Illinois’ shrinking middle class

Researchers say new ways needed to elevate lower-income families

By Phil Ciciora 
U of I News Bureau

CHAMPAIGN – A new report from a University of Illinois expert in urban development and local economies found that the share of middle-income households in the state of Illinois has fallen steadily from nearly 60 percent in 1970 to below 50 percent in the current, post-Great Recession period.

The large middle class in Illinois that emerged during the middle of the 20th century has experienced a consistent but multifaceted squeeze since roughly 1980, with middle-class incomes stagnating relative to higher incomes, according to Robert Habans, a postdoctoral research associate in the School of Labor and Employment Relations at Illinois.

The paper takes a deep dive into exploring the middle class in Illinois, including the relatively wide variation in the way that the middle class is defined, Habans said.

“Analyzing the middle class is not a straightforward exercise, so it’s become increasingly difficult to even define what the middle class is,” he said. “And if there’s ambiguity in defining the middle class, there will be a disconnect between policy decisions and their impacts on middle-income households.”

After adjusting for household size, Habans calculated the lower- and upper-bounds of a middle-income household income for a family of three in Illinois in 2015 as ranging between $43,000 and $130,000 per year.

An analysis of income patterns from more than three decades of data suggests that the declining portion and changing composition of middle-income households are closely tied to increasing inequality and the changing structure of economic opportunity since 1980, according to the paper.

“The national trends are reflected in Illinois in that, over recent decades, incomes in Illinois have become increasingly polarized,” Habans said. “In this respect, the state is certainly not unique, but the slow hollowing out of its middle class has been stark.”

In 1980, the manufacturing industry accounted for a large portion of middle-income jobs, “so the loss of manufacturing jobs is certainly part of the story,” Habans said.

“As these and other middle-skill jobs have declined, the service industries that have experienced growth tend to support a wider and more polarized range of skill levels and earnings. As a result, the jobs that the Illinois economy has created tend to fall on either end of the earnings spectrum rather than in the middle,” he said.

The demographics of the middle class in Illinois are changing, as well. Even as they’ve made strides in their numbers, female workers in Illinois continue to earn less than their male counterparts, Habans said.

“Both the state of Illinois and its middle-income workforce have grown more diverse – and it’s certainly a good thing to see evidence of increasing equality in the labor market, even if it’s incomplete,” he said. “But one effect of that is, if you look at household incomes, the rise in female earnings has offset the decrease in male earnings.”

Another troubling trend is that black and Hispanic households are still underrepresented in the middle- and upper-income households in Illinois, according to the report.

“Although the middle class is becoming less white and less oriented around male workers, race and gender continue to shape access to middle-income employment,” Habans said.

Policies to help the middle class must be a mix of “growing from below” and “stabilizing from within,” Habans said.

“It’s all about giving people opportunities to jump from low-wage work to something that pays better, because conventional pathways to middle-class income levels have evaporated for many workers,” he said.

Meanwhile, labor market institutions such as unions and the minimum wage have diminished in their potency to support a broad pattern of income distribution, Habans said.

“If you’re going to affect the labor market, you can do that by raising the standards of work or by programmatic interventions in the labor market, such as raising the minimum wage,” he said. “And the goals of the interventions should be to build pathways from lower-income jobs to middle-income occupations. So that could be improving the quality of low-wage jobs, creating more opportunities to move to a higher-income job, or shoring up and protecting jobs in the middle-income range.”

It’s difficult to envision an equitable society without a large and strong middle class, Habans said.

“A strong middle class nurtures the health of the economy as a whole in ways that are often hidden,” he said. “On a societal level, a strong middle class tends to support investment in human capital, a stable demand for goods and services, and strong political and economic institutions.”

The paper “Taking the pulse of Illinois’ middle class” is available online.

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