Detailed Findings & Methodology
One factor that may contribute to the disparity in income growth is the decline of major blue collar industries in the Rust Belt and surrounding areas. In five of the 10 states with the largest declines in the share of income generated by the middle class, manufacturing accounts for a larger share of employment than the 8.6% national share. The four states with the largest manufacturing sectors in the country — Indiana, Wisconsin, Michigan, and Iowa — rank fifth, third, fourth, and eighth on this list. Over the last 10 years, employment in the U.S. manufacturing industry fell 11.0%, nearly the largest decline of any major sector.
In many of the states where upper class income growth is outpacing that of the middle class, there also has been an increase in home values, often at the expense of the lower classes. The general rule of thumb in real estate budgeting — that a household spend less than 30% of its income on housing — has become easier to follow for the wealthiest Americans over the last decade, and more difficult for poorer households. Nationwide, the share of households earning between $35,000 and $75,000 — approximately the middle income bracket — that spend at least 30% of their incomes on housing rose from 70.7% in 2007 to 71.6% in 2016.
Meanwhile, the share of households earning more than $75,000 annually that spend 30% or more of their income on housing was nearly halved, falling from 12.1% in 2007 to 6.7% in 2016. In six of the 10 states on this list, the percentage-point increase in the share of middle class households that spend 30% or more of their income on housing is at least three times the national figure.
To determine the states where the middle class is disappearing, 24/7 Wall St. reviewed the percentage-point decline in the share of aggregate household income earned by the middle quintile of households in all 50 states from 2007 to 2016 with data from the U.S. Census Bureau’s American Community Survey. We defined the middle class as the third income quintile, or the middle 20% of households. Because ACS income data reflects pre-tax levels, they may overstate the degree of income inequality in the poorer quintiles. However, it is unlikely that the tax burden of the third quintile is significant enough to skew the data.
Data on median home value, median income by quintile, the share of households that spend at least 30% of their income on housing, and the Gini index also came from the ACS. Data on employment by industry came from the Bureau of Labor Statistics. All data are for the most recent period available.