Income inequality isn’t just about the 1 percent—wealth is increasing for the next 19 percent, too.
Since the recession, America’s middle class has been shrinking as a whole, and fewer people than before feel they belong in it. Meanwhile, people in the top 1 (and 0.1 and 0.01) percent have seen a steep rise in their income.
But obscured by the startling climb of the richest of the rich is a subtler, but perhaps equally concerning, trend within the layer below. The upper-middle class—taken here to mean the 19 percent below the top 1 percent—has been leaving everyone below it behind. Its income has been rising over the last three decades, while those below it remain stagnant.
Richard Reeves, senior fellow of economic studies at the Brookings Institution, explains why this is a problem:
While the rise in income and wealth at the very top is eye-catching, it also distracts attention from the action a little lower down the income distribution. The idea that the real divide is between ordinary members of the bottom 99 percent and the rich 1 percent is a dangerous one, since it makes it easier for those in the upper middle class to convince themselves they are in the same economic boat as the rest of America; they’re not.
While the rise in prosperity of the upper-middle class may not be a bad thing by itself, it exacerbates inequalities in the U.S. social system if the bottom layers don’t budge as well. Here’s a chart that Reeves includes in a follow-up blog post, showing the upward income mobility of the upper-middle class compared with the middle and bottom classes, based on data from the Congressional Budget Office:
In the chart above, you can clearly see the divide. While the income of the 19 percent below the top 1 percent (in light blue) has risen considerably over the last three decades, the income lines for the middle 40 percent (basic blue) and bottom 40 percent (dark blue) have barely inched up. Here’s Reeves again:
The separation is not just economic. Gaps are growing on a whole range of dimensions, including family structure, education, lifestyle, and geography.
The gaps Reeves highlights are caused and compounded by discriminatory housing policies, segregated public schools, and an unequal criminal justice system, and then later inherited, so the bottom layers become less likely to move upwards, even as the upper classes keep reaching new heights.