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Middle class' share of America's income shrinks

WASHINGTON — The middle class is receiving less of America's total income, declining to its smallest share in decades as median wages stagnate in the economic doldrums and wealth concentrates at the top.

A study released Wednesday by the Pew Research Center highlights diminished hopes, too, for the roughly 50 percent of adults defined as middle class, with household incomes ranging from $39,000 to $118,000. The report describes this midtier group as suffering its "worst decade in modern history," having fallen backward in income for the first time since the end of World War II.

Three years after the recession technically ended, middle-class Americans are still feeling the economic pinch, with most saying they have been forced to reduce spending in the past year. And fewer now believe that hard work will allow them to get ahead in life. Families are now more likely to say that their children's economic future will be the same as or worse than their own.

In all, 85 percent of middle-class Americans say it is more difficult now than it was a decade ago to maintain their standard of living. Some 62 percent say a lot of the blame lies with Congress. A slight majority say a lot lies with banks and other financial institutions. Just 8 percent blame the middle class itself.

Timothy Smeeding, a University of Wisconsin in Madison economics professor who specializes in income inequality, said many middle-income families have taken a big hit in the past decade as health care costs increase, midwage jobs disappear because of automation and outsourcing, and college tuition rises for those hoping to prepare for better jobs.

The new study reviewed 2010 data from the Census Bureau and the Federal Reserve, defining the middle class as the tier of adults whose household income falls between two-thirds and double the national median income, or $39,418 to $118,255 in 2010 for a family of three. By this definition, the middle class makes up about 51 percent of U.S. adults, down from 61 percent in 1971.

In 1970, the share of U.S. income that went to the middle class was 62 percent, while wealthier Americans received just 29 percent. But by 2010, the middle class garnered 45 percent of the nation's income, tying a low first reached in 2006, compared with 46 percent for wealthier Americans.

Since 2000, the median income for America's middle class has fallen from $72,956 to $69,487.

"The notion that the middle class always enjoys a rising standard of living is a big part of America's sense of itself. And in modern times, it's always been true, until now," said Paul Taylor, executive vice president of the Pew Research Center.

Middle class' share of America's income shrinks 08/22/12 [Last modified: Wednesday, August 22, 2012 10:30pm]
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