The Middle Class in Numbers

The "middle class" is an imprecise but politically powerful concept -- so powerful that virtually every American political argument is framed in terms of its interests, even when those interests are being directly harmed by the policy in question. Economists have tried to give the concept more precision, generally defining the middle class as households earning between two-thirds and twice the median household income. By this measure, the US middle class -- roughly $50,000 to $150,000 per year in 2022 dollars -- has shrunk as a share of the population over the past four decades.

In 1971, approximately 61% of American adults lived in middle-income households by the Pew Research Center's definition. By 2021, that share had fallen to 50%. This is not because people moved into poverty -- the upper-income tier also grew, from 14% to 21%. The middle class shrank from both ends: more people fell below and more people rose above it. But the distribution of where people moved matters enormously: the income gains of the upper tier were far larger, in dollar terms, than the losses of those who fell below (Pew, 2022).

The experience of middle-class households since 1980 has differed dramatically depending on location, education, race, and occupation. Manufacturing workers in the industrial Midwest experienced sharp real income declines as plant closures eliminated the well-paid union jobs that had anchored community prosperity. Professional workers in coastal metropolitan areas experienced rising incomes even as their housing costs absorbed most of the gains. Black and Hispanic middle-class families, whose wealth accumulation relied heavily on home equity, were disproportionately harmed by the 2008 housing crisis and have not fully recovered.

The median family income in the United States has grown slowly since 1980. The median family wealth has grown even more slowly. The median family's ability to sustain a middle-class standard of living without going into debt has declined substantially. These are not perceptions -- they are measurements.Adapted from Raj Chetty et al., The Fading American Dream (2017)

Raj Chetty's research on intergenerational mobility provides a particularly striking metric of middle-class decline. Children born in 1940 had roughly a 90% chance of earning more than their parents. Children born in 1980 had approximately a 50% chance. This collapse of what Chetty and colleagues call "the American Dream" -- the expectation that each generation will do better than the last -- is not explained by slower aggregate growth alone. It reflects the redistribution of growth toward the top of the income distribution, leaving insufficient gains to sustain broad generational advancement.

The political consequences of middle-class stagnation are visible and likely to intensify. When economic institutions fail to deliver the outcomes they promise to the majority of the population, the majority eventually stops extending them legitimacy. The appropriate response -- restoring the institutional conditions for broadly shared growth -- requires confronting the political power of those who have benefited from the current distribution. That is a political challenge, not an economic one: the economics of what is needed is relatively clear, and has been for some time.