- In recent years, wealthy Americans got wealthier and low-wage workers bargained for higher pay.
- But middle-class Americans have seen their wages stall, economists found.
The pandemic economy has been tumultuous, to say the least.
The wealthiest of Americans have seen an influx of cash, while low-wage workers have managed to secure historic raises through bargaining, despite inflation creating a tight squeeze for anyone on a budget.
But the middle-class has had no such bright side, with their income gains stalling, according to a recently updated paper by three University of California, Berkeley economists, who run a project called Realtime Inequality, where they track growth statistics for each income group. And that's on top of housing affordability woes locking the middle class out of their traditional avenue for wealth-building over the past few years.
The lowest 50% of earners in the US, who have an average income of $20,000 a year, according to the Realtime Inequality website, have seen their income grow by 6.4% between September 2019 and September 2022. That's in comparison to 7.6% for the top 10% of earners, who make about $420,000 a year, and 2.6% for the middle 40%, who make about $92,000 a year.
That wage growth for the lowest-earning 50% of Americans since the pandemic started caused a "reduction in wage inequality among the bottom 99%," the authors noted, which departs from the trend the country has seen since the early 1980s. That's on top of incomes for the bottom 50% temporarily improving when COVID first hit, due to expanded unemployment benefits and stimulus checks.
When those cash avenues from the government ended, income growth declined from its peak, the researchers said, but still continued to rise — which shows that the labor market is strong, and that lower-wage workers are securing higher paychecks. Lower-wage workers, such as leisure and hospitality workers, are the only ones seeing the higher pay they're bargaining for outpace the toll of inflation.
As the US approaches a probable, though relatively shallow, recession in 2023, it's also dealing with a much different wage growth picture than during the Great Recession. In the years following that recession, all income levels saw stagnant pay; now, the opposite is true. But even those seeing wages gains aren't guaranteed it will last. The Fed is seeking to cool them in order to avoid a price-wage spiral and bring raises in line with the level "that's sustainable and consistent with 2% inflation," chair Jerome Powell said in early November.
Middle-class Americans are losing options for wealth growth
A July Primerica poll of 1,400 people found that three-quarters of middle-income Americans reported that their earnings aren't enough to pay for their cost of living.
The survey also found that concern about the economy continues to be a major pressure, with about 41% rating inflation as their top concern. Being able to pay for food and groceries also ranks high, and higher than when people were polled in March.
On top of that, middle-class Americans are losing access to real estate as their most reliable source for wealth building. Over the past decade, middle-class households made more than $2 trillion from homeownership.
But today, housing remains unaffordable for many Americans, especially after nearly two years of price hikes in a white-hot market. Millions of homebuyers have been priced out this year, according to economists, and the median home price hit a record high. Now, however, home values are beginning to decline, taking wealth from homeowners. Plus, an ever-growing real estate market is not a guarantee, as Yale economist James Choi recently told Insider.
America's middle class has been shrinking since 1971, according to the Pew Research Center, they continue to face obstacles as real estate values decline, inflation grows, and wages remain in stasis.