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Report shows middle class shrinks amid recession

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Posted: Thursday, August 23, 2012 4:30 am

WASHINGTON — The middle class is shrinking and is now barely a majority in the United States, underscoring the challenge President Barack Obama and Mitt Romney face as they argue over who can best protect the wealth of struggling Americans.

The proportion of middle-income earners, or those making from $39,000 to $118,000 for a family of three, narrowed as the housing-market crash erased two decades of gains in wealth since 2001 and average incomes fell for the first time since World War II, a Pew Research Center report shows. The middle class shrank to 51 percent of adults in 2011 from 61 percent in 1971.

“We think of ourselves and pride ourselves as being a middle-class society,” said Paul Taylor, the center’s executive vice president and the editor of the report, released Wednesday. “But there’s a sense that the middle class is getting smaller. It’s hollowing out.”

Middle-class people are reluctant to lay much of the blame on Obama, with Congress, banks, corporations, the Bush administration and overseas competition more commonly cited as the cause of their problems, according to the survey. More than half, 52 percent, say Obama’s policies would aid the middle class, a 10-percentage-point advantage over Romney.

Effects of recession

The report, “The Lost Decade of the Middle Class,” highlights the effects of the longest recession since the Great Depression, which left 12.8 million currently unemployed and pushed more into poverty. The plight of middle-income Americans in an economy that has yet to fully rebound more than three years after the recession ended is a central theme of the presidential campaign.

Romney, who co-founded private-equity firm Bain Capital and served as Massachusetts’ governor, has faulted Obama for failing to spur a stronger recovery. Obama has cast himself as a defender of the middle class and criticized his opponent, who has an estimated net worth of as much as $250 million, for seeking to cut taxes on higher-income Americans.

Obama’s pitch may resonate with middle-income voters, the Pew poll indicates. Republicans favor the rich, according to 62 percent of self-described middle-class respondents. That compares to 16 percent who said the same of Democrats. The survey showed 37 percent said Democrats were more likely to favor their interests while 26 percent said that of Republicans.

“Obama is perceived as more sympathetic to the middle class,” said John Sides, who teaches politics at George Washington University in the nation’s capital and is working on a book about the election. “The challenge for Romney is that he is seen as someone who’s competent, but you want to be seen as someone who’s in touch. There’s enough of a gap there that it may be a liability for him.”

In Columbus, Ohio, Marla Caslin, 62, said she blamed the economic collapse on Republican policies that fostered Wall Street excesses. She was fired from her $44,000-a-year job in the accounts-payable department of a gas company five years ago, and wound up on public assistance until she landed a job at the YWCA last year.

She said Obama has done the best he can with a crisis he inherited, while Romney’s wealth distances him from the plight of typical Americans.

“He can’t relate to us,” Caslin said as she waited for Obama to appear at a campaign rally.

Drain on earners

The past decade was a drain on middle-income earners, the Pew study shows. Median household income, adjusted for inflation and household size, dropped 6.6 percent to $59,127 in 2010 from $63,277 in 2000, according to the Washington-based center.

The median wealth of all U.S. families, adjusted for inflation, dropped 39 percent from 2007 to 2010, when it stood at $79,431, just 7 percent higher than it was in 1983, according to the Pew report.

For middle-income families, which have almost half their wealth tied up in their homes, their median wealth increased 2 percent in 2010 from 1983. By comparison, the wealth of upper-income families jumped by 87 percent, the study shows.

It’s not just nongovernment workers who are feeling the pinch. In Atlanta, Rick Lagotta, 48, who has worked for the fire department for the past eight years and is a member of its union, said he has had to forgo raises, or use them to pay for higher health-care costs, as the economic rout hit the city’s tax collections.

He now earns about $38,000 a year, less than half of what some firefighters make because they started at a time when raises were common. With one child in college and another in high school, Lagotta has drawn on retirement savings from his prior job at a car dealership to avoid taking on a second job.

“Everybody is out there trying to get part-time jobs, putting even more stress on their families,” he said.

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