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Report: Centre County Middle Class Feeling the Squeeze, Wealthy Getting Richer

by on September 26, 2014 6:00 AM

A non-profit research group says the middle class is under fire across Pennsylvania -- and Centre County is a prime example.

According to the Keystone Reasearch Center, economic inequality is now "one of the most pressing public policy issues in Pennsylvania."

A report released last week says the percentage of Pennsylvania households with middle-class incomes has declined more than nine percent, from 62.3% to 53% since the late 1970s.

The KRC says the middle class has dwindled in every single county of the state.

And Centre County is among the counties that saw the biggest declines in middle class households. Its share of middle class households fell by 15 percent.

In fact, the report says Centre County has the second smallest middle class in the entire state, with 50.1 percent of households recognized as middle class. Only Philadelphia has a smaller share of middle class households, with 43.1 percent.

So what's going on? According to Mark Price, a labor economist with KRC, there are a number of factors. He points to the dot.com bust in the early 2000s, followed by a weak recovery. That was followed by the big recession in 2009 with another weak recovery. With low demand for workers, wages have stagnated.

The decline of unions has also hurt the middle class because workers have lost bargaining power. If these trends continue, Price warns, "You're going to be looking at, in your region, a middle class that's basically a minority. We think that's a problem."

Price says it's become harder for folks to muscle their way into the middle class. Manufacturing jobs used to offer opportunity to earn good wages. Now there are many more low paying jobs. People who lose jobs and can't find employment fall out of the middle class. "Overall, the pattern is the nature of employment opportunities that exist in the economy are just worse today for a lot of folks compared to years ago," he says.

According to Price the numbers for State College and Centre County fall in line with other areas. "You are seeing this general decline in the the size of the middle class all across the state," he says. "It doesn't imply that there's something unusually unhealthy about the State College region. It just means you're not a ship at sea. You're not an island. You're being buffeted by the same trends that everyone else is."

There are a lot of variables that go into figuring out exactly who is in the middle class. Using figures from 2010-12, Price estimates that the median household income in Centre County is $59,800. That means half of all households earn less than $59,800 and half earn more. Price defines the middle class as households making at least two-thirds of the median income up to double that number -- anywhere from $39,866 to $119,600. Those numbers have been adjusted to reflect that households are smaller than they used to be.

There's another area of concern. Income for the wealthiest taxpayers has skyrocketed. According to the KRC report, the share of income claimed by the top one percent did not exceed 10 percent in any Pennsylvania county back in 1978. By 2011, the top one percent was earning more than 10 percent of the income in all but six counties.

Price points out that this is part of a nationwide trend. "You have this pattern of a shrinking middle class and in concert with that, a rising share of income being captured by a tiny fraction (of people) at the top."

The report says that the real income of the bottom 99 percent of taxpayers grew in only 21 of 67 Pennsylvania counties.

Central Pennsylvania is currently home to the state's largest middle class. However, the report warns that if current trends continue, the middle class will by in a minority here by 2045.

Price says two factors are at work; the health of the labor market; and the rules that govern the labor market. "In my view, in the past 30 years, national policy makers, in particular the Federal Reserve of the United States, have not made full employment a specific high priority," he says. And that's important because when labor markets get really tight, that's when you get really healthy growth in wages and income in society."

To reverse the trend, the KRC is recommending that state policymakers "raise the minimum wage to at least $10.10 per hour, index the minimum wage to inflation and apply the new minimum to tipped workers."

Click HERE to read the entire KRC report.

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Steve Bauer was the Managing Editor of StateCollege.com. Steve and his wife Trina are longtime area residents. They reside in State College along with a wacky Golden Retriever named Izzy.
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