Why rich appear to be leaving the middle class behind?

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By IE&M Research

US agencies have confirmed the much arguable point around the world that people in higher income bracket have faster growth than those with lower incomes. And that can be attributed to be the reason why rich appears to be leaving the middle class behind. To establish this fact for an economy like India and other Asian countries the question itself is the answer. It’s self explanatory. No data required, no calculation needed as the gap between haves and have-nots is too big.

The US Congressional Budget Office has released some startling data. It shows that 81% of the U.S. middle-income households had flat or falling income between 2004 and 2014 and 61% of middle-income households feel their incomes are either not advancing or staying the same as they were last year.

Likewise a report released by the Urban Institute after analyzing the US Census Bureau’s Current Population Survey found that the American middle class made up just 26% of the income in 2014, down from 46% in 1979, adjusted for inflation. The upper middle class took away 63% of all income in 2014, up from just 30% in 1979. To understand these numbers, we must remember that according to the Pew Research Center, middle-income households make up 120.8 million, almost as much as upper middle-class and lower-income Americans combined.

McKinsey Global Institute in its report says that before the Great Recession, gross domestic product growth contributed about 18 percentage points to median household income growth in the U.S. and Europe. In the seven years after the recession, that contribution fell to four percentage points.  And the reversal of fortune for middle classes has its roots in the recession and slow recovery after the 2008 global financial crisis. It has hurt middle income families. Indeed, the Urban Institute has also sunbstaintal proof to say that inequality between the wealthiest and poorest American neighborhoods grew most substantially between 1990 and 2010 in the largest urban commuting zones where people work and live.

About the author: IE&M Team
IE&M Team
Indian Economy & Market is an Indian media and information platform producing data-backed news and analysis on all the vital elements at the intersection of the economy, stock markets, mutual fund, insurance, commodities, currency, technology, startups and business.

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