The Shrinking Middle Class

Trillions of Dollars On the Move

Economists are telling us that we are on the cusp of the greatest transfer of wealth in the history of America. Today's retirees make up one of the wealthiest segments of the U.S. population with more personal wealth than any previous generation.

It goes without saying that the lives of over 76 million Baby Boomers will be transformed with the estimated 40.6 trillion dollars changing hands. This has the potential to boost the economic status of families for generations to come.

At the same time we are also hearing about the disappearing or shrinking middleclass. What this means to you depends on how you perceive the statement. Some may view it as indication that we will be made up only either very poor or very rich people.

If there is no middle class, does that mean we will only have the very rich and the very poor? As detrimental as that may sound, it is important to avoid classification labels and look at the real picture.

Does this Affect You?

The answer to this question lies in how you see yourself in the greater economic picture. If you feel that you are one of the poor then you are probably throwing up your hands in disgust and feeling like this means the rich will get richer, while you will end up having less.

 For instance, you hear of this massive wealth transfer and that the middle class is quickly disappearing, then you might wring your hands and declare that the rich are getting richer and the poor are getting poorer. And you are convinced without a doubt that you are in the latter group!

Define the Middle Class

In earnest there really is no definitive means with which to define the middle class. This is because many people classify people based on material possessions while others classify them on lifestyle and occupational functions. Compared to Americans a decade ago, we have much more in
terms of belongings. There were no computers, cell phones or two car families back then.

 The point is, where is your focus? If the direction of your focus is dictated by the ten o'clock news, you are in deep trouble. If you believe the middle class is under the heel of the rich, and being squashed like a bug, how does that affect your behavior?

Engraved in Stone?

There are many economists who are not convinced that there really is a shrinkage in the middle class. The viewpoints depend largely on which parameters the economist uses to define middle class. Some define middle class by income
brackets or occupational categories. The truth is that many economists say for certain that there is no real shrinking middle class theory.

Consider this:

 Fewer people today live in households with incomes between $30,000 and $100,000 (a reasonable definition of "middle class") than in 1979.

 The number of people in households that bring in more than $100,000 rose (in that same time period) from 12 percent to 24 percent.

 The percentage of people in households making less than $30,000 has remained static.

 More and more people are making more money thus the decline of the "middle class".

 For married couples - median income inflation dollars have grown a whopping 25% since 1979.

Reading these facts, you can easily see that the decline of the middle class is more likely because they are the ones moving up rather than down the economic ladder of success!

The wealth transfer and possible rise of the middle class to richer folks may mean that there is greater resource for all these people to invest in your product or service.

If you must believe that the middle class is shrinking, think of it has shrinking because they are moving on up which means more money in the pot for you to collect upon.
 

Toni Shrader
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