The same middle-income quintile had a median before-tax family income of $47,300. That is, half had more, half had less.
That middle income quintile accounted for 10.9% -- no! that was the the 1989 figure. By 2007, it was 7.54% -- of America's net worth in 2007.
Here's how the net worth was distributed across the income quantiles in 2007:
Top income decile:
59.45% of the net worth
Second income decile: 10.92% of the net worth Top income quintile: 70.37% of the net worth Second highest income quintile: 13.48% of the net worth Middle income quintile: 7.54% of the net worth Fourth highest income quintile: 4.84% of the net worth Bottom income quintile: 3.77% of the net worth
If we define the middle class more broadly -- as the middle 60% of the income distribution -- our "middle class" has 25.86% of the net worth.
And here's how the before-tax income was distributed across the same income quantiles:
|Top income decile:||47.19% of the before-tax income|
|Second income decile:||13.77% of the before-tax income|
|Top income quintile:
||60.96% of the before-tax income|
|Second highest income quintile:||18.18% of the before-tax income|
|Middle income quintile:||11.23% of the before-tax income|
|Fourth highest income quintile:
||6.72% of the before-tax income|
|Bottom income quintile:
||2.92% of the before-tax income|
[Source: SCF Chartbook, page 7 and my calculations]
Using the broader definition of middle class -- again, the middle 60% of the income distribution -- our "middle class" has 36.13% of the before-tax income.
(Think of this quantile data as you read Bob Herbert's recent column "The Worst of the Pain.")
Alternatively, if we define the middle class in terms of net worth -- erase the above income-based definitions from your mind for the moment! -- here's the corresponding data:
The median household arranged according to net worth had net worth of $120,600 [source: SCF Chartbook, p. 39] That doesn't sound so bad, does it?
Let's look at the net worth quantiles:
||Top net worth decile:||71.46% of aggregate net worth|
|Second 15% of net worth holders:||15.83% of aggregate net worth|
|Top net worth quartile:||87.29% of aggregate net worth|
|Second highest net worth quartile:||10.21% of aggregate net worth|
|Third highest net worth quartile:||2.60% of aggregate net worth|
|Bottom net worth quartile:||-0.10% of aggregate net worth|
[Source: SCF Chartbook, 2007, page 73]
If you define our middle class as those between the 50th and 85th percentiles of the net worth distribution, our middle class owns 26.04% of the net worth.
How is the income distributed across those same net worth quantiles?
||Top net worth decile:||41.25% of before-tax income|
|Second 15% of net worth holders:||16.56% of before-tax income|
|Top net worth quartile:||57.81% of before-tax income|
|Second highest net worth quartile:||19.76% of before-tax income|
|Third highest net worth quartile:||13.80% of before-tax income|
|Bottom net worth quartile:||8.63% of before-tax income|
The middle 50% of us, arranged according to net worth, have 33.56% of before-tax income
If you want to define our middle class as those between the 50th and 85th percentiles of the net worth distribution, our middle class is getting 36.32% of the before-tax income. 35% of us getting 36% of the income. That's middle, I guess.
If you've gotten this far, I'll bet that you will think that we might want to tax income more heavily at the upper end of the income spectrum, or tax large estates more heavily.
I'm going to propose something different. Something which digs deeper, and seeks the source, the cause of the problem, rather than trying to redistribute the income or net worth after the fact.
Henry David Thoreau, in Walden, wrote this:
There are a thousand hacking at the branches of evil to one who is striking at the root, and it may be that he who bestows the largest amount of time and money on the needy is doing the most by his mode of life to produce that misery which he strives in vain to relieve. It is the pious slave-breeder devoting the proceeds of every tenth slave to buy a Sunday's liberty for the rest. Some show their kindness to the poor by employing them in their kitchens. Would they not be kinder if they employed themselves there? You boast of spending a tenth part of your income in charity; maybe you should spend the nine tenths so, and done with it. Society recovers only a tenth part of the property then. Is this owing to the generosity of him in whose possession it is found, or to the remissness of the officers of justice?
Henry George wrote this, in the opening chapter ("The Problem") of Progress & Poverty (1879), describing the first 100 years of America's existence as a nation:
It is true that wealth has been greatly increased, and that the average of comfort, leisure, and refinement has been raised; but these gains are not general. In them the lowest class do not share. I do not mean that the condition of the lowest class has nowhere nor in anything been improved; but that there is nowhere any improvement which can be credited to increased productive power. I mean that the tendency of what we call material progress is in no wise to improve the condition of the lowest class in the essentials of healthy, happy human life. Nay, more, that it is to still further depress the condition of the lowest class. The new forces, elevating in their nature though they be, do not act upon the social fabric from underneath, as was for a long time hoped and believed, but strike it at a point intermediate between top and bottom. It is as though an immense wedge were being forced, not underneath society, but through society. Those who are above the point of separation are elevated, but those who are below are crushed down.
Now go back and look at the distributions of income and of net worth in America in 2007. I've not provided the trend data here, but the 2007 snapshot tells the story well enough.