By Tom Huddleston Jr. and Alan Murray
December 10, 2015

The American middle class is no longer the majority of the U.S. population, according to a new report from my former colleagues at the Pew Research Center.

 

The study, based on an analysis of government data, uses a common definition of “middle-income” Americans as those with annual household incomes between two-thirds and double the national median – or from about $46,000 to $126,000. Under this definition, the middle class is now only 50% of the U.S. adult population, down from 61% in 1971.

 

Does it matter? The report shows that the percentages of adults in both upper and lower income households have grown since 1971, but the upper tier has grown faster – a sign of economic progress. Moreover, median household income has risen for all the groups, albeit faster at the top and more slowly at the bottom.

 

But the hollowing out of the middle class certainly marks a change in the nature of American society. The good folks at Pew Research are scrupulous about staying out of political debates – they are one of the few organizations left in American society that successfully does so — so they avoided any discussion of either the complex causes or the likely political consequences of this trend. But the report does say that the middle class dropping below the 50% threshold could mark a “tipping point” for the U.S.

 

You can read the full Pew Research report here. And you can view a very lively discussion from last month’s Fortune Global Forum between Marc Andreessen, Sheryl Sandberg and myself on the role technology plays in such trends here.

 

More news below.

 

 

 

Alan Murray
@alansmurray
alan.murray@fortune.com

Top News

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Fortune

Glencore’s shares jump on debt-reduction plan

Anglo-Swiss commodities giant Glencore’s shares saw a price bump despite the company lowering the 2016 forecast for its trading arm. But, Glencore shares jumped on news that the company plans to speed up its debt-reduction plan, with the aim now to cut debt to as little as $18 billion by the end of next year rather than the previous target of $20 billion. Following rival Anglo American’s announcement of major restructuring plans, Glencore said it would cut spending and look to sell a stake in its agriculture business amid the ongoing drop in commodity prices. 
BBC

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Fortune

Fiat Chrysler agrees to more fines 

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Reuters

 


Around the Water Cooler

Senate hears about effects of skyrocketing drug prices

Health care professionals testified before a U.S. Senate committee on Wednesday as lawmakers began an investigation into generic drug prices that have jumped dramatically recently. Hospital and health center executives from around the country recounted horror stories of off-patent drugs that are now harder to afford and, in some cases, less likely to be stocked due to astronomically higher prices, such as the 5000% increase for Turing Pharmaceuticals’ Daraprim. The problem behind the climbing prices? A lack of competition in a generic space that has seen a wave of consolidation in recent years, leading some of the health care reps to suggest that the government expedite the reviews process to ensure that a wider selection of generic drugs are able to find their way onto the market. 
Fortune

Dow CEO’s long wait for a potential DuPont deal 

The proposed tie-up would change the face of two iconic chemicals companies with combined market value of $130 billion as well as alter an entire industry (which is why it faces quite the slog to antitrust approval). A merger would also end a long pursuit of DuPont by Dow Chemical head Andrew Liveris, who had to wait years to find an open-minded deal partner at DuPont in Edward Breen, who took over the CEO only months ago from Ellen Kullman, who wanted to keep DuPont intact. Of course, behind the scenes, both companies have faced activist pressure to improve shareholder returns and any merger would be a stepping stone to breaking up the combined companies into several standalone businesses. 
Wall Street Journal (subscription required)

Energy companies wipe untapped oil reserves from books 

Companies across the ailing oil industry are erasing billions of barrels of crude from their books as a result of SEC filing rules and the global oil glut. The accounting changes at companies like Chesapeake Energy and Oasis Petroleum come years after the industry pushed for SEC rules to allow oil drillers to claim reserves long before drilling begins. The SEC allowed it, but the rules state that reserves must be tapped within five years. Now, with depressed worldwide crude prices slowing the pace of production, those same regulatory stipulations are causing some companies’ inventories—on paper, at least—to drop by as much as 45%. 
Bloomberg


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