The shrinking middle class

The Luxemburg Income Study Database (LIS), a data center in Luxemburg, recently published a study that announced that the middle class in the U.S. is shrinking and led to stunned headlines in a vast amount of media outlets.

The complaints over the growing income disparity aren’t new. But the LIS study is disquieting because of the expansive amount of data it based its conclusions on.

The study shows that Canada now has the most affluent middle class in the world. Incomes in European countries such as the U.K., the Netherlands and Sweden are catching up with incomes in the U.S. Poor people in most European countries earn more than the poor in the US. The still-growing U.S. economy, which is as strong as or stronger than many other countries’, hasn’t benefited most regular American households.

An article on the study from The New York Times suggests that the imbalances in the U.S. are caused mainly by a lack of educational attainment, a lack of income distribution within corporations, a lack of income redistribution by the U.S. government and slow economic growth.

Comparative studies on education have shown that the U.S. has a well-educated population among older citizens. But the level of educated of 16- to 24-year-olds lags behind levels in other developed countries, such as Canada, Australia, Japan and the Scandinavian countries.

Profits earned by companies aren’t properly distributed within those companies. Often only a small amount of the yield is shared with the lower tier employees.

Most governments in countries that lead the study’s ranking are taking aggressive steps towards an income distribution, a step that is increasingly closing the income gaps between classes.

And finally, comparatively low economic growth simply means that there is less to share among members of a society, especially when a huge chunk of income streams into pockets of a small number of executives. (This is an interesting point that was recently emphasized by another study, which came to the conclusion that the U.S. is more of an oligarchy than a democracy)