Georgia’s vanishing middle class

In a nation whose middle class reportedly is shrinking, Georgia’s appears to be disappearing more dramatically than most of the country’s. While there are some positive trends embedded within the bigger one, the overall reality of a starkly widening chasm between the wealthy and the poor has never portended anything good.

Those are the bottom-line conclusions of a just-released economic study by Georgia State University, according to a recent issue of the online business journal The Saporta Report.

As summarized in an article by David Pendered, Georgia showed the 11th largest decrease in middle-income share between 2000 and 2013, and in that time fell from 33rd in the nation in share of middle-class households to 44th. (For statistical purposes of the study, GSU defined middle class as household income between 67 and 200 percent of a state’s median household income.)

Why does that matter?

“It’s that decrease in the middle, and the increases in the extremes,” David Sjoquist, of GSU’s Center for State and Local Finance, told Pendered, “that result in less compromise, less agreements, more geographic segregation by income, segregation of political views.”

Aside from the sociological implications, there is a purely economic cost as well, according to a 2016 International Monetary Fund report:

“Low-income households have limited ability to consume and save little. High-income households save a lot but, relative to their incomes, consume too little. Middle-income households provide a reliable balance for consumption and saving in a society. In the United States, the middle class not only accounts for most of the economy’s consumption, it also provides most of its human capital and owns most of its physical capital, such as houses and cars.”

GSU’s report is positive in terms of Georgia’s income mobility: More than 72 percent of households classified as middle class in 2000 were in the high-income category in 2013, moving the state from 12th to 6th in share of high-income households.

But those stats are skewed by the fact that overall income fell: Census figures show an inflation-adjusted drop in median household income in Georgia from $54,803 in 2002 to $47,829 in 2013. Almost $7,000 is a substantial hit in a middle-class family’s budget. Also, the GSU study shows that Georgia, 21st in the nation in share of low-income households in 2000, was 15th in that category in 2013.

Maybe most troubling is that the researchers have no explanation for what is causing Georgia’s middle class to constrict. Upward (or downward) income mobility of households from 17 years ago doesn’t explain it. Maybe the time frame involves a curious economic anomaly: GSU’s Sjoquist called it a “unique 13-year period. We have the great recession in there. So that is an important factor. And a really, really slow recovery.”

Let’s hope it was indeed unique, that recovery picks up pace, and that the economic sector that recovers the most is the one that should be the biggest and most important: the middle class.

This story was originally published April 18, 2017 at 4:25 PM with the headline "Georgia’s vanishing middle class."