Is the Middle Class Shrinking Because People are Getting Richer?
…and what makes people feel middle class?
Poring over whitepapers and opinion riffs from opposite sides of the political spectrum is one of my favorite pastimes—especially opposing views that attempt to explain the same phenomena. It’s usually one big exercise in the frustrating reality that you can effectively make data say anything you want it to by including (or excluding) certain nuances.
In practice, this means seeking out the hot, fiery perspectives of economic institutes that are either explicitly progressive or conservative in their mission and viewpoints. And let me tell you, some of these reports have absolutely banger titles: “The Annoying Persistence of the Income Stagnation Myth”? The Libertarian-influenced Cato Institute really doesn’t give a f***.
Anyway, I was recently poking around in the data about the shrinking middle class, and noticed something odd in the 2022 findings from Pew Research:
Between 1971 and 2021, it’s clear that the yellow middle section—representing “the middle class”—did shrink, but the “lower income” section wasn’t the only group that grew. The “upper income” bar grew, too.
25% of households were considered low income in 1971, and today, 29% are—an increase of four percentage points in “low income” households.
But those considered “upper income” rose from 14% to 21%.
According to Pew, the median annual incomes in each of these class strata (all numbers adjusted to 2020 dollars and scaled to reflect a three-person household) are:
Low income: $20,604 in 1970; $29,963 in 2020 (a 45% increase in real terms)
Middle income: $59,934 in 1970; $90,131 in 2020 (a 50% increase in real terms)
Upper income: $130,008 in 1970; $219,572 in 2020 (a 69% increase in real terms)
In plain English, the median real income for someone who’s considered “low income” has increased by 45% over 50 years, representing an annual growth rate of about 0.7% (which is, in this reporter’s opinion, accurately characterized as “stagnant”—my sincerest apologies to the fine folks at Cato). And as we saw earlier, the number of people in this group (29% of Americans) grew over the last 50 years.
The middle group didn’t fare much better, with an annual income growth rate of about 0.8% per year, though the size of this group shrank over the last 50 years.
Finally, the upper income group fared best, with an annual income growth rate of 1% per year, and a 50% increase in the number of people earning these incomes.
This realization complicated my understanding of class dynamics in the US, so I did what any good internet user would do: I immediately hunted down the nearest libertarian economic outlet, because I knew they’d be all over it.
Are people actually getting richer?
The primary arguments made by the American Economic Institute (AEI)—a center-right think tank—reinforce this story; that America’s middle class is smaller because so many families are richer than they were before.
After all, it does appear true that more people find themselves in the “upper income” brackets than they used to, and all three strata have experienced real income gains over the 50-year period. The optimistic take is that it’s not a “middle class meltdown,” but rather a “middle class triumph.”
But simply cresting the $90,131 income threshold is not enough to be “middle class”—because the number itself is less important than what that money can actually buy you
Because sure, while these numbers were presumably adjusted for inflation (by either the consumer price index, CPI, or personal consumer expenditures price index, PCE; it’s not always clear), the rate of inflation doesn’t adequately reflect the change in the big three: housing, healthcare, and education.
As such, statistics obfuscate the true degradation of the “middle class” experience.
Because “being middle class” isn’t defined by income. It’s a vibe.
And when you’re technically “upper class” by the standards of econ nerds firing off hot charts but you can’t afford a starter home, it’s hard not to feel like a geek with an Excel spreadsheet is gaslighting your checking account.
The cost of things like cell phones, televisions, and running shoes might have plummeted over the last two decades, and the price of things like bacon, cat food, and shampoo may have risen mildly (speaking from experience, as I must feed Samcat and bathe).
But nobody judges their quality of life based on their ability to own the newest pair of Air Maxes or spring for the Blue Buffalo kitty treats—no, you primarily perceive your own rung on the class ladder by looking at things like where you can afford to live, if you can visit a doctor without stress, and whether or not you’ll be able to send your kids to college.
“Does it really matter if the numbers look better on paper if most people, regardless of strata, feel like they’re worse off?”
Sadly, economists have a hard time quantifying “vibes,” which distorts the extent to which we can trust the progress these gains supposedly represent.
(There’s also, of course, the issue with national averages in a country where the cost of living swings wildly when you move a few miles in one direction or the other, but that’s a complication for another day.)
So why does the national rhetoric around the middle class feel so dismal right now, if things are actually better? More importantly, does it really matter if the numbers look better on paper if most people, regardless of strata, feel like they’re worse off?
The role of class in the US
Because the American ethos is centered around social and class mobility via the alchemy of hard work and determination, we see class through a moral lens. I didn’t realize this until I tweeted something about how everybody (rich, poor, working class) thinks they’re middle class—and an Australian who replied thought it was amusing that the amount of money someone has is what determines their class in the US.
In cultures where your socioeconomic class is something you’re born into and expected to adhere to for the rest of your life—something immutable and separate from your character—it’s just that. Unrelated from your character.
Because if you’re able to change your class status through intelligence, luck, and work, there’s a resultant assumption about people who have more money and people who have less, right?
“Your class standing reflects on you as a person, rather than the circumstances of your birth, despite the fact that the latter is statistically far more impactful than the former on your status.”
In the US, your class standing reflects on you as a person, rather than the circumstances of your birth, despite the fact that the latter is statistically far more impactful than the former on your status. And while the opportunity to change your lot in life is fantastic, it’s also a sociocultural double-edged sword.
So you can imagine the confusion someone who begins their life as a lower-middle income person might feel when they finally crack the $219,000 income required to be “upper class”...and realize they still can’t afford to send their kids to a good school or move into a home with a third bedroom.
This is the collective disillusionment that I believe everyone—but particularly the millennial generation—is contending with most strongly right now. The bill of goods they purchased with their student loans, 9–5 jobs, and lease agreements failed to pass the middle class vibe check.
The #1 middle class vibe determinant
When you come of age in an era when upward mobility feels natural (the early aughts, pre-Global Financial Crisis)—a time that birthed shows on HGTV normalizing owning your dream home and reality television that peeked behind the gate of communities populated by the Real Housewives—the realignment of expectations about what’s “normal” and “middle class” can feel like crash-landing in the parking lot of a Chili’s, the blow softened only by a stack of rejected insurance claims and Zillow push notifications about houses you can’t afford.
“Being middle class is a vibe. You can’t assign it with data—it’s something you must feel (and, ultimately, own).”
Because education and medical expenses and childcare aside, there’s one factor that typically reigns supreme as the chief determinant of the coveted middle class vibes: The mythos of “making it” is almost inextricably linked to being a property owner; to home ownership.
And as the census data reports, levels of home ownership among young people are currently below their pre-Great Recession levels. Whether the connection between home ownership and middle class status is deserved or not, it’s probably here to stay—save for a great reckoning about what property ownership represents in the United States.
As long as housing affordability remains at an all-time low, there aren’t enough incremental, 1% annual wage gains in the world to offset the collective feeling of economically treading water.
Being middle class is a vibe. You can’t assign it with data—it’s something you must feel (and, ultimately, own).
If you feel as though you’ve successfully achieved a middle class lifestyle, I’d love to hear from you: What income made it feel real, and how old are you? Where do you live? Do you consider yourself better or worse off than your parents were? Shoot me an email at moneywithkatie@morningbrew.com.
