The declining middle-class thesis: a sensitivity analysis,(EXCERPT), Monthly Labor Review Online, May 1988

The declining middle-class thesis: sensitivity analysis

Michael W. Horrigan and Steven E. Haugen

I n recent years, there has been considerable interest in the changing distribution of income in the United States. The consensus within the literature is that the distribution has become more unequal over the past one or two decades, as evidenced by several measures of income inequality.¹ In addition, a number of studies point to increasing proportions of the population in the lower and upper income classes, and thus a decreasing share in the middle class, as evidence of this trend.

Across these studies, however, opinions differ as to the extent to which the middle class has declined and how this decline has been divided between the lower and upper classes. The lack of agreement among findings can be attributed to variations in both the definition and measurement of the middle. Indeed, most studies fail to test the sensitivity of the results to alternative specifications of the middle class and to different techniques for measuring its size over time.

This article describes the nature and results of such a sensitivity analysis. Data on family income from the March Current Population Survey are used to track changes in the proportions of families in the lower, middle, and upper income classes over the 1969-86 period. By choosing alternative income intervals for defining the three classes, evaluating different methods for measuring changes in class size over time, and examining these changes from both a secular and cyclical perspective, the sensitivity of the findings is assessed. Through such sensitivity analysis, we attempt to reconcile the divergent views on secular changes in the size of the three classes over time. Although the underlying causes of the shifts are important, we do not attempt to identify them.

Consistent with the results found in the literature, we find that the proportion of families in the middle class has declined substantially over time. However, in contrast to many studies, we conclude that the majority of the decline in the middle is offset by an increase in the upper class. It is important to note that our findings do not run counter to arguments of growing inequality in the distribution of income. Indeed, in terms of its share of aggregate income, there has been a growing disparity between the lower class and the remainder of the distribution.

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Footnotes

1 Several studies, using measures of income inequality such as the Gini coefficient and the log-variance approach, have found evidence of increased inequality over the past two decades. See, for example, McKinley L. Blackburn and David E. Bloom, "Family Income Inequality in the United States, 1967-84," Proceeding s of the 39th Annual Meetings (Industrial Relations Research Association, 1986), pp. 349-58; W. Norton Grubb and Robert H. Wilson, "The Distribution of Wages and Salaries, 1960-1980: The Contributions of Gender, Race, Sectoral Shifts and Regional Shifts," Working Paper 39 (University of Texas, 1987); and Chris Tilly, Barry Bluestone, and Bennett Harrison, "What is Making American Wages More Unequal?" Proceedings of the 39th Annual Meetings (Industrial Relations Research Association, 1986), pp. 338-48.

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