By many measures, the U.S. economy is booming: unemployment is close to a decade-long low; the Federal Reserve recently raised interest rates for the second time in roughly a decade, signaling confidence in the economy; and the Dow Jones Industrial Average reached an all-time high earlier this year.
Despite the nearly decade-long period of growth, there have been signs the American middle class is being left behind. Over the past five years alone, incomes among the top 20% of earning households in the United States rose about 1.5 times faster than that of middle class households. Incomes among the top 5% of households increased at roughly double the rate middle class incomes did. In some states, the gap is widening at a much faster rate. In Wyoming, incomes among the top quintile of households increased by 12.2%, while the average income among middle class households rose by just 2.5%. 24/7 Wall St. reviewed the nine states where the middle class is being left behind.
> Middle class income growth 2011-2015: 4.4% (20th lowest)
> Fifth quintile income growth: 8.7% (21st highest)
> Fifth quintile share of income: 54.2% (the highest)
> Middle class household income: $60,867 (15th highest)
Income inequality is more pronounced in New York than in any other state in the country. The top 20% of earners in the state account for 54.2% of all income annually, the largest share among all states. Meanwhile, the state’s middle class households earn the equivalent of only 13.5% of all incomes, the smallest share in the country. The disparity appears to be getting worse. Incomes among the state’s highest earning households have increased by 8.7% over the last five years, while middle class incomes have increased by a relatively slight 4.4%.Incomes among the state’s top 5% of households have increased even more dramatically, jumping by 12.1% in the past half decade. The top 5% of households account for 26% of income in New York annually, more than in any other state.
As the economy has recovered from the Great Recession, a trend began to develop among the nation’s middle class. Americans who lost their jobs managed to eventually find work again, but often at a lower pay, or only part time. The result was that even as the stock market soared and unemployment improved, incomes among the nation’s middle class — often referred to as the backbone of the economy — fell.
As the recovery continued, however, middle class incomes began to rise somewhat, growing since 2011 in all but one state. Middle class household incomes declined by 0.8% in Delaware. However, throughout the country, and particularly in the nine states on our list, income growth among the top earners dwarfed the income growth of the middle class. In the nine states on our list, income growth among the top quintile was roughly double the growth of the middle quintile, and in the case of Wyoming and Alaska, it was more than four times that of the middle class.
One possible explanation for the relatively low income growth in some of the states on this list is, perhaps counterintuitively, the relative strength of the middle class there. Four states on this list have higher than average household incomes among the middle quintile. This includes Alaska, where the average household income in the middle quintile is about $73,500 a year, roughly $17,500 greater than the national average household income for the middle class.
Historically, strong labor unions have been integral to a vibrant middle class. Collective bargaining has helped improve wages, benefits, and rights for workers, both union and nonunion alike, nationwide. However, according to the Economic Policy Institute, a nonpartisan think tank, union membership has fallen considerably in the last several decades. In addition to declining membership, labor laws have weakened unions and their ability to contribute to higher wages. Since union membership began to rapidly decline in the 1980s, the share of income going to the top 10% of earners has increased dramatically.
Perhaps because unions are not as influential as they once were, there does not appear to be a strong overarching pattern between union membership and stagnant middle class wages. Nationwide, some 11.1% of all working adults are union members. Among the states where the middle class is disappearing, unionized workers comprise anywhere from 5.2% of workers in Arizona to 24.7% in New York.