By the Numbers: Why the Middle Class Matters

Since economists began keeping track in 1970, every decade has ended with fewer people in the middle class than there were at the beginning. The year 2015 was the first on record when middle-income households did not make up a majority in America.

So according to the data, the American middle class is shrinking. It’s the highest and lowest of the income tiers that have shown the most growth. To understand the potential significance of this phenomenon, you need to know a few things about the roles each income tier plays in the economy.

Watch this video. As you watch, note the middle class’s role in relation to economic growth.

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Video Transcript

It’s a fair question to ask why a shrinking middle class matters, and the answer has a lot to do with the way the economy works.

In the United States, more than two-thirds of all of our economic activity is driven by people buying stuff.

Consumption is the word that economists like to use, and the middle class has traditionally done most of that consuming, most of that buying.

The rich tend to invest their money; the poor are just trying to get by. So, we all need the purchasing power that the middle class has to drive overall economic growth.

Take Notes

Considering the role of the middle class as consumers, describe the possible consequences of a shrinking middle class.