Summary of Hollowing Out

The U.S. middle class is shrinking as households climb into higher, or slip into lower, income brackets.

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Hollowing Out summary
The decline of the US middle class may have alarming consequences for the economy.

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The American Dream seems to be fading, as the US middle class struggles to maintain a foothold. Between 1970 and 2014, middle-income households shrank from 58% to 47% of all US households. Until 2000, moving into the ranks of upper-income households accounted for most of the attrition. But since then, the number of middle-income households that slipped into lower income status has outpaced those rising to higher income levels. This “hollowing out” eats away at consumption, a major driver of economic growth in the United States. This powerful article by economist Ali Alichi provides a thoughtful look at the consequences of a dwindling middle class. getAbstract recommends it to policy makers and economists.

In this summary, you will learn

  • What has brought about the gradual erosion of the American middle class,
  • How this decline has already affected US economic growth and
  • Which other countries face this problem.
 

Summary

The middle class in the United States is quietly disappearing, as more of its citizens fail to achieve the American Dream. The middle class is critical to keeping consumption going, because high-income households spend only a comparatively small share of their incomes, while those with lower incomes...
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About the Author

Ali Alichi is a senior economist at the International Monetary Fund.


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