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Polarization and the Decline of the Middle Class: Canada and the US

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  • James Foster, Michael C. Wolfson

Abstract

Several recent studies have suggested that the distribution of income (earnings, jobs) is becoming more polarized. Much of the evidence presented in support of this view consists of demonstrating that the population share in an arbitrarily chosen middle income class has fallen. However, such evidence can be criticized as being range-specific - depending on the particular cutoffs selected. In this paper we propose a range-free approach to measuring the middle class and polarization, based on partial orderings. The approach yields two polarization curves which, like the Lorenz curve in inequality analysis, signal unambiguous increases in polarization. It also leads to an intuitive new index of polarization that is shown to be closely related to the Gini coefficient. We apply the new methodology to income and earnings data from the US and Canada, and find that polarization is on the rise in the US but is stable or declining in Canada. A cross-country comparison reveals the US to be unambiguously more polarized than Canada.

Suggested Citation

  • James Foster, Michael C. Wolfson, 2009. "Polarization and the Decline of the Middle Class: Canada and the US," OPHI Working Papers 31, Queen Elizabeth House, University of Oxford.
    • Handle: RePEc:qeh:ophiwp:ophiwp031
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    as
    1. Beach, C.M., 1988. "The "Vanishing" Middle Class?: Evidence and Explanations," Papers 1988-5, Queen's at Kingston - Sch. of Indus. Relat. Papers in Industrial Relations.
    2. Michael Wolfson, 1986. "Stasis Amid Change Income Inequality In Canada 1965‐1983," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 32(4), pages 337-369, December.
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    4. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
    5. Amiel, Yoram & Cowell, Frank A., 1992. "Measurement of income inequality : Experimental test by questionnaire," Journal of Public Economics, Elsevier, vol. 47(1), pages 3-26, February.
    6. Foster, James E & Shorrocks, Anthony F, 1988. "Poverty Orderings," Econometrica, Econometric Society, vol. 56(1), pages 173-177, January.
    7. Charles M. Beach, 1989. "Review: Dollars and Dreams: A Reduced Middle Class? Alternative Explanations," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 162-193.
    8. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    9. Katharine L. Bradbury, 1986. "The shrinking middle class," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 41-55.
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