State Has Fourth Biggest Middle Class

Wisconsin’s middle class, while still one of the largest in the country, is shrinking. Most of the loss has occurred as people fell out of the middle class to the lower income tier, rather than climbing into the upper tier.

In Wisconsin, 62.5% of residents were in the middle class in 2000, the second largest share of any state, according to a new report from Pew Research Center. By 2014, Wisconsin’s middle class had shrunk to 57.2% of residents and Wisconsin’s rank for the size of our middle class had dropped to 4^th.

Wisconsin needs a strong middle class in order to thrive economically. Businesses need a large middle class, bolstered by broad-based income growth, to generate customers. The middle class is at the heart of Wisconsin’s workforce, and decisions made by the middle class drive public investments in Wisconsin’s schools and communities. Pew defines the middle class this way: “Middle-income Americans are adults whose size-adjusted household income is two-thirds to double the national median size-adjusted household income.”

The fact that Wisconsin’s middle class is shrinking is a problem, one that we share with nearly all the other states. But in most other states, the problem is mitigated by the fact that the middle class is shrinking because people are climbing up to a higher income tier. In Wisconsin, the opposite occurred: people who left the middle class were less likely to climb up to the higher income tier than they were to drop into the lower tier. Between 2000 and 2014, the share of adults in Wisconsin’s upper income tier grew by 1.9 percentage points less than the share of adults in Wisconsin’s lower income tier. Only seven states had larger increases in the share of residents in the lower tier compared to the upper tier.

In Wisconsin, Lower Income Group is Increasing Faster than Upper One

One of the reasons that Wisconsin’s upper income tier has grown more slowly than our lower income tier is that there are far fewer jobs in manufacturing than in past decades. A bigger share of Wisconsin’s jobs are in manufacturing than in almost any other state, and those jobs often pay solid wages that allow workers to climb into the middle class. But the manufacturing sector has shrunk dramatically across the country, making those jobs harder to find, and forcing some former factory and foundry workers in Wisconsin to take jobs that pay less.

The decline in unionization is also one of the reasons Wisconsin’s middle class is giving way to the lower income group. Between 2000 and 2014, Wisconsin had one of the largest drops in the share of workers who belong to a union.  Unionized workers earn more in wages and other compensation than non-union workers who are otherwise the same, and the higher wages help push additional households into the middle class. Union workers are also better off than their counterparts with regards to health insurance, retirement, and paid time off.

The middle class is still strong, albeit shrinking, in communities across Wisconsin. In fact, the list of the top 10 metropolitan areas across the country with the largest middle class includes four Wisconsin communities: Wausau, Janesville/Beloit, Sheboygan, and Eau Claire.

In two Wisconsin communities for which the report included information – Sheboygan and Eau Claire – the upper income tier grew faster than the lower tier. In the other four communities – Racine, Milwaukee/Waukesha, Wausau, and Janesville/Beloit, the share of people in the lower income tier grew faster.

Wisconsin’s Middle Class Shrinks as Residents Move Both Up and Down Income Ladder

For more about how the middle class has changed in communities across the country, read the report: America’s Shrinking Middle Class: A Close Look at Changes Within Metropolitan Areas.