 1973, that figure had doubled, and continued to rise to $57,500 by the year 2000.

Upward march of income stalls
Those advances began to stall at the turn of the millennium, for reasons that are the subject of much speculation among economists. There’s some evidence that the decline may be caused by the lingering effects of the 2001 recession. Every major recession since World War II has been followed by a drop in median income from which it has taken between three and seven years to recover. But others suggest the lull in income growth could be the result of a more fundamental shift in the economy.

One trend that is all but universally accepted is the widening wealth disparity between those at the very top and bottom. Even as incomes in the middle have gone up, the gap between richest and poorest has gotten wider — both in America and around the world. That means that those at every level see more wealth flowing to people in income groups above them. And that could help explain why, even as everyone’s standard of living is going up, many of those in the middle feel like they’re falling behind.

Though middle class status may be largely a state of mind for many Americans, some have clearly lost ground due to specific, harsh economic circumstances that have sent them falling abruptly down the ladder. The decline of unionized labor in the past several decades has given employers more flexibility to increase productivity and adapt to rapid technological change and increased competition. But it has also devastated those workers who have been displaced from high-wage jobs and don’t have the skills they need to find a new one with comparable pay and benefits.

Now globalization poses a similar threat to the financial security of American workers whose jobs are “outsourced” to lower-wage, developing countries. Much of the credit for the current strength in the global economy goes to the elimination of trade barriers and the increased interdependence of producing and consuming countries. But if the economic benefits of that global growth flow only to a smaller and smaller group at the top, the backlash from those left behind could threaten the continued expansion of global trade, according to Zandi.

“Globalization is a fabulous thing. It raises everyone’s standard of living — it’s a net benefit to the global economy,” he said. “But there are losers. And if we don’t take care of the losers — if we don’t allow their standard of living to remain within some striking distance of the winners — then they could very well short-circuit the entire process.”

MORE FROM GUT CHECK AMERICA

Gut Check America Section Front

Is 'green jobs' initiative on target? FirstPerson: Readers set Obama's priorities Economy in turmoil: the jobs picture Battleground economics: Minnesota and Colorado Gut Check America Section Front   Add Gut Check America headlines to your news reader: