• News Release: 10/13/2016

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    October 13, 2016
    http://www.newsday.com/business/middle-class-li-households-share-shrinks-as-wealthy-poor-grow-1.12448171Reprints

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    Middle-class LI households share shrinks as wealthy, poor grow

    October 13, 2016 By    james.madore@newsday.com

    Construction work being done to expand the Bishop'sConstruction work being done to expand the Bishop's Pond development by another ten units, on Magee Street in Southampton, April 25, 2015. (Credit: Gordon M. Grant)

    The share of Long Island households that are middle class has dropped 9 percentage points since 1990, and could be in the minority in another 30 years, according to a study to be released Thursday.

    Middle-class families, defined as those with 2014 earnings of $46,165 to $184,657, represented 57.8 percent of local households in 2014, the Long Island Association Research Institute said in a nine-page report based on the most recent available data from the U.S. Census Bureau.

    That is down from 61.6 percent in 2000 and 66.9 percent in 1990. The study defined households as middle class if they earned from 51 percent to twice Long Island’s median household income.

    The number of middle-class households also has fallen, from 572,564 in 1990 to 539,783 in 2014, or 5.7 percent, according to the LIA, which is the region’s largest business group.

    In the same 24 years, the number of wealthy households increased 60 percent, and poor households rose 27 percent.

    The trends are noteworthy because a thriving middle class has helped to define Long Island since Levittown began to rise in Nassau County after World War II. As in other suburbs, residents here take pride in their middle-class status.

    “If the trends from as recently as 2000 . . . continue, the middle class on Long Island will drop to under 50 percent of all households . . . in approximately 29 years,” the LIA report stated.

    Still, the middle class is doing better in Nassau and Suffolk counties than in the rest of the country, said LIA president Kevin Law.

    The Washington-based think tank Pew Research Center found in December that the 120.8 million adults in the middle class nationwide are no longer the majority because 121.3 million adults are either rich or poor.

    Pew defined the middle class as those households whose annual income was two-thirds to double the national median. That was about $42,000 to $126,000 in 2014 for a household of three people.

    The LIA report is based on Census’ American Community Survey data. Economists divided the region’s households into five income groups based on their relationship to median income of $51,669 in 1990, $68,555 in 2000 and $92,238 in 2014.

    Law said the LIA commissioned the study because the middle class is “the heart and soul of Long Island,” supporting the housing market, retail sales, tourism and other economic sectors.

    “This goes to the overall health of our economy, and there are things that we can be doing now to ensure middle-class folks aren’t in the minority,” he said.

    Poor families increase

    The number of poor families, defined in 2014 as earning $46,164 or less, increased 3.4 percentage points in the 24-year period to 24.4 percent of all local households. The number of low-income families totaled 227,914 two years ago, up from 179,879 in 1990.

    The LIA report said low-income households grew in part because there are more retirees choosing to stay here.

    The number of wealthy households, with 2014 incomes of more than $184,657, climbed 5.7 percentage points from 1990 to 2014 to make up 17.8 percent of local households. The number of rich families totaled 165,758 two years ago, up from 103,329 in 1990. The report doesn’t give reasons for this gain.

    Michael J. Driscoll, a business school professor at Adelphi University and a former Wall Street executive, said, “Long Island is becoming an area of affluence and one of poverty . . . the haves are getting bigger, and those that are struggling are getting bigger, and those in the middle are shrinking.”

    He and others said the middle class was hit hard by massive layoffs and outright closures of military contractors such as Northrop Grumman and Fairchild Republic. Well-paying union jobs that didn’t require a college diploma have been replaced by low-paying retail jobs and well-compensated tech jobs that require higher education.

    The decline of Bethpage-based Grumman, from a local payroll of 25,000 at its peak to about 400 today, meant “the middle-class existence for many people was ripped out of Long Island,” Driscoll said.

    The job market has changed in 24 years with the rise of information technology, biotechnology and other industries that value higher education.

    Gary D. Keith, regional economist for M&T Bank, said the steep 2007-09 recession contributed to the dwindling of the middle class. “The loss of manufacturing jobs on the Island is certainly one of the drivers, and since the recession employers have been judicious in their hiring.”

    The LIA report also may illustrate the impact of high housing prices and property taxes.

    Abeba Mussa, an economics professor at Farmingdale State College who studies housing, said that some middle-class families probably left Nassau and Suffolk because they couldn’t find jobs that paid enough to live here.

    “You are losing your labor force, the younger generation, which is at the forefront of technology and innovation,” she said.

    The region’s leaders have been implementing an economic development strategy based on connecting the area’s research institutions, universities and businesses, particularly those involved in technology. They also want more training for tech occupations.

    Some growth seen

    The LIA report comes two months after a Federal Reserve Bank of New York study found jobs in construction, education, automotive repair and other “middle wage” occupations grew from 2013 through 2015 in Nassau and Suffolk. The growth was at a faster rate than other types of jobs for the first time since the recession.

    On the Island, middle-wage jobs — broadly defined as paying a median wage of around $30,000 to $60,000 per year — grew by 15,790 positions between 2013 and last year, according to the bank.

    That compares with rises of 14,030 for higher-wage jobs and 10,640 for lower-wage jobs in the same period on the Island.

    “The tide has begun to turn,” New York Fed President William C. Dudley said in August. “I believe this is an important development in the economy, because, if it were to continue, it would create more opportunities for workers and their families who have been struggling up to now.”

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    Contact:
    Matthew Cohen, Vice President
    mcohen@longislandassociation.org, (631) 493-3000
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