According to a recent study by Pew Research, only 44% of Americans self-identify as being middle class. As the study chart below shows, this is down from 53% prior to the Great Recession.
Over the same time frame the percent of Americans saying they are lower or lower-middle class rose 15 points, from 25% to 40%. The upper class has also taken a hit, dropping from 21% in 2008 to 15% in early 2014.
The decline in the middle class has profound business impacts. At a high level, there are simply fewer opportunities for businesses that serve traditional middle class consumers. Instead, businesses are increasingly focusing on either high end consumers or those with limited incomes.
The New York Times article The Middle Class is Steadily Eroding. Just Ask the Business World covers this shift. Key quote:
"The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away ... big stores and restaurants are chasing richer customers with a wider offering of high-end goods and services, or focusing on rock-bottom prices to attract the expanding ranks of penny-pinching consumers."
A big reason for shift is the increase in job polarization, which is the growth of both high wage and low wage jobs coupled with a decline in middle wage jobs. See our job polarization category for more on this topic.
Sears, JC Penny and Olive Garden are but a few of the many examples of large firms hurt in this shift.
Small businesses that serve middle class consumers should not only be aware of this trend, but also think through what it means for their business.