Report: California's middle class shrinks to below 50 percent
Posted: 12/07/2011 09:01:00 PM PST
Not even half of California's families are middle class anymore as the recession and its aftermath widened the gap between rich and poor, according to a new report.
Three decades ago, 60 percent of California families could count themselves in what the Public Policy Institute of California calls the "middle-income" bracket. Not rich but doing reasonably well, the middle class formed a comfortable majority and shared the state's prosperity.
But the portion of middle-income families slipped to 49.7 percent last year, according to the nonpartisan research group's study. Using census figures and a federal standard-of-living measure adjusted for inflation, the report defines the middle-income bracket as families who earn $44,000 to $155,000 a year.
"It really reflects a decades-long trend, at least three decades of shifts in our economy," said report co-author Sarah Bohn.
Globalization and technological progress contributed to the long-term changes, which hurt some but were not always bad for everyone over the decades, she said. While some fell out of the middle into poverty, others moved from the middle to the higher income brackets.
"Up to 2006, it looked like a net improvement," Bohn said. "The low-income group was pretty steady. The high-income group in California was growing."
Now, however, few are moving up. The downturn reduced the fortunes of almost all groups in California, but families who already earned lower incomes were hit the hardest.
Income dropped for California's lowest-income families by more than 21 percent from 2007 to 2010 while dropping by just 5 percent for the most affluent families.
What that means, Bohn said, "depends on your point of view."
In California, the rich-poor gap is growing but has been wider than the rest of the country's for decades. The widening income divide has gained attention in recent months as Occupy Wall Street protesters railed against economic inequality. Many conservatives, in turn, have derided the focus on inequality as "class warfare" that pits the poor against the wealthy.
The Public Policy Institute doesn't wade into that ideological debate, but Bohn said the income gap "raises questions about the equity of economic opportunity. Is everybody -- in families across the income distribution -- do they all have the same access to education, or training?"
Underemployment -- not enough hours worked -- was a bigger cause of declining incomes for working Californians than lower wages, according to the study.
"Employers during this recession were not adjusting wages, they were laying off workers," she said. "That's different from previous recessions. We think that the reason is that during this recession, inflation was really low. It's easier for them to just leave the salary the same and let inflation eat it away."
The recession amplified existing racial differences in economic well-being: African-American and Latino families fared the worst.
Education, more than race or income, was the biggest divider in how people fared and was the most important factor in determining a family's well-being, Bohn said. Those with college degrees were best able to buffer the downturn's ill effects.
Researchers differ in how they define the middle class or middle incomes, but Thursday's report is the latest in a flurry of studies to suggest statewide income disparities are becoming more stark.
"Experts on income inequality believe that as income gaps widen, it could be even harder for people who start at the bottom to climb the income ladder," said Alissa Anderson of the California Budget Project.
"Already, rags to riches stories are less common."