Advertisement

The Decline of the American Middle Class: Evidence from the Consumer Expenditure Surveys 1988–2015

  • Jessie X. FanEmail author
  • Hua Zan
Original Paper
  • 21 Downloads

Abstract

In 2010, the US Department of Commerce, commissioned by the White House Middle Class Task Force, recommended six indicators that define the middle class: having one’s own home, a car or two in the carport, taking a family vacation every year, sending kids to college, and having some retirement savings. We used the Consumer Expenditure Survey (CE) data to estimate the size of American middle class in selected years from 1988 to 2015 using three empirical variations of this definition and to test if there were upward or downward trends during these years. We found that the size of the American middle class was definitely on the decline between 1988 and 2015 for all three definitions. Multivariate analyses show that variations in total household annual expenditure and sociodemographic variables could not explain the decline. In fact, adjusting for these controls made the decline of the middle class over time more severe.

Keywords

Consumer behavior Emergency savings Health insurance Homeownership Middle class 

Notes

Acknowledgements

We thank Dr. Geoffrey Paulin (Bureau of Labor Statistics) and Dr. Jason Murasko (University of Houston – Clear Lake) for their valuable guidance to our data construction and analyses. We also thank three anonymous referees for their insightful comments.

References

  1. Bhargava, V., & Lown, J. M. (2006). Preparedness for financial emergencies: Evidence from the Survey of Consumer Finances. Journal of Financial Counseling and Planning,17(2), 17–26.Google Scholar
  2. Boushey, H., & Hersh, A. (2012). The American middle class, income inequality, and the strength of our economy. Retrieved from https://www.americanprogress.org/issues/economy/reports/2012/05/17/11628/the-american-middle-class-income-inequality-and-the-strength-of-our-economy/.
  3. Burkhauser, R. V., Larrimore, J., & Simon, K. I. (2011). A “second opinion” on the economic health of the American middle class. Retrieved from https://www.nber.org/papers/w17164.pdf.
  4. Chang, Y. R., Hanna, S., & Fan, J. X. (1997). Emergency fund levels: Is household behavior rational. Financial Counseling and Planning,8(1), 47–55.Google Scholar
  5. Diemer, M. A., Mistry, R. S., Wadsworth, M. E., López, I., & Reimers, F. (2013). Best practices in conceptualizing and measuring social class in psychological research. Analyses of Social Issues and Public Policy,13(1), 77–113.CrossRefGoogle Scholar
  6. Duesenberry, J. S. (1949). Income, saving and the theory of consumer behaviour. Cambridge: Harvard University Press.Google Scholar
  7. Duncan, O. D. (1961). A socioeconomic index for all occupations. In J. J. Reiss (Ed.), Occupations and social status (Vol. 1, pp. 109–138). New York: Free Press of Glencoe.Google Scholar
  8. Fan, J. X., & Abdel-Ghany, M. (2004). Patterns of spending behavior and the relative position in the income distribution: Some empirical evidence. Journal of Family and Economic Issues,25(2), 163–178.CrossRefGoogle Scholar
  9. Fan, J. X., & Zan, H. (2019). The “model minority” myth: Asian American middle class before, during, and after the Great Recession. Singapore Economic Review,64(1), 23–39.CrossRefGoogle Scholar
  10. Federal Reserve Bank of St. Louis. (2019a). Homeownership rate for the United States. Retrieved from https://fred.stlouisfed.org/series/RHORUSQ156N.
  11. Federal Reserve Bank of St. Louis. (2019b). Real Gross Domestic Product per capita. Retrieved from https://fred.stlouisfed.org/series/A939RX0Q048SBEA.
  12. Frank, R. (2013). Falling behind: How rising inequality harms the middle class. Berkeley, CA: University of California Press.Google Scholar
  13. Friedman, M. (1957). The permanent income hypothesis. A theory of the consumption function (pp. 20–37). Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
  14. Gilbert, D. (2014). The American class structure in an age of growing inequality. Thousand Oaks, CA: SAGE.Google Scholar
  15. Haskins, R., Isaacs, J. B., & Sawhill, I. V. (2008). Getting ahead or losing ground: Economic mobility in America. Retrieved from https://www.brookings.edu/research/getting-ahead-or-losing-ground-economic-mobility-in-america/.
  16. Jones, J. M. (2005). American's vacation habits. Retrieved from https://news.gallup.com/poll/20542/americans-vacation-habits.aspx.
  17. Kamakura, W. A. (2014). What happened to the American ‘Middle Class’? Class and consumption in America. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2378522.
  18. Kochihar, R., & Fry, R. (2015). America’s ‘middle’ holds its ground after the Great Recession [Press release]. Retrieved from https://www.pewresearch.org/fact-tank/2015/02/04/americas-middle-holds-its-ground-after-the-great-recession/.
  19. Kochihar, R., & Morin, R. (2014). Despite recovery, fewer Americans identify as middle class [Press release]. Retrieved from https://www.pewresearch.org/fact-tank/2014/01/27/despite-recovery-fewer-americans-identify-as-middle-class/.
  20. Merriam-Webster. (2016). Middle class. Retrieved from https://www.merriam-webster.com/dictionary/middle%20class.
  21. Morin, R., & Motel, S. (2012). A third of Americans now say they are in the lower classes [Press release]. Retrieved from https://www.pewsocialtrends.org/2012/09/10/a-third-of-americans-now-say-they-are-in-the-lower-classes/.
  22. Nam, C. B., & Boyd, M. (2004). Occupational status in 2000: Over a century of census-based measurement. Population Research and Policy Review,23(4), 327–358.CrossRefGoogle Scholar
  23. Newman, K. S. (2006). Chutes and ladders: Navigating the low-wage labor market. Cambridge, MA: Harvard University Press.Google Scholar
  24. Newman, K. S., & Chen, V. T. (2007). The missing class: Portraits of the near poor in America. Boston: Beacon Press.Google Scholar
  25. Pew Research Center. (2008). Inside the middle class: Bad times hit the good life. Retrieved from https://www.pewresearch.org/wp-content/uploads/sites/3/2012/08/pew-social-trends-lost-decade-of-the-middle-class.pdf.
  26. Pew Research Center. (2012). Fewer, poorer, gloomier: The lost decade of the middle class. Retrieved from https://www.pewsocialtrends.org/files/2012/08/pew-social-trends-lost-decade-of-the-middle-class.pdf.
  27. Pew Research Center. (2015). The American middle class is losing ground: No longer the majority and falling behind financially. Retrieved from https://www.pewsocialtrends.org/2015/12/09/the-american-middle-class-is-losing-ground/.
  28. Pew Research Center. (2016). America's shrinking middle class: A close look at changes within metropolitan areas. Retrieved from https://www.pewsocialtrends.org/files/2016/05/Middle-Class-Metro-Areas-FINAL.pdf.
  29. Reyes-Morales, S. E. (2003). Characteristics of complete and intermittent responders in the Consumer Expenditure Quarterly Interview Survey. Retrieved from https://www.bls.gov/cex/anthology/csxanth4.pdf.
  30. SAS Institute Inc. SAS Software, Version 9.4. Cary, NC: SAS Institute.Google Scholar
  31. StataCorp LP. Stata software, Version 13.1. College Station, TX: StataCorp.Google Scholar
  32. Sullivan, T. A., Warren, E., & Westbrook, J. L. (2001). The Fragile Middle Class: Americans in Debt: Yale University Press.Google Scholar
  33. The Associated Press-NORC Center for Public Affairs Research. (2016). Views of the national economy are clouded by personal finance and employment concerns. Retrieved from https://www.apnorc.org/PDFs/EconViews/economy%20report%20draft_v5_DTP%20Formatted_new%20image.pdf.
  34. The National Bureau of Economic Research. (2015). US Business Cycle Expansions and Contractions. Retrieved from https://www.nber.org/cycles.html.
  35. The White House Task Force on the Middle Class. (2010). Annual Report of the White House Task Force on the Middle Class. Retrieved from https://obamawhitehouse.archives.gov/sites/default/files/microsites/100226-annual-report-middle-class.pdf.
  36. US Bureau of Labor Statistics. (1988–2015). Consumer Expenditure Survey. Retrieved from: https://www.bls.gov/cex/.
  37. US Bureau of the Census. (2019). Household size by vehicles available 2011–2015 American Community Survey 5-year estimates. Retrieved from https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_14_5YR_B08201&prodType=table
  38. US Department of Commerce. (2010). Middle Class in America. Retrieved from https://2010-2014.commerce.gov/sites/default/files/documents/migrated/Middle%20Class%20Report.pdf

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of Family and Consumer StudiesUniversity of UtahSalt Lake CityUSA
  2. 2.Center on the FamilyUniversity of Hawaii at ManoaHonoluluUSA

Personalised recommendations