America's Middle Class Is Losing Ground Financially

The American middle class—at certain times the envy of the world and, at other times, the object of its derision—is losing ground financially to upper-income families, according to a report from the nonpartisan Pew Research Center.

The total population of the middle class in the U.S. has remained fairly stable since 2010 (50% of American adults lived in middle-class households in 2021, which is comparable to 2011). However, income disparity continues to increase in the U.S. During this same time period, those living in higher-income households made substantial income gains, while the financial gains of those in the middle class (in addition to those in lower-income households) were modest comparatively.

Reversal of a Downward Trend

Prior to 2011, the American middle class had been shrinking for several decades. This downward trend, beginning in 1971, had resulted in a 10% drop in the share of adults in the middle class.

This trend was mirrored in other Western countries during this time period, including Germany, Italy, and Spain. But the opposite was true in France, the Netherlands, and the United Kingdom: The middle class expanded between 1991 and 2010 in these countries, according to a separate report by the Pew Research Center about the state of the middle class in Western Europe.

This report, which looked at the U.S. and 11 Western European countries, found that in the nearly 20 years from 1991 to 2010, the portion of American adults living in middle-class households fell from 62% to 59%.

It defined middle-class households as those with incomes of anywhere between two-thirds and twice that of their country’s median disposable household income. In the case of the U.S., that meant a range of roughly $35,000 to $106,000 a year for a household of three.

The Western Europe study didn’t consider other common markers of middle-class status, such as occupation, educational attainment, or homeownership.

Income Inequality Is on the Rise

While the median income of middle-class households increased by 50% between 1970 and 2020—from $59,934 in 1970 to $90,131 in 2020—the median incomes of those in upper-income households fared much better during this time period: their median income increased from $130,008 to $219,572, an overall gain of 69%. (All incomes are expressed in 2020 dollars.)

Researchers suspect that this difference between the way that the middle class and higher-income households have fared since 2010 is a lingering result of the Great Recession and an earlier recession in 2001. In fact, only the incomes of those in upper-income households increased between 2000 and 2016, from $183,680 to $187,872.

The trend toward income inequality is not new by any means. The income gap between upper-income households and middle-income households (in addition to lower-income households) is the continuation of a decades-long trend. The Pew Research Center has been analyzing data about income inequality since 1970. For example, in 1970, the median income of upper-income households was 2.2 times the income of middle-income households (and 6.3 times the income of lower-income households). By 2020, these income ratios had increased significantly, to 2.4 and 7.3, respectively.

These numbers reveal that while the incomes of those in upper-income households have more than recovered from the losses experienced during the Great Recession, this has not been the case for lower- and middle-income families. For lower-income and middle-income households, their 2016 income levels were comparable to 1989 levels.

So, while the total population of the American middle class may be stabilizing, this income class is not experiencing the same level of mobility—or gains in quality of life—that has defined the American middle class in the past (and made it a desirable social position). And overall, this trend mirrors the long-running rise of income inequality in the U.S.

Economic Recovery After the Great Recession

The economic recovery following the Great Recession of 2007–2009 was one of the slowest in modern times and may have prevented adults with aspirations of class mobility from moving into upper-income households. This economic recovery also had a profound impact on how income is distributed in the U.S.

In general, the decline in the wealth share of the middle class and the rise of income inequality creates an adverse climate for economic growth. This is because a relative decrease in the incomes of lower- and middle-income families in the U.S. may result in a decline in overall consumption in the country—this has been shown to increase the level of borrowing (and debt) and decrease investments in education.

For this analysis, the Pew Research Center defined “middle-income” Americans as adults whose annual household income is two-thirds to double the national median, after incomes have been adjusted for household size. In 2020, the national middle-income range was about $52,000 to $156,000 annually for a household of three. Lower-income households had incomes less than $52,000 and upper-income households had incomes greater than $156,000 (incomes in 2020 dollars).

The Bottom Line

The poorer economic performance of the middle class compared to higher income Americans has serious implications for inequality and social justice. It also acts as a damper for economic growth. As the economy continues to move beyond the pandemic and deals with inflation and the effects of the war in Ukraine, it remains to be seen whether these trend lines will continue.