5 Reasons the Median Household Income of the Middle Class May Change If Trump Is Elected
According to the Pew Research Center, the median household income for America’s shrinking middle class is now $106,092 — and that number could rise or fall depending on the actions and fortunes of the next president.
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If Donald Trump succeeds in becoming the first president since Grover Cleveland to win two non-consecutive terms, rising wages could lift the median income, falling wages could sink it or it could drop because formerly low-income households join the middle class at the entry level.
Here are some different ways Trump may influence middle-class income.
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Tax Cuts and Deregulation Could Help Businesses Grow Jobs and Wages
Trump is firmly on the record vowing to extend and expand upon his 2017 tax cuts — many of which will otherwise sunset in 2025 — and remain staunchly anti-regulation because he believes both policies are good for businesses and, therefore, good for workers.
“If elected, Trump’s government would focus on tax cuts and deregulation, which could increase economic growth, hence raising middle-class incomes,” said Chuck Warren, economist and host of the Breaking Battlegrounds Politics Podcast.
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Or, Those Policies Could Backfire
Trump’s critics say his administration simultaneously cut taxes and increased spending, which reduced revenue and grew the debt — and his detractors insist his 2017 tax overhaul favored the rich and that the country should expect more of the same in a second term.
“These gains may be unevenly distributed, with wealthier households experiencing higher income improvements,” said Warren. “Pay increases for the middle class could be modest but this may be offset by inflation or changes in trade policies.”
In that case, the median middle-class income could fall as upper-middle-class households graduate to the ranks of the wealthy and take their high salaries with them.
Trump Could Preside Over an Economic Boom or Bust
As of now, the Fed has succeeded in pulling off a so-called “soft landing” — raising interest rates high enough and long enough to tamp down soaring inflation without starving the economy into a recession.
However, a recession could strike next year or any year nonetheless.
According to the National Bureau of Economic Research, the natural business cycle sees expanding economies ascend to a peak, decline to a trough and then wallow in recession until it expands again.
Presidential actions can trigger, accelerate, prolong and improve an expansion — or worsen a recession — but presidents can also find themselves in office when the natural business cycle blesses them with a boom or curses them with a bust, and Trump is no different.
During times of economic expansion, wages typically rise. In recessions, they stagnate, causing what the International Monetary Fund calls a decline in “real income.”
Trump Could Lower the Median by Lifting Minimum Wage and Tipped Workers Into the Middle Class
On July 24, 2009, the federal minimum wage jumped by $0.70 from $6.55 to $7.25. That was 15 years ago, almost to the day, and it has been there ever since.
Most states have higher minimum wages, but according to the Department of Labor, 15 states use the federal standard of $7.25, and the Bureau of Labor Statistics (BLS) says more than a million workers — far more women than men — earn the minimum wage or less.
The BLS inflation calculator says you’d need $10.58 today to match the purchasing power of $7.25 in July 2009. According to Indeed.com, the federal minimum is the equivalent of $15,078 per year, which is not enough for a middle-class existence even if two adults work 40 hours per week, never get sick and take no days off.
It’s Unclear If Trump Would Sign a Living Wage Bill Even If Congress Passed One
The BLS says 882,000 workers earn less than the minimum wage, three out of four of whom are service workers earning tips.
While in Nevada, Trump floated the idea of ending the federal tax on tips. Critics called the idea a wild promise made while campaigning in a swing state and service industry stronghold. They also noted that Trump didn’t say how he’d make up for the $38 billion in lost revenue that America’s 6 million tipped workers pay in taxes on the gratuities they earn.
However, if Trump were elected and signed a bill to end the tips tax, scores of low-income households could achieve middle-class security — and a minimum wage hike could have even more dramatic results.
President Biden has called for a $15 federal minimum wage, which would more than double the current income of America’s lowest-paid workers, turning low-income $30,000 households into middle-class $60,000 households.
$60,000 is on the low-earning end of the middle-class spectrum, so that would probably lower the national median — but for all the right reasons.
Trump’s position on the issue is unclear. Since 2020, publications like Forbes have reported him as saying he’d “consider” $15, to warning that a wage hike would cause businesses to close, to stating that while he thinks the minimum should be higher, $15 is too much.
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This article originally appeared on GOBankingRates.com: 5 Reasons the Median Household Income of the Middle Class May Change If Trump Is Elected