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US Middle Class Is No Longer World’s Wealthiest

April 23, 2014 by Brett Wilkins in Canada, Europe, Rich & Poor with 0 Comments

suburbiaThe US middle class, long a symbol of the nation’s economic might and proof that the “American Dream” was more than just a dream, is no longer the world’s wealthiest.

Citizens of other advanced nations have received “considerably larger raises” over the past 30 years, with after-tax middle class incomes in Canada, which lagged substantially behind the US in 2000, now surpassing those south of the border, the New York Times reports. Also, poor individuals in much of Europe are now earning more than poor Americans.

Although US economic growth equals or surpasses that of most other nations, a smaller percentage of American households are enjoying the benefits. In 2010, median Canadian income caught up to the US, at approximately $18,700. It has since very likely surpassed it, based on continuing trends. Median household income in Western Europe still lags behind Canada and the US, with nations such as Britain, the Netherlands and Sweden fast closing the gap.

In European nations suffering economic crises, like Greece and Portugal, incomes have fallen dramatically in recent years.

But poor Americans are faring worse than the poor in most of Europe, the researchers found. An American family at the 20th percentile of income distribution earns much less than a similar family in Canada, Norway, Sweden, Finland or the Netherlands. In 1979, the opposite was true.

“The idea that the median American has so much more income than the middle class in all other parts of the world is not true these days,” Harvard University economist Lawrence Katz told the Times. “In 1960, we were massively richer than anyone else. In 1980, we were richer. In the 1990s, we were still richer.”

The Times figures, which are based on surveys conducted over the past 35 years, compared incomes in 20 nations. The research was carried out by LIS, which publishes the Luxembourg Income Study Database. Researchers from LIS and the Graduate Center of the City University of New York collected data on household income in the surveyed nations. Sample sizes ranged from 5,000 to 120,000 households.

The researchers found three main factors influencing the decline of the US middle class.

-Educational attainment has risen much more slowly in the United States than in much of the developed world over the past 30 years, making it more difficult for the US economy to retain highly skilled, higher-paying jobs.

-Income inequality is much more pronounced in the United States. The American middle and lower class enjoy a smaller slice of the proverbial income “pie.” Corporate executives reap a much larger share of that “pie” in the United States than in other advanced nations, the minimum wage is lower in the US and labor unions are weaker. Raises are also lower for middle and lower class Americans, even as executive bonuses soar to record amounts. Meanwhile, the rich pay lower taxes in the United States, allowing them to keep– and invest– more of their income.

-Redistributive income policies are embraced by other advanced nations as a means of addressing inequality, while conservative Americans scoff at such policies and balk at addressing, or often even acknowledging, the negative effects of income inequality. Some US conservatives have even praised income inequality. While redistribution raised lower and middle class incomes in other developed nations, the relative share of income of poor and middle class Americans has stagnated or risen slowly while the share of the top 1 percent has soared more than 275 percent in recent decades.

While a growing number of Americans continue to struggle economically, the researchers found there was more optimism in Canada and Northern Europe.

“The crisis has had no effect on our lives,” Swedish firefighter Jonas Frojelin told the Times. Frojelin and his wife live in a seaside town north of Gothenburg. They enjoy five weeks of annual vacation, cradle-to-grave universal health care, three years’ combined parental leave and subsidized childcare. Despite considerable government spending on social welfare, per capita gross domestic product (GDP) has grown faster in Sweden than in the United States.

But for Americans at the high end of the income spectrum, life is good. Americans at the 95th percentile of income distribution, or $58,600 in after-tax per capita income, earned 20 percent more than their Canadian counterparts, 26 percent more than those at a similar level in Britain and fully 50 percent more than those in the Netherlands. For the wealthy, at least, America remains number one in the world.

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