Académique Documents
Professionnel Documents
Culture Documents
Mark Kleiner
Research Problem………..…………………………. 1
Literature Review………..…………………………… 3
Study Synopsis……………………………………….. 8
Methodology…………………………………………... 9
Findings………………………..…………………….. .11
Commentary…………………..…………………….. 13
Bibliography…………………………..……………... 22
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RESEARCH PROBLEM:
The current field of study concerned with the dynamics surrounding the
middle class is one of the most relevant and fascinating research pursuits today.
Department of Commerce, households that fall above and below the top and
bottom 20% of the population are considered part of the middle class (Census,
2003). Since the large majority of Americans find themselves in the “middle
60%,” on the scale, these studies naturally grow in significance. The ultimate
policy developed as a result of this research will most definitely impact the middle
class of America the hardest, since they comprise the greatest presence on the
quintile scale.
Current work on the middle class, much like other significant studies
necessarily limited to the political arena. The controversy has affected this field
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methodologies that are not reliable. Secondly, any policy development stemming
Unfortunately for the study of the middle class, its own sheer size
mandates a measuring tool that is uniformly accepted by the public and private
sectors. The government’s primary social responsibilities are contingent upon its
ability to tax the population of the US. The private sector must accept this policy.
researchers.
This work examines the current state of research on the middle class and
the questions surrounding the topic. The major concerns are the size of the
researchers to study the size of the middle class, regardless of its definition, is
the Gini coefficient, which will be explained in detail. The Gini coefficient
state level (Tennessee) allows for confirmation of the current body of research
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This paper confirms that income inequality in Tennessee has increased between
1990 and 2000, while the income shares of the middle class have decreased.
LITERATURE REVIEW:
middle class. The researchers that are paying attention to it find themselves in
profile of the middle class (Hacker, 1996, 41). The middle class family is
comprised of working parents, earning exactly the median estimated income for
their population. They both have a vehicle. The age of married couples is rising,
and the number of singles and broken families are on the rise, contributing to the
older couple phenomenon as well. They do not have children yet, waiting for
more financial security first. They are driven consumers, trying to maximize
every dollar. At the same time, retailers are trying to take every dollar. Times
This being said, the motives behind studying the middle class are noble
happened to the middle class. First, and most accepted, is that the middle class
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decrease in the middle class. They can be split into two different general
Economic Rationale
Beginning with the economic indicators, wage stagnation and inflation are
cited as the number one reason for a decrease in the middle class (McMahon,
1997, 35). The effects of wage stagnation, according to McMahon are reflected
in the decay of our urban centers over the past three or four decades. He argues
that cities are synonymous with the middle class, and that they essentially
created one another. He argues that when wages flatten out, those in the middle
60% either drop or rise on the scale, and unemployment skyrockets. Judging
from the suburban exodus over the years, America’s cities are left with the low
end of the scale within their limits. On an even larger scale, the decline in the
(Kacapyr, 1996, 31). According to Kacapyr, the long, downward trend of the
coefficients.
Social Rationale
Changes in household composition over the last 40 years are the primary
social reason for the decline in the middle class. This includes a gradual decline
in the respect for traditional values that our parents held dear (McMahon, 1997,
33). These values included a respect for savings, as well as a commitment for
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living within means and paying bills regularly. Along these same lines, some
researchers ascribe the decline to a loss of sincerity in our social policy planning
(Little, 2001, 341). Little argues that originally, there was a sense of genuine
care built into social programs that is lacking today. She cites Civil War benefit
programs, the GI Bill, and 1935 style social security. However, none of this deals
Solutions
Researchers are quick to point out the reasons for the decline, and even
quicker to explain how to fix the dilemma. The solutions of curbing the decline in
the middle class are centered on trying to alleviate income inequality in the US,
which alone is an interesting notion. A logical place to begin the fix is with the
does lead to other interesting suggestions though, such as instituting tax codes
that will allow for half of the lower income bracket to move up into the middle
Other proactive solutions are to deal with poverty directly (Feldstein, 1999,
137). Feldstein recommends that we should tackle poverty instead of the afore-
mentioned redistributive policy fixes. The difficulty in defining the middle class
has no official definition to work on another issue that shares the same dilemma
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The Kacapyr group offers other solutions to increase job wages. They
suggest unionizing, job training, and tax reform as the most reasonable ways to
curb income inequality (Kacapyr, 1996, 33). They also identify several shifts in
demographic trends that may affect the Gini coefficient in the near future. First,
labor force growth is slowing down. As less people are available for permanent
number one growth industry last year, the wages offered at these positions will
increase, fighting wage stagnation. This ultimately would cause the low end to
slide into the middle 60% because they are earning more. The labor force is also
aging, translating into higher pay and benefits to the older workers. Lastly, the
trend in securing education is much like the job training to capitalize on worker
Alternative Explanations
properly defining the problem is the logical place to start. So the most
the middle class. A more extreme perspective states that it has already vanished
(Ehrle, 1996, 20). (See figure #1) This illustrates how Ehrle measures the
middle class. She added capital gains and insurance supplements to the
taxes. This was her attempt to remove what she describes as “government
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tampering,” to expose what is really happening to the middle class strictly at the
household income level. The findings are startling, especially seeing that 37.9%
of the population makes less than $20,000 dollars per year. One can see that
based on the arbitrary definition of the middle class, or the lack thereof,
measurement is not conclusive. Based on the $45,000 cut off, Ehrle was able to
make the middle class “vanish.” This illustrates the need for standard measures
tenets of consumerism, the researchers are of the opinion that the middle class
has not disappeared at all, but remains alive and well (Levy, 1989, 139). Levy
argues that in terms of sales, the middle class has always been based on
buying habits, buying traditional items more often than not. This is happening at
the same time that researchers are reporting that the middle class is vanishing.
How can this be? Also, consumer spending is on an increasing long-term trend,
but if the middle class is disappearing, who is doing all the buying? Levy
suggests that Americans are living well above their means. This explains why
the middle class is experiencing the largest personal debt load they have ever
Upon review of the problems and solutions for income inequality, and the
varying views on what is actually happening to the middle class, the following
study shows exactly what the Gini coefficient measures, and outlines a very
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direct, traditional methodology that uses state level Census tables that determine
section, this study will identify the major fallacy in the field by clarifying the
problem.
STUDY SYNOPSIS:
conclusions, a little on the Gini measure is appropriate. Since the 40’s, the Gini
concerned with income distribution (Cowell, 1995, 17), providing some degree of
uniformity to the study of income distribution. The Gini coefficient ranges from 0-
scale, perfect income equality is represented by a 0 score. This would mean, for
instance, that 10% of the population has received 10% of the income distribution,
20% received 20% income distribution, and so on. Graphically, this would be
illustrated by a 45° positive slope line with a range of 0-1. A score of 1 indicates
perfect income inequality, meaning that one household has all the share of
curve (Lorenz curve) that hangs below “perfect equality.” The coefficient
measure itself is equal to the algebraic area under the line of equality and said
curve: the greater the area, the larger the income inequality, and in turn, the
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The attractive aspect of the Gini is that it shows in concise notation the
how much aggregate income is held by what percentage of the population. With
one needs are the very basic variable inputs to complete the prompts on the
program. Without the processor, any researcher would be required to search old
tables for the coefficients, which would be very time consuming. Besides, the
tables are not accurate anymore. To derive a Gini through the base algorithm
step-by-step would require completing a 30 plus step equation, for each income
interval! Instead, all the necessary data was found at the Census website, and
defaults are worked into the system, to be precise as possible. These defaults
METHODOLOGY:
Hypothesis
This study hypothesizes that the Gini coefficients for 1990 and 2000 have
increased along with a decrease in income share of the middle 60% of the
population.
Data Sets
For the purpose of this study, the data inputs required were obtained from
Census Bureau table P080, which is “Household Income in 1989,” and QT-P32,
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which is “Income Distribution of Households in 1999.” The tables were entered
into the interpolator, and processed. (See figures #3 and #4) The only
modifications to these tables were the removal of the family composition data
Results
The only omited information is the interval prompt for each interval, which
would be very lengthy. The only variables required for our purposes are the
calculated Gini, and income share data. According to analyst and program
Census Bureau, the standard error indicates that not all prompts were input
during the procedure. Prompts such as “input the aggregate income of each
income interval, if available,” automatically input a default list of values that are
derived from national trends. Similarly, the race and median income for each
income interval are set at defaults if the information is not available. For the
purpose of this study, the default more than compensates, first because they are
virtually the same as each other, and secondly, the aim of this study is to
produce a comparative analysis between two years, 1990 and 2000, and not
FINDINGS:
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This study shows quite clearly that the Gini Coefficient for the state of
Tennessee increased from 1990 to 2000. This means more income inequality.
Before the Census 2000 information was available, this comparison could not be
made, not just because of the lack of availability of data sets. In 1993 data
collection methods were changed at the Census Bureau (Census Bureau, 2003)
This is very significant in that Ginis for the following year were skewed. The
availability of the 2000 data sets last summer were the first comprehensive sets
that could be used in a decade comparison since 1990, due to the aggregate
nature of the Gini coefficient which defines distribution in terms of aggregate data
The Gini in 1990 was 4.517, and in 2000 it has increased to 4.614. This
this change occurred in the span of a mere decade. To plot these Ginis on the
Lorenz Curve in figure #2 and #7, divide the Ginis by 10. As you can see if you
plot the Gini value for 1990 as a curve, .4517 concisely shows the income spread
Points of significance from figure #5 show that the lower quintile holds
only 3.3% of the aggregate income, and a salary cap of under $10,000 for 1990.
This situation was just as bleak in 2000, the lowest quintile held only 3.34% of
the aggregate, virtually no change over 10 years. The top salary in the lowest
fifth in 2000 was $15,550, not much of an improvement over ten years. That is
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an average increase for the top wage of the low 20% of approximately $550 a
year. At the same time, the top 20% gained a whole percentage point, which
translates into an average gain of $10,317 per year through 2000. The top 20%
held just under half the wealth in the state, and in 2000 they were less than half a
While the disparities between the rich and poor are interesting, what is
most important to this study is to identify the income share of the middle class.
As mentioned before, this middle is defined as the middle 60% of the quintile
scale. One sees from figure 5 and 8 that the middle class owns 48.27% of the
state aggregate income in 1990. Simply add the middle three quantiles together
to obtain this figure. In 2000, the middle class experienced a 1.35% drop in
upper-middle income groups, and since the lower 20% didn’t experience any
significant increase in income share, then it is clear where the money shifted.
The dollars shifted into the upper income bracket. Note that the upper limits
between the two years are $100,000 apart. The cap, as calculated by default in
the Gini coefficient processor multiplies the upper limit of the last closed interval
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COMMENTARY:
the study of the middle class rests on measurement methodology. There are two
avenues available to researchers who are faced with this type of subject: they
to, as is the case of the body of work regarding the middle class, and wallow in
misunderstanding surrounding the field is the fact that most researchers do not
The two most popular approaches at measuring the middle class are
based on the two variables used in this study, people and money. The two
methodologies define, from opposite directions, the theory behind the question of
size that permeates all the studies, this one included. The first approach asks
the question “has the middle class shrunk in terms of numbers of households?”
It becomes mandatory, then, to define the middle class by their income level
middle does not exist, allowing for every study to define it as they see fit. This
much more tangible. The US government realizes that to study class dynamics,
starting with a tangible independent variable makes more sense than taking a
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pluralistic approach by creating self-serving definitions for income brackets. The
illustration below shows the general concept behind the two major income
speaking, to know who has the money, and where it is, rather than know how
many people are falling within a certain boundary on a scale. More importantly, it
has used the Gini coefficient since 1940. So the question for this approach
becomes “how much money does “X” percent of the population hold?” as
opposed to “how many people make “X” amount of dollars and ‘become’ middle
class?”
Fortunately for research conducted thus far on the topic of the middle
say the same thing, even though they tackle the issue from directly opposite
extreme than others, point to the fact that wealth is being shifted upwards and
downwards, and that the traditional middle, or what we may call “majority
stakeholders” in our economy are not “moving” but losing their monetary power.
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This conclusion is based on the approach that isolates the population as the
number of households never changes, only their share of the wealth. On the
other hand, if the operational definition of the middle is an income bracket, then
one could track the annual change in number of households falling into the
interval.
According to the government’s approach, the people in the middle are not going
anywhere, but their dollars are shifting. The confusion presents itself when
researchers define the middle with confusing and convenient terms, and don’t
specify what their independent variable is. In this literature review, researchers
have chosen to take the first approach mentioned above, by highlighting the
APPENDIX “A”
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Figure #1
UPPER CLASS
Upper Upper $100,000+ 6.3%
Middle Upper $60,000-$99,999 14.7%
Lower Upper $45,000-$59,999 11.8%
LOWER CLASS
Upper Lower $35,000-$44,999 10.1%
Middle Lower $20,000-$34,999 19.2%
Lower Lower $0-$19,999 37.9%
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Figure #2
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Figure #3 Figure #4
P080. HOUSEHOLD INCOME IN 1989 - QT-P32. Income Distribution in 1999 of Households and
Universe: Households Families: 2000
Data Set: 1990 Summary Tape File 3 (STF Data Set: Census 2000 Summary File 3 (SF 3) - Sample Data
3) - Sample data Geographic Area: Tennessee
Tennessee
Less than $5,000 163648
$5,000 to $9,999 207221
$10,000 to $12,499 104740 Total 2,234,229
$12,500 to $14,999 89526 Less than $10,000 267,405
$15,000 to $17,499 101753 $10,000 to $14,999 161,773
$17,500 to $19,999 88474 $15,000 to $19,999 160,371
$20,000 to $22,499 97894 $20,000 to $24,999 165,763
$22,500 to $24,999 79647 $25,000 to $29,999 162,795
$25,000 to $27,499 88525 $30,000 to $34,999 157,126
$27,500 to $29,999 70372 $35,000 to $39,999 140,047
$30,000 to $32,499 84031 $40,000 to $44,999 133,864
$32,500 to $34,999 61093 $45,000 to $49,999 114,184
$35,000 to $37,499 67147 $50,000 to $59,999 196,781
$37,500 to $39,999 52969 $60,000 to $74,999 208,583
$40,000 to $42,499 57308 $75,000 to $99,999 179,559
$42,500 to $44,999 42799 $100,000 to $124,999 80,699
$45,000 to $47,499 46215 $125,000 to $149,999 36,080
Figure #3
$150,000 to $199,999 31,095
$47,500 to $49,999 34541
$50,000 to $54,999 67313 $200,000 or more 38,104
$55,000 to $59,999 49414
$60,000 to $74,999 94201
$75,000 to $99,999 56341 Mean income (dollars) 48,688
$100,000 to $124,999 20626
$125,000 to $149,999 8143
$150,000 or more 19,574
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Figure #5 Figure #6
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Figure #7
1990
2000
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Figure #8
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BIBLIOGRAPHY
Ehrle, Lynn H. “The myth of the Middle Class.” The Humanist, 1996; 56:17(4)
Hacker, Andrew. “Meet the Median family.” Time. 1996; 147: 41(3).
Jones, A.F.; Weinberg, Daniel. “The Changing Shape of the Nation’s Income
Distribution.” US Department of Commerce, Current Population Reports.
P60-204, 2003.
Levy, Frank. “Income trends, the return of traditional values, and the vanishing
middle class.” Journal of Retailing. 1989; 65:137(7).
Little, Margaret. “The Middle Class and Social Policy.” Journal of the American.
Planning Association. 2001; 67: 341(7).
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McMahon, Thomas L; Angelo, Larian. Hollow in the Middle: The Rise and
Fall of New York City’s Middle Class. CUNY Center for Urban Research/
CUNY Data Servic, 1997.
Patterson, George. Technical Paper 17: Trends in the income of families and
Persons in the US 1947-1964. Bureau of the Census; 1965.
Skocpol, Theda. The Missing Middle: Working Families and the Future of
American Social Policy. Norton and Company, New York, 2000.
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