US Middle Class Is No Longer World’s Richest

NEW YORK – The American middle class, long the most affluent in the world, has lost that distinction.

While the wealthiest Americans are outpacing many of their global peers, a NYT analysis shows that across the lower- and middle-income tiers, citizens of other advanced countries have received considerably larger raises over the last three decades. After-tax middle-class incomes in Canada — substantially behind in 2000 — now appear to be higher than in the US. The poor in much of Europe earn more than poor Americans. The numbers, based on surveys conducted over the past 35 years, offer the most detailed publicly available comparisons for different income groups in different countries over time.

Although economic growth in the US continues to be as strong, or stronger, a small percentage of American households is fully benefiting from it. Median income in Canada pulled into a tie with median US income in 2010 and has most likely surpassed it since then. Median incomes in Western European countries still trail those in US, but the gap in several — including Britain, the Netherlands and Sweden — is much smaller than it was a decade ago. In European countries hit hardest by recent financial crises, such as Greece and Portugal, incomes have fallen sharply in recent years.

The income data were compiled by LIS, a group that maintains the Luxembourg Income Study Database. The numbers were analyzed by researchers at LIS and by The Upshot, a NYT website. LIS counts after-tax cash income from salaries, interest and stock dividends, among other sources, as well as direct government benefits such as tax credits.

Three broad factors appear to be driving the weak income performance in the US. First, educational attainment in US has risen far more slowly than in much of the industrialized world over the last 30 years, making it harder for the American economy to maintain its share of highly skilled, well-paying jobs.

A second factor is that companies in the US economy distribute a smaller share of their bounty to the middle class and poor than similar companies elsewhere. Top executives make more money in the US than in other wealthy countries. The minimum wage is lower. Labor unions are weaker. And because the total bounty produced by the US economy has not been growing substantially faster here in recent decades than in Canada or Western Europe, most American workers are left receiving meager raises.

Finally, governments in Canada and Western Europe take more aggressive steps to raise the take-home pay of low- and middle-income households by redistributing income.

Comments are closed