What a Gloomier Middle Class Means for You

Confirmation of what we all know about a dwindling and stresses middle class in the U.S. comes from a new Pew Research Center report summarized thusly in the Financial Times on August 24:

Incomes at the middle of the middle (that is, median income for households who earn between two-thirds and double the national median) fell 5 per cent over the past 10 years. Median net worth dropped 28 per cent, hit by home prices. The upper income tier now accounts for more of aggregate household income than the middle. Membership of the middle class has shrunk as the lower and upper classes have grown. And the overwhelming majority of middle class people surveyed think it is harder now than 10 years ago to maintain their standard of living.

The FT piece goes on to say that ordinarily such data would suggest a barbell investment strategy; e.g., invest in firms that vcater to the top and bottom while ignoring the middle. As a strategy, the evidence in favor of this is at best mixed (catering to the top works, but not so much at the other end).

However, the data have really depressing implications for institutions like independent schools (and, to a lesser extent, private universities) where maintaining some semblance of economic diversity is a key programmatic and strategic objective. The report title alone says it all: "Fewer, Poorer, Gloomier: The Lost Decade of the Middle Class." Achieving socioeconomic diversity to even a small degree will cost schools more and more in both financial aid and in hours of effort put toward recruitment.