Is the Middle Class Shrinking?

When the drift was first spotted in the early 1980s, it stirred only academic interest. But this year, as more economists and politicians began to take note of it, the seemingly slight squiggle on the demographic chart has sparked a fervent debate. The great American middle class, the provocateurs contend, is no longer so great. It is shrinking steadily, goes the theory, and shedding its members into the economic extremes of wealth and poverty. "There has been a thinning of the middle class," says David Bloom, an associate professor of economics at Harvard. "As society becomes more polarized, it has more 'haves' and 'have-nots,' with fewer in between."

The economists who highlight this phenomenon tend to be liberals; many of them blame the Reagan Administration for failing to help Middle Americans adapt to the postindustrial age. Millions of citizens, they contend, have lost their middle-class jobs in aging industries like autos and steel and have plunged into the minimum-wage realm of floor mopping and hamburger flipping. By failing to halt the middle-class shrinkage, the argument goes, the U.S. could allow itself to become a two-tiered society of rich and poor. Declares M.I.T. Economics Professor Lester Thurow: "Wherever one looks, one now finds rising inequality."

At least one set of statistics appears to confirm an erosion of the middle class, though hardly an upheaval. While the middle class has never officially been defined, the group could reasonably be described as those families with incomes between the Census Bureau brackets of $15,000 and $49,999. According to the census, the proportion of U.S. families in that category, after adjustment for inflation, shrank from 65.1% in 1970 to 58.2% in 1985 (see chart). The trend is far from being a completely odious phenomenon, though. The statistics show that more families departing the middle class have moved up than down. Families with incomes of $50,000 or more -- considered the gateway to the upper class -- increased from 13% of the population to 18.3% during the 1970-85 period. At the same time, the proportion of families below $15,000 grew from 21.9% to 23.5%.

The shrinkage theory is debated by scholars who choose to measure the middle class in different terms, whether by changing the income brackets or focusing on job categories. While some researchers see a smaller shrinkage, or barely any at all, many are convinced that the change is real. "No matter what definition you use, you come up with the phenomenon," says James Smith, a senior economist for the Rand Corp.

Any scientific measure of the middle class, however, entails drawing arbitrary brackets, both economic and psychological, around the group. At least one economist thinks this is folly and that Middle America is essentially a state of mind. Says Lawrence Lindsey, assistant professor of economics at Harvard: "A middle-class person is someone who expects to be self-reliant, unlike the upper class with its unearned wealth or the lower class with its dependency on society. Far from declining, the middle class is bigger than ever, and its ethic is alive and well."