Noah Smith: Fewer Americans identify as middle class

As the presidential primary season continues, much has been made of the appeal that candidates Donald Trump and Bernie Sanders hold for the angry, disaffected working class. Everyone seems to agree that this group is in trouble, and needs serious help.

But which Americans exactly are part of the working class? There is no set definition.

You can define class by wealth, but a young worker starting out on Wall Street and earning relatively little is hardly lower class. You can define it by income, although that will be distorted by local differences in the cost of living. You also can define it by educational status.

But perhaps the most important definition is in people’s minds. Gallup periodically asks people to place themselves in one of five classes – upper, upper-middle, middle, working and lower.

The percentage of Americans who consider themselves working class has stayed relatively stable. But the self-identified middle class has plunged by about 10 percentage points, matched by an even larger increase in the percentage of Americans who label themselves lower class. The self-identified lower class should probably be included in the working class that gets discussed in articles about Trump and Sanders.

Why do fewer Americans identify as middle class? One obvious possibility is that the middle class has been spreading out, separating into a well-to-do upper-middle and an expanding working class. The evidence shows that something like this has been happening for decades now.

That certainly seems likely to reduce the share of people who feel like they’re in the middle.

Slow growth may also have made everyone in the U.S. more pessimistic. Or perhaps inequality itself lowers everyone’s perception of their own class. People making $25,000 might compare themselves to people making $50,000, but people making $400,000 might compare themselves to people making $2 million.

One development is that the difference between the working and upper-middle class incomes has widened, but the gap between the upper-middle class and the rich has absolutely exploded. That could be making everyone more pessimistic about where they stand in the hierarchy.

But the strange thing is that if we look back to the ’80s and ’90s, when incomes within the middle class were diverging rapidly, we see very little change in class identification. The sudden increase in the lower class, and the drop in the middle class, happened after the financial crisis and the Great Recession.

Were Americans tricking themselves all that time? Did bubbles in the stock and housing markets distract them from the fact that their incomes had stagnated? Did unsustainable borrowing allow working and lower-class Americans to keep up their consumption levels for a little while?

That seems very possible. Another possibility is that class identification is really a measure of risk. Even if your family makes $180,000 a year, well above the national median, it might be hard to think of yourself as upper-middle class if you could be fired at any time, or if one medical emergency could send you into bankruptcy.

Whatever the reason, the shift in class identification is real. More and more Americans think of themselves as being on the bottom of the economic totem pole. This may be why politicians are focusing less on economic opportunity and more on fear.

This story was originally published March 30, 2016 at 7:01 PM with the headline "Noah Smith: Fewer Americans identify as middle class."