The shrinking of the middle class has been frequently cited in articles and public debates. Wages have been stagnant for decades. Families are struggling with financial insecurity. But what is the middle class exactly and is it shrinking? These questions can be difficult to answer, so we are going to start with some data.
America’s middle class
First, there is no single definition of the middle class: not in research, nor in policymaking. That’s different than poverty data, where the U.S. government issues official definitions. So while Americans have ideas and perceptions about the middle class, those are based on a diversity of concepts and definitions. Some focus on the family structure while others define the middle class in terms of education or occupation. I, like many economists, define the middle class as households whose incomes fall in the middle of their country’s income distribution.
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A recent analysis from the Pew Research Center reported that, for a three-person household 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 (2016 dollars).
That being said, the majority of the U.S. population (52 percent) was in America’s middle class in 2016, according to the Pew Research Center. This is virtually unchanged from the 51 percent who were defined as middle class in 2011.
The stability in the share of adults living in middle-income households marks a shift from a decades-long downward trend. From 1971 to 2011, the share of adults in the middle class fell by 10 percentage points.
Who is losing ground?
The data also suggest that middle- and lower-class families continue to lose ground financially to upper-income families. While the median income of the upper class increased 9 percent from 2010 to 2016, the median income of the middle and lower classes increased by 6 and 5 percent respectively over the same period.
If we look at the period from 2000 to 2016, we see that only the income of the upper class has recovered from the previous two economic downturns. In fact, upper-class incomes were the only ones to rise over those 16 years.
A widening wealth gap
The widening income gap between upper-income households and middle- and lower-income households is a continuation of a decades-long trend.
In 1970, the first year covered by earlier Pew Research Center analyses, 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. These income ratios increased to 2.4 and 7.3 in 2016, respectively.
Another Pew Research Center analysis also found that the wealth gaps between upper-income families and lower- and middle-income families in 2016 were at the highest levels recorded.
Although the wealth of upper-income families has more than recovered from the losses experienced during the Great Recession, the wealth of lower- and middle-income families in 2016 was comparable to 1989 levels.
The top 1 percent
When we analyze the data for the top 1 percent of Americans, these trends are even more pronounced. According to a 2015 report from the Economic Policy Institute, the top 1 percent of U.S. wage earners capture 21 percent of U.S. income. The report also noted that the average household income of the top 1 percent in 2015 was $1,316,985 while the average for everyone else was $50,107. Thus, the top 1 percent earns 26.3 times more than the bottom 99 percent.
Even as America’s middle class appears not to be shrinking (for now), it continues to fall further behind upper-income households financially, mirroring the long-running rise in income inequality in the U.S. overall.