We hear it all the time: The middle class is shrinking. Wages seem to have been stagnant for decades and American families are struggling with financial insecurity.
However, what exactly is the middle class? Who is in it, and who is not? Is it shrinking? What about you—which income class do you belong to? It turns out that these questions are difficult to answer. So we are going to start with some data.
- The middle class constitutes a slim majority of the U.S. population (52%), but that is still less than it has been in nearly half a century.
- The share of income captured by the middle class fell from 62% in 1970 to 43% in 2014.
- The middle class is shrinking due to an increase in population at the extreme bottom and top of the economic spectrum.
What's Your Income Class?
What Does the Data Say?
The majority of the U.S. population (52%) is in the middle class, according to the latest report (September 2018) from the Pew Research Center. That is a slight increase from 2015, when the previous Pew report found that the middle class made up 50% of the U.S. population. However, the narrow majority found in 2018 still reflects a longer-term trend of a shrinking middle class compared to the 1970s, 1980s, 1990s, and 2000s.
Pew’s previous report from 2015 showed that (as noted above) for the first time since at least the 1960s, the majority of Americans were not in the middle class. In 2015, just 50% of American adults lived in middle-income households—down from 54% in 2001, 59% in 1981, and 61% in 1971. It also found that the share of income going to middle-income households fell from 62% in 1970 to 43% in 2014. The middle class has been both decreasing in population share and seeing its cut of the income pie shrink.
Lowest and Highest Bracket Growth
The most interesting part of the 2015 Pew report, though, was its finding that the middle class is shrinking not only because more people are poor but also because more people are rich. The percentage of lowest-income earners—those earning less than two-thirds of the median income—had grown four percentage points, from 16% to 20% of the population. Over that same period, though, the percentage of Americans in the very highest-income households rose by five points since 1971, taking that group from 4% to 9% of the population.
The shrinking middle class is less a decline in how well the population as a whole is doing. Also, there is more polarization of where growth is coming, at the extreme bottom and top of the economic spectrum. So, it is not just that people are falling out of the middle class into the lower class—they are also rising into the upper class, albeit in smaller numbers.
Also, note that the state of the U.S. economy is changing with—and because of—demographic changes in American society. On average, and according to reports by the U.S. Census Bureau, the American population has grown older. This aging makes a big difference to the median income because retirees typically live off savings and generate little income. Also, the country is significantly more diverse than it was in the 1970s. Increases in the number of immigrants, for example, push down median incomes because immigrants, on average, make less money.
As of September 2018, though, Pew reported that 52% of American adults were in the middle class, according to 2016 income figures. There were 19% in the upper class and 29% in the lower class. According to Pew, the data suggests that the middle class has stabilized in size.
See the chart from the report below, for these later figures on how the class composition has changed since the 1970s.
Who Is Losing Ground?
However, the data also suggests that middle-class families continue to lose financial ground to upper-income families. While the median income of the upper class increased 9% from 2010 to 2016, the median income of the middle and lower classes increased by about 6% over the same period.
If we take a longer view—say, from 2000 to 2016—we see that only the income of the upper class has recovered from the previous two economic recessions. Upper-class incomes were the only ones to rise over those 16 years.
This segmented rise has contributed to an ongoing trend since the 1970s of the divergence of the upper class from the middle and lower classes. In another piece, Pew reported that the wealth gaps in 2013 between upper-income families and middle- and lower-income families were at the highest levels ever recorded.
The 2018 piece from Pew reported that, in 2016, the median income for the upper class was $187,872. For the middle class, it was $78,442, and for the lower class, it was $25,624 (in 2016 dollars; figures reflect a three-person household).
The Racial Wealth Gap
As a growing body of research is demonstrating in ever greater detail, there is a substantial racial wealth gap in the United States. The 2015 Pew report (see chart below) shows that in that year, 28% of Asian households and 21% of White households were in the upper class, but just 12% of Black households and 10% of Hispanic households. (Note that Pew researchers, like the U.S. Census Bureau, use the term Hispanic, not Latinx.)
Black households did see progress, Pew reports. "Over the longer term, black adults sustained the largest increase in income status from 1971 to 2015 and were the only major racial or ethnic group to experience a decline in their lower-income share. The share living in lower-income households among black adults declined from 48% in 1971 to 43% in 2015, and the share of upper-income households grew to 12% from 5% over the same period." Pew also points out that Black adults "are still significantly less likely than adults overall to be middle income or upper income." On the other hand, the number of Hispanic households in the lower-income group grew from 34% to 43%, which Pew attributes to an increasing percentage of immigrants in the population group.
The percentage of lower-income White households stayed roughly the same, with increases at the top and a shrinking middle income group. And Asian households experienced increases at both the top and the bottom of the income scale.
The Top 1%
When we look at the top 1%, it's clear which group of the population has profited the most. According to a 2015 report from the Economic Policy Institute, the top 1% of U.S. wage earners take home 21% of U.S. income. You can see this as you look below at the Note from the report. These income shares are near historic levels for the top 1%.
According to the same report, the average income of 1% of the population in 2015 was $1,316,985. To even qualify as a member of the 1%, one had to make $421,926. (That is more than double Pew’s 2016 median upper-income class income of $187,872.)
How Many Make More?
The top 1% of wage earners in the U.S. capture 21% of U.S. income.
What Class Am I In?
So, the obvious follow-up question is: Where does that leave me? Into which class do I fall?
Income data released by the U.S. Census Bureau shows that 2017 median household income was the highest on record at $61,372. Pew defines the middle class as those earning from two-thirds to double the median household income. This Pew classification means that the category of middle income is made up of people making somewhere between $42,000 and $126,000.
Those making less than $42,000 make up the lower-income bracket, while those making more than $126,000 make up the upper-income bracket. Easy, right? Just take your household income and see where you fit, given these numbers.
The problem is that your $61,372 probably does not buy you the same kind of life as your cousin’s $61,372 in another part of the country. The lives of families making the median income look very different, given the vastly different cost-of-living levels across the U.S.
This lived experience can make it difficult to determine your income class status. In a report for the Urban Institute titled “The Growing Size and Incomes of the Upper Middle Class,” nonresident fellow Stephen Rose writes that:
Because people tend to live in communities with similar incomes, they view themselves as being near the middle because their neighbors’ circumstances are similar to their own even if their incomes are significantly below or above the U.S. median.
People in the aggregate tend to live, work, and socialize with people of similar income levels. For this reason, we often do not have accurate reference points that would help us gauge our actual class status.
Where Do You Stand?
If you want to know exactly how you fit into the income class matrix, the Pew Research Center has a recently updated income calculator. You can break down your class status first by state, metropolitan area, income before taxes, and members of the household, then by education level, age, race, and marital status.
According to the calculator, a before-tax salary of $45,000 for a three-person household in Jackson, Tenn., puts you squarely in the middle class, along with 51% of adults in Jackson. However, that same salary in the same household in the New York City metro area puts you in the lower class, along with 30% of adults in the area. State and city taxes vary, access to healthcare varies, city living is expensive, and so are children. All of these factors can contribute to what class you feel you are in, regardless of what national statistics say.
Three New Ways to Look at Class in America
It turns out that lower class, middle class, and upper class are tricky terms to box in. The Pew income calculator is a good start for learning where your income puts you, given where you live and some background factors. However, the class you're in is about more than just how much money you make. Before we leave the topic, it is worth taking some time to think about how other considerations factor into who and where you are.
Social and Cultural Capital
Start with social and cultural capital, a concept debuted in 1986 by French sociologist and public intellectual Pierre Bourdieu. His essay “The Forms of Capital” outlines how different forms of capital shape class. He said that in addition to economic capital, there are social and cultural capital.
Social capital is your connections. It is who you know, whom you socialize with, and who is in your circle. It is group membership, according to Bourdieu. If you have ever heard someone say, “It’s not what you know, it’s who you know,” you are familiar with the idea of social capital.
Cultural capital is a little less concrete, but it is essentially someone’s cultural literacy. This cultural capital includes education level, skills, cultural knowledge and taste, and ways of behaving, speaking, and dressing. It’s how you communicate, through your behavior, that you are of particular social status.
When we talk about class, it’s important to remember that it’s not just a matter of income or economic capital, even when you account for the cost of living and the lived experience. This additional influence is due to the existence of other forms of money. Social and cultural capital offers different kinds of currency and a slightly different kind of class status. It’s also important to note that having one of these forms of capital makes it much easier to acquire the others.
Top 20, Bottom 80
The upper, middle, and lower designations may no longer be the best way to look at where you fit. Nor is the popular wrinkle in our politics: the 1% versus the 99%. Your income class could be something else, again with significant implications for your life and the nation’s economy.
In his book Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It, Brookings Institution Senior Fellow Richard V. Reeves breaks down the American class system, in terms not of 1% and 99% but of 20% and 80%. The top 20% sets itself apart in many ways.
In a review of the book Why the 20%, and Not the 1% Are the Real Problem, The Economist reports that while “between 1979 and 2013, average incomes for the bottom 80% of American households rose by 42%...by contrast, those of the next richest 19% rose by 70%, and of the top 1% by 192%.” In other words, the top 1% is not the only income class pulling away from the rest of the country.
The top 20% includes lawyers, doctors, and managers, all the way up to CEOs and beyond. They marry later, are better educated, and have larger and richer social networks. They’re healthier, too—they have statistically lower rates of heart disease and obesity.
Reeves argues that this class is essential for understanding inequality for two reasons. The first is that this class perceives their socioeconomic status as being squarely middle class, while their actual circumstances put them among the nation’s richest. However, because they’re not the 1%, we tend not to focus on their behavior.
The second reason is that this top quintile of earners—those making more than roughly $112,000 a year—have been big beneficiaries of the country’s growth. The top 20% of earners may not be seeing the income gains made by America’s top 1%, but their wages and investments have increased, and they enjoy the comforts of life at the top.
Further, this quintile accounts for a considerable portion of national income share, and Reeves argues that if the country wants to raise income tax revenue to pay for social programs, as many Democrats would like, then policies will have to focus on the top 20%.
In any case, it is more than enjoying comfort. According to Reeves, the top 20% also engages in different forms of “opportunity hoarding”—ensuring that their children have a better shot at remaining in that upper 20% of income earners—through “zoning laws and schooling, occupational licensing, college application procedures, and the allocation of internships.” It puts a dent in America’s idea of itself as a meritocracy.
What’s Happening to Economic Mobility?
How much economic mobility you’ve experienced—and how much you expect for your family—is another aspect to consider when you’re thinking about income class. In an article in The Atlantic, “The 9.9 Percent Is the New American Aristocracy,” Matthew Stewart argues that while we are quite conscious of the inequality in America, we tend to be somewhat OK with this because “in the United States everyone has an opportunity to make the leap: Mobility justifies the inequality.” Or so we like to think and claim.
However, Stewart writes, “contrary to the popular myth, economic mobility in the land of opportunity is not high, and it’s going down.” There’s a concept called intergenerational earnings elasticity (IGE). Essentially, IGE measures the extent to which a child’s income is the product of their parents’ income. Zero would mean no relationship between parental income and child income, while a result of one would indicate that parental income determines child income entirely.
In the United States, IGE is at roughly 0.5. For reference, that’s higher than “almost every other developed economy,” Stewart writes. That doesn’t speak to commendable levels of economic mobility or to equal opportunity, he adds.
In the same article, Stewart cites the work of economist and former chair of then-President Barack Obama’s Council of Economic Advisors, the late Alan Krueger. Krueger found that increasing immobility and increasing inequality are not uncorrelated trends. “It’s as if human societies have a natural tendency to separate, and then, once the classes are far enough apart, to crystallize,” Stewart writes, citing Krueger.
Class Is Relative: Inequality and Its Effects
What does the consolidation of wealth in the hands of fewer and fewer do to someone’s sense of their income class? Some of this depends on awareness. The knowledge and experience of inequality change perceptions and behavior. This awareness has different implications at different ends of the spectrum. In a New Yorker article, “The Psychology of Inequality,” Elizabeth Kolbert explores just that.
The Experience of Feeling Poor
Kolbert discusses this by describing the findings of psychologist Keith Payne, a professor at the University of North Carolina at Chapel Hill and author of "The Broken Ladder: How Inequality Affects the Way We Think, Live, and Die." According to Payne, she writes, “...what’s really damaging about being poor...is the subjective experience of feeling poor.” This subjective experience of feeling less privileged compared to those around us has implications for behavior, as “people who see themselves as poor make different decisions, and, generally, worse ones.”
It is not an unfair characterization. In an article in The Guardian that champions universal basic income, historian Rutger Bregman writes, “It’s a harsh question, but look at the data: poor people borrow more, save less, smoke more, exercise less, drink more, and eat less healthily.” Moreover, Payne cites research that suggests that the poor are more likely to engage in risky behavior.
It is not uncommon for the narrative around poverty to suggest that people are poor because of their bad decisions, but new research argues that the opposite is true. In their book Scarcity: Why Having Too Little Means So Much, economist Sendhil Mullainathan and behavioral scientist Eldar Shafir explore what they call “the scarcity mindset.”
A review of the book in The Economist summarizes their work well. When an individual feels that they lack some vital resource—money, friends, time, calories—their mind operates in fundamentally distinct ways.
The scarcity mindset brings two advantages:
- The mind concentrates on pressing needs, with great focus.
- It “gives people a keener sense of the value of” that thing they seem to lack—they have a much better sense of what a dollar would be worth if they had it.
The scarcity mindset can weaken the mind as well. It “shortens a person’s horizons and narrows his perspective, creating a dangerous tunnel vision.” So it causes people significant anxiety, sapping brainpower and “reducing mental ‘bandwidth.’” The pair cite experiments showing that feeling poor “lowers a person’s IQ by as much as one night without sleep.”
So, the work in Scarcity would suggest that being poor changes how people think and behave. Later on, in Kolbert’s piece, Payne cites research that he argues “provided the first evidence that inequality itself can cause risky behavior.”
The 'Discomfort' of Extreme Wealth
The wealthy feel some discomfort with this consolidation of wealth, too, but for different reasons. In her book Uneasy Street: The Anxieties of Affluence, sociologist Rachel Sherman interviews members of the 1% and asks them all about one thing they would rather not talk about: their wealth and privilege.
Sherman distinguishes between two subgroups in the 1%: the upward-oriented and the downward-oriented. The upward-oriented “tended not even to think of themselves as socially advantaged” because they tended to hang out in economically homogenous groups, where people had as much or more money than they did. The downward-oriented, with more economically diverse social networks, were “more likely to see themselves as privileged” and felt serious discomfort about that situation.
In her article, Kolbert sums up one of Sherman’s primary findings quite nicely: Regardless of which direction the privileged were facing, “...the privileged prefer not to think of themselves that way.”
In an op-ed for The New York Times, Sherman writes that this class “described themselves as 'normal people' who worked hard and spent prudently, distancing themselves from common stereotypes of the wealthy as ostentatious, selfish, snobby and entitled.” Sherman found that the very wealthy took efforts to distance themselves from these descriptions, not only in self-description but also in behavior. Kolbert quotes Sherman writing about these descriptions and behaviors as illuminative of “moral conflicts about having the privilege.”
However, Sherman ultimately argues that “such moves [from the 1%] help wealthy people manage their discomfort with inequality, which in turn makes that inequality impossible to talk honestly about—or to change.”
A Complicated Question
Class is a complicated question. It involves more than just income. It involves the cost of living, lifestyle choices, and lived experience. It consists of social and cultural capital. So, while the Pew income calculator may tell us where we stand, the experience of class is entirely relative. People deduce their class standing from the cues in their immediate surroundings—their neighborhood, their workplace, their social circles.
The middle class has stabilized in size, but it’s losing income share, mostly to the top 20% and especially to the top 1%. Also, when we talk about the effects of class in America, we should keep in mind the top 20% and the top 1%, because the behavior and choices of both of these groups seem to produce increasing class inequality and immobility.
Most people tend to think of themselves as middle class. However, the truth is, the middle class includes people with vastly different lifestyles and concerns. Pew’s 20% upper class is, in essence, Reeves’s 20%. People who belong to the lower sections of that quintile may not feel especially wealthy if those around them are far more affluent. Moreover, people who don’t think of themselves as the middle class may develop behavior patterns that are connected to whether they feel poor or wealthy, without being aware of it.
Is the Middle Class Shrinking?
According to a 2018 report from the Pew Research Center, slightly more than half of the U.S. population (52%) is in the middle class. While that represents a small increase over a 2015 Pew report, which found only 50% of the population were in the middle class, the percentage has actually been shrinking since the 1970s. In 2001, 54% lived in middle-income households, down from 59% in 1981, which was a drop from 61% in 1971. And the share of the income pie going to middle income households also dropped: from 62% in 1970 to 43% in 2014.
Which Income Classes Are Growing?
Both poorer and richer income classes have increased in size in recent decades. Since 1971, the number of the lowest-income earners, who make less than two-thirds of the U.S. median income, grew from 16% to 20% of the population. At the same time, the percentage of Americans in the highest-income households also rose—from 4% to 9% of the population.
Is There an Easy Way to Figure Out Which Income Class I'm in?
One way is simply to look at the range of incomes considered middle class. The Pew Research Center defines the middle class as households that earn between two-thirds and double the median U.S. household income, which was $61,372 in 2017, according to the U.S. Census Bureau. Using Pew's yardstick, middle income is made up of people who make between $42,000 and $126,000. According to these numbers, if you make less than $42,000, you're in the lower-income bracket, and if you make more than $126,000, you're in the upper income bracket.