Middle class shrinks as income declines

Stephanie Nickell -- Furniture Today, October 29, 2012

In 2010 the median household income was $59,127, a 6.1% decline from 2007 when the median household income was $62,941. According to a recent study by the Pew Research Center not only have incomes decreased, but the middle class is shrinking in size as well. Last year, 51% of adults in the U.S. defined themselves as middle class, compared with 56% twenty years ago and 61% forty years ago.
     For the purposes of the study, Pew defines the middle tier as those living in households with an annual income that is 67% to 200% of the national median; the upper tier are those living in households above the 200% threshold, and the lower tier are those living below the 67% threshold.
     This is an important group for the furniture industry. According to Furniture/Today's 2011 Consumer Buying Trends Survey 40% of furniture and bedding buyers have incomes between $50,000 and $99,999, considered to be middle class.
     The sharpest decline in the middle class can be seen in those adults with less than a high school diploma. In 1971, 53% of adults having less than a high school diploma were in the middle class; in 2011 that number dropped to 37%, with the majority falling into the lower-income tier.
     The biggest portion of the middle class, 42%, say they are in worse shape now than they were before the recession. While 32% say they are in better shape and 23% claim there has been no difference in their financial situation.
     As a result in declining incomes, 62% of the middle class say they have cut spending because money was tight in the past year. Another 29% report having trouble paying bills and 18% say they have had trouble getting health care for themselves and their family in the past year.
     Yet, this group maintains some optimism as 78% of the middle class believe their standard of living compared with their parents during their peak financial years will eventually be the same or better.