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Watch “Real Money with Ali Velshi” Monday, May 19, through Wednesday, May 21, for our three-part series on Philadelphia’s middle class.
Philadelphia is a city beloved for reasons as diverse as those who live here. It’s celebrated for its rich history, cheesesteaks and many, many a “Rocky” movie.
But over the last 40 years, the city has lost a quarter of its population — almost 400,000 residents. And 43 percent of that population loss has been from the middle class. Nationwide, the middle class has shrunk since the 1970s, from 60 percent to 51 percent. But Philly’s middle class was reduced even more dramatically, to just 42 percent.
The strength of the suburbs is one reason for this. “Chester County, Montgomery, Bucks, Delaware County — those economies have grown significantly over the past 40 years, and their success has come at the expense of the city of Philadelphia,” said Ryan Sweet, an economist at Moody’s Analytics.
But it’s also due to the decline in manufacturing there. In 1970 the middle class worked primarily in manufacturing and midlevel jobs. No longer. Manufacturing jobs have plummeted to just 10 percent of the workforce.
Still, there are signs of hope. “Even though there’s been this huge decline in the middle class over the last 40 years, if you look back from 2000 on, it seems to have stabilized,” said Larry Eichel, project director for the Philadelphia Research Initiative at Pew Charitable Trusts.
The middle class is a reflection of a city’s economic health. It fuels the local economy and pays for and uses a city’s services. In Philadelphia, however, the middle class carries a much larger relative tax burden than in other cities. The taxes it pays support one of the largest groups of low-income residents in the country, second only to Detroit’s, and there are fewer high-income residents than in many other large cities to offset the burden. This has stretched Philly’s middle class, leading to higher taxes and limiting how much the city can spend on important services like policing, firefighting and updating its aging infrastructure.
“The city of Philadelphia’s tax structure is out of whack with the rest of the Northeast and other large cities,” Sweet said. “The other thing is [that] the city wage tax, which is part of their tax structure, has driven people from the city to the suburbs because it’s an enormous burden on so many households.”
Philadelphia’s middle class may have declined dramatically, but there’s still a solid — albeit much smaller — base in a few vibrant neighborhoods throughout the city. The corner of Passyunk Avenue and 11th Street in South Philadelphia is one of those neighborhoods. Traditionally blue-collar Italian-American, the area is being transformed as young professionals move in.
Brian Howard, news editor for Philadelphia magazine, could be considered the face of the new middle class in South Philly. He bought a home there in 2009, says he loves the neighborhood and gets along with the old-school middle-class residents who still live there.
“There was a feeling-each-other-out period, especially the first winter, when I didn’t shovel my block right away,” he said. “I got some sidelong looks.”
Forty years ago, 44 percent of Philadelphia residents achieved middle class status without a high school diploma. Only 8 percent had graduated from college. Today those number have switched, and only 8 percent of the middle class doesn’t have a high school diploma. Half of today’s middle class has some college education.
One reason for this influx of a new middle class is the big universities in town like Drexel, Temple and the University of Pennsylvania.
“Eds and meds create a lot of high-paying jobs but also a lot of middle-class jobs with good income,” said Sweet.
Philadelphia’s middle class has grown more diverse. In the 1970s, 74 percent of the middle class was white, compared with 54 percent in 2010. Today about 42 percent of the city’s middle class is black.
“What some people in the black middle class will tell you is that a lot of that is generated by public-sector jobs and related jobs,” said Eichel. “Some African-American analysts and scholars will tell you they haven’t made as much progress in the private sector. And they would like to see that.”
Wynnefield is a primarily black middle-class neighborhood in West Philadelphia. Frances Aulston moved there in the 1960s when the neighborhood was mostly white. She says being black middle class in Philadelphia is different from being white middle class.
“When you look at the median [middle-class] income, it’s such a wide gap from blacks to whites that you never catch up to what whites are making because you don’t have those opportunities,” she said.
The majority of black middle-class Philadelphians worry about their class standing. The Pew Charitable Trusts found that 59 percent of black middle-class Philadelphians fear they will slip out of the middle class, compared with 41 percent of white middle-class residents.
Mayor Michael Nutter, a longtime Wynnefield resident, is keenly aware of the problem.
“African-American community wealth, I think, over the last few years, generally, has gone up, [but] not as much as some communities. We’re seeing immigrant wealth going up as well. The biggest challenge the city faces across the race, in most instances, is actually poverty,” he said. “And we’re not only seeing that in the city but even poverty rising in our suburbs.”
But it’s not all bad news. The Pew Charitable Trusts also found that most black people in the middle class — some 70 percent — are optimistic that they will move into a higher class.
Ryan Sweet
economist, Moody’s Analytics
Philadelphia has some hurdles to overcome to attract more middle-class residents. Aside from high taxes, one obstacle to a growing middle class is the city’s public school system, which has been in financial trouble for a long time. Public school enrollment has decreased almost 30 percent since 2004, while charter school enrollment has increased 195 percent.
“Crime is another problem,” said Sweet. “Even though they’ve made a lot of progress in reducing crime, Philadelphia suffers a bit of a marketing issue with that regard.”
Nutter says revitalization is key to seeding a new middle class.
“What we’re doing is creating the infrastructure, changing the culture and investing in the areas where we need that support to create a diverse, strong economy [and] jobs for people who want to be here,” he said. “An environment that says, ‘This is an honest government, this is a quality of life that I want to have for my children and my families, that I want to move my business here.’ We’re lowering the tax burden for startups and existing businesses in Philadelphia, creating a better business environment.”
Philadelphia has an uphill climb to fix these problems, but Sweet remains hopeful.
“I think, overall, people think Philadelphia is a very slow-growing economy, and traditionally it is a step or two behind the U.S., but it is a very diverse economy, and it has a lot going for it,” he said. “The universities — a lot of top-tier research centers, pharmaceuticals — these industries are going to grow in the next decades along with our aging population. I think Philadelphia has a lot going for it in that regard.”
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