Giving Compass' Take:

• Richard V. Reeves lays out four different benchmarks for judging the success of the middle class and points out that through each lens reality look bleak. 

• How can funders work to reduce inequality and achieve real wage growth for the middle class? 

• Learn more about economic inequality. 

The general message of scholarship, commentary and journalism is that the middle class is shrinking, stagnating, sliding, being squeezed, hollowed out, left behind – or some combination of these. A few countervailing voices point out that incomes are still growing, at least for most people; that median incomes are in fact rising, even if more slowly; and that one reason the middle class is shrinking (on some definitions) is because more people have become rich.

The truth is that the economic position and progress of the middle class can only be judged in comparison to something or somebody else. It is in this sense an inescapably relative evaluation. The real question is: relative to what? Relative to the position or progress of other groups, such as the rich and/or the poor? Relative to the middle class of the past? Relative to how an individual or family is doing compared to their own personal economic history? Or relative to the expectations – reasonable or otherwise – of middle-class citizens? There are of course many more benchmarks that could be used, but I’ll focus on these four here.

The Jones’s
The first way to judge how things are going for the middle class is by comparison to others. Most often, the other group in question is those who are in a higher economic bracket: the upper class, or upper income, or rich, depending on which label you prefer. The Under Pressure report highlights the different income trajectories in recent decades for families on different rungs on the income ladder. Across the countries in the study, income inequality has risen. Incomes in the middle of the distribution have risen more slowly than at the top.

The old middle class:
Another way to judge the condition of the middle class is not by comparison to today’s rich, but by comparison to yesterday’s middle class. The Under Pressure report shows that in most countries, incomes at the median have grown more slowly in the last decade than in the two previous decades.

Personal economic trajectory:
For many, the relevant metric for how they are faring may be the year-by-year improvement (or deterioration) in their own economic position. In other words, it is their personal economic history that counts.

Expectations: 
But there is another kind of benchmark: how people are doing by comparison to how they think they should be doing. This is of course very difficult to get at empirically. How and why a person comes to create a certain yardstick against which to judge their situation is a subjective exercise. But it does seem that some middle-class malaise is founded on a sense that life ought to be better.

It is striking, however, that right now, whichever relative benchmark is used, things are not going well for the middle class in most developed economies. As the OECD points out, history, including recent history, suggests that this bodes ill for societies in general – and not just in economic terms, but perhaps even for liberal democracy itself.

Read the full article about the middle class by Richard V. Reeves at Brookings.