Yes, America's Middle Class Is Shrinking - Here's the Proof

The middle class is shrinking here in the U.S. of A., according to new data from The Pew Charitable Trusts...

A March 19 study revealed the percentage of American middle-class households dropped in every state between the years 2000 and 2013. In other words, households with earnings between 67% to 200% of their respective state's median income (thereby qualifying them as "middle class") fell during that period.

For example, Minnesota's middle-class population dropped from 52.9% in 2000 to 48.9% in 2013; Nevada's middle class fell from 53.6% to 48.8%; and Georgia, which had a middle-class-identified population already below 50% (at 49%), fell almost 5% to 44.2%.

"Our future will bring more wealthy people than ever before, but also more poor people," wrote libertarian economist, professor, and New York Times best-selling author Tyler Cowen in his 2013 book "Average Is Over." "Rather than balancing our budget with higher taxes or lower benefits, we will allow the real wages of many workers to fall - and thus we will allow the creation of a new underclass."

Cowen speculates that employers will have authoritarian-like rule over their employees in the future, demanding perfection to weed out the underperformers. Cowan also predicts retirees will live in favela-like Shantytowns. Youngsters, disillusioned by their prospects (or lack thereof), will keep themselves occupied with drugs and online entertainment.

Whether or not a dwindling middle class will result in Cowen's dystopian future, one thing is for certain: The middle class is shrinking - and has been doing so since the late 1970's...

5 Facts that Prove the U.S. Middle Class Is Shrinking

Evidence Middle Class Is Shrinking No. 1: Wages have been stagnant for decades. The United States has experienced generally stagnant wages while high-earning individuals keep making more and more annually. On Jan. 6, the Economic Policy Institute (EPI) released data showing that in 2007 (the last year before the Great Recession), "the average income of the middle 60% of American households was $76,443. It would have been $94,310, roughly 23% (nearly $18,000) higher had inequality not widened (i.e., had their incomes grown at the overall average rate - an overall average buoyed by stratospheric growth at the very top). The temporary dip in top incomes during the Great Recession did little to shrink that inequality tax, which stood at 16% (nearly $12,000) in 2011."

Evidence Middle Class Is Shrinking No. 2: The worker-to-productivity ratio is grossly unbalanced. Wage growth stagnation has stemmed from a growing wedge between overall worker productivity - the improvements in the amount of goods and services produced per hour worked - and the pay (wages and benefits) received by a typical worker.

According to the EPI, over the 30-year span following the Second World War, hourly compensation for the majority of workers rose 9%. That number was approximate to the productivity growth at the time - also 9%.

But the parallel hasn't persisted.

With the exception of a few years in the late 1990s, compensation for the majority of working Americans fell behind overall productivity - by a lot. Between the years 1973 and 2013, hourly wages for a worker in a nonsupervisory position rose just 9%. However, productivity during this time rose a whopping 74%.

Because workers have been putting in more time for scant, if any, pay increases over the last three decades, they haven't been able to save and prepare for retirement - which brings us to our third piece of evidence...