Recent Trends in the Material Well-Being of the Working Class in America

• Author: James P. Ziliak
• Date: 01 May 2021
• DOI: 10.1177/00027162211021365
• Published date: 01 May 2021
• Subject Matter: Overview Papers

70 ANNALS, AAPSS, 695, May 2021

DOI: 10.1177/00027162211021365

Recent Trends

in the Material

Well-Being of

the Working

Class in

America

By

JAMES P. ZILIAK

1021365ANN The Annals Of The American AcademyMaterial Well-Being Trends In The Working Class

research-article2021

I examine trends in the material well-being of working-

class households using data from the Current Population

Survey in the two decades surrounding the Great

Recession. In the years leading up to the Great

Recession, average earnings, homeownership, and

insurance coverage all fell, and absolute poverty and

food insecurity accelerated. After-tax incomes were, for

the most part, stagnant. The economic hemorrhaging

either abated or reversed, however, in the decade after

the Great Recession, especially for the least skilled and

for households headed by a Hispanic person. This

includes robust earnings growth, which led to declines

in earnings inequality, absolute poverty, and food inse-

curity, coupled with increased insurance coverage and a

modest rebound in after-tax incomes. As many of these

recent advances likely stalled with the onset of the

COVID-19 pandemic, I discuss various policy options.

Keywords: income growth; poverty; health insurance;

homeownership; food insecurity

The U.S. economy over the past two decades

has been characterized by declining

employment rates across gender and skill level,

tepid income growth for much of the income

distribution coupled with rising upper-tail ine-

quality, and stalled upward mobility (Autor

2014; Abraham and Kearney 2020; Chetty etal.

2017; Saez and Zucman 2020; Shambaugh and

James P. Ziliak is the Carol Martin Gatton Endowed

Chair in Microeconomics and University Research

Professor, Department of Economics, University of

Kentucky. He is founding director of the University of

Kentucky Center for Poverty Research and the

Kentucky Federal Statistical Research Data Center. He

has published widely on the topics of labor economics,

tax and transfer policy, poverty, and food insecurity.

NOTE: I am grateful to Isabel Brizuela for excellent

research assistance and for the helpful comments of

Rich Burkhauser, Gary Burtless, Robert Moffitt, and

Tim Smeeding on an earlier version. The opinions and

conclusions are solely those of the author and do not

represent the views of any sponsor.

Correspondence: jziliak@uky.edu

MATERIAL WELL-BEING TRENDS IN THE WORKING CLASS 71

Strain 2021). Not all the news is bad, even for some households in the middle,

and there is countervailing evidence challenging some of these claims (Auten and

Splinter 2019; Strain 2020). However, most evidence points toward income

growth in the last 20 years that falls short compared to preceding decades; and

while the tax and transfer system undoes some of the rising inequality, it is

increasingly skewed toward families with children (Blundell et al. 2018; Rose

2020; Wimer etal. 2020).

Despite these economic headwinds, the last two decades have been relatively

quiet in terms of major social policy changes compared to the landmark tax and

welfare reforms of the 1980s and 1990s. There was a robust response by Congress

to expand the safety net during the Great Recession of 2007 to 2009, which miti-

gated much of the growth in pretax poverty and inequality (Burtless and Gordon

2011; Moffitt 2013; Larrimore, Burkhauser, and Armour 2015); but with the

notable exception of the Patient Protection and Affordable Care Act of 2010

(ACA) that expanded health coverage to more vulnerable populations, there was

little in the way of social-policy legislation.

While many papers have been written on these trends and for select subpopu-

lations, one group for whom little has been documented is the working class. The

working-class family eking out a hardscrabble existence from the farm or the

factory features prominently in American lore (Terkel 1974). The major transfor-

mation of work away from physical labor in recent decades has shifted that nar-

rative toward new economy service jobs such as the home health aide, the

retail-sales clerk, or the call-center operator, but the result is the same in that

these families are depicted as living one paycheck away from eviction and for

whom the “American Dream” remains elusive (Ehrenreich 2001; Shipler 2005).

The emphasis on the most disadvantaged workers is crucial, especially for our

understanding of the effects of the social safety net, but it overlooks the semi-

skilled laborer who likewise may identify as working class, but whose economic

status is more closely aligned to the middle class with potentially divergent finan-

cial destinies. This raises important questions, such as, Have the level, composi-

tion, and growth of income changed for different groups of working-class

households? What about rates of homeownership, the bellwether of the American

Dream? What has happened to health insurance coverage among the working

class, as well as risks of food insecurity? The aim of this article is to begin to

address these questions by documenting trends in the material well-being of

working-class households in the first two decades of the twenty-first century.

The next section describes the data used in the analyses, including a discussion

of the choice of classifying the working class as households whose head or spouse

has less than a four-year college degree. I then provide detailed trends in the

composition, distribution, and growth of incomes, both across all working-class

households as well as separately by education attainment, and, for some out-

comes, by race and ethnicity. I focus on changes in labor and nonlabor income,

including receipts from food assistance programs, along with tax payments inclu-

sive of refundable tax credits. Cumulative growth in earnings and after-tax and

transfer incomes is documented across the entire distribution over the whole

sample period and separately by peak-to-peak business cycles before and after