Fewer Middle-income Families in California

SAN FRANCISCO, Dec 8 (Reuters) - Just under half of California families were middle income in 2010, a new low reflecting the effects of high levels of unemployment and underemployment in recent years on a state whose middle-class was already shrinking, a report released on Thursday said.

"By 2010, just less than a majority - 49.7 percent - of California's families could be considered middle income, compared to 54.9 percent in the rest of the country," the report by the Public Policy Institute of California said.

That level was down substantially from 1980, when a 30-year high of 60 percent of California families were middle income.

The decline underscores just how hard the recent recession struck the most populous U.S. state and amplified income trends chipping away at its middle-class over the past three decades.

Over that time, California's high-income households posted substantial income gains while low-income households saw small income losses, which widened the state's wealth divide faster than in the rest of the nation just as fewer and fewer families in the state fell in the middle-class.

"The Great Recession exacerbated these trends," the report said, noting they gained added fuel in recent years from the loss of full-time jobs - California's unemployment rate was 11.7 percent in October - and from fewer hours worked than from sagging wages.

Compared with the 49.7 percent of families in California in 2010 that were middle income, 36.6 percent of families in the state were low income and 13.7 percent were considered high income.

At the national level last year, 55 percent of families were considered middle income, 33 percent low income and 12 percent high income.

The report defined low income as income at or less than two times the federal poverty level for families, or $44,200 and below. It defined middle income as income between two and seven times the federal poverty level, or $44,200 to $154,800. High income was defined as any family income above $154,800.

California's income distribution also reflects that its high-income families have been able to withstand the recession much better than middle- and low-income families, suggesting the state's income gap between its top and bottom ends will remain large for some time to come.

"If previous recovery patterns repeat themselves, it is likely that the lower half of the income distribution will recover much more slowly than the upper half, potentially allowing already record-high income inequality to persist," the report said.

The UCLA Anderson Forecast economic unit said on Wednesday that a nascent economic recovery is under way in California but its expected job gains will not be strong enough to lower the state's unemployment rate to single digits until 2014. (Reporting by Jim Christie; Editing by Kenneth Barry)